Study: Pension savings 'barely dent' Illinois fiscal woes
If you think Illinois’ new pension law will fix the state’s money troubles, think again.
Savings from the controversial pension overhaul will “barely dent” Illinois’ budget shortfalls over the next decade, according to a new study released Tuesday by researchers at the University of Illinois.
Even with the new law, Illinois’ budget shortfall is still on course to grow to $13 billion by 2025, according to estimates produced by U of I’s Institute of Government and Public Affairs.
Chalk it up to state government’s propensity to spend more money than it takes in, said Richard F. Dye, who co-authored the study.
“It just doesn’t add up,” said Dye, an economics professor assigned to the institute. “We like government services. We don’t like paying taxes. We like politicians that tell us it’s gonna be fine. But it ain’t fine.”
Backers say the pension law, passed by lawmakers and quickly signed by Democratic Gov. Pat Quinn in December, will save the state $160 billion over the next 30 years. Much of those savings comes from scaling back annual benefit increases for state workers, a provision organized labor groups say violates the state constitution’s guarantee that benefits “shall not be diminished or impaired.”
But the law’s savings are backloaded and will not be fully felt for years, Dye said, even if the law survives legal challenges.
Illinois would save between $1 billion and $1.5 billion each year for the next decade, according to his analysis. Even with those savings, the state would face a roughly $3 billion hole in 2015, which would swell to $13 billion in 2025.
Darkening the forecast is the scheduled 2015 expiration of the income tax hike -- aimed at closing the state’s budget gaps -- that was championed by Quinn and enacted in 2011. That will mean less money to the state starting next year, unless that law is extended.
But even if lawmakers do continue the increased tax rate beyond 2015, things do not get much sunnier, Dye said. That would still leave Illinois on track to have its deficit grow to $5.5 billion in 2025.
“We are spending beyond our means,” Dye said. “And, you know, greater cuts in education or social services are on the way. It’s just not sustainable.”