Gov. J.B. Pritzker has been traversing the state in recent days to brag about all the construction projects contained in the $45 billion infrastructure spending plan he signed into law.
It’s going to be great, he indicates, and never mind about all the pork projects included in it and all the tax increases passed to pay for it.
While voluble on the building plan, Pritzker has been more reticent about discussing a problem far more significant than the state’s — please cue the required magic word — “crumbling” roads and highways.
That would be state’s faltering public pensions. Like the recently discovered alligator living in Chicago’s Humboldt Park Lagoon, the pension alligator is waiting just beneath the surface to leap up and drag taxpayers to the murky bottom.
Chicago authorities will, no doubt, fix the Humboldt Park alligator problem one way or another.
The pension problem will be much more difficult to solve.
For example, Chicago Mayor Lori Lightfoot recently discussed her city’s municipal pension woes.
“The reason we haven’t solved the pension problem is (lack of) political will, pure and simple,” the mayor said.
That was easy for her to say.
Lightfoot then proposed her solution — the state should take over Chicago’s pension debts.
Pritzker quickly made clear that idea is a nonstarter.
He noted that adding Chicago’s pension debts to the state’s pension debts “would drive” Illinois’ bonds to junk status.
“So we’re not going to do that,” he said.
Chicago’s municipal bonds already hold “junk” bond status, meaning its credit rating is as low as it can go. Illinois’ bonds are rated a notch above junk status.
It’s a vexing issue. As much as Pritzker and Lightfoot would love to run away and hide from the pension leviathan, it’s just not possible.
That’s why earlier this year Pritzker appointed a pension task force to study the problems and make recommendations.
One question involves whether to consolidate the hundreds of municipal pensions (fire and police) under one management roof, just like municipal employees are covered by the Illinois Municipal Retirement Fund.
Consolidation of funds under one management team — rather than being managed separately — would, supporters say, reduce administrative costs and increase investment returns.
Still, the savings and gains would be measured in pennies, not dollars, not nearly enough to lift municipal pension funds out of their holes.
The other question is what the state will to do moderate or fix the under funding of its five public pension plans.
Depending on whom readers believe, the state’s pension plans were underfunded by $136 billion as of June 30 or about $230 billion by the same date. The first number is a state estimate while the second is based on standards used by corporate pension managers.
Among the ideas under consideration to build up state pension funds is transferring public assets to them.
Task force recommendations are expected later this summer, and they appear to be focused on increasing pension assets through transfers and tax hikes.
Pritzker already has proposed using a portion of the $3 billion-plus in anticipated revenue from his proposed progressive income tax plan for public pensions. Lightfoot has recommended taxing retirement income and imposing sales taxes on selected services as another means of coming up with new revenue.
Both oppose a constitutional amendment that would revise the pension clause and allow state officials to slow the future growth of pension costs.
Nonetheless, The Chicago Tribune advocates paring a constitutional amendment on the pension issue with Pritzker’s progressive income tax hike plan.
“To fix the pension mess, Illinois politicians should strike a fair deal with voters: We want you to approve a graduated-rate income tax, and at the same time, we’ll give you a change to reduce our biggest cost driver, the pensions. As the governor and mayor strategize, they should agree that giving voters an opportunity to change the pension clause will be part of their plan,” the Tribune editorialized.
While Illinois’ public pension under funding stands — officially — at $136 billion, Chicago’s pension debt just increased by $2.1 billion to $30.1 billion. Even as both entities pour money into the systems, the under funding increases because neither the state nor the city are contributing amounts actuaries say are required to stop the slide deeper into the hole.