* Remember this Chicago police and fire pension bill that the General Assembly passed in the spring?…
Over the short term, the bill would have reduced how much taxpayers contribute to the retirement funds by hundreds of millions of dollars a year. But that delay would come at a cost of billions of dollars over the long haul. By paying less upfront, the city would see its pension debt continue to grow.
* The governor vetoed that bill and was then overridden. Gov. Rauner was not amused…
“Clearly, those who supported this measure haven’t recognized what happens when governments fail to promptly fund pension obligations,” [Gov. Bruce Rauner] said. “Instead of kicking the can down the road, local and state governments should instead focus on reforms that will grow our economy, create jobs and enable us live up to the promises we’ve made to police and firefighters.”
In vetoing the bill Friday afternoon, Rauner called the measure “irresponsible” and warned “the cost to Chicago taxpayers” in the long run is “truly staggering.”
The bill allowed the city to avoid a $300 million tax hike.
And then we have last week. Gov. BRUCE RAUNER’s administration let it be known it didn’t want the Teachers’ Retirement System board to vote to lower the estimated rate of return it would get on its investments. Although that recommendation comes from actuaries not under anyone’s political control, the administration said the process needed more scrutiny and input before the decision was made.
It also made note that lowering investment returns would cost the state money that could not then go to education and other programs.
Fair enough, but the other point to remember is this. Overestimating investment returns would save the state money in the short term, but that doesn’t mean the bill goes away. It just shoves it off into the future. It’s sort of a variation on the old practice of simply shorting the money outright.
For Rauner, it would make budget life a little easier next year, not to mention possibly helping to hold down the size of the tax hike everyone seems to acknowledge is coming. As for making the pension systems any healthier, probably not so much.
Subscribers know more about the motivations here, but the governor clearly fell into his own rhetorical trap on this one.
…Adding… I’m not sure who thought of it first, but it really doesn’t matter. Greg Hinz made the same comparison to the Chicago pension veto.