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Monday, Jul 8, 2019

* My weekly newspaper column

One point Gov. J.B. Pritzker has made since Mayor Lori Lightfoot began using the news media to ask for a multi-billion-dollar state pension bailout is that other parts of Illinois are having the same problems as the state’s largest city.

Rockford is one of them, as the governor noted last week. Its first responder pension funds are in horrible shape for pretty much the same reason as so many others are: The state didn’t require local governments to fully fund those particular pension funds, so a large number of locals just didn’t do it.

Sufficient local contributions have long been required by state law to the Illinois Municipal Retirement Fund, the unified statewide pension system for almost all other local government retirees. Consequently, the IMRF has always ranked among the best-funded systems in Illinois.

Locals are now required to do the same for police and fire pensions and the squeeze is real. In typical top-down Statehouse fashion, local governments were simply ordered to fix their first responder pension deficits without any sort of help from the state.

Rockford Mayor Tom McNamara claimed not long ago that by 2025 pension payments will consume an eye-popping 60 percent of his city’s annual budget.

Last November, Peoria’s city council voted to eliminate 22 firefighter and 16 police positions to help close a $6 million budget hole. Carterville, in southern Illinois, raised its property taxes by 30 percent last year to help cover the hole created by the state mandate. The list is almost endless.

The governor has flatly ruled out any sort of state assumption of local pension liability. He explained, with strong evidence, that doing so could quickly hurtle the state’s bond rating into junk territory. Pritzker talked about some pension fund consolidation, but only for administrative functions and investments, which would save some money, but only on the edges and mainly for smaller funds. Full consolidation of liabilities would probably not go over well with local governments which have healthy pension funds.

Something clearly needs to be done about this mess. Pritzker himself has repeatedly admitted that high property taxes are driving businesses out of state.

But, unlike his two immediate predecessors, Pritzker will not support pension benefit reductions (which would be unconstitutional anyway without changing the state’s constitution, which is politically not possible and might only be doable for new hires even if it could be accomplished, which it can’t). And, unlike the man he defeated last year, Bruce Rauner, Pritzker won’t favor allowing local governments to cut their operating costs by unilaterally slashing benefits earned through the collective bargaining process.

That leaves revenue. But Pritzker won’t support a politically unpopular tax on retirement income that Lightfoot foolishly floated. Anyone paying even the slightest bit of attention to last year’s Democratic gubernatorial primary could see Pritzker’s aversion to that tax and how he used the issue to successfully bludgeon his top two opponents. I have no idea what she was thinking, but she ought to fire whoever came up with the idea. And if it was her idea, she needs to learn from that blunder, or she’s got a very rocky road ahead of her.

What this rookie mayor doesn’t yet seem to quite grasp is that if she wants state help for her city then she has to make friends and allies. And you obviously don’t do that by allowing the state’s leaders to be blindsided by a tax proposal which has zero chance of being considered, let alone passed.

You also don’t make friends by setting up the governor and the General Assembly to take the blame for your own failure. They aren’t the City Council, which can be pressured into standing at the new mayor’s command during an inauguration ceremony. Just ask Bruce Rauner how that sort of governing style worked in Springfield. Actually, don’t ask him because he probably still thinks he did everything right.

Mayor Lightfoot has a governor and two Democratic legislative leaders with super-majorities who live in her city and want her to succeed. But, as important as her city is, it is not an island. The mayor needs to make common cause with Downstate and suburban mayors to push for realistic solutions.

A local service tax option, which the mayor said she now supports as an alternative to that retirement income tax, might possibly be one way to do it. But it most certainly won’t happen unilaterally. Nothing will.

* Related…

* Gov. Pritzker still looking at pension fix: “Our goal is to have the work of the task force, at least the initial work with an initial recommendation sometime this summer so that in the event there is action needed in the veto session we’re ready to do that,” Hynes said.

* Will Illinois Help Its Cities With Pension Problems?

- Posted by Rich Miller        

36 Comments
  1. - Honeybear - Monday, Jul 8, 19 @ 9:17 am:

    “but she ought to fire whoever came up with the idea.”

    I don’t think it’s cool to even joke about firing.
    Getting fired these days
    Is a black mark
    that is incredibly hard to recover from.
    good jobs are precious.
    It was the Mayors choice to propose it.
    Creating a “sin eater” is a Rauner move.
    Sure it was not a good idea.
    But punishing the help for helping
    only fosters an environment where no one wants to help.
    The Mayor sits in the chair and is responsible


  2. - RNUG - Monday, Jul 8, 19 @ 9:28 am:

    Spot on. Politics is the art of the possible. Pushing the impossible doesn’t work; it just makes people mad.

