Illinois set to spend more on pensions than on education
An analysis released today (Monday) by the Governor’s Office of Management & Budget shows that without pension reform, Illinois will spend more on pensions than education by Fiscal Year 2016.
The budget office performed the district-by-district analysis based on current projections to examine the long-term funding challenges of the state if public pension reform is not enacted. Under current actuarial assumptions, required state pension contributions will rise to over $6 billion in the next few years if no pension reform is enacted, which will continue to result in significant cuts to education. According to the analysis, continued cuts to education as a result of fast-rising pension costs will cost Downstate and suburban school districts more than assuming the responsibility to pay for their compensation decisions over time.
For example, if pension reform that includes phased-in normal cost realignment is enacted, Downstate and suburban school districts would assume $49 million in new normal pension costs in Fiscal Year 2014. However, if no such reform is adopted, Downstate and suburban school districts would instead see their budgets reduced by $152 million, according to current projections.
Jerry Stermer, director of the Office of Management & Budget, says school districts would be better protected from a property tax increase with pension reform that includes the responsibility to pay for compensation decisions, than they would be without.
Stermer notes that every day Illinois' pension crisis goes unresolved, the unfunded pension liability grows by $12.6 million.
The governor has proposed a pension reform plan that eliminates the unfunded liability over the next 30 years and includes phased-in normal cost realignment that would ensure school districts have a stake in the contracts they negotiate.