June 1, 2012
The following opinion piece by Civic Federation President Laurence Msall was published by Crain's Chicago Business on June 1, 2012.
Yesterday was a most disappointing day in the State of Illinois. Efforts to stabilize the State’s broken pension system dissolved last night amid confusion and acrimony in the Illinois General Assembly. Illinois lawmakers must do better and the recent passage of legislation to fix the Medicaid program gives us evidence that they can.
Governor Pat Quinn issued two challenges to the Illinois General Assembly in his February budget address: curb unsustainable costs of the State’s Medicaid program and stabilize the State’s pension systems. However, action on Medicaid and pensions in the Illinois General Assembly followed two very different paths, resulting in very different outcomes. The publicly debated and data-backed effort to repair Medicaid resulted in a package of bills that will likely prevent the collapse of vital services to the state’s most vulnerable residents. The closed path to pension reform lacked any meaningful data and led nowhere.
The path to repairing Medicaid included three key components which were absent in this week’s disjointed legislative maneuvering surrounding pension reform. First, lawmakers identified a shared goal of what the State needed to achieve: cut $2.7 billion from the Medicaid program. Lawmakers must be able to identify an equally specific goal for pension reform. The State currently projects it will spend 22.1% of its operating revenues on pension costs in fiscal year 2013 (including both contributions and payments on pension bonds). This percentage has grown from only 3.6% in fiscal year 1996 and is expected to reach nearly 30% by the 2033 budget year. These costs are obviously unsustainable and will continue to crowd out the State’s ability to pay for basic government services. What percentage of operating resources can the State afford to spend on pension? This answer to this question is essential to defining the goal of pension reform.
During the Medicaid deliberations, lawmakers and the general public also had access to detailed information on the implications of all proposed options for achieving the shared goal. The Illinois Department of Healthcare and Family Services made information widely available on each of the proposed changes and their projected savings. The various pension reform proposals did not come with this kind of detailed analysis. Lawmakers and the public could only speculate on what the vague notions of cost savings would imply for the State, local governments, employees and retirees.
Finally, meaningful reform requires a rigorous debate on the proposed options which involves all stakeholders. Such debate on pension reform was impossible without access to the kind of detailed information provided on the Medicaid program.
In the absence of a shared goal, detailed information and rigorous debate, pension costs will continue to crowd out other state spending priorities. There is no time to waste to get pension reform right – every day of delay makes the solution more painful. By passing meaningful Medicaid legislation, Illinois lawmakers have shown they are capable of the difficult decisions necessary to save the State from fiscal collapse. Without applying the same effort to pension reform, however, the State budget is not fixed and the work of lawmakers is far from complete. It is time to move beyond the obfuscation and distrust which too often stymie urgently needed action in Springfield. Lawmakers owe it to taxpayers and to all who rely on services provided by the State of Illinois to open the pension debate as they work toward a concrete, shared goal for reform.
Laurence Msall is president of the Civic Federation, an independent, non-partisan government research organization that promotes efficient delivery of public services and sustainable tax policies in the Chicago region and State of Illinois.