While magic does occasionally happen in political circles – such as this week's out-of-the-blue, last-minute temporary fix for the fiscal cliff (and its small pieces of good news for Roth 401(k) conversions) – occasionally decisions made at virtual gunpoint don't come off as planned.
The longest saga in the American DB world, Illinois and its faltering state pension plans, faces an imminent deadline next week as a new cast of elected officials are set to be sworn in on Jan. 9 and the state's legislative clock is reset.
The Chicago Tribune reports that Gov. Pat Quinn and the soon-to-be-somewhat-redundant 2012-era leadership will be meeting this weekend trying to hammer out the details and come to a fiscal cliff-inspired solution for the state's pension deficit, the largest in the continental United States.
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But observers say that unlike the deal worked out in the wee hours of the New Year in Washington, the continued bickering and battles in Illinois will likely prevent a quick fix to the state's not inconsiderable pension problems.
As the Tribune notes, there are 17 different sets of rules and laws overseeing pension plans for the various public employees, teachers, public safety officers and the like in the state, and no common answer in finding a solution to address the $96.8 billion in deficit shortfalls.
More money is needed to inject into the funds – themselves battered by low interest rates and less-than-stellar returns on investments – and workers will somehow have to be convinced to contribute more of their own money to pensions and settle for decreased benefits and minimal cost-of-living increases, if they hope to get any pension at all upon retirement.
Even the state's $5 billion 2012 pension payment is three times larger than it was 10 years ago, the Tribune says, and it hardly makes a dent in the bucket.
"If you don't improve things fairly soon, you reach a sort of … black hole, and when you get too close to the black hole at some point you will never escape," independent actuary and SOA board member Jeremy Gold told the newspaper. "You can reach a point of no return, where they can't afford to be funded."
The state's issues have been compounded by the fact that repeatedly over the past decades, the politically turbulent state and its biggest city, Chicago, have failed to make payments and even borrowed from the various public pension funds to keep afloat.
Quinn, who will meet with other legislators at 1 p.m. Saturday in Chicago, told the Tribune he remains optimistic that a deal can be worked out.
"I think we saw in Washington with the debate over the fiscal cliff that people, in order to solve a problem, oftentimes have to make reasonable compromises, make changes in their original position in order to get an outcome that benefits the public," he said.
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