Gov. J.B. Pritzker said Tuesday that a constitutional amendment voters will decide next year will help save the state’s finances. He also dismissed any proposal to reduce the state's pension costs through a constitutional amendment to remove the state's pension protection clause.
During a wide-ranging fireside chat at the Economic Club of Chicago Tuesday, Pritzker promoted his constitutional amendment for a progressive income tax. Voters next year will be asked the binding question that Pritzker ushered through the legislature. Pritzker also campaigned on the issue of changing the state's existing flat income tax to a progressive system that has higher rates for higher earners.
During the discussion, Club Chair Debra Cafaro asked Pritzker why lawmakers shouldn't also let voters change the state’s pension protection clause to control the growing cost of public sector pensions.
“To even working-class me, that seems like a fair way to address the shared sacrifice that we all have to make to get Illinois on the right track,” Cafaro said.
Pritzker dismissed the idea.
“There are a lot of things we can do, but anyone that thinks there’s a silver bullet in one constitutional amendment, that is not something that you should focus on,” Pritzker said. “You should focus on the entire group of things that we need to do to reduce our pension liability.”
The governor also listed other reasons he wouldn't support such a plan. He said lawmakers seeking another term wouldn't want to vote for a plan to get rid of the pension protection clause.
“You can imagine there are lots of people who would say, ‘you know I took a big chance and I voted for this thing that I’m no doubt going to suffer from to polls from,’” Pritzker said.
Even if such a proposal got support from 60 percent of the legislature and 60 percent of voters, Pritzker said there’d be a legal challenge.
“If you could do all of those things, you would then face the U.S. Constitution contracts clause,” Pritzker said.
Public finance analyst Mark Glennon with Wirepoints.com said Pritzker was wrong about the contracts clause.
“He’s demonstrably wrong on that,” Glennon said. “The U.S. Supreme Court guidelines on this were applied recently on a Rhode Island case where pension reform was upheld. That case proves what we’ve been saying all along – that the contracts clause is not an obstacle for pension reform.”
In Rhode Island, the state Supreme Court upheld a lower court's decision to allow the city of Cranston to reduce promised cost-of-living adjustments for city retirees.
Pritzker downplayed any possible taxpayer savings from changing Illinois’ 3 percent compounded automatic annual increases for Tier I public sector employees.
Glennon said the more than $3 billion from the governor’s proposed progressive income tax won’t solve the problem either.
“The $3.6 billion from the progressive tax, if applied entirely to pensions, still wouldn’t fund them sufficiently to bring the pensions to health,” Glennon said. “He’s promised that for many other things.”
Pritzker said he’s doing a lot to address pensions. He pointed to a measure to consolidate the state’s 649 local police and fire pension funds and expanding the pension buyout plan, something the governor said could lead to savings.
“We have a buyout plan and it’s a disaster,” Glennon said. “Only a few tens of millions of dollars of buyouts have occurred and the bond proceeds of $1 billion sold to fund those are sitting there unused accruing interest, so we’re losing money on that program.”
Illinois’ unfunded pension liability is estimated at more than $134 billion.