Any real pension reform in Illinois, and in any state for that matter, should start with 401ks. Workers in the private sector have been in a 401k for decades. It’s time the public sector put new hires into 401ks from day one, and got rid of pensions, end of story. Collin Levy writes in The Wall Street Journal:
Illinois lawmakers have been notoriously reckless with the state’s pension liabilities, leaving the system among the most underfunded in the country. In its latest bellyflop, the committee in charge of finding a “compromise” solution to the crisis missed a July 9 deadline. In a press conference Wednesday, Democratic Gov. Pat Quinn announced that he was suspending lawmakers’ pay until they take action.
“For taxpayers, when they lose millions, it’s a crisis,” the governor said. “For lawmakers, when they lose their pay, maybe it’s a crisis for them.”
Because of previous shortchanging of the system, the state now spends 20% of all money on pension payments, a situation that will quickly become unsustainable. The best hope would be to switch to a 401(k)-style system where taxpayers could get out from under the mountain of debt. The Illinois Commission on Government Forecasting and Accountability calculated that one plan suggested by the Illinois Policy Institute would cut the state’s unfunded liability by $46 billion immediately.
That would be a start—if it could ever survive the political swamps of Springfield.