State and local community officials like to refer to a “pension crisis” when they discuss deficit problems in their respective budgets. They employ this term because it takes the financial onus off their shoulders and puts it on the backs of police and fire personnel, teachers and other public servants. They love to point to the top 1 percent of retirees who collect large pensions and ignore the majority of pensioners who receive average pension payments.
The awful truth is that the “pension crisis” was created by public officials at both state and local levels who for decades knowingly and with forethought under-funded their pension systems.
At the state level governor “Big Jim” Thompson in the 1970s and 1980s, together with the state general assembly, declared “pension holidays” in which the state did not fully fund its five state pension plans and then used the money for other purposes. Subsequent governors and state legislators continued this fiscally irresponsible practice. They did this knowing that the state would owe their pension plans not only the amounts withheld, but also interest (which would have accrued if the funds had been properly invested).
At the local level, communities are responsible for the pensions of their police and fire personnel. If community leaders act in a responsible manner, they will follow the advice of police and fire pension board actuaries and annually put into their pension funds sufficient monies to service the future pensions of their current employees (these funds are invested by the respective pension boards in a variety of investment vehicles). If the amounts in the funds fall short of meeting pension payments, then taxpayers must make up the differences through increased real estate taxes.
That is the way the system is supposed to work. However, a problem arises when elected officials are reluctant to raise taxes to pay for increased government expenditures. These elected officials know that increasing taxes will make them unpopular at election time, whereas under-funding pension systems will draw little or no public attention. Therefore, it becomes politically expedient to under-fund pensions. Doing so, of course, creates problems for future elected officials who all too frequently repeat the sorry process. Present harsh economic conditions have brought an end to this political game of “kicking the can farther down the road.”
Since public officials will not accept responsibility for the current “pension crisis,” they too often shift the blame to pensioners. The public, which knows little or nothing about state or local pension systems, is deceived.
Al Popowits is a River Forest resident and community activist.