Pension Reform Battles Get Underway in Illinois (UPDATED)

Stock art? No, this is actually how much Illinois has contributed to its employee pension funds.Credit: Andre Blais at Dreamstime.comWith Illinois’ new supermajority Democratic state legislature seated, it’s time for the state to try to face its massive public pension time bomb, widely argued to be one of the worst in the nation (worse than California’s even).

Today, the Illinois Policy Institute, a free-market think tank trying to encourage pension reform in their state (not unlike how the non-profit Reason Foundation, which publishes this site and Reason Magazine, is trying to encourage the same in California), held a presser to promote their own solutions (pdf). Their plan has been introduced as HB3303, sponsored by Assembly Rep. Tom Morrison (R-54), and would work to close the gap in funding for existing public employee pensions, level out pension payments, and – the biggie – push new hires into 401(k)-style plans rather than pensions.

Theirs is not the only plan. Another bill with bipartisan support would create a hybrid program for some employees, making a system of both defined benefits (pensions) and defined contributions (401(k)s). Reuters reports that Illinois House Speaker Michael Madigan is trying to push some reforms of his own, increasing the retirement age for public employees, freezing cost of living increases, and requiring employees to contribute more to their own pensions.

But the big question is whether any public pension reform can happen in a state with such powerful unions. I spoke briefly with Jonathan Ingram, the Illinois Policy Institute’s director of pension reform, and they’re hoping heavily Democratic Rhode Island’s shift to hybrid retirement funds for new hires is a sign that change is possible.

“I think the day of reckoning is very close on the horizon,” Ingram said. “They’re realizing they have to cut education and public safety because pensions are crowding out the money.” A temporary income tax hike meant to help the state pay bills was instead used to pay pensions (and at least one Illinois Democrat wants to make the hike permanent for that very reason).

California has shown that if the state legislature is too beholden to unions to fix the problem, voters can force it with ballot initiatives, as they did last year in San Diego and San Jose. Ingram said Illinois’ ballot initiative system, though, is much weaker. Citizens there are more dependent on politicians facing down union interests. So, good luck with that!

UPDATE: The Illinois House utterly rejected Madigan's proposals.

Below, Reason Foundation Director of Policy Adrian Moore chats with former San Diego Councilman Carl DeMaio in our Reason office in Los Angeles about pushing pension reform in California:

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  • WLC||

    Illinois civil servants can already sign up for a 457 plan http://www2.illinois.gov/cms/E.....ation.aspx

    Not sure how many actually do.

  • Sevo||

    ..."A *TEMPORARY* income tax hike"...
    Ha and ha.

  • Brandon||

    I know this was covered in the morning links, but that thread seems to be dead. MSN interprets Subway CEO's Obamacare comments to this headline: Subway CEO Says Don't Worry About Obamacare.

    http://money.msn.com/now/post......507c391fab

  • Brandon||

    Also, HuffPo is completely losing their shit over the Bob Woodward stuff. They have no fewer than 4 columns on their front page right now attacking Woodward for going off the reservation. Serious mask-slippage.

  • Paul.||

    Has the mask even been on?

    Someone yesterday noted that the Obama administration is 'poor' at media control.

    I offer that he doesn't have to be good at it. The media establishment is almost universally friendly towards this administration.

  • ejhickey||

    tell me about it. i posted a comment that was mildly critical of the WH on this issue but not supportive of woodward either. within seconds i received 8 critcal comments. kind of funny to see the drones in action

  • Dweebston||

    We have lower retirement ages. Age 50 for public safety in most jurisdictions, 55 for everyone else.

    I'd be halfway to retiring on a phenomenally munificent pension if I'd gone to work for the state like ma always said. Am I a total piker for insisting "No, no shoring up the funding gap, no tax increases, no cuts in services without privatization, you renegotiate your bennies or you go bust"?

  • Enough About Palin||

    and – the biggie – push new hires into 401(k)-style plans rather than pensions

    , which will be seized by the federal government because some people choose to borrow against the principle and as the Feds tell us, borrowing against the principle is both wrong and bad as it is better to borrow uncollateralized like they do.

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