By Jim Hagerty
Illinois lawmakers have reached a deal to solve the state’s $100 billion pension problem, a spokesman for House Speaker Michael Madigan (D) reported Wednesday, Nov. 27.
Details most of the plan’s details were not announced, however, Democratic and Republican insiders said a memo explaining the deal will be sent out Friday, Nov. 29.
“A deal has been made,” a Democratic insider e-mailed Wednesday. “It’s one that has been worked on since this summer by both parties.”
The agreement is expected to save the state about $160 billion over the next 30 years and changes the retirement age. The plan also replaces the 3 percent annual cost-of-living increase with one that’s equal to the rate of inflation.
Illinois’ pension crisis has been about 35 years in the making. As the state’s credit rating continued to fall, available cash to fund pensions of public employees became less available, resulting missed and shorted payments. Although the problem has been widespread throughout the country, the predicament in Illinois is, by far, the nation’s worst.
The majority of the problem can be attributed to the fact that Illinois funds about 150 percent more public pensions than most other states. Illinois is also one of states that gives special protection to public employees in its constitution.
According to the State of Illinois Constitution, public pensions are guaranteed from the time workers are hired. That means even when there’s no money, the state must still pay.
In 1996, former Gov. Jim Edgar (R) instituted a system whereby the state would make graduated annual pension payments lawmakers said would make the fund solvent by 2045. Several manipulations and payment holidays later and Edgar’s plan was gutted. Legislators tried to stop the bleeding but ran into a buzz saw in the form of the SEC and the commission charged Illinois with securities fraud.
The state was charged with failing to disclose to investors the nature of the pension crisis and the risk when it sold more than $2 billion worth of municipal bonds from 2005 to 2009.
House and Senate lawmakers have been told to return to Springfield Tuesday Dec. 3.