Illinois Grapples With Pension Shortfall

February 16, 2005 ( - Illinois Governor Rod Blagojevich is expected to propose a reform package for the state's badly underfunded pension system that includes a cut in the 3% cost-of-living increase for future employees.

A St. Louis Post Dispatch news report said Blagojevich will make the proposal in his annual budget address in which he will lay out ways to deal with the shortfall in the state’s five pension systems that is expected to be $2 billion this year. The proposed cost-of-living cut would apply only to future state employees, since the state constitution prohibits cutting the benefits of current employees after they’re hired.

When Blagojevich came into office two years ago, he inherited a $43 billion unfunded pension liability, according to the news report. The administration cut that deficit to $35.8 billion last year with a controversial $10 billion bond sale, but it still remains the nation’s most debt-ridden state government pension plan.

Both sides will pull out competing numbers in the approaching debate, according to the news report. The AFSCME union argues that Illinois workers’ average pension of $1,400 a month is not at all out of line with those of other states. It points out that Missouri has a more generous starting pension formula than Illinois and doesn’t require employee contributions.

But the Blagojevich administration argued that perks within the pension system – particularly the cost-of-living increase – are unusual generosities that the state can no longer afford.