January 2013

As I write this message, the prospects for passage of legislation that would diminish the pension benefits earned by public retirees is uncertain. The Governor and others have been promoting the passage of such harmful legislation. Hopefully, they will approve a solution to the State’s budget problems that does not include a reduction in the pension benefits of public retirees.

While the Legislature and the Governor have struggled with various aspects of legislation and the timing for voting on it, they have thus far seemed focused on the “choice” as a means for fixing the pension unfunded liability. This will result in a diminishment of retiree pension benefits to solve a problem that was not caused by retirees.

We continue to believe that the correction of the pension unfunded liability problem can be accomplished without reducing the current pension benefits of retirees. An example is House Bill 6204.

The campaign against public employment retirees has been well crafted and well funded by private sector groups like the Commercial Club of Chicago, its Civic Committee, and Chicago’s Civic Federation. In addition, they have been strongly supported by the Chicago Tribune and the Gatehouse Publishing Company. There clearly has not been a balanced presentation of information in the media. And, on multiple occasions, the information has been either exaggerated or incorrect.

Organizations like the Commercial Club of Chicago, its Civic Committee, and Chicago’s Civic Federation are made up of representatives from large corporations. They know how to market ideas, whether valid or not, in order to influence the thinking of the public. And, although they continually spend money to influence Legislators and Governors for corporate tax benefits and grants, they do not want to pay taxes needed to support the State’s increasing budget costs.

A current theme in the attack on public retirees is that the cost of retirement benefits may soon exceed the costs the State pays for education. I haven’t seen anything that explains the numbers used for this comparison. However, it seems a more fair comparison would be to compare only the cost of retirement benefits of retirees within a given service area, such as education, to the costs the State pays for that service area.

Another theme in marketing the idea that public retirement benefits should be diminished are the statements that paying these benefits takes away from services to the public, i.e. taxpayers, such as education for children, roads, treatment for the disabled, and public safety. The truth is that retirees are the ones who have provided these services during their work lives. Assuming all these services have been beneficial to the public, then retirees as a group should be recognized and commended for their service rather than denigrated and targeted for a reduction of the benefits they were offered in exchange for their time and skills.

Another theme is the comment that these severe reductions in retirement benefits are necessary to “stabilize” the retirement systems in order to assure that sufficient assets will be available to pay the benefits of future retirees. Short of the State continuing to withhold significant amounts of money from the retirement systems, this appears to be another exaggeration or misrepresentation of facts.

I have been told by a knowledgeable source that there is no real danger of the retirement systems running out of money. The real concern of the Legislators and the Governor is that the State’s budget problems are resulting in increased costs to borrow money. This is money they want to borrow in order to spend more in the future and to pay for services they have already provided to the public.

Over time, the Legislators and Governors chose to spend money without assuring there was adequate funding, including sufficient taxes, to pay for the services and projects. These included the many services needed by the public as well as projects of interest to the Legislators and Governors. They were able to do this in part by not appropriating the required State payment to the retirement systems.

Now, they seek to “fix” the shortfall in the State’s budget revenue by diminishing the retirement benefits of public retirees rather than adopting new or increased revenue options. What has been characterized and labeled as a need for “pension reform” would more accurately be described as a need for “funding reform” or “revenue reform”.

Retirees did not cause the “unfunded liability” budget problem. They provided the service they were asked to provide. They contributed financially and timely to their respective retirement systems as required by the laws passed by the Legislators and Governors of the State.