State Sen. Jeff Schoenberg of Evanston is sponsoring Senate Bill 3514 which will let the state borrow $4 billion to finance state employee pension funds.

This additional debt exacerbates an already weak state financial position and will jeopardize the future of Illinois and its citizens.

State Sen. Jeff Schoenberg of Evanston is sponsoring Senate Bill 3514 which will let the state borrow $4 billion to finance state employee pension funds.

This additional debt exacerbates an already weak state financial position and will jeopardize the future of Illinois and its citizens.

We need responsible leaders who are willing to address the difficult structural issues underlying our state’s financial predicament rather than kicking the can down the road and burdening future generations.

The State of Illinois has the lowest bond rating in the United States. Due to high debt levels, poor budgeting and concerns about political corruption, Illinois is required to pay the highest interest rate to holders of state debt of any state in the country.

In fact, Illinois pays a higher rate of interest on its debt than countries such as Portugal and Mexico. More debt is not the solution to shoring up state pension funds.

Injecting debt into the pension funds is just investing on margin – a very risky proposition. When the State of Illinois issued $10 billion of pension obligation bonds in 2003 during the Blagojevich administration, taxpayers lost millions of dollars.

The state debt burden is $15,000 for each Illinois resident. County and municipal debt adds an extra $6,000 to each Evanston resident’s tab.

Why should we be concerned by these debt levels?

Debt is a legal liability that must be paid regardless of other obligations. In a period of very low economic growth and inflation, it will be extremely difficult for Illinois to grow its way out of its current financial situation.

Charles Evans, President of the Federal Reserve Bank of Chicago, forecast a subdued economic outlook during his talk in Evanston on Oct. 19. In addition, our state debt is increasingly held by foreign investors, whose investment goals and time frames may be quite different than U.S. residents.

In the future, more money will be needed to pay for increasing interest payments and principal when the debt comes due. As a result, taxes will likely rise and essential services like food stamps for the poor, education for our children and healthcare for the elderly will be cut. The higher debt levels crowd out spending on long-term investments and essential services.

The economic challenges confronting our state and country are the result of multiple issues that have evolved over several decades. The solutions will require thoughtful leadership, well developed long term plans and a “shared sacrifice” to provide our children and grandchildren an opportunity to enjoy a standard of living comparable to, or better than our own.

Providing a better opportunity for future generations has been one of the hallmarks of our country.

As our state begins to slowly recover from one of the worst economic crisis in our history, prudent and thoughtful policies need to be implemented. Adding massive amounts of debt like Senate Bill 3514 suggests, will jeopardize our state’s fiscal situation, the value of your home and possibly your job and retirement.

This risky strategy is akin to giving your teenage children your credit card, keys to the car, and leaving them home alone for the weekend with their assurance that everything will be OK.

Are we so irresponsible? Have our leaders learned nothing from the near financial melt-down in late 2008 and subsequent painful recession? Have our leaders learned nothing from the grim economic situation confronting Japan today? Only 20 years ago, many people thought Japan was going to become the preeminent superpower in the world.

Consider the recent riots in Greece and the labor strikes in France. Our state is going down the same path as these debt laden countries and our children will bear the consequences. We need sound and prudent policies that can deliver sustainable economic growth and provide secure and appropriate pensions for our hard working state employees.

Illinois residents deserve more mature and responsible leadership from Springfield. If Sen. Schoenberg and other legislators want to go to Las Vegas and roll the dice, let them do that with their own money. We should not allow this risky strategy to jeopardize the future of Illinois. We know that lead in paint is bad for our health and asbestos causes cancer. This debt laden strategy is as harmful to our health as those examples.

Contact your state senator and demand a “no” vote on Senate Bill 3514. And remember, all state senators come up for re-election in 2012.

Evanston resident Jim Young served on the city’s Blue Ribbon Pension Committee in 2008 

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13 Comments

  1. Democrats and unions are tied at the hip

    This has been the Democrat party’s modus operandi at all levels of government.

    Borrow, spend and protect the unions’ best interest over the private sector.

    The sad irony is that government unions who are paid through taxation contribute some of their money to Democrat candidates who then get elected and advance policies favorable to unions. It’s a vicious cycle that taxpayers pay for and get screwed with their own hard-earned money.

    The only way to stop it is not vote for Democrat politicians.

    1. Repub’s are hipsters as well

      Actually that’s been the Republican MO…borrow and spend… to protect big corporations.

      Democrats are tax and spend.

      Both parties like to spend.

      Just depends on when you want to pay.

      1. Democrats recceive more corporate money

        Racer X,

        From 2006-2009, Democrat candidates received the majority of business PAC campaign contributions.

