All the politicians in Illinois talk about our public pensions woes, but nobody is doing much about it.
The latest to jump into the discussion is new Chicago Mayor Lori Lightfoot.
She recently gave a rousing speech at a Civic Federation dinner in which she spoke in bold terms about the need to take bold steps to come up with bold solutions.
“We cannot get there if we continue to lug this mounting, looming, all-consuming pension debt with us. This is our moment to solve this problem. We have to do it now. We cannot keep looking past the obvious,” Lightfoot said. “... Yes, there are tough solutions. Yes, there are tough choices that have to be made. Yes, they involve putting ourselves at political risk. But I ran for change. I didn’t run to perpetuate myself in elected office forever. And if it means that I will sacrifice myself politically, so be it. But we must do this now.”
Sounds great, eh? The trouble is that, according to a Chicago Sun-Times account of the speech, Lightfoot “didn’t say” what solutions she has in mind, just that she’ll be asking experts to come up with “nonpartisan solutions to our economic challenges.”
How big is Chicago’s public pension debt?
It’s roughly $32.5 billion. The city has roughly $9.5 billion of assets available to pay obligations totaling $42 billion.
That’s big money by most standards. Compared to the state’s pension underfunding problem, it’s chump change.
Illinois’ five public pensions are roughly 40 percent funded, a percentage that represents an estimated $136 billion deficit as of June 30, a sum that is expected to jump to $139 billion by June 30, 2020.
Broken down by households, that debt comes to about $73,000 each for downstate households and nearly $150,000 each for Chicago households, according to financial watchdog Wirepoints.
“Those are impossible numbers to ask people to pay back,” said Wirepoints financial analyst Ted Dabrowski.
This is a problem explained by numbers.
In a recent analysis of the origin of the pension underfunding problems, Greg Hinz, a columnist for Crain’s Chicago Business, explained how the state’s pension woes are overwhelming the ability of state government to fund core services.
He pointed out that “in 1996, the state spent almost six times as much on aid to elementary and high schools as it did on pensions.” Public pension costs consumed 2.9 percent of the state’s 1996 budget.
Fast-forward to 2019, and, Hinz reports, “this year, the state spent more on pensions than educating children,” and pension costs consume “one dollar in every four.”
“The cost of serving pension debt is devouring all else in state government,” Hinz writes.
That, of course, is his opinion, and there are many opinions out there — plus, a lot of misinformation.
For example, public employees are, naturally, sensitive about talks of high pension costs and highly irritated by suggestions that they are unaffordable.
Perhaps that’s why AFSCME Executive Director Roberta Lynch recently wrote a commentary in which she poor-mouthed benefits paid to public employees.
“Illinois public pensions are modest: just $34,084 for the average state employee retiring on the standard formula, according to the retirement system’s latest annual report, and $34,413 for retirees in the Chicago municipal fund who aren’t eligible for Social Security. Reality in most cases is far from the six-figure outliers whose benefits make headlines and fuel political attacks on the pension funds,” she said.
Wirepoints’ Mark Glennon described Lynch’s characterization as “brazenly dishonest.”
“First, the averages Lynch used are meaningless because they include part-time workers and, most importantly, those who worked far less than a full career to earn their pension. ... You have to look at full career benefits. We will be generous here and call ‘full career’ just 30 years or more of service,” he said.
Glennon said “average career benefits” are between $53,000 and $73,000, depending on whether the retiree is a university employee, a public school teacher or a state employee.
Disputed facts, however, generate disputed solutions, a sort of tug of war between those who claim taxpayers must increase contributions to make up the $136 billion underfunding and those who argue that is a financial impossibility in a state that already is effectively bankrupt.
Where does that leave the taxpayer? It’s most likely a division of opinion that includes disgust, apathy and resignation. One thing, however, seems certain — this problem is going to get a whole lot worse before it gets better, assuming that it ever gets better.