Earlier this week, Gov. J.B. Pritzker made an appearance before the Economic Club of Chicago in which he was described as “positively peppy” about the state of the state and prospects for its economic future.
“The narrative about Illinois is we are a state on the rise,” he told his audience. “We are turning the state in the right direction.”
Effusive about the strong Illinois economy and a 3.9 percent unemployment rate that he called “the lowest ever recorded,” the governor used his speaking appearance as an opportunity to take a shot at his predecessor, former Republican Gov. Bruce Rauner.
“We spent years where the leader of the state and his allies were spending hundreds of millions of dollars to tell all of us how bad the state is,” Pritzker said in an obvious reference to Rauner’s frequent observations that Illinois needs to change its ways to ensure continued prosperity.
Rauner, of course, was governor from 2015 to 2019, losing his bid for a second term in a landslide a year ago.
He faced different circumstances — a slow-growing national economy and implacable opposition from Democratic House Speaker Michael Madigan. The differences that separated Rauner and Madigan were highlighted by a two-year budget standoff for which Rauner got most of the blame.
Pritzker faces a different set of political realities. He has a supermajority Democratic House and Senate that means he doesn’t have to care, for the most part, what Republicans think. He also enjoys the benefits of a strong national economy that is carrying Illinois along with it.
But Illinois still has significant problems, including being effectively bankrupt. Pritzker wants to address that problem, at least in part, by a passing a progressive income-tax amendment to the Illinois Constitution that would allow the governor and legislature to impose higher rates of taxation on higher levels of income.
The governor was less effusive, but no less emphatic, about the financial woes surrounding state and local public pension systems in Illinois.
“Our public pension problem in this state is enormous. There’s just no doubt about it,” he acknowledged.
Pritzker, however, rejected the idea of asking voters to approve a constitutional amendment that would allow legislators to modify future pension benefit increases for retirees. He was dismissive of the notion that modifying the annual 3 percent compounded increases in pensions would be a big money-saver.
Pritzker praised two pension buyout options the state offers as “good for the taxpayers and good for those who are choosing it.” He also cited progress made in the recent decision by the legislature to approve the consolidation of roughly 650 downstate fire and police municipal pensions into two state-run plans.
It’s unclear what most members of his audience thought about Pritzker’s pension commentary. But one — Forbes magazine columnist Elizabeth Bauer — was underwhelmed.
Bauer, who writes about pensions “from an actuary’s perspective,” contended that Pritzker “cannot reasonably pat himself on the back for a buyout and a consolidation of unrelated pensions, while simultaneously shrugging off true pension reform as too hard. Not, that is, unless he just doesn’t care.”
Depending on whom one believes, Illinois’ five public state pension systems are underfunded anywhere from $135 billion to $250 bil-lion. Bauer concluded, after listening to the governor speak, that “in his heart, (Pritzker) believes that Illinois systems are rightly pay-as-you-go, with enough of a cushion to placate those who say otherwise.”
In other words, while the public pension programs would have enough resources to pay benefits to retirees, she contends that Pritzker really isn’t serious about eventually eliminating the massive underfunding.
That’s one way to go. But it only addresses half the problem.
The other half of the problem is the enormous amount of money pension contributions consume as a percentage of the state’s annual budget. Recent news stories have indicated that pension contributions will consume roughly 25 percent of next year’s roughly $40 billion state budget.
Bauer also scoffed at Pritzker’s praise of the buyout options. She said it’s no surprise that few state retirees have chosen the buyout options because they’re so financially one-sided.
“If the program were really as he describes it — a full buyout of retirees’ pensions, at retirement age, at a 40 percent reduction, it would be insanity, except for a small number of retirees with terminal illnesses,” she wrote.