Illinois Gov. J.B. Pritzker is rejecting a push to take on Chicago’s pension debt. But local pension costs are a growing problem across the state.
Towns and cities across Illinois collectively manage hundreds of separate pension funds for public workers. The trouble is: Many of them have been shorting payments for decades. Now that the state is requiring better funding, some municipalities have raised property taxes and even slashed positions.
Pritzker said a state task force is taking stock of the problem.
“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," he said during a press conference about the state's new infrastructure plan.
The biggest of those ideas is consolidating all local pension systems into one. Pritzker said more than 600 local pension funds operate separately from one another, which means there are more than 600 relatively small pots of money that are invested on behalf of public workers.
“When you have a lower amount of money to invest, you tend to get lower returns.” Pritzker said. “If they simply consolidated and were able to invest the way that the benchmark is invested, [that’s] 2 percent more per year. When you compound that, that has significantly positive impact on pensions.”
But even a consolidation would not be enough to solve the problem.
Among all local governments, the city of Chicago is particularly challenged. It alone owes tens of billions of dollars to its pension systems. Mayor Lori Lightfoot has asked the state to take on that debt, and even suggested taxing retirement income to help pay for it.
She said Chicago needs the state’s help.
“Obviously the governor is going to be a partner with us. He’s well aware — as we all are — that 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.”
Pritzker has all but ruled out taking on Chicago’s pension debt, saying such a move would reduce the state’s credit rating to junk status. He also campaigned against taxing retirement income.