The Cook County Board’s pension committee chairman, Bridget Gainer (D-Chicago), released a report yesterday on the county’s growing pension problem – the system has endured a meteoric rise in liabilities and will run out of money by 2038 if the trend continues.
The grim report comes on top of scrutiny in Springfield and by Chicago Mayor Rahm Emanuel on rising pension costs. Like Emanuel did, Gainer set up a Web site that tries to help citizens – including contributors and recipients of public pensions – understand and provide input on an issue that is an both politically explosive and difficult to understand. The report notes that pension discussions often devolve into political fights that can, for example, pit unions against fiscal conservatives
The Cook County pension system had $743 million in liabilities in 2001 – and had $5.16 billion in liabilities by 2010. The system only had enough money in 2010 to pay for 60 percent of the benefits promised to the 15,000 Cook County retirees and 23,000 active county employees it is supposed to cover.
The reasons for why the pension system went south are numerous. Here a few key ones from Gainer’s report:
* Broader economic trends, including the 2008 financial collapse, yielded lower than assumed investment returns. The majority of pension fund revenue comes from investment returns.
* The Illinois legislature created a number of “early retirement” programs in the 1990s. The idea was that having some public employees retire early would lead to short-term savings in state personnel costs. But it has lead to a long-term strain on the County pension system (as the well as the state and other local government systems).
* People are living longer.
Gainer proposes a number of solutions like increasing the retirement age from 66 to 71, lowering the annual Cost of Living Adjustment increase to retired recipients, and putting a moratorium on early retirement programs.
More broadly, the report raises the possibility of increased contributions and decreased benefits for current employees – an idea that the state has also considered, though it is strongly opposed by unions and may run afoul of the Illinois constitution.
Citing pension problems across the state and country, the report optimistically concludes that “Cook County has the opportunity to lead in solving this problem.”
UPDATE 1 (4:35 p.m.): Many progressives take issue with the continued focus on pension funding problems -- and the possible cuts in contributions -- in larger debates about state and local government budget problems. Ralph Martire, executive director of the Center for Budget and Tax Accountability, for example, continues the fight against cuts to pension benefits for state employees, and feels public employees are slighted in the discussion.
"People talk about this is a pension issue," Martire says. "It is not a pension issue -- it's a debt issue. If the government owed a lot of money to banks, politicians wouldn't be talking about reducing payments to the banks."