By Jayette Bolinski | Illinois Watchdog
SPRINGFIELD – A catastrophic pension-fund collapse may be what Illinoisans need to understand the urgency of pension reform, House Republican leader Rep. Tom Cross said Tuesday.
“I think folks in this state and around the country don’t think it could happen to them. They say, ‘That happens in Europe. That happens in faraway places. That’s not going to happen here,’” said Cross of Oswego.
“Well, when you’re at $130 billion of unfunded liability, I’d say it’s pretty real. And I think perhaps until something dramatic happens, we may not do anything in a real substantive way. It’s a difficult conversation, but it’s not one that’s going to go away.”
Cross spoke with reporters before a House Pension Investments Committee hearing in Chicago. The $130 billion figure he cited is Moody’s revised estimate of what Illinois’ unfunded liability is, based on assumptions about rates of return. Moody’s says the assumption that the state’s retirement systems could achieve an 8.5 percent rate of return is not realistic and that the rate is more like 5.5 percent.
During Tuesday’s hearing, lawmakers learned about new accounting guidelines set by the Governmental Accounting Standards Board, the agency that oversees government pension accounting. The new guidelines could cause Illinois’ unfunded-liability figure to balloon.
Josh McGee, with the Laura and John Arnold Foundation, a Texas-based nonprofit organization, told lawmakers GASB no longer will recommend pension funding levels, making it more incumbent upon legislatures to come up with a sound plan for addressing unfunded liabilities. He also noted that a state’s ability to make its debt payments is the biggest factor in a state’s bond rating.
McGee also urged lawmakers to take action to not only responsibly pay down the state’s pension debt but also to “fix the leaky system going forward.”
House and Senate lawmakers will be in Springfield Friday for a special session to address pension reform. Gov. Pat Quinn summoned the lawmakers back but has not said how long he intends to keep them.
Cross wants to see Quinn keep lawmakers in special session for as long as it takes.
“I would encourage him if nothing happens Friday, to call us back. If he wants to call us back Saturday, Sunday, Monday, Tuesday or Wednesday, we really don’t care. We’ll go back,” Cross said, adding that reform needs to happen now, not after the November election. “People are going to yell and scream and they’re going to complain. It’ll be chaotic down there (in Springfield). But my approach is you put us in a room, lock the (door) and when we’re done you let us out.”
Cross seemed lukewarm to a proposal pitched Monday by We Are One Illinois, a consortium of unions representing state employees. The group says workers would pay more toward their retirement costs if the state promises to pay its portion as required, closes some corporate tax loopholes to boost revenue, and exempts already-retired state workers from pension changes.
“I think it’s good they’re throwing things out there. I don’t think it goes far enough. I would have liked to have seen something in a little more substantive way and a lot sooner,” Cross said.
“I don’t think that at the end of the day — as much as I think it would be nice to say we’ve got an agreement on pension reform — I don’t think that realistically is going to happen. That doesn’t mean anybody’s bad. It’s just hard for folks to agree to this kind of issue. It’s very controversial and it has an impact on folks.”