        Last year, business PACS gave 59 percent of the $64 million in campaign contributions to Democrat candidates. Healthcare and Pharma companies gave 75 percent of all campaign donations to Democrats and banks and financial services gave 65 percent to Democrats. It had been like this for Democrats since 2006.

        Remember, Obama received the largest campaign contribution from BP Oil last year than any other candidate in history.

        The tides are turning a bit this year where business PACS have given 52 percent of all campaign donation to Republicans – 48 percent have gone to Democrats.

        Consider that union PACS overwhelmingly donate to Democrats.

        So the tired Democrat talking point that Republicans protect corporate interests is totally false. 

        Democrats receive almost all union support and now are splitting evenly with Republicans for corporate support after receiving the majority of corporate financial backing since 2006.

      2. That’s why there’s a Tea Party movement

        At least one of the major parties is listening. Make the government smaller, tax people less. Let’s give it a try.

        1. Why there’s a Tea Party movement

          The TEA Party movement exists because the Koch brothers and other wealthy right-wingers funded it.  Nothing grassroots about it – it is all phoney.

          "Taxed Enough Already"?   – these fools don’t realize that Obama CUT taxes! 

          And the worse things get…the more that wealth becomes concentrated among the Koch brothers and other superwealthy while unemployment is high and people lose health insurance – the angrier the poor fools become. 

        2. G.W. Bush created the deficit – why put the GOP back in charge?

          What short memories the people of this country have!  It was the republicans that drove this country into the deficit spending (with 2 wars and tax rebates) and that took their eyes off of mortgage regulations – now, we are going to put that group back in charge? That’s just plain nuts.

          1. It was Dodd/Frank

            Bush pushed for more mortgage regulation and the Democrats blocked.  It was Frank who wanted to "roll the dice" with expanding home buying and reduced payments and regulation [as he now admits].  Dodd/Frank did not want to put any strictures on Fannie or Freddie.

  2. Between a rock and a hard place

    I agree, taking on more debt is a bad idea. But what else should be done? The Illinois economy is poor and pension benefits cannot be cut without an Illinois constitutional amendment. Should taxes be raised by the amount of the debt proposed? Should the State continue not paying its suppliers and vendors? Should it cut its already horrendous level of human and education services?

    Borrowing money from a pay-day loan store is a pretty bad idea, too. But people get themselves in bad situations from which it takes time and sacrifice to extricate. No solution is optimal, nor will be greeted with acclaim.

  3.   In the end, the state owes

    In the end, the state owes $4 billion in pension payments this year. Not because pensions have gotten out of control, but because in 1995 the General Assembly said that is how much the state should pay in this year.

    You essentially have four options:

    1) Make the payment and then find $4 billion to cut out of the rest of the budget for the remaining part of the fiscal year (essentially 25% of the remaining half-year budget)

    2) Raise new revenue to make the $4 billion payment

    3) Change the 1995 law that set the payment schedule, but that is just avoiding the issue

    4) Borrow to pay this year and meet your obligation.  

    I think it is better to pay 2-4% interest on a pension obligation bond then pay the 8.5% interest the pension system effectively charges for money not paid into the system.

    1. No one has the right to bankrupt the state

      Some options you didn’t mention…

      5) reform current pension benefits such as eliminating the automatic 3 percent annual raise, raise the retirement age and require employees to pay more into their Cadillac health insurance premiums (most are paying little to nothing that the state pays)

      6) switch the current pension into a 401 k plan such as Governor candidate Bill Brady is proposing.

      That would save billions right there

  4. Pension Reform in Government Workers Best Interest

    The biggest losers if pensions go unfixed will be those workers and retirees who depend on the pensions. There is not enough potential tax revenue to fix the issue absent dramatic changes in benefits (e.g., no more retirements at 50).

    As such, governmental entities will eventually go the route of the airlines and auto companies and fix the union / pension issues through bankruptcy. In bankruptcy, pensioners are one of the least important and least powerful constituencies and will end up with 10-25 cents on the dollar in pension benefits.

    As such, I would encourage the union members to press their leaders and the rest of us to press our elected officials for resolution of the issue sooner than later as there’s no way to make up lost income once you are in retirement.

    The unions and government officials from both parties aren’t doing anyone a favor by kicking this down the road with more debt and no plan to resolve the issue with something simply like a combination of a special"limited duration" levy and transition from defined benefits to defined contribution (401k) style plan.

    Like every other issue on this board, there’s a probably a reasonable solution if all reasonable folks come together, share the pain, and ignore the yelling from the extremists.

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