No single solution to pension plight

Sen. Steans, Civic Federation’s Msall, IPI’s Schuster agree on problem, urge action

State Sen. Heather Steans, Jacki Robinson-Ivy of the City Club of Chicago, Adam Schuster of the Illinois Policy Institute, Kristen McQueary of the Chicago Tribune, and Civic Federation President Laurence Msall pose after Monday’s discussion on public pensions. (One Illinois/Ted Cox)

State Sen. Heather Steans, Jacki Robinson-Ivy of the City Club of Chicago, Adam Schuster of the Illinois Policy Institute, Kristen McQueary of the Chicago Tribune, and Civic Federation President Laurence Msall pose after Monday’s discussion on public pensions. (One Illinois/Ted Cox)

By Ted Cox

CHICAGO — A panel of financial experts acknowledged Illinois has a pension problem and the time for action is now, but failed to settle on any solutions in a discussion Monday at the City Club of Chicago.

“Why are we waiting for the problem to get bigger rather than addressing it while we have the opportunity?” Civic Federation President Laurence Msall said before a packed house at Maggiano’s Banquets.

“I do believe it’s a solvable problem,” said state Sen. Heather Steans of Chicago, the lone legislator on the three-person panel.

Steans joked that she had to “bite the bullet for our (Democratic) caucus” in appearing at the event, in which she was seemingly outnumbered by deficit hawks: Msall, head of a business-oriented government watchdog, and Adam Schuster, budget and tax research director at the vociferously anti-tax Illinois Policy Institute, as well as moderator Kristen McQueary, who has been known to raise pension issues herself as a Tribune columnist in Springfield.

They agreed on public pensions being a problem, with Steans citing the commonly mentioned figure that the state has a $130 billion unfunded pension liability.

“It’s very real and something Springfield needs to focus on and fix,” McQueary said.

Calling the issue “the most severe public-policy problem that we face in Illinois,” Schuster said, “The benefits cannot be paid. They will not be paid,” adding, “We cannot tax our way out of it.”

“This is not politically attractive or easy,” Msall said. “If it was it would have been done a long time ago.”

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“This is not politically attractive or easy. If it was it would have been done a long time ago.”

Civic Federation President Laurence Msall (One Illinois/Ted Cox)

“Tax hikes have failed to solve our economic problems,” Schuster said.

“It is not going to be one thing” that solves the shortfall, Msall said.

Steans offered a series of actual proposals, beginning with raising additional money for pensions, including through Gov. Pritzker’s “fair tax,” a graduated income tax, scheduled to go before voters to amend the state constitution with next year’s general election. But it would no doubt face opposition led by the IPI.

She mentioned a “consideration model,” meant to give public workers a choice between pensions based on raises on the job or on cost-of-living increases after retiring, but not both.

Other attempts to alter benefits for public pensions have been rejected by the Illinois Supreme Court, and it’s not clear it would allow those benefits to be negotiated in any case. Msall bemoaned how the Supreme Court had simply struck down previous attempts to change pension benefits, while offering “nothing” in the way of guidance on how to proceed without reductions.

Regardless, Steans said, “I do believe we should have labor at the table working with us on this.”

“We have to allow adjustments to the future,” Schuster said. He said pensions currently increase 3 percent annually in what’s considered cost-of-living adjustments, but he pointed out that’s outstripping the rate of inflation — a point previously made last year by former Chicago Mayor Rahm Emanuel, who also called for COLA increases to be reined in. Schuster called them “a guaranteed post-retirement raise” and said they’re “unsustainable” going forward.

But, like the progressive income tax, that fix would require an amendment to the state Constitution, and while Schuster and McQueary seemed receptive, it was unclear if it would pass a voter referendum, as it did in Arizona, or even be permitted at all by the state Supreme Court. Steans warned that “there will be a well-funded campaign against it.”

Steans also mentioned the possibility of consolidating pension plans to gain efficiency and get a better return on investment through the size of the pension fund. Schuster said that was “not a solution,” but Msall endorsed it, calling it “a big first step” and adding that consolidating all the local public-safety pensions into one statewide fund “works out much better,” as in Wisconsin. He pointed out the pension problem was not created by local governments, but by the General Assembly granting pension holidays and using pension funds for other spending, so a statewide solution might be called for.

“I certainly agree this is something we should be looking at,” Steans said.

Steans also suggested that the government reassess the amortization schedules for the various pension funds.

“I do think ultimately this is solvable,” she said.

Steans said the state has a “moral obligation” to both workers and voters to put pensions on firm financial footing, and she pointed out that many workers in public pensions — schoolteachers, for instance — don’t pay into Social Security. “This is their retirement,” she said.

She said she couldn’t speak for state representatives in the House under Speaker Michael Madigan, but “this is something that Senate President Cullerton takes seriously.” She said it was “helpful” that new Chicago Mayor Lori Lightfoot is also highlighting the need for pension reform, as she tries to address a Chicago budget deficit estimated at $838 million this year, but added that Lightfoot had been inconsistent on whether she’d pursue changes in future pension benefits.

“It’s not Chicago alone” seeking pension reform, Steans said, adding that many downstate cities like Peoria also face pension shortfalls.

A statewide solution might seem best then, and even Schuster committed to “thoughtful and balanced pension reform,” but what exactly that might consist of was left open for now, even as all pressed for more urgency in confronting the issue.