* From a Decatur Herald & Review editorial…
In hindsight, the pension problems began during the Jim Edgar administration, when a 1994 law was approved to have pensions funded at the 90 percent level within 50 years.
They’re kidding, right? The pension problems “began” in 1994?
* Look, there’s no doubt that Edgar’s pension ramp plan was flawed. I’ve been saying so for years. It seriously backloaded payments and burdened future generations instead of tackling the issue head-on.
But can anyone say for certain that if Edgar’s ramp had not been passed that we would be better off today? Does anyone seriously believe that the unfunded liability would be lower today if not for the ramp?
* The state’s pension problems date back to at least the 1940s. The underfunding problem had gotten so bad that by the time the state constitutional convention convened in 1969, delegates decided to scare the pants off legislators by making pensions an unbreakable contract.
But even that didn’t work. It wasn’t until Edgar decided to force the issue that something was done. Yes, they kicked the can down the road, but they did do something.
* On that same topic, this claim in a column is nonsense…
On Monday, the U.S. Securities and Exchange Commission, or SEC, investigation charged the state of Illinois with fraud.
Here is what it had to say:
“… that Illinois failed to inform investors about the impact of problems with its pension funding schedule as the state offered and sold more than $2.2 billion worth of municipal bonds from 2005 to early 2009. Illinois failed to disclose that its statutory plan significantly underfunded the state’s pension obligations and increased the risk to its overall financial condition. The state also misled investors about the effect of changes to its statutory plan.”
That’s lawyer-speak for “the Edgar Ramp fell well short of the mark.”
Oh, please. It’s actually “lawyer-speak” for “Rod Blagojevich’s administration lied.”
* And this editorial is only partly true…
The SEC report says the underfunding mess dates back to a protracted payback plan put forth in 1994 by then-Gov. Jim Edgar. It was compounded exponentially by pension holidays given under ex-Gov. Blagojevich. What [House Speaker Michael Madigan] didn’t say, is that he helped to lead the Legislatures which signed off on those pension holidays.
The first sentence is woefully inadequate, but the rest is spot on, including Madigan’s culpability.
* A little history…
That [Edgar pension payment ramp] legislation, which took effect in 1995, passed both chambers of the Legislature unanimously, drew no opposition from unions and had backing from business groups and newspaper editorial boards. It set out an escalating schedule that required gradual pension payments of as little as $500 million at first but a much steeper ramp-up after 15 years. By 2009, the state paid $2.4 billion toward its pension tab, and next year that obligation will reach a staggering $6.7 billion.
Yes, the ramp was flawed, but at least there was something on the books that hasn’t been totally ignored.
* This section of the recent SEC fraud report is the reason why the law was flawed, but also contains some information that is almost always conveniently ignored by newspaper editorial writers, particularly at the Tribune…
“Rather than controlling the state’s growing pension burden, [the law’s] contribution schedule increased the unfunded liability, underfunded the state’s pension obligations and deferred pension funding,” the SEC wrote. “This resulting underfunding of the pension systems … enabled the state to shift the burden associated with its pension costs to the future and, as a result, created significant financial stress and risks for the state.”
The contribution schedule purposely increased the unfunded liability.
So, when anybody bemoans the pension systems’ unfunded liability, they ought to remember that it was a feature, not a bug of the Edgar plan. It was, however, made far worse by Blagojevich and everybody else who backed the pension holidays.
* Henry Bayer has the last word here about the Edgar plan, which passed unanimously…
“I’m sure if we’d have been opposed to it, maybe there would have been 10 or 20 votes against it,” said Henry Bayer, AFSCME Council 31’s executive director. “If it didn’t pass, it wasn’t like there was an alternative bill that would have made things better. If it didn’t pass, we’d still have what we had. There would have been no contribution or what they’d decide to put in every year, which would have been even less.”
Henry is exactly, totally right.