Behind the semantics
Monday, Oct 21, 2013
* Senate President John Cullerton will undoubtedly set tongues wagging with his declaration yesterday that the pension funding issue is not really a “crisis”…
* Cullerton’s mistake was attempting to argue semantics. He’s a lawyer, so that’s what they do. And since words matter to those most committed to this issue, the outrage will be utterly predictable. Reboot Illinois is already astonished that Cullerton would say such a thing…
OK, once again, with feeling, legislators did not raise the tax rate solely to pay down the bill backlog. A small part of the tax hike was earmarked to pay interest and principal on borrowing that was supposed to be used to pay down the backlog, but that bond was never issued.
And as Cullerton rightly points out, we’re currently pretty much at the top of the pension payment ramp. So the “ever-increasing” rhetoric is just that.
* Either way, though, challenging a totally accepted media narrative ain’t ever easy and will usually fail without a lot of paid advertising behind it. Cullerton loves to do this sort of thing, but he would’ve been better off without trying to define some terms and focusing instead on the reality.
I mean, seriously, when is the last time you read a news story or an editorial that points out state pension payments are finally leveling off? So I’m betting that Cullerton’s needless semantics argument will be what everybody covers.
* But the reality is this: No pension reform currently under serious current consideration would save more than about $1.5-$1.8 billion a year for all but the last few years of the 30-year plan (it may be a little higher than Cullerton’s estimate). Not one. And while $1.5-$1.8 billion is most definitely a lot of money to take out of the state’s spending base, it doesn’t come close to the $5.4 billion budget hit from the partial expiration of the temporary income tax hike. And, of course, that assumes any new pension proposal will be declared constitutional - which is a big “if.”
So, even the harshest pension reform plan would only lower state payments by a four or five percentage points in relation to state revenues. The problem is apparently “solved” when 15-16 percent of annual General Revenues are going to pensions until 2044, but remains a crisis when the share is 20 percent?
On the other hand, allowing the state income tax hike to expire would impose a permanent 15 percent or higher hit on General Funds revenues in 2016, the first full year of the expiration. And yet the enormous “squeeze” felt by state programs from that event is barely mentioned at all by those pushing the hardest for pension reform.
Make no mistake, major pension reform would help the state absorb the hit from the loss of the tax hike revenues. But it’s still gonna be a huge freaking hit and will produce a far more intense budget “crisis” than the one produced by pension funding.
* The full Cullerton interview is here…