The government pension system involves billions in taxpayer money, provides retirement nest eggs to public sector employees and reflects fiscal responsibility. This is why it’s important to fix and reform our state pension code.
Just a few short years ago, our Cook County Pension Fund had reached the brink of insolvency.
A cap in the state law meant that the amount we paid into the system did not even come close to meeting our obligations. The amount we paid into the system was not even close to keeping pace with our obligations because of a cap written in state law. Our unfunded liabilities grew by $1 million per day.
We found a simple, but temporary solution. Paying more every year via an intergovernmental agreement. It’s now time to update the pension code in order to make this fix permanent.
By paying $300 million extra each year, we took decisive steps to reduce fund liabilities responsibly and sustainably. The pension fund funding level was successfully raised by $2.3 billion. The pension system now has enough money to cover 70.7% its future liabilities. This is up from 60% when we first started making these extra payments.
This is a significant improvement. This is a dramatic improvement. We have kept our promise to provide pensions through a pandemic and economic downturns, among other challenges. Rating agencies and groups that promote good government have recognized our work, but we still want to do more. We want to remain at the forefront of pension funding. Springfield’s current law can be changed to ensure we continue doing this year after year.
While we were working to reform our pension system, we saw a chance to tackle another problem before it became more serious. According to the current law, the increase in the pensionable wage cap for members hired after January 1, 2011 (Tier 2). has not kept up with the increases in Social Security wages.
The reform proposed by my office is to make sure that the county follows federal Safe Harbor guidelines, which state that pension benefits given to employees instead of Social Security should be equivalent to the value provided by Social Security. We want to ensure that employees receive the same benefits as they would under Social Security.
It’s about following the law and being fair, but also encouraging public service to keep good people. Our legislation’s sponsor State Sen. Rob Martwick has said: Would you come to work for a county knowing that your retirement after 30 or 40 years would be nowhere near what you could get in another job?
Total pension payments including supplemental can vary but have generally averaged around $500 million per year. The Tier 2 costs that will be included in these payments represent a small portion — less than 1 percent.
We are happy with this amount and it would not affect the county’s capacity to provide essential services. This is a fiscally-responsible, good-government and good public policy initiative. It helps to retain employees, prevents costly lawsuits, and solves the problem before the cost increases.
All of this points to a Cook County that is stronger and more stable.
This is an example of a goal, a plan, and staying committed to them. We are now asking the General Assembly for help in building on our successes by passing pension reform legislation which makes these payments permanent and fixes another problem before it becomes bigger.
Toni Preckwinkle, Cook County Board President.