Pension Transparency: Reform Rauner Can Make Alone

Bruce_Rauner_August_2014

Illinois governor-elect Bruce Rauner will likely face opposition on many issues as he tries to work with the Democrat-controlled General Assembly.

But over at the Illinois blog Wire Points, Mark Glennon writes about one thing Rauner can accomplish without the help of the rest of the legislature: making the public pension system more transparent.

The post from Wire Points is printed below.

 ____________________________

By Mark Glennon, Wire Points founder

Public pension numbers are by far the murkiest part of Illinois’ fiscal crisis, and the biggest. Pension numbers have been deliberately obfuscated for years by politicians intent on hiding problems and by many actuaries hired by those politicians who are willing to play ball. They’ve succeeded.

Reform is long overdue, and Governor-elect Rauner can do it alone after he takes office.

Readers here, and anybody who follows public pensions closely, are well aware of the gap between the numbers reported by government and the real numbers calculated using better, more realistic methods, like new ones from the Governmental Accounting Standards Board. Absurdly, Illinois now keep two sets of books – the official ones (that are widely reported), and the new ones required by the those standards (that are rarely reported).

Additionally, irrespective of how pensions numbers are calculated, the form of typical actuary reports is impenetrable for all but serious pension students. A step forward on this problem was taken recently when the actuary for the Illinois teachers’ pension put its annual report in readable form, clearly flagging where major problems previously hid. That report, discussed here, might be a good starting point for a better model form. It ridiculed “Illinois Math” used by the state to calculate appropriate pension payments.

Finally, the Illinois Department of Insurance collects extensive numbers, much of which is not online, for all 675 public pensions in Illinois. One village trustee who is particularly conscientious about the municipal pension crisis (Jim Palermo of La Grange) had to file Freedom of Information Act requests on all 675 to get the data he wanted. That’s ridiculous. The Department of Insurance had the data in electronic form and it should be online.

All these problems can be corrected by a governor who wants pension transparency, and he can do it on its own. Rauner will be appointing many new trustees to the largest pensions and a new Director of the Department of Insurance. They can be selected based on a commitment to transparency. He could probably also implement reform by executive order, or by making his expectations clear to the state actuary that annually summarizes major pensions in a report certified by the Auditor General. (The most recent such report is discussed here.) One way or another, a governor can do it if he wants.

Pensions are immensely controversial for many reasons, but two of them are that the numbers are rigged and few people understand them. The cooperation needed to solve the pension crisis requires, initially, a shared understanding of what the real numbers are.

Fix it. No more “Illinois Math.” Report pension numbers honestly and transparently.

 

Photo By Steven Vance [CC-BY-2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

Share This Post

Recent Articles

Leave a Reply

Privacy Policy | © 2017 Pension360 and © 2014 Policy Data Institute | Site Admin · Entries RSS ·