Solutions for pension hole not easy to implement

Finding a possible solution for Illinois’ massive pension debt problem isn’t difficult. Tax increases, more borrowing, selling state assets, trimming future benefits — all are on the table for discussion.

But seeing any of those become reality is a much bigger hurdle. None are easy to adopt.

Some polarize policymakers and advocates at their very mention. All are major undertakings because of the price paid — either with taxpayers’ money or state officials’ political popularity.

In fact, about all they agree on now is that Illinois’ pension debt can’t be pushed off any longer.

“It’s a lot easier to put the problem off on somebody else. You can’t do that forever,” said Eden Martin, who heads the civic committee of the Commercial Club of Chicago.

Avoidance has been a problem for years. Illinois’ pension debt now tops $42 billion, more than doubling since 1995. The debt grows by nearly $5 billion a year because of interest and the cost of benefits earned.

The state is more than 10 years into a 50-year plan designed to steadily whittle away at the debt. But that means more money is needed each year to pay pension expenses, taking from the pot of tax money available for other needs such as education, health care and law enforcement.

So lawmakers and advocates say the debt has to be dealt with today. But how?

The Blagojevich administration backs borrowing $16 billion in lower-interest pension bonds, potentially saving the state $55 billion over the next few decades.

“Anything you pay off sooner is cheaper and better,” said John Filan, Gov. Rod Blagojevich’s top budget adviser. “We really have to make some sizable, significant decisions, and a pension bond will help an awful lot.”

Others say an income tax increase would help solve the pension and other state money problems. And there’s a push to switch from a pension system that guarantees employees certain benefits to one that promises the state will pay a certain contribution each year in a 401(k)-style setup.

All face a difficult road that could become a dead end.

“What it’s going to take is some tough decision-making,” said Rep. Kurt Granberg, D-Carlyle. “Members have to stand up and say, ‘We have to resolve this issue.”’

That’s not a preferred path for many lawmakers, especially with top leaders fighting over more high-profile issues such as budget spending and priorities.

To some extent, the very nature of pension funding and its public interest is at fault.

Lawmakers know voters are tuned in to issues such as schools, roads and health care. But pension systems largely are in the shadows. They don’t spur passionate debate that can lead to action, like with electric rate and medical malpractice insurance increases.

For years, lawmakers favored other needs rather than paying off the pension system debt and even now may not tackle the issue.

“It’s the elephant in the living room, and we’ve grown very accustomed to ignoring the elephant,” said Sen. Don Harmon, D-Oak Park.

Some argue the 50-year plan has Illinois on the right path to get most of its pension debt paid off over time, as long as lawmakers commit to fully funding the required payment each year.

“We think it will work,” said Nick Yelverton, a legislative director for the Illinois Federation of Teachers. “The problem is providing the resources in order to make it work.”

Each possible solution comes with a backlash.

Critics say another pension bond is foolish because new borrowing to pay off old debt only pushes the problem to future generations. An income tax increase is adamantly opposed by Blagojevich and many Republicans whose support is needed for it to become law.

Switching to a 401(k)-style retirement plan is harshly criticized by the politically powerful unions as unfair to employees and costly to the state.

“You can only cut back so much,” said Cinda Klickna, secretary-treasurer for the Illinois Education Association and a Springfield high school English teacher. “We reach a point where there isn’t enough money and you’re going to have to deal with some of these other solutions. Cutting benefits isn’t going to work.”

So what could be done?

Legislators could continue to follow the 50-year plan, which calls for putting more than $3 billion in money into the funds this year. They could take another pension “holiday” as they did in 2006 and 2007 when they cut back the annual payments to cover other budget needs.

Or they could try to reach agreement on one or more of the options outlined above.

Some predict pension debt will continue to grow until Illinois leaders feel true pressure to turn it around.

“This problem’s not sexy enough,” said Ralph Martire of the taxpayer watchdog Center for Tax and Budget Accountability. “We’re at a pretty horrible place, and we need to fix it.”