Tom Kacich | If only Illinois leaders had listened to pension prophet

Right-wing interest groups and news columnists love to blame Gov. J.B. Pritzker and Democratic lawmakers for the sorry state of Illinois’ pension systems and the cost required to keep them solvent.

It’s true that the state’s five retirement systems are a mess. Combined, they have more than $144 billion in unfunded liabilities, and they now require more than $10 billion in state funds annually just to stay above water. By 2045, it’s estimated that state funding for pensions will require about $20 billion a year. That’s money that should be going to education, social services, public safety or other important expenses.

But it won’t, and the blame goes not to Pritzker or today’s legislators, but to the people who were calling the shots 50 or more years ago: governors (Republicans, for most of those years), university presidents and their boards, retirement-system trustees and all the others who charted a reckless course.

I was reminded of this when I came upon a News-Gazette story from July 1971 — nearly a half-century ago — about how Gov. Richard Ogilvie had shorted pension funding to the University of Illinois by about $10 million that year.

Ogilvie, a Republican who two years earlier had pushed successfully for Illinois’ first income tax and all the revenue it yielded, wasn’t the first governor to shortchange the pension systems, but his decision is emblematic of a history of mismanagement and lost opportunities.

If only Ogilvie had listened to Edward Gibala.

Gibala, the executive director of the State Universities Retirement System, had been a sort of Paul Revere for the pension systems since the 1960s, warning state leaders that their chronic underfunding of pensions would create problems for future leaders. By 1967, SURS was already underfunded by $143 mil-

lion. A law was passed that year requiring the state to fully fund pension costs plus interest on the unfunded liability. But the law was ignored and the pension debt continued to grow.

“No other state has anything like this,” Gibala told The News-Gazette in July 1971. “All others are either meeting their obligations or making a real, tangible effort to do so.”

Illinois was already an outlier and headed to a point where 50 years later, its pension system is ranked either worst or second-worst (behind New Jersey).

“We can only guess what it will be like in 20 or 30 years, when the current debt comes due,” the prescient Gibala said 50 years ago. “The bill will be staggering. I don’t think taxpayers will be able to meet it.”

Through the 1970s, Gibala continued his campaign to fully fund pensions and was generally ignored by state leadership. In 1976, he noted that the unfunded liability of the State Universities Retirement System had increased fivefold since the passage of the state law that required full funding.

“The responsibility for this staggering increase in … unfunded pension obligations must be shared by … university administrators, the state board of higher education, the bureau of the budget, the governors who served during this nine-year period and the General Assembly,” Gibala wrote.

Further, he said the total unfunded liability for all state, county and local-government pension funds in Illinois was already at $5.7 billion. That was about four times what it had been in 1963.

I was able to talk to Gibala in 2005, a few months before he died at the age of 82. His message hadn’t changed.

“It’s been going on since 1941, when SURS was founded,” he said. “The first (University of Illinois) president (Arthur Cutts Willard) set the precedent for all the other presidents. The retirement boards and the Legislature deferred the pension funding, leaving the problem for future presidents and others.

“They figured the more that is given to retirement funding, the less that goes to new construction and salary increases. The active staff and faculty were non-responsive about the underfunding. It was the annuitants who have been pushing for full funding.”

If those leaders had listened to Edward Gibala, Illinois’ pension systems would be in much better shape, credit-rating agencies wouldn’t have downgraded the state’s bonds, taxes might be lower and the state might not be losing population.

There’s a lesson there for all of us, whether government or business leaders or heads of households.

First, pay the bills.

via The News-Gazette

June 28, 2021 at 02:14PM

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