Daily Herald opinion: Illinois lawmakers must avoid the mistakes that created the state’s pension crisis

Illinois lawmakers pushed through a plan in 2010 in an attempt to address the pension underfunding problem that many of them had created and added to over multiple years.

The measure reduced retirement benefits for public employees — including those working for school districts and state and local governments — who were hired after Jan. 1, 2011.

Today, workers in the “Tier 2” pension system are understandably displeased.

“Over 50% of our members statewide that are in the pension plans are Tier 2,” Pat Devaney, secretary-treasurer of the Illinois AFL-CIO, told Capitol News Illinois during an interview in October. “They are realizing what an insufficient deal that is in terms of retirement security and demanding that changes are made.”

In a recent Daily Herald letter to the editor, Chuck Sullivan, president of the Associated Fire Fighters of Illinois, said that fire departments in the state are struggling to recruit and retain new firefighters because the Tier 2 retirement system is “unfair, unsustainable and driving people away.”

While Tier 2 firefighters pay the same amount into their pensions as their more senior colleagues, Sullivan said, they receive reduced benefits, including a higher retirement age, lower cost-of-living adjustments and a pensionable salary cap “that cuts into their future financial security.”

Also, there have been warnings that the retirement benefits in the Tier 2 system are so low that they may violate the federal “Safe Harbor” requirement. That rule mandates Social Security replacement plans, such as pensions, to offer benefits that at least match those of Social Security.

Sullivan and others are calling on legislators to approve Senate Bill 1937, which would strengthen Tier 2 pensions.

We sympathize with public employees who feel like they were shortchanged because they don’t have the same retirement benefits as some of their colleagues.

However, the bottom line is that the Tier 2 system was created because something had to be done to try to reduce the state’s pension costs.

Illinois owes its five state-run pension systems an estimated $144 billion — even with the Tier 2 system. Imagine what that number would be without it.

Our state is in an awful mess because Republicans and Democrats alike spent decades overpromising on benefits while putting off the state’s pension debt. A 1995 law signed by then-Republican Gov. Jim Edgar put the state on a 50-year payment plan that would result in Illinois’ pension systems being 90% funded in 2045.

Unfortunately, state legislators and governors didn’t always hold up their end to make the annual payments. They refused to increase taxes or cut spending to generate the money needed and obligated for the pensions.

In recent years, we have praised the JB Pritzker administration for its commitment to making the full annual payment. We continue to hope that the governor keeps that record intact.

While Illinois has made some progress in addressing its pension crisis, our elected leaders need to stop the behavior that caused the problem in the first place.

They must remain focused on properly funding the state’s pension obligations. They also must avoid actions and policies that would add to the debt. Failing to do both would betray hardworking taxpayers and jeopardize their financial security.