Illinois business leaders: Reject pension reform bill SB1Continue reading.
What business is telling Legislature about pension reform
Douglas Whitley, president and CEO of the Illinois Chamber of Commerce, says businesses are worried the state Legislature might take a pass once again on reforming state pensions.
In a note to Chamber members, Whitley wrote, “I am of the opinion that many of our legislators are once again ignoring the problem with a false sense of hope that continued delay will somehow make all the painful decisions they must make go away.”
On Wednesday, Whitley sent a letter about pension reform to every legislator.
Here’s the letter:
Dear Senator or Representative _______,
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 frustrations with the state’s inability to adequately deal with fiscal challenges continue to influence their investment and hiring decisions.
Restoring the state’s fiscal integrity is the single most important issue before the 98th General Assembly. Fixing the pension crisis is at the center of the problem and is perhaps the biggest challenge ever to confront an Illinois General Assembly.
Some business leaders with whom I have spoken liken the state’s financial situation to a bankruptcy workout plan. In essence, the task before you and your fellow members of this Legislature is to come up with a workout plan for the State of Illinois.
Sadly, your predecessors who served the people of Illinois in the 97th General Assembly failed to fix the broken and unsustainable public employee pension liabilities that have grown over decades to become the largest in the country. However, 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 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. Private sector employers expect you to implement a rational and fiscally responsible solution to the public employee pension problems.
Indeed, some employers are struck dumbfounded by government’s inability to directly and effectively address the state’s financial obligations. This is especially confounding to them because those unaddressed financial obligations are suppressing the very economic activity that would generate greater tax revenues for Illinois. The vicious cycle of deficit spending and poor credit ratings must be broken.
The Illinois Chamber supports and applauds the bi-partisan effort organized by Senator Dan Biss and Representative Elaine Nekritz that set a reduction target in excess of $30 billion. Our desire is to see the 98th Illinois General Assembly approve legislation that is similar in scope. Undoubtedly, this requires more than a token gesture. You must make hard choices that will be painful for recipients to bear and almost universally unpopular. However, such changes are not unprecedented.
It would be worse to adopt an inadequate solution that proves insufficient and forces you to re-visit these monumental problems again and again.
There are those who would plant doubt in your mind by suggesting any substantial and bold solutions you might enact would be ruled unconstitutional by the Illinois Supreme Court. I urge you to keep in mind that naysayers who prefer inaction do so to thwart true leadership by those who honor their pledge to the public interest. Second-guessing the justices is irrelevant to your fiduciary responsibility of assuring the state’s financial solvency.
Any pension law changes will undoubtedly land before the Supreme Court for resolution. Yet, the Supreme Court cannot rule until the General Assembly acts. The General Assembly must venture a thoughtful and justifiable approach to restoring the state’s fiscal health.
Nobody thinks this will be easy, and most everyone agrees that the consequences of solving the state’s enormous pension liability crisis will adversely affect tens of thousands of individuals. There is never a good time 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 every year for decades, because accounting standards have 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 – and have moved on.
You and your colleagues are equipped to embrace and adopt a path to fund solvency, balanced budgets and making payments 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, you and other members of the 98th General Assembly would prefer to be remembered as the Legislature that solved the seemingly unsolvable, rather than be saddled with the legacy of past lawmakers, who carry the infamy of accumulating the largest unfunded pension obligations of any state. I urge you to demonstrate the courage to reverse our state’s current dire circumstances, which include:
- A pension debt load of almost $100 billion and growing by nearly $2 million a day.
- Retiree funds that may well reach insolvency, without changes.
- An Illinois pension funding ratio of only 45%, which is the lowest among the states and woefully short of the recommended 80% level.
- A magnitude of annual pension claims (approaching 20%) on the budget that limits the state’s ability to adequately support other fundamental responsibilities, such as education.
- The fact that the annual growth to adequately and appropriately satisfy the actuarial requirement for pension funding alone exceeds the estimated annual growth in tax receipts.
- An Illinois bond rating that has been downgraded 11 times since 2003, and is the lowest rating among the 50 states.
- Increasingly higher interest rates on debt, due to poor bond ratings, which diminishes funds for basic needs, such as human services.
With such a situation, how does one seriously dispute that unprecedented and drastic measures are not required? The Illinois General Assembly must be fearless in undertaking dramatic changes that undoubtedly will fire the emotions and generate the ire of constituents. Even so, I urge you and your fellow lawmakers to be undaunted in fulfilling your duty as the stewards of the state.
On behalf of the members of the Illinois Chamber of Commerce and the millions of Illinois citizens who understand financial discipline must be restored, we urge you to take the necessary votes that will ultimately restore the state’s fiscal integrity. We trust you are up to the task. We thank you in advance for your courage and perseverance, which we all know is necessary to reverse our fortunes.
Douglas L. Whitley
President & CEO
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