According to media reports, state Senator Don Harmon recently spoke to a large gathering at the Business and Civic Council meeting at the Carleton Hotel in Oak Park. He was evidently very candid when he spoke of the state's "pension problem," which he referred to as "the elephant in the room." He also stated that "the state never missed a pension check for a retired teacher or state trooper." Media reports further stated that "Harmon offered a worthy tutorial to the assembled and made valid points." (Wednesday Journal, July 3)
Since the senator is very knowledgeable and articulate, I'm sure those persons present found his presentation edifying. However, for clarification purposes, I feel that the two statements attributed to Sen. Harmon require amplification.
First, at its core, the state has a serious "revenue problem." The state has an $8 billion hole in this year's "balanced budget." Unfortunately, this is not an anomaly. According to the State Comptroller Judy Baar Topinka, who spoke at a recent roundtable discussion, Illinois has experienced deficits every year for the past 20 years. Therefore, because of revenue shortages, the state has not only failed to make its constitutionally mandated pension contributions but has also failed to adequately support its schools and health services, and pay its vendors in a timely fashion.
Some of the reasons for these deficits are:
1) the state's flat income tax does not generate sufficient income to finance state services.
2) the state's sales tax is outmoded.
3) the state exempts too many forms of income from taxation.
4) the corporate community demands and receives huge tax breaks whenever it threatens to move out of state.
To say that the state has never missed a pension check for a retired teacher or state trooper may create the erroneous impression that the state is acting responsively even though it is facing a financial crisis. The truth is that every time the state declared a "pension holiday," it failed to make its contribution to the Teachers Retirement System (TRS). This forced TRS to sell assets in order to give retired teachers their pension checks. It was TRS and not the state legislature that acted responsively.
Where did TRS receive the money to make those payments? Partially from the contributions of working teachers, who currently contribute 9.5 percent from every paycheck; from individual schools that employ those teachers; and from the return on investments. Years of reckless behavior by state legislators has left TRS less than 50 percent funded. This means the fund holds less than $1 for every $2 it is obligated to pay to future teacher retirees.
I believe this information is necessary to help citizens understand the "pension problem."
Al Popowits is a River Forest resident and head of a civic organization called "River Forest Voice."