Public Act 98-0599, the Illinois law that diminishes the pensions of current state employees, is now before the Illinois Supreme Court to determine its constitutionality.
Prompting this law is the insistence that each of the five pension funds achieve a 90 percent funded ratio by the year 2045. This means that there would be, on hand in 2045, 90 percent of the dollars needed to pay all pension obligations as far into the future as they have been accrued.
Instead, why not simply make sure that sufficient dollars, along with deep reserves, are always on hand for current needs? A recent analysis shows that this can be done without cutting pensions for working employees. This would save billions of dollars — dollars that could be used to alleviate other troubled financial areas.
Using the Teachers’ pension system, the largest, as an example, the funded ratio after 2015 will be 42.7 percent. If the state’s yearly contributions are reduced so as to maintain that level, the fund will grow from $47.8 billion to $96.9 billion in 2045 — five times the amount of benefits needed.
This same analysis applies to the other four funds as well. If funded ratios of 40 percent to 45 percent were maintained out into the future, the goal of having enough cash on hand to meet all obligations, plus a large surplus, would be achieved. Illinois could then keep paying pensions as they were contracted to be and billions of dollars would be saved.
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