From Bloomberg Business:
Illinois will delay payments to its pension fund as a prolonged budget impasse causes a cash shortage, Comptroller Leslie Geissler Munger said.
The spending standoff between Republican Governor Bruce Rauner and Democratic legislative leaders has extended into its fourth month with no signs of ending. Munger said her office will postpone a $560 million retirement-fund payment next month, and may make the December contribution late.
“This decision is choosing the least of a number of bad options,” Munger told reporters in Chicago on Wednesday. “For all intents and purposes, we are out of money now.”
There’s no reason why this should come as a surprise, we’ve known this day would come, and it finally has.
This is of course being blamed on the budget impasse in Springfield. But the lack of a budget isn’t responsible for this, it only moved the date forward.
As can be seen in these graphs, even though Illinois has been making its pension payments in full for the past several years, the level of underfunding continues to increase. That’s because the system itself is fundamentally broken, and there are only one of two things which can be done, though I have no rational hope that either will happen:
- Propose an amendment removing the pension guarantee language from Article XIII, Section 5 of the Illinois Constitution, or
- Both sides sit down and agree that the current system needs to be scrapped in favor of a defined contribution system. There’s nothing in the Constitution that says that those to whom the promise of undiminished or unimpaired pension benefits have been made can’t voluntarily make concessions that would help relieve the pressure on the system.
Why would they want to do that? It’s simple. As I said in an earlier post, even though the Constitution promises that benefits shall not be diminished or impaired, there’s no corresponding Constitutional requirement that the pensions be funded. That was left to the Legislature. When the money’s gone, it’s gone for good.
Illinois has had ample opportunity to fix this mess, but the unions that are holding this state hostage refuse to do what’s clearly in their own best interest. There will come a day, and it will be soon, when the payments won’t merely be delayed, they’ll come to an end. While that’s going to hurt a lot of people, they’ll have no one to blame but the union bosses and their Legislative truffle pigs who formed the unholy alliance and made them a promise they knew would never be fulfilled.