    Time to start building bridges to all the Chicago area Representatives and Senators, especially Madigan and Cullerton. Ask their advice and listen to them. Madigan and Cullerton can’t pass your bills, you’ll still have to find your votes … but your bills won’t advance without Madigan and Cullerton supporting them.

    And start small; do what I call salami slicing. Take what you can get today, then come back for a deeper cut next year. Keep doing that and you can usually get what you want in the long run.


  3. - Robert the Bruce - Monday, Jul 8, 19 @ 9:36 am:

    With her current popularity, she ought to have plenty of allies in the Legislature.

    But she has a little bit of Pat Quinn in her. She’d be wise to learn from J.B. on playing nice with others.


  4. - Strategy Geek - Monday, Jul 8, 19 @ 9:38 am:

    “Actually, don’t ask him because he probably still thinks he did everything right.” Sad but true.


  5. - Responsa - Monday, Jul 8, 19 @ 9:38 am:

    Chicago is the anchor city of the region. What goes on in Chicago affects so many more millions of people than those who live within the city limits and can vote for city government. There is something off key about the early days of the Lightfoot administration. It is already starting to concern many whose livelihoods and interconnections depend on the health of Chicago.


  6. - Telly - Monday, Jul 8, 19 @ 9:43 am:

    She’s new to politics and especially green when it comes to the legislative process, so the multiple rookie mistakes outlined here by Rich are somewhat excusable. (At least that’s the optimistic view I’m trying to take.) It appears she either doesn’t have politically experienced staff who know’s how to roll these things out, or she does and chose to ignored their advice.

    I’m a little worried that her big margin of victory in the runoff has lulled her into a false sense of how easy it is to manage the politics of these things.


  7. - Huh? - Monday, Jul 8, 19 @ 9:47 am:

    I have often wondered why the municipal police and firefighters aren’t in IMRF. The pension fund is well funded and stable.

    Going forward could new hires be put into IMRF as a “pension reform”?


  8. - A State Employee Guy - Monday, Jul 8, 19 @ 9:50 am:

    ==I have no idea what she was thinking, but she ought to fire whoever came up with the idea. And if it was her idea, she needs to learn from that blunder, or she’s got a very rocky road ahead of her.==

    Fired? Really? C’mon, Rich.

    If the worst thing you can say about giving the same tax treatment to retirement income that we do to, um, all other income is that “people don’t like it,” you are far from blunder territory.


  9. - RNUG - Monday, Jul 8, 19 @ 9:54 am:

    == you are far from blunder territory. ==

    Nope. Seniors vote consistently in both primary and general elections, and pretty much in a block. Taxing retirement income in Illinois is a third rail, just like attacking Social Security at the national level. Something a politician looking to survive long term just doesn’t do.


  10. - Roman - Monday, Jul 8, 19 @ 9:55 am:

    == If the worst thing you can say about giving the same tax treatment to retirement income… ==

    The column is not about the policy merits of the proposal…it’s about her screwing up the politics of her proposal.


  11. - RNUG - Monday, Jul 8, 19 @ 9:58 am:

    == I have often wondered why the municipal police and firefighters aren’t in IMRF. ==

    Couple of reasons. One is the whole local control / don’t trust the State issue. Another is the police / fire tend to have better benefits and the fear that combining might lead to watered down benefits.

    == The pension fund is well funded and stable. ==

    Because the State forced the municipalities to make the required contributions.

    == Going forward could new hires be put into IMRF as a “pension reform”? ==

    Absolutely … if you have the votes.


  12. - zatoichi - Monday, Jul 8, 19 @ 10:03 am:

    “so a large number of locals just didn’t do it.” These are decisions made 10-20+ years ago. Whether the locals followed the GA example of a pension holiday or they temporarily avoided a difficult local vote, they avoided reality of the numbers while the resulting problems built over the years. Many of those original decision makers are gone and the current office holders are stuck with the results. Does not matter how they got here, they are here and those difficult local votes are now mandatory. Chicago, Olney, and Quincy all face the financial reality of meeting obligations. There is no easy ride.


  13. - Paddyrollingstone - Monday, Jul 8, 19 @ 10:05 am:

    Telly- “I’m a little worried that her big margin of victory in the runoff has lulled her into a false sense of how easy it is to manage the politics of these things.”

    You are spot on. Her victory was impressive in the run off but she got 17% of the vote in the primary. I would guess that that number is a more important one for her to focus on. She ran an excellent campaign and got lucky with the Burke indictment and a badly damaged opponent in Toni Preckwinkle.


