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Home Illinois News

Dabrowski: It’s the pension promises, stupid!

Illinois Review by Illinois Review
August 15, 2018
in Illinois News
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By Ted Dabrowski - 

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You can trust public pension apologists to deflect any critique that calls out the failure of defined benefit plans. Unsurprisingly, their response to a recent Wall Street Journal editorial highlighting Wirepoints’ research was just that – deflection via misdirection and victim playing.

Wirepoints found that a skyrocketing growth in pension benefits, what are known as accrued liabilities, is behind most of the state pension crises playing out across the country. Uncontrolled pension benefit growth is swamping many state economies and the residents who pay for those benefits.

The apologists find the facts inconvenient, so they deflect. But they don’t disprove the core findings of our research: that unrestrained benefit growth is behind many state fiscal crises.

That was the subject of our two most recent reports: Illinois state pensions: Overpromised, not underfunded and Overpromising has crippled public pensions: A 50-state survey.

The numbers are undeniable. And it’s not just the growth rate of accrued liabilities that’s daunting. It’s how they’re crowding out everything in their path.

For example, look at the chart below. It compares the total of Illinois’ state pension promises to the state’s operating budget over time. You’ll quickly see why those promises are swallowing the budget and crowding out spending for everything else.

Unnamed (1)

In 1987, total promises made to active workers and retirees were 1.6 times, or 162%, the size of the state’s yearly operating budget.

By 2016, those promises had jumped to 6.8 times that of state general fund revenues. That’s outrageous any way you measure it.

The bottom line: Total pension benefits owed by the state grew 2.5 times faster than state revenues, year after year, for nearly 30 years.

Illinois’ pension growth has dwarfed the growth of everything else in the economy – the state’s GDP (using state personal income as a proxy), the state’s tax revenues and its residents’ ability to pay for them.

It’s little wonder that Illinois pensions are dramatically underfunded. Taxpayer contributions could never keep up with that kind of growth. It’s left Illinois with an officially-reported pension shortfall of $129 billion. And a credit rating that’s just one notch above junk.

It’s time to stop blaming taxpayers for the pension mess in Illinois. It’s overpromising, and not underfunding, that’s the real cause.

Illinois' pension crisis won't end until the growth in liabilities is halted.

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