in Wake of IL Democrat Failure
Washington Free Beacon
Conservatives are calling for a total transformation of Illinois' public pension system in the wake of Democratic Gov. Pat Quinn's failure to reform the program, which is nearly $100 billion in debt.
Bob Williams, president of State Budget Solutions (SBS), says Illinois will be the first of many states to fail if something is not done to quell rising retirement costs for state employees and teachers.
SBS, a conservative nonprofit, has studied the fiscal problems of all 50 states and sees one common denominator to curbing pension shortfalls: Converting defined-benefit retirement plans in which employees receive set benefits regardless of a state's financial health to the defined-contribution plans common in the private sector.
"The only solution is a 401(k)-type, defined-contribution system," Williams said. "These defined-benefit systems are underfunded woefully, and unfortunately, too many states aren't waking up to reality."
Illinois already supplies defined contribution plans to state university employees through its TIAA-CREF program. That retirement system is the healthiest in the state since lawmakers are forced to match employee contributions in a timely manner even as they have ignored and delayed full contributions to the defined benefit systems.
Illinois has the lowest credit rating of any state and is in danger of being reduced to junk bond status because its pension liabilities are 39 percent funded. That is less than half of what accounting professionals consider healthy. The TIAA-CREF system, by contrast, enjoys the highest credit rating from each of the four major rating agencies.
"The higher-ed system has performed very well because members are involved directly," Williams said. "If the legislature did not fully fund its contribution, the faculty would immediately know about it. Whereas in a [defined-benefit] plan, they assume the money is going to there--it's obviously not."
Williams' proposal is gaining steam among some political insiders in Illinois but reform-minded Democrats, including Gov. Quinn, are cool to the idea. The governor has proposed a number of smaller reforms to cut back on the system's $97 billion debt to no avail. Democrats, who hold super majorities in both legislative branches, refused to vote on his lame duck push to create a super-committee to resolve the crisis.
Conservative activists from the Illinois Policy Institute, a state think tank, opposed Quinn's plan because he seemed unwilling to push for major reforms.
"It's clear that Pat Quinn does not understand the full scope of the problem. He's just flailing around," said Jonathan Ingram, IPI's director of health policy and pension reform.
"Defined-benefit plans are outdated, virtually unheard of in private sector and for good reason. They assume that you can predict what the [stock] market's going to look like in 30 years, what the life expectancy is going to be; there are too many variables to account for."
Unions have fought against defined-contribution reforms, a major reason Quinn has not entertained the idea. Anders Lindall, spokesman for the politically powerful American Federation of State, County, and Municipal Employees, said conservatives are trying to exploit the crisis by blaming employees rather than politicians for the funding shortfall.
READ FULL SOURCE ARTICLE: 01/15/2013
Editor's Note: Have we mentioned that we view labor union leadership as a gaggle of fiscal bloodsuckers who always blame everyone else for the problems their demands create?
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