Chicago Mayor Lori Lightfoot is asking the state of Illinois to lump the city's pension liabilities into a statewide fund with other local pensions, essentially transferring the city’s debt load to taxpayers across the state.
Lightfoot has been meeting with freshman Governor J.B. Pritzker, also a Chicago Democrat, about the prospect of consolidating the city’s $28 billion debt into a statewide fund that would include the police and firefighter pension obligations of the rest of the state’s municipalities, which as of 2017, had accumulated $11 billion in unfunded liabilities, Crain’s Chicago Business reported.
The move could be a game-changing one for Lightfoot, who must find an additional $1 billion for the city's larger pension contribution next year, as mandated by state law.
“The city has substantial budget issues and financial issues particularly around our pensions and we’re going to work together cooperatively to see what we can get done,” Lightfoot said at an event in Chicago alongside Pritzker.
In exchange for picking up that tab, Lightfoot said that she would push for other statewide taxes like a tax on retirement income above $100,000 and expanding the sales tax, according to media reports.
Pritzker said Friday that he would not support a retirement tax, but did say the state needs to help all municipalities in the state to better manage their pension debts.
“We’re looking at all of the things that are available, not just to the state pension funds, to the cities, and the counties to make sure that we’re going to help people to improve their funding levels. We’ll do everything we can,” he said.
Chicago also has, since 1995, had pension autonomy for its teacher retirements, something that the city has used to short the fund and bolster budgets. It now receives an annual block grant from the state as part of the 2017 school funding formula overhaul.
State Rep. Brad Halbrook, R-Shelbyville, has found notoriety for leading a campaign to separate Chicago from the rest of Illinois. While that effort is unlikely to pass, he has succeeded in creating a dialogue about how the city often receives preferential treatment compared with other municipalities in Illinois.
“This is just more of the reason that downstaters want to separate from Chicago,” he said of Lightfoot’s pension idea. “If there’s all this wealth in Chicago, why are they in all of these financial problems?”
Pritzker said that the idea of the state assuming Chicago's debt would likely be enough to push Illinois’ credit rating into junk status, which could push borrowing costs higher still.