Mt. Vernon Register-News

February 15, 2013

Rep. Bost speaks on pension reform

Pension systems will fail themselves if something isn’t done, says Bost

By TESA GLASS
tesa.glass@register-news.com

MT. VERNON — — State Rep. Mike Bost says the legislature is not working on issues they should be working on, with pension reform at the top of the list.

"Right now, (House Speaker Michael) Madigan just wants to shift the responsibility for pensions to the downstate property owners," Bost said. "His ideas are just delaying tactics. If we don't solve the problem quickly, the state won't be able to make its obligations again."

Bost, who now represents Jefferson County as part of the newly-drawn legislative district, spoke from his new Mt. Vernon office about some of the top priorities. As a veteran legislator, Bost said he has continued to be frustrated with the pension problems facing the state.

"If we don't do something, the pension systems themselves will fail," Bost predicted. "The first to fail will be the GARS, that's ours. The one that is for the legislators and judges. The next to fail will be the two smallest systems, URS and SERS will fail closely together. I predict within 17 years, the collapse of TRS."

Bost also predicted without pension reform, GARS will collapse in about 8 to 10 years, with URS and SERS failing in 12 to 15 years.

"There have been some sensible solutions proposed," Bost said. "Some people say, 'don't touch it, don't do anything.' We have to do something. Right now, so many political games are being played with it. ... I hate to use the term of kicking it down the road, but in this case, if we kick it down the road, it will fall off a cliff. It really doesn't matter why it failed, we know how it failed. We need to fix it."

Bost said he hopes lessons have been learned from how the state got behind in its pension obligations. At this time, the state is between $117,000 and $120,000 billion in debt, with pension debt amounting to $80,000 to $90,000 billion.

"We know the pension system gets in trouble when any governor shorts a payment," Bost explained. "Gov. Thompson did it the first time and Gov. Edgar came up with a plan to repay it. But, that didn't happen and Blagojevich shorted the pension funds. That created a-third of the problem."

Bost said the state has learned that once a pension is solvent, money can't be taken from it.

"You see a pile of excess money and start offering early outs with incentives," Bost explained. "When that happens, it depletes those funds."

Bost said one thing that couldn't be predicted was the financial losses in investments for the pension funds.

"Back before the financial crisis, it was sensible to think the average return on investments would be 6 to 8 percent," Bost said. "Since the financial crisis, we can't do that anymore — but we are."

Bost said an Abraham Lincoln quote best describes the pension reform crisis.

"It was said, 'a debt against yourself isn't much of a debt," Bost said. "Lincoln said that right after the Civil War when the federal government owed $98. It's still true now."

Bost said he plans on looking at sensible, Constitutional reform plans.

"It must be Constitutional," Bost said. "I believe any pension reform will be tested in the courts. ... I think it will come down to only paying part of the (Cost of Living Allowance) instead of a flat 3 percent every year.  of the plans the Governor wants is to pay COLA or healthcare, one or the other. I don't think that will stand up in court."

Bost said he believes a sliding scale on retirement should be used to help start paying back the pension indebtedness, and an increase in the employee pay-in will be needed.

"We can't change what interest rates are doing, but there are things we can change," Bost said. "The important thing is, we need bills to move forward, sensible bills. I won't vote for a bill that isn't sensible."