Loophole could be at the heart of the Illinois pension crisis

Illinois legislature

In the story below, we identify one of the loopholes in the proposed Illinois pension reform legislation, and who that loophole hurt.   

Legislators now say they have closed some of those loopholes.  News 8’s Jenna Morton explains which loophole survived as pension reform became law, and who wins and loses in pension reform that was passed in Illinois – Monday, February 24, 2014 on News 8 at 10 p.m.

The state faces a $100 billion pension crisis, and Illinois lawmakers have yet to come up with a pension reform.

Amid all the debate over the state’s pension crisis is a little-known secret in Springfield.  It’s a loophole that allows non-state employees to also collect public pensions.

“I did not think that was something that should be happening in Illinois, particularly when we’re facing such a huge pension crisis,” said Emily Miller, of the non-profit watchdog group Better Government Association.  “You know, there are public workers who work really hard and deserve those benefits.  But, you know, private employees don’t deserve the benefits that public employees do.”

Employees of 13 non-government groups are currently eligible for publicly-funded pensions in Illinois, including lobbying groups like the Illinois Association of Park Districts and the Illinois Principal’s Association. Workers for such organizations may be paid by member dues, but they are entitled to the state’s public pension system.

“I think it’s the kind of thing that causes, understandably, a lot of concern out there for voters,” said State Representative Elaine Nektriz, (D) from Northbrook.

Nektriz says the loophole was created when a court ruled in 1982 that people in certain organizations affiliated with government groups, such as a university, a school system or a park district, were all eligible for state pensions.

“They’re paying in, so they’re paying their share toward it, but it creates an inequity, because that means everybody maybe ought to be able to pay in and receive that,” said Nekritz.

While the dollar amount might seem like a drop in the bucket, Miller says the bucket’s overflowing right now and it’s more about the principle than the money.

“It’s not fair to the taxpayers that private employees would be able to benefit from a taxpayer-backed system,” said Miller.

There is currently legislation up for debate in Springfield that would prevent employees of those organizations from getting a public pension.

However, until pension reform is passed, loopholes like this will continue.  Some say the loophole is just one example of abuses for which lawmakers need to take responsibility.

4 comments

  • Earl Shumaker

    This is is absolutely immoral, and legislation should be enacted that will no longer allow this. Also, there should be legislation enacted that will not allow our part-time legislators to receive a full state pension state pension based on part time employment. Such pensions should be pro-rated

    Also, an individual who retires from one state pension with full benefits should have caps on how much they can earn if that individual upon retirement is employed by another government entity.

  • Billy Bolt

    Here is the real heart of the pension crisis:

    From page 48 of the State of Illinois Report of the Pension Modernization Task Force:
    http://www.ilga.gov/commission/cgfa2006/upload/112009pensiontaskforcereport.pdf

    “How did we get here?
    The reality is that the primary cause of the State’s unfunded pension liability is Illinois’s decades-long failure to make its full, actuarially required employer contribution to the five pension systems.

    This poor fiscal practice was codified in the 1995 pension funding bill “P.A. 88-0593,” known commonly as the “Pension Ramp” bill. During the first 15 years of the Pension Ramp, the State’s employer contribution was set at levels that continued the practice of not making the full actuarially required employer contribution, thereby increasing the unfunded liability amount.

    This poor fiscal practice was followed by a $10 billion pension obligation bond issue in 2003 (P.A. 93-0002), which diverted $2.7 billion of the bond proceeds to cover expenses in the state’s operating budget, thereby allowing the state to skip part of the FY 03 and all of the FY 04 payment required under the 1995 funding law.

    In addition, P.A. 94-0004 reduced the FY 06 and FY 07 payments by $2.3 billion. The deadly combination of nearly 30 years of systematic State underfunding of its employer contributions to the pension systems, followed by the cataclysmic decline in asset values caused by the national meltdown in financial markets over the last year, combined to create an all-time high in the State’s unfunded pension liability.”

    • Aaron

      You can talk about the state no contributing all you want. The fact is the state (read taxpayers) have contributed more to the pension funds EVERY year than state employees. Try finding another employer that does that. The pensions are too generous.

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