This morning Glenn Reynolds points to an article at WBBM Radio’s web site:
The State of Illinois has the most underfunded public pension plans in the nation, with a funding gap that is now approaching $50 billion. The low balances in the state’s pension accounts have been made worse by the stock market crash, which has also hit Chicago’s and Cook County’s employee pension plans.
It’s a the dire situation for the retirement plans of state workers ranging from police to judges to university professors to members of the Illinois General Assembly. All are counting on state pensions, but may wake up to a brutal reality.
A financial war is brewing — and it’s likely to pit these public employees against Illinois taxpayers who are responsible for paying those generous pension promises. There simply isn’t enough money in all these retirement plans to send out the promised checks. If you think Bernie Madoff had a Ponzi scheme going, wait until the wave of boomer retirement hits the reality of pension underfunding.
The article understates the problem here if anything. Illinois’s problems with public pensions are particularly troublesome due to Article XIII, Section 5 of the Illinois Constitution:
Membership in any pension or retirement system of theState, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.
IIRC that’s been fully litigated, understandable since the provision applies to the pensions of judges and attorneys employed by the state and units of local government. I interpret it to mean that, barring constitutional amendment, the Illinois legislature doesn’t have the power to reduce public pensions in the state and a state court has the power to order that pensions be paid, taxes levied to pay them, etc. under its equity powers.
When Gov. Blagojevich decided to fund projects of his own (some of which are included as examples of abuse in the articles of impeachment) rather than paying in to the state pension fund, it was the last straw for me. It was so obviously foolish and short-sighted. In Illinois fiscal sanity requires funding public pensions first. If you can’t afford to do that, you can’t afford to do anything new.
