As Oak Lawn twiddled their thumbs a few years ago and continued to under fund its pension obligations, Trustee Robert Streit floated the idea of issuing pension bonds to refinance the debt and reduce the cost. The Mayor and her then allies said “no” without even studying the idea. Now the idea may have legs in the General Assembly, which is dealing with its own pension debt.
State Representatives and Senators are acknowledging that pensions are a contractual right and cannot be diminished. It is language that comes from the State Constitution. So, instead of wasting time complaining about pensions, the legislators are finally looking at real solutions. One idea that will at be discussed is what they are calling “a massive bond issue that would be applied to the state’s pension debt.” The idea is the money could be borrowed at a lower interest rate than the state is essentially paying on its $129 billion pension debt now.
A General Assembly committee was scheduled to hold a hearing on the idea last week, but the House canceled its session days for the week. The hearing will be rescheduled.
The State Universities Annuitants Association has issued a fact sheet claiming that $107 billion in bonds would be sold and repaid over 27 years. It contends the state would save $103 billion by 2045 over the payment plan currently in effect. The plan would only affect the State’s five pension systems and not the local systems, like the Oak Lawn Police and Fire Systems.
One State Rep who is at the center of the debate has called it the ” largest bond sale in the history of the world” but doesn’t know if it is feasible. He did say that the idea will be explored. With returns on investment going higher by the day, the time may have come to quit kicking the can down the road and fix the problem.
Will Oak Lawn follow suit or instead head down another dead end road with pensions? When Streit brought the idea up in 2016, Mayor Sandra Bury scoffed at it.
Under a law passed in 2016, Oak Lawn and other municipalities can now be penalized if they miss a payment on their pension obligations. Illinois State Comptroller Susana Mendoza is now authorized by law to legally withhold the full amount that municipality falls behind from state payments to the municipality by withholding funds owed through the Local Government Distributive Fund.
The process allows the police or fire pension fund to give notice to the municipality and certify to the State Comptroller that the municipality is more than 90 days behind in its required contributions. Once that action is taken, the Comptroller shall take the delinquent payments owed to the pensions from the Local Government Distributive Fund and basically pay the pension funds.
For those wondering if Oak Lawn will now revisit the idea, the answer was recently delivered. The Oak Lawn Leaf has learned that the Village administration has no intention of revisiting the idea that came from Streit. In fact, Village Manager Larry Deetjen recently called the idea bad public policy before even allowing a discussion or investigation into the potential savings.
Despite the fact that local pension funds increased their balance sheets by millions in the last month through interest rate increases, Deetjen has told Trustees that he doesn’t like the refinance idea because it does nothing to address benefits.
State Representative Robert Martwick has admitted to various news outlets that the Illinois Supreme Court has made it “crystal clear” that changing benefits for current employees is unconstitutional. The State of Illinois in 2012 passed a law that reduced benefits for employees hired after that law passed and they are referred to as Tier II pension recipients and receive lower benefits.
In the end, the State of Illinois may solve its pension crisis before Oak Lawn even figures out that the debt isn’t going away.