"The worst-case scenario is there's another national recession, which would cause our pension funds to lose a bunch of their assets again," says Adam Schuster of the Illinois Policy Institute.
"As the assets shrink, the pension funds go into a financial death spiral. We might end up with some kind of Puerto Rico–style pseudo-bankruptcy or federal bailout. Everybody in the nation is now on the hook for Illinois politicians' irresponsible decisions."
The best-case scenario would involve repealing an automatic 3 percent raise that pensioners receive each year of their retirement and requiring workers to pay more into their own plans. Democratic Gov. J.B. Pritzker would prefer to scrap Illinois' flat income tax and replace it with a progressive tax scheme, which could cause even more people to flee the state. In May, Schuster spoke to Reason's Mike Riggs about the pension conundrum.
Q: If somebody had been paying attention 30 years ago, could they have anticipated this pension problem?
A: Thirty years ago would be just about enough time to stop some of the mistakes. We changed the state constitution in 1970 to add a pension protection provision, which essentially says that as of the day of hire, an employee's benefit formula cannot be changed in any way. So it doesn't only protect benefits that somebody has already earned. It protects the future growth rate of those benefits for life and gives the state legislature no flexibility to change them.
Q: What happened next?