Shortfall Threatens Illinois Pension System For years, Illinois lawmakers and governors have failed to set aside enough money for state pensions. In recent years, they've made matters worse by skipping some pension payments altogether, and borrowing money to make others. Illinois' pension funds could go broke within the next decade.
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Shortfall Threatens Illinois Pension System

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Shortfall Threatens Illinois Pension System

Shortfall Threatens Illinois Pension System

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LINDA WERTHEIMER, Host:

This week, we've been hearing how states are funding their public pension plans. Today, why Illinois is the worst in the nation when it comes to setting aside enough money for state workers and retirees. Illinois has socked away less than half the money that's been promised for public pensions. And that big gap keeps growing. NPR's David Schaper wraps up our series with this report.

DAVID SCHAPER: Illinois has five public pension funds for teachers, state employees, university employees, judges and legislature. Think of them as one big home mortgage. And instead of making the required house payments, Illinois' governors and state lawmakers have been paying much less than they should, even skipping some payments and borrowing money to make others.

LAURENCE MSALL: Basically, the state of Illinois is upside down on its home mortgage and it's maxed out its credit cards and its applying for more credit cards.

SCHAPER: Laurence Msall is president of the Chicago-based Civic Federation, which keeps tabs in government finances. He says Illinois has so badly underfunded its pensions that the unfunded liability has ballooned to a whopping $78 billion.

MSALL: That means every man, woman and child in the state of Illinois is on the hook for $6,031 of pension promises that we don't have the assets for.

SCHAPER: Eden Martin is president of the Civic Committee of the Commercial Club of Chicago, a business group. He says while the politicians have been underfunding Illinois pensions, they've also sweetened pension benefits.

EDEN MARTIN: For example, in Illinois, if you're a state employee, you can retire at either 60 or 55, depending on which pension plan you're in, with a full pension if you have enough years in the pension system. That's pretty early.

SCHAPER: Martin says early retirement incentives over the years have thousands more retirees drawing pension checks for longer periods of time. He adds that Illinois retirees get automatic three percent annual pay increases, regardless of the rate of inflation. And the state pays their health insurance premium.

MARTIN: The pension have become, with the passage of time, more generous, out of sync with what's going on in the private sector, and that's where reform has to happen.

SCHAPER: Martin's group and others are pushing for Illinois to raise the retirement age, and to implement a two-tiered retirement system so future state employees would be on a defined contribution plan instead of the defined benefits system in place now. Illinois' Constitution prohibits a reduction in benefits earned by current retirees and employees. And many of those retirees say they're hardly living high on a hog, as has been portrayed.

IDA CALLOWAY: Okay, this is my living room. This is nothing fancy in here.

SCHAPER: Seventy-year-old Ida Calloway shows off her modest, three-bedroom ranch home in the Chicago's south suburbs. Calloway worked for the state for 24 years as a mental health technician, bathing, dressing and feeding people with developmental disabilities in a state home.

CALLOWAY: There was some who couldn't walk, couldn't feed themselves. I know I had to learn how to massage food down their throat. It was hard. You'd get feces thrown on you. You'd get spit on.

SCHAPER: The union's Hank Scheff says employees contribute at least 4 percent of their pretax salary into the pension funds, and he argues they shouldn't be asked to give up benefits or pay more.

HANK SCHEFF: I mean, if the problem was created by underfunding, the solution is funding.

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SCHAPER: David Schaper, NPR News, Chicago.

WERTHEIMER: You can hear more stories in our series Deferred Promises: America's Pension Crisis at our Web site: npr.org.

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WERTHEIMER: This is NPR News.

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