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Column: Helping to explain the pension plan
State Senator and State Represenatives speak out
Guest Columnists
Issue date: 6/28/05 Section: Opinions
Over the last week, our offices have received a number of inquiries about the pension plan that was pushed through the Illinois General Assembly by the Democratic leaders of the House and the Senate over the Memorial Day weekend. In fact, there has been so much confusion about what the plan actually does; we are submitting this column in an effort to clear up some of the confusion.
First, what is the plan and who supported it? Basically, money was taken out of our state pension systems in order to help finance current state expenses and subsidize the state's $1.2 billion dollar deficit. Despite this massive deficit, the pension money was also used to finance new state supported social service programs and cover current state expenses. Like Wimpy from the old Popeye cartoon used to say, "I'll gladly pay you Tuesday for a hamburger today," the parties in control of Springfield borrowed against the future to cover current spending.
This plan was an initiative of Governor Blagojevich, House Speaker Michael Madigan (D-Chicago) and Senate President Emil Jones (D-Chicago). For the reasons that follow, we did not support this plan, nor did any Republican vote for it.
Specifically, the legislation borrows $3.5 billion from the pension systems over the next 5 years which is then paid back over 40 years. The estimated pension raid in just the coming year is $1.2 billion - the estimated cost to pay back this money over 40 years is $38.5 billion or over $3000 to every citizen of our state. To help finance this, the Governor is cutting a number of pension benefits to state employees - which, he argues, will help offset the interest cost to repay the loan. However, the net single year savings from his pension cuts is only $30 million, or $12 billion over 40 years. This leaves a net gap of $26.5 billion between the savings and the amount that has to be repaid - money that will have to eventually be paid back.
Governor Blagojevich and Democrat leaders in the General Assembly tell us that this isn't a raid on the pension funds, but rather a "restructuring" of the payments; but as noted above, the savings from these reforms won't come close to covering the enormous interest costs of taking money from the pension funds. A better, but much less flattering analogy would be someone who changes the repayment plan on their mortgage, not to take advantage of better interest rates, but simply to put off current payments. In the end, those payments will be much larger and less affordable. In other words, this is not about a responsible restructuring and savings plan; it's simply an unwillingness to live up to current financial obligations.
First, what is the plan and who supported it? Basically, money was taken out of our state pension systems in order to help finance current state expenses and subsidize the state's $1.2 billion dollar deficit. Despite this massive deficit, the pension money was also used to finance new state supported social service programs and cover current state expenses. Like Wimpy from the old Popeye cartoon used to say, "I'll gladly pay you Tuesday for a hamburger today," the parties in control of Springfield borrowed against the future to cover current spending.
This plan was an initiative of Governor Blagojevich, House Speaker Michael Madigan (D-Chicago) and Senate President Emil Jones (D-Chicago). For the reasons that follow, we did not support this plan, nor did any Republican vote for it.
Specifically, the legislation borrows $3.5 billion from the pension systems over the next 5 years which is then paid back over 40 years. The estimated pension raid in just the coming year is $1.2 billion - the estimated cost to pay back this money over 40 years is $38.5 billion or over $3000 to every citizen of our state. To help finance this, the Governor is cutting a number of pension benefits to state employees - which, he argues, will help offset the interest cost to repay the loan. However, the net single year savings from his pension cuts is only $30 million, or $12 billion over 40 years. This leaves a net gap of $26.5 billion between the savings and the amount that has to be repaid - money that will have to eventually be paid back.
Governor Blagojevich and Democrat leaders in the General Assembly tell us that this isn't a raid on the pension funds, but rather a "restructuring" of the payments; but as noted above, the savings from these reforms won't come close to covering the enormous interest costs of taking money from the pension funds. A better, but much less flattering analogy would be someone who changes the repayment plan on their mortgage, not to take advantage of better interest rates, but simply to put off current payments. In the end, those payments will be much larger and less affordable. In other words, this is not about a responsible restructuring and savings plan; it's simply an unwillingness to live up to current financial obligations.
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