To
the Honorable Members of
The
Illinois Senate,
99th
General Assembly:
Today
I veto Senate Bill 777. This bill continues the irresponsible practice of
deferring funding decisions necessary to ensure pension fund solvency well into
the future. The bill effectively makes Chicago taxpayers borrow from the
pension funds at an additional cost of $18.6 billion. It’s a game politicians
like to play with taxpayers’ dollars by delaying payments today and forcing
future elected officials to deal with pension funding issues tomorrow. As
all know by now, that practice led to our current pension woes across state and
local pension systems. Chicago police retirees are rightfully opposed to
the bill. Instead of doubling-down on our past mistakes, we must learn
from them. In vetoing this bill, I stand with all Chicago taxpayers who
will be saddled with higher future pension contributions if the bill were to
become law.
The
cost to Chicago’s taxpayers of kicking this can down the road is truly
staggering. Actuaries estimate that between now and 2055, when the law
would require these funds to achieve the 90% funded ratio, the total
contributions to the Policemen’s Annuity and Benefit Fund of Chicago would
increase by approximately $13 billion—an increase of 47.4% over contributions
required under the current law. For the Firemen’s Annuity and Benefit
Fund of Chicago, the total contributions would increase by approximately $5.6
billion, or 47.1% over the amounts under the current law. In other words,
by deferring responsible funding decisions until 2021 and then extending the
timeline for reaching responsible funding levels from 2040 to 2055, Chicago is
borrowing against its taxpayers to the tune of $18.6 billion. This
practice has to stop. If we continue, we’ve learned nothing from our past
mistakes.
Irresponsible
funding decisions have left us with state pension funds that are collectively
underfunded to the tune of $111 billion. The poor fiscal health of these
pension funds means we have to spend nearly 25 cents out of every dollar of the
state budget on pensions, which significantly impairs our ability to provide
vital services to those in need.
Irresponsible
funding decisions have left teachers in Chicago with a drop in pension reserves
from 100% funded as recently as 2001 to 51.8% funded today. On that
trajectory, teachers can count on receiving only slightly more than 50 cents of
every dollar owed to them in retirement – all because of a decade of pension
holidays in which Chicago skipped the necessary contributions to the teachers’
pension fund.
Irresponsible
funding decisions have left two of Chicago’s main employee pension funds near
insolvency. The Municipal Employees’ Annuity and Benefit Fund of Chicago
and the Laborers’ Annuity and Benefit Fund of Chicago, covering some 79,000
current and former Chicago workers, are projected to have zero balances as
early as 2026 and 2029, respectively.
This
is what happens when you fail to responsibly fund pension obligations.
And
now, against this historic backdrop, Chicago wants to do it again, this time
gambling with the pensions of its police officers and firefighters. SB
777 would permit Chicago to contribute to the two pension funds for its public
safety workers far less than is actuarially required during fiscal years 2016
through 2020. Even worse, the bill would allow Chicago an additional 15
years to bring the funds to a responsible funding level of 90%, with the target
year shifting from 2040 to 2055. Current and retired police officers and
firefighters would have to wait until 2055 to know their pensions are
secure. This is bad policy regardless of any fiscal impact, but doubly so
when it comes with a price tag of $18.6 billion.
Therefore,
pursuant to Section 9(b) of Article IV of the Illinois Constitution of 1970, I
hereby return Senate Bill 777, entitled “AN ACT concerning public employee
benefits”, with the foregoing objections, vetoed in its entirety.
Sincerely,
Bruce
Rauner
GOVERNOR