I got the following e-mail from Representative Morrison.
Pension Reform Bill Sent to Governor Quinn
This was a historic week in Springfield. After years of indecision and failed attempts, the General Assembly on Tuesday sent a comprehensive pension reform bill to the Governor. After several hours of debate in both chambers, SB1 was approved in the House in a 62-53-1 vote and in the Senate in a 30-24-3 vote. Governor Quinn has promised to sign the bill as soon as he receives it and representatives from the public pension systems have promised to file a suit challenging the bill’s constitutionality as soon as the ink is dry.
Virtually everyone agrees that pension reform is critical, but I believe SB1′s reforms are not adequate, especially considering the enormity of our unfunded liability. Four years ago, our unfunded pension liability of over $80 billion was widely and rightly regarded as a crisis. SB1 barely gets us back to those levels, which means the state is still in trouble, despite modest changes like increasing the retirement age and tweaking the cost-of-living adjustments. In short, the bill does not go far enough in fixing an unsustainable system.
The Illinois Policy Institute, a non-profit, non-partisan research organization, published an excellent article this week that detailed many of the problems with SB1. The article states that SB1 “delays addressing the problem head on. It buys time.” You can read that article at http://illinoispolicy.org/illinois-general-assembly-sends-pension-fix-to-gov-quinn/.
I believe the only real pension solution is to move all state employees, teachers, judges, and General Assembly members to a 401(k) retirement plan at the earliest time possible. Transitioning to a 401(k) would not affect benefits that have already been earned, and it creates a much more predictable and sustainable system moving forward. The state and other public employers would contribute generous matching funds into employee self-managed accounts every pay period. This gives the workers more control and flexibility over their own retirement nest eggs. The state’s worst-in-the-nation unfunded pension liability would be cut in half and be paid off with flat payments over the next 30 years. I recently filed HB3303 which proposes these changes and am disappointed it was not given due consideration in the Illinois House. For those who wonder why I continue to push for such major reforms, please consider a recent Wall Street Journal editorial:
Detroit’s Painful Pension Lesson
Defined-benefit plans are subject to economic and political risk
This week’s legal decision on Detroit’s bankruptcy means Motown pensioners will take a hit, which is unfortunate if unavoidable. But there’s a lesson in this for government workers who have been told that defined-benefit pensions are safer than 401(k)-style defined-contribution plans.
Union leaders say defined-contribution plans are anathema because they are subject to market risk, while pensions are better because they guarantee a minimum lifetime payout. Ah, no. The market risk is real for 401(k) plans, though at least a worker makes his own investment choices and can keep the accounts when he changes jobs. But as Detroit is showing, defined-benefit plans carry significant economic and political risk. Politicians can promise unions the world but they can’t guarantee those benefit in the future if those same union demands help retard a city’s growth and ruin its finances.
We sympathize with the Detroit retirees who will now suffer after years of service. But they ought to aim their ire at the politicians and union chiefs who told them the lie that government pensions are forever. [emphasis mine].
Ultimately the Supreme Court will decide if the provisions included in SB1 are constitutional. If the courts side with the General Assembly, the pension crisis will have been slowed but not fixed. If the bill is found to be unconstitutional, we will be right back at square one, but with a larger pension liability. I believe that transparency and honest, respectful dialogue is critical as this issue remains active. I welcome continued input from my constituents as we work together to solve our fiscal problems.
Legislature Fails to Act on Account Wagering Extension Bill
Because pension reform discussions monopolized the one-day session in Springfield, legislators failed to act Tuesday on an important bill that would allow the practice of account wagering to continue at Arlington Park and at the Hawthorn Race Course. Account wagering is a form of horse race gambling in which the bettor must fund an account before being allowed to place bets. This form of wagering is most-often conducted online. While I am opposed to bills that provide for large expansions to gambling in Illinois, I have signed on as a co-sponsor of SB66, a bill that simply allows for the continuation of an already-existing practice. In its current form, SB66 has no known opposition.
As written, SB66 would extend account wagering to February 1, 2017 (the pilot program currently sunsets on January 31, 2014). It also enacts two new surcharges on winning bet payouts. One statewide surcharge, of 0.20 percent, will raise $1.0 million per year for the annual operating expenses of the Illinois Horse Racing Board (IRB). The other surcharge of 0.50 percent will be levied at the racetrack’s discretion and will raise funds for the track and its horsemen. Legislators will only be in Springfield for one day prior to the January 31 expiration of the pilot program, and I hope the bill can be approved quickly since there is consensus on the wording of the bill.
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