Dan Petrella
The SJ-R
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Pension report
The Illinois Policy Institute used Tuesday’s meeting to unveil its new report titled “The Crisis Hits Home: Illinois’ Local Pension Problem.” The group bills itself as a “nonpartisan research and education organization” but has received more than $500,000 from GOP gubernatorial candidate Bruce Rauner over the past five years.
The institute used publicly available data to rank the impact of pensions on the financial health of 114 Illinois municipalities outside the city of Chicago. The report found that, of the 20 largest cities studied, Springfield ranked lowest on the institute’s 100-point scale. The capital city ranked 112th out of the 114 towns studied.
“What we’re seeing is more and more of the budget being consumed by pensions,” said Ted Dabrowski, the organization’s vice president of policy. The situation is not sustainable, he said. “This isn’t a Springfield problem; it’s a statewide problem,” Dabrowski said. “But it’s acute here in Springfield.”
McMenamin, who has been outspoken about the problems facing the city’s retirement funds, said the report should be “another wake-up call.”
“We’ve got a report here that shows that our taxpayers are deeper in the hole — much deeper in the hole — than they were 10 years ago,” McMenamin said. “Now we can recognize the problem, or we can play the blame game.”
‘Advocacy, not analysis’
University of Illinois finance professor Jeffrey Brown, who has been an active voice in the debate over Illinois’ public pension systems, said he agrees that the growing unfunded liabilities of local retirement funds is “a serious problem that needs to be addressed.”
While he didn’t independently verify the report’s numbers, the sources the Illinois Policy Institute used to rank the towns are legitimate, he wrote in an email Tuesday afternoon.
However, Brown said the report is flawed in its assertion that “the real reason these pensions are in shambles is the inherently flawed defined benefit design” and its conclusion that the only solution to the problem is switching to a 401(k)-style defined contribution system.
Brown said there are many examples of well-funded defined benefit plans — both public and private — around the world.
He also said a defined contribution system would do nothing to address existing unfunded liabilities if, as the report suggests, current workers are guaranteed that they will receive the benefits they’ve earned under the current system. This would force local governments to pay into the new system while continuing to play catch-up in the old one, Brown said.
“They did some useful work here collecting all this data and putting it in a format that shows just how difficult the municipal finance situation is going to be in the years ahead,” Brown said. “Had they stopped there, I would praise their work.
“But then they lose total credibility when they suggest that there is somehow a free lunch to be eaten if only we would follow their preferred solution. That is advocacy, not analysis.”
Read the full article at sj-r.com…
Joe McMenamin for Ward 7 