While Illinois politicians vacillate on the issue of public pension reform, the investment ratings firm Moody's is proposing that pension funds lower their projection of future investment returns to 5.5 percent. Teachers' Retirement System, the largest public pension plan in Illinois, assumes an annual investment return of 8.5 percent. A recent article by Pensions and Investing (pionline.com) on the Moody's proposal states that this change would immediately increase Illinois' actuarially calculated $83 billion pension shortfall to a whopping $135 billion.
And who would be responsible for every penny of this shortfall? Why, the taxpayer would be of course, as the Democratic leadership in Illinois hides behind the claim that asking public employees to contribute more to their pensions is "unconstitutional," a claim that is refuted by many.
Illinois is not the only state with a constitutional clause regarding public pensions. The Arizona constitution mandates that public employees and taxpayers each share pension costs 50-50. However, in Illinois, using the Democratic leadership's interpretation of Illinois' constitution, the public employees' fixed contribution to their pensions cannot be increased for current employees. And, any added pension enhancements, missed investment return targets, end-of-career pay bumps and various pension abuses are 100 percent the responsibility of the taxpayer to cover. Is this fair? I think not.
The only idea floated by the Illinois Democratic leadership for "pension reform" is to shift the responsibility to fund pensions from the state to the local school districts, essentially producing a "back door" tax increase by significantly increasing local property taxes. Instead, Illinois should propose changing its constitution to mirror Arizona's. Such a plan would end the pension abuses we constantly read about and restore fairness to the system.