The Laws of Arithmetic and Illinois Pensions

Posted by Jeffrey Brown on May 17, 2010

Filed Under (Retirement Policy)

An article on Saturday in the Tribune pointed out the obvious – that there are no easy solutions to Illinois state budget woes.  Lawmakers are not even thinking about how to backfill the enormous pension funding gap that already exists.  Rather, they are spending all their energy trying to figure out how to deal with one piece of it – namely, the $4 billion or so that is due this year.

It reminds me, once again, of former Fed Chairman Greenspan’s remark about Social Security options, and how we only have three options – raise taxes, reduce benefits, or repeal the laws of arithmetic.

The same three options are the only ones on the table for Illinois.  Our ability to reduce benefits is limited.  And as many have pointed out in comments on my prior posts, one can hardly lay the blame for this problem at the feet of the pension participants who paid their share along the way.  That leaves tax increase or borrowing.  But I would hasten to add that borrowing is just a tax increase on future generations of taxpayers.  This being gubernatorial election year in Illinois, I suspect that lawmakers will once again kick this fiscal can down the road …

2 Responses to “The Laws of Arithmetic and Illinois Pensions”

  • Syncope says:

    So how do you deal with this 600lb gorilla sitting in the corner? Taxpayers are never going to force raising taxes, the growing numbers of retirees will never consent to losing benefits and mathematicians are never changing their laws. What is the most likely place for the dam to break?

  • Jeff Brown says:

    Sadly, I think the answer is that we will continue to get up to our ears in debt until, like in California, the fiscal pressure is so intense that we have no choice but to make drastice changes. I think we have very hight tax rates in our future …