Take care before shifting pension burden to property taxpayers

Editor’s note: Two suburban lawmakers wrote differering opinions about a pension proposal for the reform group Reboot Illinois. State Rep. Darlene Senger, a Naperville Republican, fears the legislation before the House will mean higher local taxes. State Rep. David Harris, an Arlington Heights Republican and co-sponsor of the legislation, disputes that and calls for urgent action. Excerpts are reposted here with permission. For the full text of Senger’s article, click here.

It is an indisputable fact that Illinois’ pension systems are currently insolvent and are only getting worse. Illinois taxpayers foot the bill for $18 million in additional costs for each day this issue is left unaddressed. Inaction is simply no longer an option.

As a financial adviser and member of the governor’s working group on pension reform, I understand the instability caused by this crisis. Whether the symptoms are the reluctance of businesses to invest in Illinois, the increased costs of borrowing money, or the crowding out of vital state funding for other services, the cause undoubtedly stems from our debt crisis.

This is why I have been working in a bipartisan manner from the day I arrived in Springfield, set on finding a solution to this problem. I have spent countless hours in working groups with Democrats, Republicans and members of the governor’s staff hashing through proposals and working to find common ground.

Just weeks ago, on the final day of veto session, a handful of legislators put forward another proposal aimed at finding a solution to this issue. I commend them for that action and truly believe this is an act of good faith.

The measure includes many solid proposals that were discussed throughout our negotiations, such as raising the retirement age for teachers and university employees, reducing a portion of the cost of living adjustment, increasing active member contributions over time, capping the amount of a salary used to determine benefits.  It also would afford union officials the right to sue the state if future pension obligations are not met.

Unfortunately, the issue that drove a wedge into the negotiations this past spring remains in the proposal. This group still wishes to include shifting the cost of teacher pensions onto the local taxpayers via their school districts. Without careful consideration, this idea could wreak havoc on local school budgets, causing the need for drastic increases in property taxes.

I do, however, believe the latest pension proposal provides a good framework for reform and could signal we are getting close to a comprehensive package, and while I do believe this last hurdle remains before we have a final deal, I don’t believe the differences are insurmountable.  

Signs of this include the recent proposal from the We Are One coalition of public employees that offers to increase member contributions so long as the state guarantees its share of the retirement payments. And while that proposal contains an unrealistic increase in taxes to the tune of $2 billion, it does signal movement on the part of labor leaders.

For years, our state’s pension system was inadequately funded, setting the stage for this crisis. We are now in the unfortunate situation of having to fix this issue, which will unavoidably include many painful decisions. In the end, the decision to take action will rest in the hands of the legislature and, it would seem to me, that there are enough legislators who are now taking this issue seriously enough that we will arrive at a solution.

My only hope is that solution doesn’t fall squarely upon the taxpayers of Illinois by pushing the costs onto local schools.