* Amanda Kass has been working on another white paper about pensions and posted about one aspect of it on Twitter. I’ve copied and pasted her tweets into one post, but click here to read it online…

One big trend I see throughout the legislative history is a sort of sleight of hand.

A pension crisis narrative emerges that focuses on the finances of the pension systems using one or two metrics (the funded ratio and/or unfunded liabilities) and a flurry of speeches, op-eds, etc about how the crisis is dire and must be solved immediately ensues.

But these same speeches and op-eds also touch on a second, related issue: pension payments in context of the state’s operating budget, and concern that payments are burdensome + crowding out other areas of the budget.

The sleight of hand occurs when legislation is passed that cuts the state’s required pension payments, but in such a way that that same legislation can also be used to claim the pension crisis is solved.

A prime [example] of this sleight of hand is the [Jim Edgar] 50-year pension ramp, which replaced PA 86-273. That state’s [required] contributions under that prior law were higher, but payments were subject to the annual appropriation process + lawmakers simply didn’t adhere to the payment schedule.

Rather than just make the [required] payments lawmakers elected to scrap the existing plan and put in a new 50-year one that started out with a fifteen year ramp period. So not only did this lower the [required] payment, but it kicked paying down unfunded liabilities decades into the future.

Lawmakers also made the pension contributions under the new 50-year plan subject to a continuing appropriation, which meant that if they failed to appropriate the payments during the budget making process the payments would still get made.

Passage of the 50-year funding plan was touted as a good compromise that fixed the pension mess… even though the state’s payments to just TRS would have been an estimate $400 million more under the old law.

And while the continuing appropriation was a good measure, state lawmakers can change the state’s payments through legislation. Precisely what [happened] w/PA 94-4, which cut the state’s pension payments for FY2006 + FY 2007 [under Blagojevich].

*** UPDATE *** Rep. Rob Martwick (D-Chicago)…

This year, despite the availability of more attractive assignments, I decided to remain the Chair of the House Committee on Personnel and Pensions. I decided to stay with pensions because more than ever, I believe that Illinois’ future will be determined by how we deal with out pension debt. Name a problem that the state is dealing with. I bet that at least 9 out of 10 times, I can show you how our inability to handle our pension debt has caused that problem or made it worse. If we are to solve Illinois, we must solve the pension debt crisis.

As I read Amanda’s thoughts, something echoed in my mind. Nearly every solution that has been ever been proposed to deal with pensions has involved putting LESS money into the fund, not more. Whatever your political persuasion, there is one undeniable fact: If you try to pay off a debt by putting less money toward that debt, you will not succeed. Whether it was the Edgar ramp, the Blagojevich pension holidays, we have constantly tried to lower the payment in order to solve whatever our crisis of the moment is. Until we commit money into front loading the repayment schedule, we will only make the problem worse. In my role, I will continue to push for math based solutions that solve the problem. No one wants a tax increase. No one.

However, I believe that our citizens will support us if we actually solve problems. According to COGFA, adding $1B per year to the annual pension payment would cut 7 years off the repayment schedule, reaching 90% funding by 2038 instead of 2045, saving the taxpayers $60 billion in repayment costs.

Under this scenario, the payment in 2039 would drop from approximately $16 billion to about $2 billion. That $14 billion dollar annual budget windfall could be used to pay for an increased investment in K-12, higher education, infrastructure, and social programs. It could even be used to pay for a tax decrease. Imagine that. Instead of just empty promises that certain legislators make to “fight” for lower taxes, we could provide a plan to pay for one.

We can and should consider to look at creative ways to manage the repayment so that we can find any and all savings possible. That’s what Rep. Batinick and I did with pension buyouts, and I will always be open to new and creative ideas like reamortization, consolidation and bonding. However, I will continue to advocate for additional funds. The sooner we pay down our debt in a responsible manner, the sooner we will return Illinois to a fiscally responsible state on the path to prosperity.