Whitley: Legislators must have courage to bring about pension reform
By Douglas L. Whitley Guest Commentary March 7, 2013 9:10PM
Douglas L. Whitley
Updated: April 9, 2013 11:56AM
An open letter to Illinois legislators:
The ongoing public employee pension crisis is a huge barrier to restoring confidence and trust in our government and our state’s future prosperity. Employers, business owners, investors and financial decision-makers tell me that their disappointment and frustration with the state’s inability to adequately deal with its fiscal challenges continue to influence their investment and hiring decisions.
Restoring the state’s fiscal integrity is the single most important issue before the General Assembly. Fixing the pension crisis is at the center of the problem and is perhaps the biggest challenge ever to confront an Illinois Legislature.
Sadly, your predecessors in the prior General Assembly failed to fix the broken and unsustainable pension liabilities that have grown over decades to become the largest in the country. Like it or not, every Illinois resident now looks to you to solve this problem and assure their children a brighter future.
Business leaders tell me what they must see to continue to invest in our state is a well-defined, multi-year financial plan that guarantees a resolution and certainty that Illinois is on a course to solvency. Without that, some say they are reluctant to make business plans that include Illinois.
Indeed, some employers are dumbfounded by state government’s inability to directly and effectively address its financial obligations. This is especially confounding to them because those debts are suppressing the economic activity that would generate greater tax revenue for Illinois. The vicious cycle of deficit spending and poor credit ratings must be broken.
The Illinois Chamber of Commerce supports the bipartisan pension reform proposed by state Sen. Dan Biss (D-Evanston) and Rep. Elaine Nekritz (D-Northbrook) that aims to reduce pension cost by more than $30 billion. Our desire is to see the General Assembly approve legislation that is similar in scope, which will require more than a token gesture.
You must make hard choices that will be painful for recipients and almost universally unpopular. However, such changes are not unprecedented. It would be worse to adopt a solution that proves insufficient and forces you to revisit these monumental problems again and again.
There are those who would plant doubt in your mind by suggesting that any substantial and bold solutions you might enact would be ruled unconstitutional. I urge you to keep in mind that naysayers who prefer inaction do so to thwart true leadership.
Any pension law changes will undoubtedly land before the state Supreme Court, but the court cannot rule unless the General Assembly acts. Second-guessing the justices is irrelevant to your responsibility of assuring the state’s financial solvency.
Nobody thinks this will be easy, and most everyone agrees that the consequences of solving Illinois’ pension liability crisis will adversely affect tens of thousands of individuals. There is never a good time or way to inform employees and retirees that their benefits will be reduced or that their contributions will increase. However, not acting will only make matters exponentially worse for everyone.
Private-sector employers have confronted and addressed similar pension issues for decades because accounting standards made it abundantly clear that yesterday’s retirement plans are unsustainable. It has been a rough road, but private-sector employers and their employee unions have restructured pension and health care plans to ensure survival.
You are equipped to embrace and adopt a path to pension fund solvency, balanced budgets and making payments to the funds in a timely manner. The key elements to pension cost reduction are well known, but you must find the political will to create a majority.
Certainly, this General Assembly would prefer to be remembered as the one that solved the pension crisis,rather than be saddled with the legacy of past lawmakers, who bear the infamy of accumulating the largest unfunded pension obligations of any state.
I urge you to demonstrate the courage to reverse our state’s dire circumstances, which include:
A long-term pension debt of almost $100 billion and growing by nearly $2 million a day.
Retiree funds that may well reach insolvency without changes.
A pension funding ratio of only 45 percent, the lowest among the states and woefully short of the recommended 80 percent level.
Annual pension claims approaching 20 percent of the state budget, which limits the state’s ability to adequately support other fundamental responsibilities, such as education.
A state bond rating that has been downgraded 11 times since 2003 and is the lowest among the 50 states.
Increasingly higher interest rates on debt because of that low rating, which also diminishes funds available for basic state government services.
With such a situation, how does one dispute that unprecedented and drastic measures are required? The Legislature must be fearless in undertaking dramatic changes that undoubtedly will fire the emotions and generate the ire of constituents.
On behalf of the members of the Illinois Chamber of Commerce and the millions of Illinois citizens who understand that financial discipline must be restored, we urge you to act to restore the state’s fiscal integrity. We trust you are up to the task.
Douglas L. Whitley is president and chief executive officer of the Illinois Chamber of Commerce.