Press Release - Friday, July 06, 2007
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Gov. Blagojevich congratulates Illinois Senate for passing resolution affirming its commitment to shoring up State's decades-old pension debt
SPRINGFIELD - Governor Rod R. Blagojevich today congratulated members of the Illinois Senate for passing a resolution affirming members' commitment to solve the state's mounting pension crisis so future generations will not be burdened by mounting deficits. Without action, the retirement of state and university employees, teachers, judges, members of the Illinois General Assembly, and anyone who depends on a state pension would be jeopardized.
Between Fiscal Years 1972 and 2003, the State of Illinois' unfunded pension liability grew from $2.8 billion to a staggering $40 billion. Despite a record investment of $13.3 billion into the pension systems over the past four years, Illinois' unfunded liability is still one of the highest in the nation. Without significant action, payments to cover the growing pension debt will absorb nearly all anticipated natural revenue growth, leaving little for important programs like healthcare and education.
"The state's pension debt has escalated through the past three decades to an unmanageable level. While we have been making some inroads the past few years, it is crystal clear that we must take drastic steps now to ensure that millions of citizens who have spent their entire adult lives working hard can continue to enjoy their golden years in retirement. I applaud the Illinois Senate for acknowledging the crisis and committing themselves to helping find a solution before pension contributions grow so out of control that they will threaten the state's ability to make any new education or health care investments," Gov. Blagojevich said.
Earlier this spring, Gov. Blagojevich offered a plan that would address the State's most pressing structural deficit challenge by injecting $26 billion into the cash-strapped pension system and thereby reduce the existing pension debt by 60 percent. In his March 7th Budget Address, the Governor proposed leasing the Illinois Lottery and issuing pension obligation bonds, which would immediately increase the system's funded ratio from 60.5 percent to 83 percent. While Governor Blagojevich supports his plan to enter into a long-term lease of the lottery to cover the state's growing pension liability, he is willing to consider proposals to address the problem from members of the General Assembly. The resolution reads as follows:
WHEREAS, Article XIII, Section 5 of the Illinois Constitution of 1970 requires the State to provide pension benefits to members of State-sponsored retirement systems; and
WHEREAS, the State of Illinois supports five retirement plans on behalf of State employees, university employees, teachers, judges, and members of the Illinois General Assembly; and
WHEREAS, it is the State's responsibility to provide adequate funding to support State pension liabilities so that future generations are not held responsible for current expenses; and
WHEREAS, deferrals of the State's obligations to its annuitants contributed to an unfunded pension liability in State-sponsored systems of $19 billion in 1995, which grew to $43 billion in 2003, resulting in a funded ratio of 48% in 2003, the worst funded ratio of any of the fifty States and significantly under-funded in comparison to the national average of 91.1% among 101 public retirement systems, according to the 2003 Public Fund Survey conducted by the National Association of State Retirement Administrators; and
WHEREAS, because of this crisis, unless changes are made, commitments to State employees will become a significant burden on future generations; and
WHEREAS, annuitants of the State's benefit systems rely on the security provided by pension benefits to meet their daily necessities, including food, housing, and healthcare; and fairness requires that Illinois keep its obligations and commitments to those who have earned it and will work for it in the future; and
WHEREAS, over the next three years, in order to meet the statutory funding formula, the State will be required to increase annual contributions to the pension systems and debt service on outstanding pension obligation bonds, reducing available State resources to fund growth in other core services provided by the State, such as education and health care, to less than $200 million of natural revenue growth per year, representing less than one percent growth per year in these critical areas; and
WHEREAS, further deferrals of the State's pension liabilities will force future generations to pay billions of dollars in additional interest on the unfunded liabilities of the State between fiscal years 2008 and 2045; therefore, be it
RESOLVED, BY THE SENATE OF THE NINETY-FIFTH GENERAL ASSEMBLY OF THE STATE OF ILLINOIS, THE HOUSE OF REPRESENTATIVES CONCURRING HEREIN, that the State's pension funding system is in a state of crisis, and that the State will continue to unnecessarily pay billions in interest costs alone if the unfunded pension liability does not receive an immediate and significant infusion of funding, the General Assembly is in agreement that a solution to this crisis must be adopted prior to adjournment of 2007 Spring Session of the Ninety-Fifth General Assembly; this action is necessary to adequately secure existing pension obligations, reduce long-term interest costs on current obligations, more effectively manage State funding requirements, and ensure that future new revenues will not be consumed solely by escalating pension contributions.
RESOLVED, that the General Assembly shall enact any such additional protections necessary to ensure that no further State pension liabilities may be deferred to future generations of Illinois citizens.
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