Civic Committee of the Commercial Club lauds "necessary and meaningful" action to improve state’s fiscal outlook
Chicago, Ill. – Faced with the most pressing pension crisis in the nation, Illinois lawmakers returned to Springfield Tuesday to pass landmark legislation: a compromise bill to reform the state’s public employee pension systems.
"This bill isn’t perfect and it wasn’t without compromise, but it was undoubtedly the right thing to do for the state and its citizens," said Ty Fahner, President of the Civic Committee. "Today, legislators put the people over politics and put the state on a viable path forward."
SB1 is projected to reduce Illinois’ almost $100 billion unfunded pension liability by more than $21 billion and 30-year state contributions by $160 billion – funds that can be reinvested into state programs and used to pay down the state’s backlog of unpaid bills.
"This bill is for the betterment of Illinois taxpayers, as well as public employees and retirees," said Ed Liddy, Chairman of the Civic Committee of the Commercial Club of Chicago. "With these reforms, Illinois has taken significant steps to secure the retirements of Illinois’ public employees while freeing funds for education, human services and other critical state programs."
The legislation’s most notable elements include:
- reducing annual cost-of-living-adjustments,
- phasing-in increases in retirement ages,
- instituting a pensionable salary cap,
- reducing employees’ contributions by one percentage point, and
- instituting a new funding schedule for the systems to be fully funded by 2044.
In 1995, Illinois dedicated just four percent of revenue to pension funding. Today, more than 20 percent of state operating funds go towards pension payments. Without reform, these payments would continue to grow and consume a greater and greater share of state revenues.
The Civic Committee released its first Facing Facts report, detailing Illinois’ path towards financial implosion and the urgent need for pension reform, back in 2006. In the seven years since, the state’s financial situation has significantly deteriorated.
"It’s about time," said Jim Farrell, Chairman of the Civic Committee’s State Finance Task Force. "This is an important step in bringing our state back to an economically viable and competitive Illinois."
In spite of the passage in 2010 of pension reforms for new employees, Illinois has racked up billions in unpaid bills, lays claim to the lowest credit rating in the country and boasts the nation’s second-highest unemployment rate. This despite a 67 percent income tax hike in 2011, deep cuts to nearly every discretionary program and significant cuts in the size of the state workforce.
"For far too long the pension crisis has tied our hands. While there is still much to be done to address the state’s fiscal woes, this bill will allow us to focus on investing in our communities and opening doors of opportunity for Illinois residents," said Rick Waddell, chairman of the Commercial Club of Chicago.