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Illinois' pension crisis: 'Catastrophic' failures, big perks, retiree worries

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"I sometimes wonder whether people actually understood the math.”
-- Peter Chan, former head of the U.S. Securities and Exchange Commission's municipal securities and public pensions unit in Chicago.
There are many paths to failure. But to understand how Illinois' pension system became the worst in the nation, it's instructive to look at what happened 10 years ago in the final, hectic days of the annual state legislative session in Springfield.

A dense, 78-page bill aimed in part at curbing pension abuses in downstate and suburban school systems landed in lawmakers' laps two days before their scheduled May adjournment. One sponsor called it the first “meaningful” reform in 40 years, a reversal of “decades of neglect and bad decisions.” Another predicted that it could save the state up to $35 billion.

But in addition to true reform, the bill later signed by Gov. Rod Blagojevich allowed the state to skip half its pension payments for two years and to stretch out some expenses approved under the previous governor, George Ryan. No one mentioned those could cost $6.8 billion. The math hadn't been done.

In fact, reliable calculations weren't completed for two months. Democrats in the Legislature, eager to pass a budget before their summer began, muzzled debate with a stopwatch, ignored the incomplete calculations and jammed the pension bill through anyway.

In retrospect, Senate Bill 27 was no cure-all. It also was no exception.

For more than a quarter-century, governors and state legislators, Republicans and Democrats alike, made a series of financially toxic moves in the pension systems for state employees and public school teachers. Proposals to fix the perennially underfunded pensions were based on botched calculations—or no calculations at all—and were driven by misguided rationales that weren't fully vetted. Everyone was to blame, yet few accepted responsibility. Even the public-sector unions that stood to lose the most sometimes embraced those choices.

Stories:

State legislation favors city and county pensions (12/1/1999)
Ryan to make more when he’s retired; State pension lets governor collect $30,000 more a year than his current pay (8/27/2001)
Pension for Philip will top his pay;45% boost kicks in for '04; other perks also in package (12/6/2002)
Appointees get perk: 'double-dipping'; Pension plus salary adds up to sweet deal for a select few (2/22/2005)
Lawmakers OK skipping pension fund payments to balance budget (5/30/2005)
EXCLUSIVE: Gov.'s pal gets huge pension boost; 8 weeks as adviser hikes ex-lawmaker's yearly take $38,000 -- critic slams 'abuse of . . . system' (5/24/2008)
Pension hike: Gov 'didn't know'; 8-week job upped yearly take $38,000 (5/28/2008)
Gov. Quinn asks: 'Have you no decency?'; Gov calls deal 'an insult to the people of Illinois,' but ex-lawmaker says fuss just 'typical Pat Quinn’ (4/5/2009)
Can state find a fix for pension crisis?; Suggestions: Give new hires less, end automatic 3% boost, raise retirement age (9/15/2009)
No pension for Ryan, state's high court rules (2/20/2010)
INVESTIGATION: 'I deserve every penny of it' Oak Brook's clout-heavy former police chief unapologetic about benefitting from taxpayer-funded pension sweetener Oak Brook's clout-heavy former police chief is unapologeticabout benefitting from a taxpayer-funded pension sweetener (4/1/2012)
Move to save 1 fat pension (5/31/2012)
'IDIOTS'; Pension session goes nowhere (8/18/2012)
'Where'd the money go?' State's failure to fund pensions threatens retirees' security (12/23/2012)
ANALYSIS: Illinois pension crisis; Big names litter road to pension disaster; SEC, in fraud case against state, says plenty of blame to go around for nearly $100 billion funding crisis (3/17/2013)
'VICTORY FOR THE PEOPLE' (12/4/2013)
State pension crisis; Pension vote pleases Wall Street (12/5/2013)
State pension crisis; Quinn signs pension overhaul into law (12/6/2013)
ANALYSIS: Campaign contributions; Courting controversy; State Supreme Court justices rake in cash tied to players in pension law fight (1/2/2014)
Constitutional clash; Public-sector unions sue Quinn over pension reform (1/29/2014)
CRAIN'S CHICAGO BUSINESS SPECIAL REPORT: The Illinois Pension Disaster: What Went Wrong? (8/10/2015)
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"I didn't know about it until I read it in the newspaper."
--Ex-Gov. Rod Blagojevich, reacting to my story about a $38,000-a-year pension boost one state lawmaker got for working eight weeks in Blagojevich's office
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