As far as special legislative sessions go, the one in Texas stole all the headlines in recent days but the one in Illinois has far more practical significance for Connecticut.
You’ve already heard the story of state Sen. Wendy Davis, a Democrat from Fort Worth, who filibustered an anti-abortion bill in the Texas State Senate for nearly eleven hours. By the time she sat down, she was trending on Twitter, had been mentioned as a potential Democratic candidate for governor, and even her tennis shoes were a sensation.
The unborn in Texas will have to live to fight another day. Oh, wait.
Though lacking a “star” like Sen. Davis, the unnoticed special session in the Illinois General Assembly bears a closer look. Legislators in the Land of Lincoln are considering several proposals to reform the states underfunded state employee pension system.
You probably haven’t heard the story of the financial disaster that is Illinois, but it will sound strangely familiar. The state’s bond rating has been downgraded 13 times since 2009. The unemployment rate is one of the highest in the nation. The state had a backlog of unpaid bills of more than $9 billion last year, leaving state vendors scrambling to survive.
Underpinning all that bad news were the state employee pension funds, which were underfunded by $81 billion according to state estimates. Moody’s Investor Services, however, recently adopted a new rating system that uses more realistic expectations for investment returns to calculate unfunded liabilities. Using this new measure, Illinois’ pension plans are underfunded by at least $133 billion, the worst in the nation.
Moody’s measures unfunded liabilities as a percent of a state’s financial resources. For 2011, Illinois’ net unfunded liabilities were 241 percent of its resources, also by far the worst in the nation. Connecticut was second worst, with net liabilities worth 189.7 percent of resources.
Gov. Pat Quinn, a Democrat who took over after they hauled Gov. Ron Blagojevich away in chains but who then won election in his own right in 2010, is thoroughly outmatched by the pension crisis. He attempted to explain the issue to the public (quite hilariously) with Squeezy the Pension Python. He called the legislature into special session to deal with the issue in June.
House Speaker Michael Madigan proposed a knock-off version of Gov. Malloy’s pension reform plan: start paying the annual required contribution plus an additional payment each year, from both the state and employees, to eliminate the unfunded liability. It also trims benefit levels. Like Malloy’s plan, it won’t work because it relies on the responsibility of the state legislature each year to solve the problem. Recall that the legislature’s responsibility, or more precisely lack thereof, was a contributing factor to the problem in the first place.
Madigan’s fellow Democrat, Senate Leader John Cullerton, proposed a smaller plan that would let state employees choose between state-funded health insurance in retirement and full pension benefits, among other changes.
The session will continue, though some legislative leaders have already announced they will miss Gov. Quinn’s deadline of July 9 to adopt a reform plan.
Working with the Illinois Policy Institute, a group of conservative lawmakers proposed a plan based on the pension reforms adopted in Rhode Island in 2011. This plan would transition state employees into a 401(k)-style plan, as is available to most private sector employees. Unlike the other plans, it would actually solve the crisis. Nonetheless, passage seems unlikely.
Connecticut trails Illinois in the severity of the crisis but it isn’t for lack of trying. Barron’s called Connecticut’s financial situation the worst in the nation last summer, primarily because of unfunded liabilities, and Fitch Ratings changed their outlook on the state’s debt to negative this week.
Pension reform hasn’t had a Wendy Davis moment yet, and will be hard pressed to do so. But for special session drama that might actually matter to Connecticut, check out Springfield, not Austin.
Heath W. Fahle is the Policy Director of the Yankee Institute for Public Policy and a former Executive Director of the Connecticut Republican Party. Contact Heath about this article by visiting www.heathwfahle.com