The latest Speaker of the Illinois House, Chris Welch, believes that a progressive income tax amendment can be passed in Illinois if the state promises to direct the revenue towards paying off the state’s $140 billion dollar pension liability.
When I heard the Speaker’s idea, my first response was that it was a great idea. Anything to address the pension debt.
Welch’s theory was that the reason the amendment failed last time was the lack of trust on the part of Illinois voters that we wouldn’t just be handing the corrupt politicians in Springfield more money to fill their pockets and the vaults of corporations like Commonwealth Edison.
I was for the amendment, but the voters aren’t wrong not to trust Springfield. And I don’t see how Welch’s proposal will create trust.
Take Governor J.B. Pritzker’s current 2021 budget proposal. It claims to be making a full pension payment when it isn’t.
It includes the statutory contribution to the state’s public pension funds. And all the Springfield reporters dutifully reported that there would be no cut in the state’s contribution from last year.
Only the statutory contribution is not what the state owes to meet its obligation and prevent more debt. “Statutory” should be translated as the legislature made up a number and blew it out their collective butts.
The actuarial amount owed, the amount actually needed to keep from growing the liability is several billion more that the statutory amount.
They short the pension system every year, after year, after year, after year. And this year again.
Not exactly a trust-building thing, right?
Joe Cahill in Crain’s says as much. “Yet the funding gap continues to grow, because the state isn’t contributing the amount actuarially necessary to cover future pension obligations.” Or to reduce the debt on past unmet obligations.
If state Democrats were interested in trust they would make proposals that address the actuarial obligations that would at least decrease the growing pension liability.
Instead Cahill supports the idea of a constitutional amendment that would take out the pension protection clause.
Pritzker, Welch and their party should go after the pension deficit itself. Before seeking more revenue from taxpayers, political leaders should do everything in their power to shrink pension obligations. That means attacking the driving force behind rising pension debt: compounded annual cost-of-living increases for pensioners.
Eliminating cost-of-living raises would require a constitutional amendment to delete a clause barring any diminution in pension benefits. Pritzker and legislative leaders declined to propose such an amendment when they asked voters to approve an amendment eliminating the state constitution’s provision that precludes graduated income tax rates. That omission sent a clear message about the Democrats’ priorities, and the likelihood that money from a graduated income tax would be spent responsibly.
If Pritzker and Welch are serious about winning trust, they’ll allow Illinoisans to vote on a standalone constitutional amendment repealing the so-called “pension protection clause.” To build public support and treat retirees fairly, such an amendment could be narrowly drawn to permit only reductions in future pension increases under the COLA mechanism.
This would be a lie. Lying to the voters is no way to build trust.
Even if they were successful in erasing the pension protection clause from the Illinois constitution, it would have absolutely no impact on the current $144 billion pension liability.
It would have no impact on the contractual and constitutional obligations to current Tier 1 and Tier 2 members of the Teacher Retirement System.
The bill still has to be paid.