(The Center Square) – Illinois’ finances are in a perilous position, as they’ve been in the last decade.
Revenue is shrinking due to the pandemic, a federal package of untethered aid seems uncertain, the state’s lines of credit are becoming increasingly expensive as it teeters on junk bond status, and Gov. J.B. Pritzker’s ballot initiative that would have allowed lawmakers to hike taxes on higher-earners was soundly defeated.
In light of all of the fiscal pressures, experts say the state’s no closer to amending one of its largest bills – pension liability – than it was before the pain of 2020 began.
“I don’t think so,” said Nick Kachiroubas, a professor with DePaul’s School of Public Service, when asked about whether the state’s closer to pension reform. “Given the fact that it’s sort of wrapped up into the state constitution, I think you need a constitutional amendment to make that change. I don’t see a Democratic-led Legislature and executive leading that charge.”
By the state’s figures, Illinois’ unfunded actuarial liability is $137 billion. Others estimate it to be nearly $250 billion when assuming more realistic returns on the pension fund investments. That doesn’t include an estimated $56 billion in healthcare costs for those retirees that the state has agreed to cover.
Wirepoints President Ted Dabrowski said the math is getting closer to where it would make sense to address one of the state’s largest costs, but the relationship between Illinois’ political class and public-sector unions largely precludes the possibility.
“Mathematically, we’re much closer with the impact of COVID and the economic shutdown,” he said. “Politically, we’re not there. I still think the politicians think that they can hope for a bailout from the federal government. They’re hoping they can play around with the pension payments or get some kind of tax hike to avoid doing pension reform.”
Gov. J.B. Pritzker has, on many occasions, dismissed the idea of altering the agreement between Illinois’ pensioners hired before 2011 and the state. Tier I retirees, as they’re classified, receive an annual 3% compounding pay raise. Other pension funds across the country typically offer cost-of-living adjustments tied to inflation.
Around one-quarter of Illinois’ general revenue fund goes to paying down annual pension contributions. Despite that high tab, it’s not enough to actuarily reduce the debt burden, rather it follows a slow increase with the goal of better-funded accounts decades from now.