Lawmaker: Illinois needs pension reform ‘like Rhode Island’

January 27th, 2012 at 12:29 pm by under Nesi's Notes

Illinois Issues reports on how a top Republican in the Land of Lincoln – a state that faces a larger pension shortfall than Rhode Island did – is trying to get the state to rally around its own version of Raimondo-Chafee:

“We’ve talked about pension reform in this state until we’re blue in the face. We know what needs to be done. We know that other states have done what we need to do, like Rhode Island,” House Minority Leader Tom Cross said during a recent news conference.

It is fitting that Cross would cite Rhode Island as an example, since it is the only state that has in recent years taken some controversial pension reform steps similar to a proposal from Cross. David Draine, senior researcher for the Pew Center on the States, called Rhode Island’s reforms “the only [recent] example of a state that really changed the terms of pension benefits for current employees.” …

Rhode Island had one of the largest funding gaps in the country relative to its size. The state operated its fund on a pay-as-you-go basis from the 1930s until the 1970s.

“Pension systems with really severe problems often started out as ‘pay-as-you-go’ plans, in which retirees derived their benefits from current state revenues, not any pool of accumulated cash. Inevitably, the number of retirees grew, relative to the number of current employees, and the checks going out the door took up a larger and larger portion of state revenues,” said a study of state pensions from the Pew Center on the States.

Well well well – not looking so smug anymore, are we, Illinois?

January 9th, 2012 at 12:02 pm by under Nesi's Notes, On the Main Site

Back in October, Chicago columnist James Warren wrote that on the subject of pensions, Illinois’ “solace is that hapless Rhode Island is in even worse shape.”

Since Warren penned those words, Rhode Island has passed the most sweeping pension overhaul in the nation, boosting its funded ratio from 48% to 60%. Illinois’ funded level, meanwhile, has dropped to 43%, and Bloomberg moved this story Monday (emphasis mine):

Illinois had its general-obligation bond rating reduced by Moody’s Investors Service to A2 from A1, making it the company’s lowest-graded U.S. state.

The downgrade to the sixth-highest rating came after a legislative session that “took no steps to implement lasting solutions to its severe pension under-funding or to its chronic bill payment delays,” Moody’s said in a report. Illinois, it said, has “weak management practices.”

Looks like Warren will have to seek solace somewhere else.

(photo: Alexander Gardner, via Wikipedia)

Pension problem’s bright side? RI is giving solace to Illinois

October 3rd, 2011 at 11:30 am by under Nesi's Notes

While bemoaning Illinois’ fiscal problems over the weekend, The New York Times’ Chicago columnist James Warren did find some consolation:

The state’s finances are in well-chronicled disintegration. When it comes to just the pension debacle, our solace is that hapless Rhode Island is in even worse shape.

We do what we can, Jim.

But Warren’s comfort may be misplaced. Rhode Island’s pension funding problem exploded in April when the Retirement Board voted to lower its investment return forecast from 8.25% to 7.5%. Illinois’ largest pension fund, on the other hand, is still banking on a rather optimistic return of 8.5% over the long term.