Bipartisan Think Tank: Pension Cuts Won’t Solve Budget Mess

Last week, Illinois lawmakers failed to overhaul the state's pension systems. According to the state's Center for Tax and Budget Accountability, reducing state employees’ retirement benefits will still leave Illinois in a fiscal mess.

Illinois is paying a billion dollars more toward its pension funds this year, compared with last year. But that’s not because retirement benefits have gotten more expensive. In fact, what’s called the “normal cost” for pensions actually decreased. That extra billion dollars is all paying down debt. It is a figure that, by law, is going to rise every year.

The Center for Tax and Budget Accountability’s Ralph Martire said that is what’s creating Illinois’ fiscal pressures. He said even if a law passed to cut employees’ benefits.

"It won’t relieve the fiscal pressure created by the repayment structure for the debt owed to the pension system," Martire said. "They have almost as bad of a fiscal problem as they had before they cut benefits, but now taxpayers believe the problem’s been solved.”

But Martire said that’s not a politically popular idea.

“So there’s this political canard hanging out there that most voters and taxpayers believe that overly generous benefits, or Cadillac benefits, were the driver of this problem," he said. "Now it’s not the reality. And the data don’t support that. But if that’s the generally held politically belief you can bet that politicians are going to respond to that rather than the reality."

Martire said Illinois needs to refinance its debt, so the state can pay an even amount every year.