‘The job still isn’t done’

With Gov. J.B. Pritzker shoveling unpredicted extra cash into state pensions in recent years, the outlook for the public pension system has brightened considerably, leading to a succession of rare improvements in Illinois’ credit ratings. This is, of course, good news, but it is tempered by the realization of how bad the pension news was only a few years ago.

Even now, as watchdog editor Jake Griffin reported on Sunday, five of the key state employee pension systems held a combined $140 billion in unfunded pension liabilities at the end of Fiscal Year 2022. And, the challenge facing those funds - as well as other Illinois public pension systems - is that they have barely more than 20 years to reach 90% funding according to requirements of the 1990s-era law at the root of today’s difficulties. The best of those five funds, by the way, is currently just 45.2% funded; the worst is a mere 21.3% funded.

Considering such circumstances, a budget expert with the Commercial Club of Chicago offered an appreciative but reserved assessment.

“(Illinois leaders have) used financial successes over the past couple years to make really smart financial decisions, including supplemental pension payments and paying down debt,” Mary Wagoner, director of state and local finance with the Civic Committee, told Griffin. “But the job still isn’t done though, with pensions specifically.”

This particular job was far from unforeseen. The so-called “Edgar Ramp,” devised during the Jim Edgar administration as a compromise to use pension funds to buttress a flagging state budget, paying the money back according to a schedule that increases annually. From the beginning, it was obvious that chickens would begin coming home to roost about now, and the situation was only deepened as lawmakers continued to dip into pension funds when crises loomed rather than sharply cutting spending.

Not so long ago, the crisis seemed on the verge of open disaster. But improving economic factors in the state along with generous helpings of COVID emergency money from the federal government offered opportunities to better prepare for those roosting chickens. Fortunately, Pritzker and other government leaders have taken bold steps.

But to get the pension-funding job done, even more and bolder steps may yet have to be taken. Wagoner’s Civic Committee, has recommended a 10-year income tax increase to raise $28 billion and save taxpayers $35 billion over the course of the remaining ramp period. Lawmakers have been slow to embrace such a proposal, and surely aren’t going to jump at it during this election year. But the idea emphasizes the kind of dramatic action that still needs to be taken.

The Civic Committee proposal also builds from a fundamental practical weakness that afflicts the Edgar Ramp. “Temporary” tax hikes in Illinois do not stay temporary long, and politicians are only too willing to solve today’s crises with tomorrow’s money - as though the families and children of tomorrow won’t have financial crises of their own to deal with.

So, at least two important observations need to be made. One, politicians have to stop using hopes of future revenues to address spending realities of the moment. And, two, we can’t let the comparative good fortune of the past few years lull us into a sense of complacency about this problem.

We’ve had opportunities to address it recently, and thankfully, leaders have taken them. But these have reduced the problem, not solved it. One strong economic jolt could easily push us right back to the brink. To avoid disaster, the determination of the past few years has to remain a driving force in our economic philosophy. Even at that, we’ll still have a long way to go, and we’re going to need more bold ideas and plans to finish the job.