The Illinois legislature's Tier 2 public pension creation is the chicken coming home to roost.
As the Illinois’ legislators finish up the current session they will be voting on a plan by Chicago Democratic Party state senator Robert Matwick to try and deal with a mess they created back in 2010.
Many of us tried to warn them that when they created a second tier to the public pension systems they were creating a time bomb.
Since the Illinois constitution prohibited cuts to current employees and retirees, a prohibition that was later upheld unanimously by the Illinois Supreme Court, the legislature passed a law that cut the pension benefits of any public employee in a local or state pension plan hired after January, 2011.
State senator Martwick was a state representative at the time and a close ally of Cook County Board President and Cook County Democratic Party Chair Tony Preckwinkle.
“In 2010 Illinois passed Tier 2 pension legislation and as a result, every state worker, teacher, judge and State University employee is now part of new sustainable pension system that has dramatically lower benefits than the previous system, and dramatically lower costs,” said Martwick a few years later.
That wasn’t and isn’t true.
Many of us who were and are pension rights activists warned the politicians in Springfield that they were creating a time bomb that would explode soon enough.
“It’s irresponsible action by elected officials,” Ralph Martire said at the time.
Ralph was and is the head of the Chicago-based, bipartisan, Center for Tax and Budget Accountabilty.
The problem, as I wrote in yesterday’s post, is that employee contributions are only one source of pension revenue.
We always paid our contribution.
The legislators consistently voted to skip the state’s contributions.
Some, like the Chicago Tribune and the Civic Committee blamed pensions that were too “generous.”
The unfunded pension liability was never a benefit problem.
It was always a funding problem.
But Martwick and the rest of the legislature decided they could solve the problem by cutting benefits by creating a Tier 2.
Now, as we get closer to the date when Tier 2 employees will retire it has become obvious that the time bomb is ready to go off.
The benefits to Tier 2 employees will be in violation of federal “safe harbor” laws.
Public pensions must be as good or equal to Social Security. Illinois’ Tier 2 benefits won’t reach that threshold.
Local school districts, the state an local municipalities (and taxpayers) will be on the hook for millions, maybe billions of back payments.
State Sen. Robert Martwick (D-Chicago) is proposing legislation he says would “fix” a 2010 law that aimed to stem Illinois’ pension crisis by cutting back retirement benefits for future public employees. Researchers have since warned that the measure likely went too far, potentially depriving workers of benefits they’re entitled to under federal law.
Chicago leaders and other local governments are blasting the bills for their promise to burden taxpayers with hundreds of millions more dollars in pension obligations. And at least one fiscal watchdog says the proposals risk repeating the previous law’s sin of taking action before studying the consequences.
Martwick, who chairs the Senate Special Committee on Pensions, says the move can’t wait.
Martwick’s chickens have come home to roost.