By: Mark Glennon, Ted Dabrowski and John Klingner
Gov. J.B. Pritzker on Wednesday ducked a question from a reporter who asked if the governor’s new pension consolidation law would be as impactful as advertised. The new law, Pritzker said, was a “banner accomplishment in Illinois’ long history.” He said it also showed lawmakers’ “monumental willingness to prioritize responsible and sustainable fiscal management.”
The reporter* specifically raised Wirepoints’ concern that the potential benefits of combining investments through consolidation are insignificant compared to Illinois’ total pension shortfalls.
“As you may know, Wirepoints and other entities estimate…that this bill, while useful, at best addresses maybe 5 percent of Illinois’ [retirement] liabilities…how do you get at that bigger issue, that 95 percent?”’
Here’s how Pritzker sidestepped:
“Organizations like Wirepoints want to diminish what’s been accomplished here by saying we have so much more to do. The reality is that so little has been done in the past and this is a monumental accomplishment and it is evidence that we can tackle the most intractable problems of the state…I also want to call out that there are organizations in the state that just want to beat up on the state even though they live here and not recognize we all know there are challenges and that we are addressing them.”
Exchange begins at 23:40
Why Pritzker is wrong
Start with his earlier claim at the press conference that the bill will help “hundreds, hundreds of cities alleviate their spiraling property tax problems.” Consolidation’s annual benefits, according to the state’s own estimate, are $164 million to $500 million per year, though there’s no guarantee those savings will actually occur.
That means almost nothing to the ordinary Illinoisan’s property tax bill. The property tax collections in downstate and suburban Illinois total about $27 billion. The annual potential savings are just 0.6 percent to 1.8 percent of the total.
So if savings materialize and if the savings go towards property tax relief, then residents may just a very tiny reduction in their property tax bills.
Nor is the new bill bold. Consolidating local pension investment functions was just a common sense step, as a couple speakers at the press conference said. Six hundred and fifty separate investment functions never did make any sense, we wrote earlier. The toughest question could have been directed at the legislators gloating over the new law at the press conference: Why on earth didn’t they do this long ago?
Also, look at the new law more broadly and ask whether it’s a “monumental accomplishment.” As the graphic above shows, state and local unfunded liabilities for pensions and pensioner health insurance total $266 billion, but only about 5 percent of that is from the local pensions covered by the consolidation law.
There’s nothing about the consolidation plan that could be replicated for the other 95 percent of Illinois’ retirement shortfalls.
Changing the narrative
While Pritzker admitted “we have so much more to do,” he’s also ruled out any chance to meaningfully address the crisis as a whole.
That’s because Pritzker has categorically refused to consider the one step that would allow for real pension reform and a meaningful reduction in unfunded liabilities – a constitutional amendment to the pension protection clause.
Pritzker’s response also reveals something else: He doesn’t like challenges to his effort to “change the narrative” on Illinois.
Changing the narrative is a central part of his strategy, according to his recent interview at the Economic Club in Chicago: “We spent years where the leader of the state and allies were spending hundreds of millions of dollars telling all of us how bad the state is.”
Instead, he wants Illinoisans to believe “We are solving those problems…The narrative about Illinois is that we are a state on the rise…(W)e are turning the ship in the right direction and powering ourselves forward.”
Pesky things like real numbers don’t fit that new narrative, so ad hominems against groups like Wirepoints will have to do.
Realism, not pessimism
The state’s accomplishments aren’t being “diminished” by Wirepoints and others who are calling for much-needed structural reforms, as Pritzker claims. We shouldn’t have to accept that a small, common-sense law is a “monumental achievement.” Nor should we be forced to deny that Illinois is a national outlier in almost every financial, economic and demographic fact we can think of (see Appendix).
We aren’t “beating up” on Illinois “even though” we live here. We are challenging Pritzker’s narrative because we live here.
We simply want honesty from lawmakers and remedies big enough to match the state’s deep maladies.
Read more about the consolidation bill and Illinois’ fiscal reality
- Local pension investment consolidation is sensible but risky
- How Illinois’ police and fire pension consolidation bill went from good to bad
- Consolidation of police and fire pensions: a good idea with limited impact and many risks
- Illinois’ demographic collapse: fewer immigrants, fewer babies and fleeing residents
- Moody’s shows Illinois is nation’s extreme outlier when it comes to pension debts
- It’s not just property taxes Illinoisans should be worried about. It’s home values, too.
- Progressive tax proponents say Illinois is a low-tax state, your tax bills say the opposite
- Indiana keeps its AAA credit rating, Illinois is still stuck near junk
*A special salute to Jeff Berkowitz, the only reporter at the press conference to challenge Pritzker’s numbers.