Op-ed: Another opportunity the General Assembly can't afford to squander

July 23, 2013

The following opinion piece by Civic Federation President Laurence Msall was published by Crain's Chicago Business on July 23, 2013.

Long-term financial pressures on the state of Illinois and our local governments are continuing to grow at an unsustainable rate as lawmakers struggle to reach consensus on pension reform. So far this struggle has resulted in little more than public sparring among lawmakers, culminating earlier this month in a move by Gov. Pat Quinn to suspend lawmaker salaries and stipends until pension reform is enacted. Amid this struggle, one potential bright spot for the state and local governments largely has been overlooked.

Illinois' $96.8 billion unfunded pension liability remains our most urgent fiscal crisis, but it is not the only looming financial pressure facing our state and local governments. Lawmakers must be mindful of other long-term liabilities including the unsustainble cost of providing health insurance to retired public employees.

Annual retiree health care costs currently exceed $190 million for the city of Chicago and $880 million for the state of Illinois. These costs are projected to rise sharply as a result of health care inflation. A bold move announced by Mayor Rahm Emanuel's administration would manage this liability in a smart way that other governments should carefully consider.

Mr. Emanuel recently announced that Chicago would begin phasing out its subsidy of retiree health care in 2014 with the goal of transitioning all but the oldest retirees to coverage under the federal Affordable Care Act. The announcement followed a thoughtful and informed examination of the issue by the city's Retiree Healthcare Benefits Commission led by city Comptroller Amer Ahmad.

The commission recognized and responded to the national health care landscape that will be significantly altered as the Affordable Care Act is implemented. Previously, employer-subsidized coverage was arguably the only affordable option for non-Medicare eligible retirees of the city and other governments. The Affordable Care Act removes this limitation by setting up new health care exchanges and outlawing practices that previously made affordable health care virtually unattainable for government retirees.


Mr. Emanuel deserves a great deal of credit for an innovative proposal that relieves Chicago governments of an unsustainable cost and smartly responds to a federal initiative with wide-ranging implications. The city is expected to announce detailed plans for the transition later this summer. The entire process will need to be closely monitored by the Emanuel administration and the City Council to ensure seamless coverage for all city retirees.

In the meantime, our state government leaders would be wise to look at the bold example set by Mr. Emanuel's administration when considering their own retiree health care liabilities. The enormous financial pressures on the horizon demand that the General Assembly end its costly pattern of squandering opportunities for real reform. Pension reform is an absolute must -- and so is taking advantage of this opportunity to contain growing long-term liabilities and preserve essential government services.