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Cathy Taylor
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Sen. Righter: It’s time for state government to get out of the pension business

Legislation to stop pension costs from draining critical state taxpayer resources away from schools, universities, and important programs is being sponsored by State. Sen. Dale Righter (R-Mattoon). Righter’s Senate Bill 1012 would require any new employee hired after July 1, 2018 receive a 401(k) style plan and not a defined-benefit plan with guaranteed annual increases. This includes state workers, teachers, university employees, judges, and members of the General Assembly.

“It’s no secret Illinois’ pension costs are draining tax dollars from high-priority areas,” Righter said. “But I don’t think people realize just how bad it is. For example, pension costs in both higher education and K-12 education consume approximately 50 percent of all state spending in these areas. That’s billions of dollars that can’t be spent on bettering our classrooms, hiring more teachers and staff, funding important programs, reducing tuition costs to students, constructing new buildings, or reimbursing our education system on time. Taxpayers are being forced to subsidize a pension system that we simply cannot afford. Pension reform must be a top priority if we’re serious about our future.”

Righter noted a handful of facts demonstrating this issue:

·         Spending on pensions now consumes almost 25 percent of the state budget.

·         From 1996 to 2017, taxpayers have put more than $75 billion toward pensions, $23.7 billion more than the 1994 Gov. Jim Edgar plan called for over the same period; yet, the pension funds are only 38 percent funded.

·         Between 2003 and 2015, Illinois pension liabilities grew at 7.1 percent a year, contrasted to Indiana at five percent, Missouri at 4.5 percent, and Wisconsin at three percent.

·         If Illinois’ liabilities grew at Missouri’s rate, our pension funds would overfunded by 25 percent.

“Here’s what these number mean to our students,” Righter said. “For 2015, the most recent year for which number are available, approximately 47 percent of all state taxpayer support for K-12 education went to pay for pensions. Even worse, for higher education, over 50% went to pensions. The state simply cannot offer to both pay for the current pension system and put the money we should into classrooms.

“It’s now a question of priorities; do we care more about preserving an unaffordable pension system than shifting those dollars into schools? The answer must be ‘no,’ and the system must change.”

Right now, employees in the State University Retirement System are the only employees who can choose a 401(k) style retirement package instead of a pension. About 21,000 employees choose that option.

Eighteen states have enacted some 401(k) style plan for state workers.

Public support for offering state employees the option to enroll in a 401(k) style plan is overwhelmingly high at 78 percentaccording to a recent poll done by Fabrizio, Lee & Associates.