“It’s all the fault of those irresponsible people from that other party, who voted for unaffordable benefit increases!”
That’s pretty much the standard narrative when it comes to underfunded public pensions. In Illinois, specifically, we all like to point to the law implementing the 3% compounded annual increases as a source for the unaffordable benefits now.
But the story, it turns out, is not that simple, because, well, politics in Illinois rarely is.
The annual report from the Commission on Government Forecasting and Accountability is as good a place to start as any, as it lays out a history of the legislation affecting the five state systems, starting in 1989 with the bill implementing compounded guaranteed 3% annual pension adjustments. (To be clear, this wasn’t the first pension benefit increase, but merely the first one outlined in this summary.) This was followed, in 1997, by benefit formula increases for SERS (state employees) and TRS (teachers) up to a flat rate of 2.2% annual accrual, or 1.67% for those state employees who are covered by Social Security (for reference, in the days when private sector employers commonly sponsored pensions, 1.67% was a typical accrual rate for a plan which reduced benefits by proportionate Social Security amounts, but here the 1.67% is in addition to Social Security). For the state employees, this increase was effective for all years of service; for teachers, service prior to the effective date could be upgraded with additional contributions. Finally, in 1999, early retirement benefits were made more generous for state employees, implementing a “Rule of 85,” providing unreduced benefits when age + service points totaled 85. These were some of the last benefits expansions, not counting early retirement incentives that were touted as money-savers, before, at last, the legislature started paying attention to benefit costs.
So what was the vote for these bills? It requires a bit of digging, and I’ll “show my work” as I do so.
To work backwards, let’s start with the “Rule of 85,” which is PA 91-0927. Using the Illinois General Assembly website, we can take a look at the Public Acts for that session, and look at the text for the bill, which tells us it was originally HB1582, so from there we can search for the general bill status, which tells us that after initially being stalled in 1999, it was revived in the fall veto session of 2000 and passed unanimously in the Senate and with two dissents in the House.
Backing up a few years, let’s examine the increase to 2.2% annual accrual.
Again, the CGFA report tells us the bill numbers: PA 90-0065 for SERS and PA 90-0582 for TRS.
PA 90-0065 is HB0110, or the Public Employee Pension Equity Act, which was passed on May 31, 1997, unanimously, in both the House and the Senate.
PA 90-0582 is SB0003, which was passed by both houses on May 22, 1998, with a vote of 113 – 3 – 2 in the House and 56 – 2 in the Senate.
And going further back still, the bill PA 86-0273, or SB 95, created compounding 3% increases in the 1989 legislative session. This is a bit harder to track down online, as only the transcripts of the floor debate are available at the General Assembly website. To follow the path a bill took to becoming law, it’s necessary to dig further, into the Illinois Legislative Synopsis and Digest as scanned in by the University of Illinois, and specifically to page 65 of volume 1 of the 1989 session. This bill was passed on June 30, 1989 by a vote of 108 – 4 – 3 in the State House and a somewhat less unanimous 41 – 12 – 6 in the State Senate. (I am unable to find any particulars about the partisan split of that State Senate vote; the Democrats held the majority but it appears to have been much closer then than now, to the point that in 1992, Republicans took control.)
But this bill was about more than just the compounding COLA. The bill started with numerous small changes but subsequent to the conference committee process, the final form of the bill was described as follows:
“Deletes all [prior text]. Amends numerous provisions of the Illinois Pension Code. Increases benefits and makes numerous administrative changes. Amends the State Mandates Act to require implementation without reimbursement.”
As readers will recall from my prior article, 1989 was also the year that the state, for the first time, passed pension legislation with an explicit funding goal – a seven year ramp and an ultimate goal of 100% funding in 40 years. The bill creating a compounding COLA was the very same bill as that with the new funding plan (which, as it turned out, had nothing binding in it so the money was never appropriated). Yet both these changes were largely invisible to the public. A Chicago Tribune article on July 2, 1989, “How various key issues fared in the spring session,” listed even such new legislation as the designation of the big bluestem as Illinois’ official prairie grass, but had nothing to say about the pension legislation. Only when then-Gov. James Thompson signed the bill in August, it came to the Tribune’s notice on August 24th, with a brief description of the changes and no indication of any reason for concern.
Should any of this be a surprise? Perhaps not. But I wonder whether today’s Illinois Republican Party, so appalled at the degree of underfunding of Illinois pensions, quite understands that their own predecessors, and not merely their Democratic opponents, cast their votes to create and compound the problem.
As always, you’re invited to comment at JaneTheActuary.com!
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