I doubt there's been a day on the campaign trail that Illinois' dire pension situation isn't mentioned by someone. Last month, Governor Rauner gave us some hope by announcing his support for Senate President John Cullerton's pension reform proposal.
First, let's remember why we are in this predicament. In 1994, Governor Jim Edgar was joined unanimously by members of the General Assembly in passing legislation to get us out of the pension crisis at that time. Unfortunately, the Edgar Pension Ramp, as it's called, was easy to swallow in the short term and merely held out promises in the long term.
As most of us understand, long-term promises that are actually kept by politicians are as common as unicorns.
The chart to the right shows just how much the Edgar Pension Ramp failed. Our unfunded liabilities are increasing by about $10 billion per year. It's taking money away from needed human services, education, and roads.
While Governor Rauner boldly stepped forward in supporting the Cullerton plan, his hand across the aisle was not taken by the Democrats. Mike Madigan continued his stubbornness and is holding the state hostage to unions and trial lawyers. And John Cullerton, who presented this bill two years ago, has now decided to hold the bill.
We all must take to heart the invaluable lesson of the 1994 Edgar Pension Ramp. Passing a compromise with the support of the entire General Assembly that pushes our problems down the road is not good government. It's cowardice.
I voted against the Quinn-Madigan pension reform plan in 2013 because I knew it was unfair to retirees and that it was unconstitutional. Since then, we've added $20 billion to our unfunded liabilities.
Each day that we delay pension reform, we dig a deeper hole for our children and grandchildren. It's time to act now and undo the mess created in 1994.
Yesterday I had the pleasure of touring the Caterpillar plant in Decatur and visiting with some of the 2000 people employed there. It's an outstanding facility with a great record of productivity, efficiency, and safety. But there are dark clouds on their horizon and we need our state government to step up help secure a bright future for them.
Simply put, despite being in an ideal location for transportation and despite the presence of an excellent workforce, the future of the Decatur plant is certainly in doubt. The worker's compensation costs for the facility are the highest that Caterpillar has anywhere.
Here is a recent article from the Illinois Policy Institute that shows worker's compensation costs in Illinois being more than double those of Indiana. In industrial sectors, the difference with other states can be more than 300%.
Here is how this impacts our area.
In Decatur, Caterpillar is running only one shift and not all the lines in the facility are being used. They are not anywhere near capacity and neither are other Caterpillar heavy mining equipment plants across the world.
Last fall. Caterpillar announced their plans to get back to profitability. (Cat's stock price has been cut in half in the last three years.) Among their stated objectives:
The remaining cost reductions are expected to come from lower period manufacturing costs, including savings from additional contemplated facility consolidations and closures, which could impact more than 20 facilities and slightly more than 10 percent of our manufacturing square footage. A portion of these cost reductions are expected to be effective in 2016, with more savings anticipated in 2017 and 2018.
There are certainly concerns that the Decatur facility could end up coming up on the short end of Caterpillar's restructuring. If it does, our overall business climate, especially our excessive worker's compensation costs, will be a major component of Caterpillar leaving.
Politicians in Springfield need to act immediately to institute the worker's compensation reforms necessary to not only keep Caterpillar here but hopefully to be able to take advantage of restructuring and perhaps even expand operations in Decatur.
Of course, Caterpillar is a major component of the area economy. They draw employees heavily from Shelby, Moultrie and Douglas Counties. Losing them would be devastating.
Let's also remember that Cat's concerns about worker's compensation are matched in smaller numbers by hundreds of small business owners in the area. Those excessive costs are often the difference between profitability or closing down. They too are crying out for reform.
Retaining and growing businesses is the most important job for the Illinois General Assembly right now. They need to act before it's too late.