In advance of the new Fiscal Year 14 which starts Monday, July 1, the state of Illinois released its latest projection of the growth in the state's unfunded pension liability: $5 million a day. While Governor Pat Quinn's honest fiscal policies -- making the full statutory payment to the pension systems every year since taking office and enacting pension reform for new employees -- have slowed the acceleration of Illinois' skyrocketing pension debt, the hole continues to deepen by millions of dollars every day the General Assembly fails to pass comprehensive pension reform.
The previous projection, released in November 2012, pegged the daily growth at $17 million a day for fiscal year 2013.
"The people of Illinois are continuing to pay a steep price of $5 million a day for legislative inertia on pension reform," Governor Quinn said. "We must stop this bleeding. Legislators must work around the clock to put a bill on my desk that erases the pension debt for the greater good of the people of Illinois."
The pension squeeze already has forced $2 billion in education cuts and $3 billion in social service cuts in recent years. Additionally, the General Assembly's failure to send the governor a comprehensive pension reform bill has resulted in multiple downgrades of Illinois' credit rating, which hurts the state's economic recovery, and just this Wednesday cost taxpayers an extra $130 million to ensure work continues on critical capital construction projects. This year alone, the lack of action has cost taxpayers $180 million in additional costs over the life of the bonds.
Governor Quinn's responsible fiscal policies have slowed the acceleration of Illinois' skyrocketing pension debt, including making the full statutory payment to the pension systems every year and his enactment of a pension reform law in 2010, which created a "Tier 2" lower pension plan for new hires.
The daily cost of the unfunded liability growth is calculated by taking the projected amount of the growth of the shortfall in a given fiscal year among the state's five pension systems, and dividing that number by 365.
The five pension systems typically release data several months after the close of the fiscal year. One year ago, the state's budget office, using available data, projected a figure of $12 million a day as the amount the pension shortfall would grow during FY13. When the five pension systems released their analyses in November, the budget office computed an updated projection of $17 million a day. The majority of that increase was due to the fact that the Teachers Retirement System - the largest of the five systems - lowered its expected rate of returns on investment from 8.5 percent to 8 percent.
Improvement in the financial markets does not factor into the latest projection. That will be reflected when the five pension systems release data on the growth in their respective funds and their portfolio performance again in November.
Governor Quinn has made pension reform the top priority for the state of Illinois for almost two years. Since he convened a pension working group in January 2012, he has proposed comprehensive solution after solution, worked across the aisle, called special sessions, set deadline after deadline and released study after study on the dire impact of inaction on education and our economy. He has met at length, numerous times, with the leaders and legislators on this issue and fought hard to pass comprehensive pension reform.
At Governor Quinn's suggestion, the General Assembly formed a conference committee one week ago to bridge the differences between the House and the Senate. The governor has set a deadline of July 9 for the General Assembly to act on comprehensive pension reform.