The quest for a pen­sion amend­ment: Can Pritzker and Light­foot save Illi­nois from it­self ?

Chicago Tribune (Sunday) - - EDITORIALS -

There are cer­tain words and phrases Demo­cratic po­lit­i­cal lead­ers in Illi­nois don’t ut­ter of­ten enough: $133.5 bil­lion un­funded state pen­sion obli­ga­tion, wors­en­ing cri­sis, junk bond sta­tus, am­bi­tious so­lu­tions …

We’ve watched as pols pri­or­i­tized and gov­erned. We’ve kept tabs on Gen­eral Assem­bly dis­cus­sions. And we’ve waited, and waited, for the light bulb to go on: Illi­nois has a pen­sion obli­ga­tion cri­sis that must be solved, so here’s what we’ll do right now.

In­stead, the debt keeps ris­ing, as does the num­ber of tax­payer dol­lars that must be si­phoned away from other uses to feed the pen­sion python. Chicago, for ex­am­ple, must make a new $270 mil­lion con­tri­bu­tion to its un­der­funded pen­sion sys­tem in 2020. Within four years that an­nual pen­sion up­charge will rise to nearly $1 bil­lion.

A few days ago all of us saw some­thing pos­i­tive: Gov. J.B. Pritzker and Mayor Lori Light­foot ac­knowl­edged the $133.5 bil­lion beast in the state­house and its dire im­pact on Illi­nois fi­nances. They pre­sented no spe­cific fixes, but they met pri­vately to talk through some options, ac­cord­ing to Crain’s Chicago Busi­ness, then spoke pub­licly.

We’re not yet giv­ing the pair an “A” for ef­fort, or any­thing above “Baa3,” which is the Moody’s In­vestors Ser­vice rat­ing for Illi­nois gen­eral obli­ga­tion bonds (the low­est of any state, and just above junk sta­tus). But it was good to see a gover­nor and mayor talk out the scope of the cri­sis rather than avoid the sub­ject.

“We have got to get this prob­lem solved,” Light­foot said. “When we have a pack­age of options fi­nal­ized, we’ll present them to the gover­nor and se­nior lead­er­ship.” She re­port­edly would like to see the state con­sol­i­date Chicago’s pen­sion funds with more than 650 sub­ur­ban and down­state po­lice and fire­fighter pen­sion funds.

That no­tion might help Chicago, sure, but is of du­bi­ous value to state gov­ern­ment. That’s be­cause while a con­sol­i­dated, big­ger in­vest­ment fund could yield higher re­turns, the hit to Illi­nois’ cred­it­wor­thi­ness could be se­vere. As Pritzker noted: “The state is at just above junk sta­tus in its credit rat­ing, so there are not li­a­bil­i­ties that can be adopted by the state that would not drive us into junk sta­tus.”

The gover­nor said there are other options. A Pritzker ad­min­is­tra­tion task force is sup­posed to re­lease a pen­sion pro­posal this sum­mer. We’re not big fans of task forces. Like blue-rib­bon pan­els, they’re of­ten bu­reau­cratic do-si-dos. We’d pre­fer the gover­nor think through the options — they’re pretty straight-for­wrd — and com­mit to a plan. Again, though, talk­ing about the prob­lem is bet­ter than de­nial.

One of Pritzker’s ideas for gen­er­at­ing some rev­enue to help sta­bi­lize state fi­nanc­ing is to switch from a flat-rate in­come tax to a grad­u­ated-rate tax. Ev­ery cit­i­zen of Illi­nois knows too much about Spring­field’s spend­ing habits to be­lieve the Democrats’ prom­ise that they only want to raise the tax rate on the high­est in­come earn­ers. Un­der grad­u­ated tax rates, bet that al­most every­one soon would have to pay more in taxes, and still law­mak­ers won’t change their prof­li­gate ways. Voter ap­proval is re­quired for Pritzker to re­place the flat-rate tax. The Gen­eral Assem­bly ap­proved a ref­er­en­dum to be put on the November 2020 bal­lot.

Ev­ery cit­i­zen of Illi­nois knows too much about Spring­field’s spend­ing habits to be­lieve the Democrats’ prom­ise that they only want to raise the tax rate on the high­est in­come earn­ers. Un­der grad­u­ated tax rates, bet that al­most every­one soon would have to pay more in taxes, and still law­mak­ers won’t change their prof­li­gate ways.

But Pritzker and Light­foot ought to reach the same re­al­iza­tion Mayor Rahm Emanuel reached: The best, per­haps only way to tame the pen­sion python is to amend the state constituti­on’s rigid pen­sion clause. Along with the grad­u­ated-rate vote, they should sup­port a companion ref­er­en­dum. A re­laxed pen­sion clause could, for ex­am­ple, free Illi­nois taxpayers from com­pounded, overly gen­er­ous costof-liv­ing ad­just­ments.

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 chance 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.

SCOTT STANTIS/CHICAGO TRIBUNE

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