AP News

Civic Committee: Ill. pension system 'unfixable'


SPRINGFIELD, Ill. (AP) — Illinois' public-employee pensions system is so far in debt that it is "unfixable," an influential business group said Wednesday.

The Civic Committee of the Commercial Club of Chicago told its members in a memo that even current retirees' benefits must be cut to retain any kind of pension program. Drastic action, including cuts to existing benefits, is necessary to prevent pension-program bankruptcy, it said in the memo, provided in advance to The Associated Press.

"The pension crisis has grown so severe that it is now unfixable," former state attorney general Tyrone Fahner, the committee's president, wrote in the memo. "We do not make that statement lightly. It is an honest statement that no one — not our legislators, nor our governor, nor labor leaders — is willing to say publicly."

It said workers putting money into the retirement accounts will never see the payback they were promised and called it "fraud" for the state to collect it.

In an interview with the AP, Fahner acknowledged that even with a pension debt that he puts at over $90 billion, the problem is mathematically solvable. But to continue trying to catch up, Illinois must pay $6.7 billion next year — about a fifth of the state's general revenue — and that amount will top 40 percent by the beginning of the next decade.

"You can't take all the people who are currently retired or paying into pensions now and find a system that will make good on all the benefits owed them before the system collapses," Fahner said.

The Civic Committee, a group of senior executives from top Chicago-area businesses that has studied the pension crisis for six years, wants to set a "baseline" for action legislators must take to keep the program afloat, Fahner said. Along with the memo to committee members, Fahner wrote Gov. Pat Quinn and legislative leaders that "from now forward, we will support proposals that cut to the core of the problem."

A spokesman for Quinn did not immediately respond to a request for comment.

The memo said the committee supports eliminating all pensioners' cost-of-living increases instead of the current 3 percent compounded annually. It wants to cap the final salary on which pensions may be based (for those receiving Social Security, it is $106,000). It says the retirement age should be increased to 67 and that local school districts must assume the employers' share of teacher pension contributions.

Republicans in Springfield oppose that "cost shift" to local school districts, a sticking point that has held up action in the Capitol. They believe it will force school boards to increase property taxes. Quinn and Democratic leaders in the General Assembly support the cost shift as part of a larger plan to reduce cost-of-living increases, or COLAs, for retirees or lost their state-subsidized health insurance after retirement.

Fahner's memo calls those proposals "half measures" that will only save a fraction of what is needed to erase the deficit.

"Financially, it's bogus," Fahner said. "You have to eliminate COLAs even to have a change of putting a meaningful curb on it. That's where the money is."

Lawmakers two years ago approved a salary cap and a retirement age of 67 for new employees, but Fahner says the state isn't hiring anyone so it has made little difference.


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