(The Center Square) – Budget experts are at odds over how to handle Illinois’ coming pension debts.
Ted Dabrowski, president of financial watchdog Wirepoints, said the stock market’s meltdown and falling interest rates will likely mean a shortfall for Illinois’ five state-run pension funds. Taxpayers could be required to make up any shortfall.
He cited credit-rating agency Moody’s most recent pension shortfall calculation, before the crisis, totaled $241 billion. That could climb to more than $310 billion this year if existing conditions hold through the funds’ fiscal year-end in June.
“COVID-19 exposes just how unfair these long-term contracts are, these powers to strike, guaranteed pensions, guaranteed health insurance if you work 20 years,” Dabrowski said. “Those are things that have to be removed.”
Dabrowski called for an amendment to remove the state’s pension protection clause, which states that pension benefits cannot be diminished or impaired. He said reducing benefits was the only way to reduce retirement debts, which he said were “strangling” Illinois households.
Ralph Martire, executive director for the Center for Tax and Budget Accountability, does not see that happening.
“These talks about a constitutional amendment on the pensions are just off point,” Martire said. “They wouldn’t be effective and they wouldn’t save us one dollar in debt.”
Martire said the alarmist approach to Illinois’ fiscal problems was not helpful.
“What we need to do is take a step back and have an honest discussion about what long term fiscal policy needs to look like in the state of Illinois,” Martire said.
Martire’s organization has advocated for restructuring the state’s pension debt to be paid off over a longer timeline as well as paying more into the system.
Illinois’ annual pension contributions to pensions are not enough, according to actuaries, to begin to erase the unfunded liabilities. The state spends about a quarter of its general fund revenue on pension payments.