Pension Reform: Easy as 1-2-3

Recently it was revealed that Apple has over $137 billion in cash reserves.  That's more than enough to cover Illinois' pension debt.  Since our state fruit already is an apple, perhaps Governor Quinn can work out a deal with Apple's CEO.  In exchange for the funds we can place the Apple logo on our state flag, change our state motto to "Land of iPads," and start spelling Illinois with a lower case i. 

While it's unlikely for Apple to agree to such terms, true pension reform has seemed just as unlikely.  The lack of any real progress at last week's pension summit is another unpleasant reminder. 

But it shouldn't be this way.  Pension reform is achievable in three simple steps.

Step 1: The state needs to provide a legal guarantee that they will fund their portion of the pension system.  This is the only way to prevent a repeat of past failures and without such a guarantee other reforms our futile. 

Step 2: Unions must allow for some realistic, but still significant, reductions to pension benefits.  These are necessary to reduce the current and future costs of pensions.  No idea should be off the table in these discussions, including increasing the retirement age, capping pensionable salary and capping the COLA on both current and future retirees.  These changes can be crafted in such a way as to do little to no harm to those with the smallest pensions.

One example of this is to limit the COLA to the first $50,000 of a pension and adjust for inflation over time.  This would allow any teacher or other state employee with an average pension to receive their full COLA.  Those with larger pensions would still get a fair COLA benefit, even though it may not be the 3% currently in place.   (For a more detailed explanation of suggested changes to the pension system, click here.)

Union members, such as myself, must remember that pension reductions are not meant to punish anyone, but are necessary to restore the health of the system.  And towards that effort all beneficiaries--current and future--would see some changes.  Union leadership needs to realize that if they do not offer realistic changes, they may be stuck with whatever the General Assembly decides without them.

Step 3:  New revenue must be found to help fund the system, so that the state's pension obligations do not overtake the entire state budget.  One area where both legislative and union leaders agree is that members should contribute more to the system, but this alone is not enough.  All ideas should be on the table for this step, just as they should when considering reductions to current pension benefit: cutting spending to some programs, closing loopholes or even through new taxes.

New revenue cannot be looked at until the first two steps are crafted into law.  New revenue streams will potentially affect every taxpayer in the state and therefore all citizens must have a voice in any proposed tax changes.  That is why this step must be separated from the first two. 

I realize that the details of each step need to be worked out.  But once a framework like this is agreed to, the task of reform becomes a bit easier.  Both sides can relax, knowing that all issues will be thoroughly addressed.

And if these simple steps don't work?  Maybe "illinois: Land of iPads" isn't such a bad idea after all.