Playing Politics, Ignoring Reality
10:08 am
Tue August 21, 2012

Tax Expert: Pensions Are Not the Problem for Illinois

Conservative estimates indicate Illinois is $83 billion short of what it has promised state workers in retirement benefits.  But Ralph Martire of the Center for Tax and Budget Accountability said said there is nothing inherently wrong with the state's pension plans.

He said the problem is that for 40 years the state “borrowed like a credit card” from pensions to pay for other services. But instead of acknowledging that, state leaders and lawmakers have played politics with the issue.

“So there’s this political canard hanging out there that most voters and taxpayers believe that … overly generous benefits -- or Cadillac benefits -- were the driver of this problem,” Martire said.

“Now it’s not the  reality and the data don’t support that. But if that’s the generally held political belief, you can bet that politicians are going to respond to that rather than the reality.”

Illinois  is paying $1 billion more toward its pension funds this year than last, but that's not because retirement benefits have gotten more expensive. In fact, what's called the “normal cost” for pensions actually decreased. The extra $1 billion is paying down debt.

It's a figure that -- by law -- is going to rise every year, and Martire said that is what's creating financial pressures for Illinois. He said passing a law to cut employee benefits won't help.

“It won't relieve the fiscal pressure created by the repayment structure for the debt owed to the pension system,” Martire said.

Martire said Illinois needs to refinance its debt so it can pay an even amount every year.

Thanks to Illinois Public Radio