Need to go back on a pension promise

On April 18, the Illinois House passed a resolution to amend the Illinois constitution so that future pension sweeteners will require a super majority. To take effect, the Illinois Senate must pass it and the taxpayers ratify it.

This is a Speaker Michael Madigan proposal to fix a nonexistent potential problem rather than the real pension problem. But he has admitted that the constitution can be changed. The state funded public pension systems that are bankrupting the state are “defined benefit” systems. Each system sets a level of employee contributions and promised benefits based upon a formula. The formulas assume matching employer (taxpayer) contributions, returns-on-investment, and amounts to be paid out based upon employee demographics, salary histories and actuarial tables.

If everything had gone as planned, the pension funds would be fully funded; since it hasn’t, the taxpayers are expected to pick up the shortfall. The current $83 billion shortfall has several root causes. For instance, the TRS assumes 8.5 percent return on investment, but actually averaged 3.7 percent for the last decade. Due to salary spiking, in 2010 TRS paid out $3 for every $2 it had anticipated. The state’s contribution has gone from approximately 3 percent of the general fund in 1995 to 15 percent in 2012. And it is still not enough.

My suggestion is an Illinois constitutional amendment to limit the taxpayers’ liability and cap or recomputed pension. Would this be fair? Well, the average TRS pension is $46,000, which is more than the average first year teacher ($37,500). Recent TRS retirees who worked a full career averaged $65,109, which exceeds the average salary for active teachers ($58,686). The maximum social security for an individual is less than $30,000. Yes, this would mean going back on a promise. But, the taxpayer never agreed to pay whatever it takes.

Jan Shaw

Wheaton