Rep. Grant Wehrli (R-Naperville) said getting Illinois' massive pension debt under control should start now.
At Tuesday’s House Personnel & Pensions Committee hearing, Wherli expressed his openness to a proposed pension reform package, which includes securing ties by the unfunded liability of selling of pension obligation bonds in the amount of $107 billion that would be paid out over the next 27 years, presented to legislators by Committee Chair Robert Martwick (D-Chicago).
“I am not to the point where I am going to say that it is a good plan, but it is a plan,” Wherli said of the idea Martwick indicated could possibly assist Illinois out of its massive retirement debt.
“And I thank you for bringing this forward because here it is January 2018 and my fear is we are going to be back here in January 2019 and have the same pension problem because of the political arena that we are all in, and mathematically that doesn’t help us,” Wherli said.
Wehrli said while most of his questions were asked previously by committee members, he did want to inquire about an “adverse scenario” noted in the plan.
“The years were it dips below the $40 billion investment number, is that an unfunded liability at that point and time,” Wehrli asked.
Professor Runhuan Feng, head of actuarial sciences at the University of Illinois at Urbana-Champaign, said it was not and that it was just a special investment fund balance.
“Thank you because that is what I was looking for,” Wehrli said.
He continued noting if in a perfect world the committee agreed to the deal, the proposal in front of him was a static document and investments are dynamic.
“What happens if it changes adversely?” Wherli asked. “Are the pensioners willing to say ‘this is what we are going to get, the money is the money,’ or are we going to be in a situation in 22 years where our 3 percent component COLA has to be paid, but we don’t have the money because our investments did not work?”
He said what he was really asking was how much skin are pensioners willing to put in the game and if the mark is missed, will pensioners be willing to take less.
Panel witness State University of Annuitant Association (SUAA) Executive Director Linda Brookhart said there would have to be some compromise.
“The discussions are out there and we want to hear what everybody else wants to hear,” Brookhart said. “We want to hear what the bond companies say, what the investment companies say. Right now we know nothing can be diminished or changed. We are just working on idea to put the conversation out there.”
“So we put the conversation out there, but we are not willing to assume any of the risk,” Wherli said, adding, “If we are willing to step up and do things like this, I just need to hear there is going to be something in return, when it comes to the assumption of risk. It can’t simply be all on the taxpayers.”
Brookhart said the plan is simply one way to think about managing Illinois' pension debt.
“We do not present as a final solution, but we view this plan as a start of a very important conversation,” Brookhart said.
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