The state’s largest unfunded debt will likely continue to linger when lawmakers return to finish the final three weeks of the legislative session.
State Rep. Chris Miller, R-Oakland, said there are a lot of issues lawmakers haven’t fully addressed so far, from recreational cannabis legislation to expanding gambling, working to reduce property taxes and getting business-friendly reforms in place, among others.
“Even the pension reform that needs to happen in order to be fiscally responsible here in Illinois, we haven’t had one conversation about any of the things that are really the elephant in the room that hasn’t been talked about yet,” Miller said.
State public employee pensions carry an estimated $136 billion in unfunded liabilities, a major driver for Illinois poor credit rating. Pensions also consume nearly a quarter of every dollar the state brings in. The share of state funds devoted to pensions is expected to grow in future years, potentially crowding out core government services.
Lawmakers have had some conversations about pension proposals in committee, but there has been no movement on substantive measures to reduce the unfunded liability.
One issue Republicans have pursued is to amend the state constitution to reduce future 3 percent compounded annual increases for retirees, but some in the Democratic supermajority, including Gov. J.B. Pritzker, have said the benefit is a promise the state must keep.
Previous legislation passed in 2011 to address the pension issue was found unconstitutional by the Illinois Supreme Court because it diminished benefits in violation of the state’s pension protection clause.
State Rep. Robert Martwick, D-Chicago, said the $1.5 billion in unexpected revenue the state captured from taxpayers last month was welcome and will likely help Pritzker avoid a proposed pension holiday.
“We don’t have to try and make a complete overhaul in the way that we fund our pensions,” Martwick said. “So there will be no major shift in pensions. We will try and push forth some additional reforms, some additional buyout measures, try to clean up some of the mistakes that were made in Tier II.”
Lawmakers created the Tier 2 system with less generous pension benefits for new employees in 2010.
State Sen. Chapin Rose, R-Mahomet, said Pritzker should thank U.S. President Donald Trump for the state’s 1.5 billion windfall because Illinois seems to be benefiting from the broader national economic growth.
“Now because of the [President] Donald Trump tax plan [Pritzker] has backed off that,” Rose said. “I just think it’s just absolute irony that he’s now able to get out of this proposal because the tax plan by Donald Trump has brought this much more revenue to the state. But again what good is that if they just run up the bill and spend it.”
Pritzker has been pushing for higher taxes on higher earners through a progressive income tax. Trump’s federal tax plan passed in 2017 and implemented for all of the calendar year 2018 cut taxes for everyone, including corporations. Those tax cuts and deregulation efforts have been credited by some for stock market gains, higher wages and increased economic activity nationwide.
Rose said Illinois’ Democratic supermajorities need to control state spending and prioritize paying down pensions and the state’s multi-billion dollar backlog of bills. Other Republicans have said that instead of tax increases, there should be reforms to the state’s business climate to attract more economic activity.