Quinn looks at teacher pensions as address nears

(AP)  SPRINGFIELD, Ill. — Gov. Pat Quinn, responding to a dire new report on state finances Monday, said more clearly than ever that he wants schools and universities to help pay for their employees' retirement costs.

A statement from Quinn's budget office said the practice of state government paying for the retirement of downstate teachers and professors "requires careful examination and reform" because "employers need to have a stake in funding their own employees' pension costs."

Ben Schwarm, associate executive director of the Illinois Association of School Boards, said schools can't simply absorb hundreds of millions of dollars in new expenses.

"It's either an $800 million cut in public education funding or ... an $800 million property tax increase to cover the pension costs," Schwarm said. "Either way, I'm not sure it's the best way of solving the problem or in the best interest of the taxpayer."

Quinn also called for "aggressive restructuring of the Medicaid system," a topic he may discuss in his State of the State address on Wednesday and in the budget proposal he offers Feb. 22.

Retirement and Medicaid costs were two of the biggest factors in a report Monday from the Civic Federation that says state government's backlog of unpaid bills could nearly quadruple — from $9.2 billion to $34.8 billion — over the next five years unless officials take action.

The group's Institute for Illinois' Sustainability predicts pension and health costs will continue to climb, while revenues will drop when the state's temporary income tax increase expires. The result will be a government falling further and further behind in paying its debts, the federation concludes.

"The governor and General Assembly must act now," Laurence Msall, president of the Chicago-based Civic Federation, said in a statement. "Failure to address unsustainable trends in the state's pension and Medicaid systems will only result in financial disaster for the state of Illinois."

The federation recommended cutting state employees' pension benefits, making retired employees contribute toward their health care costs, trim Medicaid spending and apply state income taxes to retirement and Social Security income that is subject to federal taxes.

It did not address the possibility of making the temporary tax increase permanent or making schools contribute to teacher pensions, an idea mentioned not only by Quinn but House Speaker Michael Madigan and Senate President John Cullerton, both Chicago Democrats.

A major state-employee union sharply criticized the Civic Federation's recommendations.

The American Federation of State, County and Municipal Employees said the group calls for government workers to make sacrifices but not big corporations or wealthy individuals. It opposes borrowing to pay overdue bills but ignores the impact on businesses and community groups the state is failing to pay, the union said, and the report doesn't make clear that high pension costs are largely a result of the state failing to pay its share in the past.

"The federation's repeated omission of relevant context calls its credibility into question," said an AFSCME statement.

Danny Chun, spokesman for the Illinois Hospital Association, said the Quinn administration has been talking to his organization about overhauling the state Medicaid system, including cutting payment rates and overseeing patient care more carefully.

"This is very complicated stuff. It's not easy," Chun said. "Let's make sure we do it right."

He said it should be done by lawmakers instead of turned over to the executive branch so that everything is done out in the open. That process also might reduce the cuts as lawmakers try to protect their local hospitals.

Quinn hinted over the weekend that he may propose some kind of tax relief for families in Wednesday's speech. He often has talked about making Illinois taxes more progressive by lowering the amounts paid by the poor and middle class.

Cullerton, the Senate president, has concerns about any moves that leave state government with even less money to operate, an aide said.

"Everyone needs to be asking what the price tag is and how we pay for it," said Cullerton spokeswoman Rikeesha Phelon.

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Online: http://www.civicfed.org/FY2013IllinoisRoadMap

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Follow Christopher Wills on Twitter at www.twitter.com/chrisbwills

Scientific American

• Quinn looks at teacher pensions as address nears

[areUbroke]

"...the union said, and the report doesn't make clear that high pension costs are largely a result of the state failing to pay its share in the past." Not exactly.
The state pension systems assume a set level of employee contributions, matching employer (tax-payer) contribution, return-on-investment and amounts to be paid out based on actuarial tables. If everything went as planned, the pension funds would be fully funded. Since it hasn't, the taxpayer is expected to pick up the shortfall.
In 1987 TRS was about 70% funded. Currently around 46%. In 1994 the IL legislature passed legislation increasing the amount the state would contribute to pension funds. In 2004, IL sold pension obligation bonds in hopes of shoring up the pension funds. TRS assumes the invested assets will earn 8.5% in return-on-investments. However, in 2001 and 2002 it lost money, and in 2008 - 2009 TRS lost about a fourth of its value.
Also depleting funds, wide spread salary spiking resulted in 2010, TRS paying out $3 for every $2 it had expected. Tax payers never agreed to pay what-ever-it-takes. Pensions need to be capped, or recomputed. Retirees do deserve a livable retirement income, but the taxpayer also deserves to keep most of what he earns.