The Voters In Illinois Are Being Hoisted On Their Own Petard

Yesterday the Wall Street Journal posted an article about what is happening with public employee pension funds in Illinois. To quote a Chicago pastor, “The chickens are coming home to roost.”

The article reports:

The Constitution is not a suicide pact—except maybe in Illinois. On Friday the Illinois Supreme Court struck down modest pension reforms as a violation of the state constitution in a decision that tees up state taxpayers for years of tax increases.

The Court stated that the pensions were a contract “the benefits of which shall not be diminished or impaired.”

So where did this begin? It began with a very cozy relationship between unions and Democrat politicians. Politicians promised the unions benefits that could not be sustained in exchange for the support of the unions.

The article explains:

Less than 40% of the increase in the state’s unfunded liability since 1995 is due to inadequate payments. The rest is due mainly to benefit growth and faulty actuarial assumptions such as investment rate of return.

The 2013 reforms at issue capped salaries of current workers that are used to calculate pensions at $110,600 (with a carve-out for collectively bargained increases) and raised the retirement age for workers in their 20s to the ripe, old age of 60. Compounded 3% annual cost-of-living increases were also tweaked for younger workers, a modification that courts in nearly every other state have upheld.

The article concludes:

All of this means that Illinois and its municipalities may soon have little choice but to raise taxes or restructure debts to pay for pensions. Chicago, whose credit rating is two notches above junk, faces a $20 billion unfunded liability for pensions and $1.1 billion balloon payment next year. Unions (and perhaps investors) were counting on a state bailout, but now they will probably beg Washington for a rescue.

Republican Governor Bruce Rauner has floated an alternative: a state constitutional amendment allowing pension modifications, which would require a public referendum and two-thirds vote of the legislature. Barring that, Illinois taxpayers may want to start contemplating Indiana or Florida residency.

The voters of Illinois have brought this upon themselves. In case you are in another state and laughing at their plight, don’t laugh too hard–this may be coming to your city or state soon. Most states and cities have unfunded mandates involving pensions for public employees which were given in union negotiations with politicians in exchange for union support. There has been a very unhealthy alliance between public employee unions and Democrat politicians for years in many cities and states. Although the Democrats and unions share a good part of the blame for this mess, the ultimate responsibility rests with the voters.

A representative republic needs informed voters. If voters are not informed, they are at the mercy of alliances such as these.