Gov. J.B. Pritzker signed bipartisan legislation Wednesday to consolidate 649 public safety pension systems into two, a baby step to address the state's much larger pension problem.
Much more difficult decisions still need to be made to give the state any chance of digging out of an underfunded pension quagmire that was decades in the making.
“Bipartisanship in this General Assembly has achieved what none of their predecessors have been able to do: Consolidate the 650 downstate and suburban pension funds to just two, amplifying their investment power and reducing the burden on property taxpayers,” the governor said. “Working together, we are helping hundreds of cities in Illinois alleviate their spiraling property tax burdens, and just as importantly, we’re showing that Illinois can tackle its most intractable problems.”
That's a bit hyperbolic, but par for the political discourse in Springfield.
The consolidation measure is expected to increase investment returns by $820 million to $2.5 billion over the next five years and billions more over the next 20 years, according to the governor's office. Improving investment returns will help, but the law does nothing to address the more than $12 billion in unfunded pension liabilities of the combined funds. Until those liabilities are addressed, municipalities through the state will struggle to pay mounting pension bills and be forced to choose between funding core services or paying for benefits promised to retired police and firefighters.
More bluntly, Illinoisans will continue to see their already out-of-control tax burdens continue to grow. That's because the governor and lawmakers haven't touched the largest and most intractable of the state's pension problem: The five state-run pension systems.
The largest of those systems, the Teachers' Retirement System of the State of Illinois, had an unfunded liability of $78 billion at the end of fiscal year 2019. That's 6.5 times the size of the unfunded liabilities of the consolidated local public safety pension funds, which, again, wasn't really addressed by the consolidation measure. Yes, those funds could see improved returns, but betting on the market to wipe out liabilities that significant is nothing more than wishful thinking.
If lawmakers want to address the state's pension problem, they are going to have to do something many of them have said they'd never do: Reduce promised pension benefits. It's not going to happen overnight. But lawmakers either have to stop digging or voters need to take away their shovels.