  14. - A State Employee Guy - Monday, Jul 8, 19 @ 10:07 am:

    I appreciate your input RNUG, as I do on most topics, but I remind you that there was once a time when issues such as abortion access, gay rights, legalizing marijuana, and reparations for slavery were considered solidly third rail. Some pol always needs to be the first mover.

    Maybe it’s more about advocating for what you think is right, as opposed to doing what you think will keep you in office.


  15. - Oswego Willy - Monday, Jul 8, 19 @ 10:11 am:

    Great column, Rich, spot on.

    To that, and the post,

    Not much to “add”, but Lightfoot must remember the most important thing;

    60/71, 30/36… signature.

    Rauner learned Dunkin helped hurt people by stopping overrides, but never learned how to pass his own agenda.

    Lightfoot must come to grips with… the mayor is really powerful, but a governor can make or break a mayor’s agenda in Springfield.

    The rest? The rest is thinking mandates carry over into Springfield. They don’t… unless the mayor has, you guessed it, the votes required, and a governor’s signature.

    Make friends, they vote, cobble the votes, then… who knows.


  16. - Former State Worker - Monday, Jul 8, 19 @ 10:12 am:

    =Maybe it’s more about advocating for what you think is right, as opposed to doing what you think will keep you in office.=

    This is essentially the strategy that led to the downfall of Quinn.

    He was ultimately right that the 5% personal income tax needed to be made permanent but running on this brought us 4 years of Rauner.


  17. - A State Employee Guy - Monday, Jul 8, 19 @ 10:21 am:

    Had Quinn not advocated for that permanent tax increase then, do you think we would have a progressive income tax now? My money says no.


  18. - Anyone Remember - Monday, Jul 8, 19 @ 10:28 am:

    zatoichi
    Not sure if Sangamon County is comparable to the rest of the state, but when the pension benefits for fire / police were increased post 9/11, the local retirement funds were unable to properly analyze the proposals (State pension changes require a Pension Impact Note). If they were administratively part of IMRF, they would be able to analyze proposals.


  19. - Lucky PierreJB - Monday, Jul 8, 19 @ 10:32 am:

    In six years, pensions wil take 60% of the budget of Rockford, the third largest city in Illinois but pension reform is not politically possible?

    Municipal bankruptcy for local Illinois governments is inevitable.


  20. - Grandson of Man - Monday, Jul 8, 19 @ 10:37 am:

    The rookie is trying to make a big impact but is pressing. Don’t swing at every pitch and learn how to take some pitches. Don’t be like the last governor, trying to force things that couldn’t be done and just alienate people.

    Pritzker has shown he can work with and accommodate people. Do the doable.


  21. - supplied_demand - Monday, Jul 8, 19 @ 10:44 am:

    Didn’t Rahm make the same proposal in May?

    From Crain’s: Mayor Rahm Emanuel is floating a new way to address some of the city and state’s pension woes: a tax on retirement income of more than $100,000 a year.
    https://www.chicagobusiness.com/greg-hinz-politics/emanuels-new-pension-rx-tax-high-end-retirement-income


  22. - Shemp - Monday, Jul 8, 19 @ 10:53 am:

    Not many locals fear statewide consolidation. IML is on board with it. Those that dear consolidation are all those making money on the 600+ plans. The actuaries, accountants, attorneys and such that service all these individual boards have reason to put the fear of consolidation into the local pension boards (not to be confused with the local councils). It stuns me that so few seem to want to emulate IMRF, as successful as it is. There were around 8 different consolidation bills out there last session and they went nowhere, sadly. And what is repeatedly lost is the State sets the benefits then dictates the locals fund it, without any say in it. I’d take an extra 1% sales tax for a drop in property tax.


  23. - Panopticon - Monday, Jul 8, 19 @ 11:01 am:

    The state has been attempting to get it’s paws on the IMRF system for decades. This is not news or a story of making friends. Simply a ploy to gain access to more money to raid. Sad.


  24. - Roman - Monday, Jul 8, 19 @ 11:03 am:

    == Start making friends ==

    Always good advice for passing legislation. But too often, those who fancy themselves as political outsiders are better at making enemies. Rauner is an obvious example, but Pat Quinn and even Blago fall into that category, too.


  25. - RNUG - Monday, Jul 8, 19 @ 11:27 am:

    == The state has been attempting to get it’s paws on the IMRF system for decades. ==

    The GA set up the IMRF as an independent operation. If the GA wanted to, they could pass a bill to take it over. They apparently are happy with the independent way it works.

    == Simply a ploy to gain access to more money to raid. ==

    No.

    Lightfoot is looking for a State bailout for the Chicago pension systems, it’s that simple.

    The proposals for police and fire are a couple of different flavors. One is to create a new IMRF like fund for all police / fire pensions. Another is to merge police and fire into the existing IMRF. In both cases, it would be independent of the State other than State oversight to ensure the funds are contributed. Initially, either proposal won’t change things too much in terms of funding other than some cost / adminstrative savings from reduced overhead, and it may result in better earnings. It is bring fought because of the both perceived and real loss of local control, and fears by the better funded they would have to pick up the tab for the others.

    What I see is it would professionalize the fund management instead of it being subject to local politics, partronage, and insider dealings. And give the State the power to divert State provided municipal funds to the police / fire pensions if the municipality doesn’t make the required contributions.


  26. - RNUG - Monday, Jul 8, 19 @ 11:30 am:

    == Municipal bankruptcy for local Illinois governments is inevitable. ==

    Technically allowed today … but they have to get the permission of the GA first. Part of why it would be different from Detroit; the GA could chose to allow an alternate path of other bailout action instead.


  27. - Lucky Pierre - Monday, Jul 8, 19 @ 11:31 am:

    How is the Democratic legislature permanently raising taxes on working people with zero reforms to the cost drivers of the debt and deficit not “hurting people”?

    It is crystal clear the only people you are really concerned about obviously benefit from increasing the spending side of the equation, not trying to resist increases on the taxing side.


  28. - Oswego Willy - Monday, Jul 8, 19 @ 11:42 am:

    ===permanently===

    Hmm. So it can’t go up or down? It’s permanent. No more moving? That’s fun.

    ===zero reforms===

    “I’m frustrated too but taking steps to reform Illinois is more important than a short term budget stalemate”

    So, you’ve learned nothing.

    You are tiring. You aren’t an alternate voice, you’re the rejected voice of ignorance because you think you’re speaking for a forgotten lot, when in reality Raunerism was on the ballot and rejected at a measured vote level not seen against an incumbent Republican Governor in 100 years.

    The Raunerism way isn’t the way. Keep peddling it, it shows, like Rauner, you can’t learn from mistakes.


  29. - Jocko - Monday, Jul 8, 19 @ 12:02 pm:

    ==zero reforms==

    If these reforms are illegal (pension theft) or immoral (refuse to negotiate with AFSCME, remove prevailing wage)…what’s the point?


  30. - Sue - Monday, Jul 8, 19 @ 12:03 pm:

    Still hoping Lightfoot is successful but her numerous rookie mistakes spell trouble


  31. - FP_J - Monday, Jul 8, 19 @ 12:31 pm:

    Has anyone looked into what the impact of going PAYGO for pension obligations would be? In Rockford’s case, would it really be 60% of the budget?


  32. - Wonk - Monday, Jul 8, 19 @ 12:40 pm:

    To RNUG’s suggestion, the state already does have power to divert tax revenues to pension plans if the municipality fails to fund them at the level determined by DOI’s actuarial projections. The pension fund submits a certification to the Comptroller, who then withholds any sales or other taxes that would otherwise be due to the municipality. The different articles of the Pension Code have this kick in at different years and vary a bit between fund types, but it is usually withholding of up to 1/3 of revenues the first year after the law kicks in, up to 2/3 the second year, and all of the revenues after the third year. Last year was the first year when the full amount could be withheld, and the Comptroller withheld all tax revenue from Harvey at the request of the fire and police funds. It led to the layoff of many of their city workers because they could not meet payroll.


  33. - RNUG - Monday, Jul 8, 19 @ 12:59 pm:

    I knew that was true for municipalities in IMRF.


  34. - Proud Sucker - Monday, Jul 8, 19 @ 1:51 pm:

    IMRF, itself, also has the power to correct spiking: https://tinyurl.com/yxa3yy82
    Local Munis have no such influence over ‘their’ Police and Fire pension boards.


  35. - Not a Billionaire - Monday, Jul 8, 19 @ 1:57 pm:

    My downstate city ptax is almost all pension . Without city pension and school my ptax would be nominal. Instead its a 3 percent tax.


  36. - The Most Anonymous - Monday, Jul 8, 19 @ 2:01 pm:

    Rich sounding the alarm about this, running circles around the Chicago press. The grace period is starting to close in on Mayor Lightfoot. She and her rookie team need to pull it together. Time to move out of campaign mode and into elected leadership mode. Kudos to the governor’s team for not totally exposing her…yet.


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