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Yeah, sure, let’s just snap our fingers and do that

Wednesday, Oct 5, 2022 - Posted by Rich Miller

* Sun-Times

Laurence Msall said state law was used to create the police, fire, laborers and municipal employees pension funds, and the Illinois General Assembly dictates “who the members are, what their contribution levels must be and what benefits” those retired city employees receive.

That’s why Msall believes it’s time state lawmakers live up to their responsibility to consolidate, reform and fund local pension funds to relieve Chicago and municipalities from Peoria to Rockford from the “enormous pressure” they face to raise property taxes.

Gov. J.B. Pritzker “took an important step three years ago when he rolled up many of the smaller police and fire pension funds investment oversight into one state board. The next step would be to take over the local police and fire pension funds and municipal pension funds and have the locals manage the current obligation. And the unfunded liability should be absorbed by the state,” Msall told the Sun-Times. […]

Pressed to identify funding sources, Msall said: “Regardless of whether you’re a pensioner or a multimillionaire who has millions of dollars in investments, you pay no Illinois state income tax. The federal government taxes retirement income. Illinois is one of the few states that doesn’t tax any amount of retirement income.”

What about broadening the sales tax umbrella to include professional services or amending the Illinois Constitution to eliminate the pension protection clause?

“Certainly, those should be on the table,” Msall said.

60-30-1. Not one of those three numbers currently exists in any shape or form to impose a tax on retirement income. The mayors of this state have, in the past, generally opposed income tax increases. I doubt the unions will touch such a thing. So, who’s gonna get this done? The governor is on record opposing the whole idea, even in a graduated income tax format.

It’s all just magical thinking.

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29 Comments
  1. - Person 8 - Wednesday, Oct 5, 22 @ 8:48 am:

    Could the courts (federal or state) rule that not taxing retirement income is unconstitutional (state constitution)?

    I know in the past this was ruled in the retirees favor, but different times, different outcomes? This would bypass the 60-30-1


  2. - Big Dipper - Wednesday, Oct 5, 22 @ 8:55 am:

    Non-retirees are not a suspect class so treating retirees better need have only some conceivable rational basis to survive a challenge.


  3. - Oswego Willy - Wednesday, Oct 5, 22 @ 8:57 am:

    To the post,

    ===60-30-1. Not one of those three numbers currently exists in any shape or form to impose a tax on retirement income. The mayors of this state have, in the past, generally opposed income tax increases.===

    What is great, part 3,755, about Rich’s blog is the reality of “what is real”

    It’s tiring when at jump street… no 60/30… no signature.

    That’s the ball game, it’s everything, it’s governing.

    The rest is dorm room pathetic, and Mr. Msall *knows* better.

    Knows.

    Pick anything, pensions, taxes, education, roads… heck, I’ve been known a “time or three” to discuss any of all things, but I *know*… 60/30 signature… the rest is nothing.

    What is true is Frerichs wants a discussion to taxing retirement income, and frankly I’m still stunned that either his Advance Crew ill-prepared him for an event Frerichs never-never should have attended, and further, Frerichs’ own ego that he thinks it’s fine to be at an event like that and be so ill-prepared to walk into such a horrible take… taxing retirement income.

    Until one is honest to policy that includes the idea(s) of 60/30 signature… it makes you wonder (it doesn’t, just take a quick “think”) who was the audience Msall was trying to entice with such thoughts.


  4. - Oswego Willy - Wednesday, Oct 5, 22 @ 8:59 am:

    ===This would bypass the 60-30-1===

    How would that work?

    If anything, if any court ruled against it, there’d be a half dozen bills filed to protect it… again.

    Even if they were merely election bills


  5. - Rich Miller - Wednesday, Oct 5, 22 @ 9:05 am:

    ===If anything, if any court ruled against it===

    Judges at all levels run for retention. I doubt they’d find a way to overturn the law. Just the opposite. Remember, the Illinois Supreme Court has also ruled that the state constitution’s language “The State has the primary responsibility for financing the system of public education” somehow doesn’t mean it has to provide 50 percent plus one dollar of funding.


  6. - Cheswick - Wednesday, Oct 5, 22 @ 9:06 am:

    == This would bypass the 60-30-1 ==

    I’m no lawyer, but I don’t think the Illinois Supes are going to legislate From the Bench on anything to do with Illinois pensions.


  7. - Norseman - Wednesday, Oct 5, 22 @ 9:11 am:

    Larry, put it in a report with a nice fancy cover and put it on a bookshelf with all the other reports proposing great ideas to “improve” government problems.


  8. - Back to the Future - Wednesday, Oct 5, 22 @ 9:11 am:

    The bottom line on funding for public employees is that local Police and Fire Pension systems were on average the 2nd and 3rd best funded systems in the state.
    The State systems have piled up a huge underfunding burden. Given the State Fund’s history it would appear that more state influence in terms of improving the funding levels for local funds would be foolish.


  9. - Retired SURS Employee - Wednesday, Oct 5, 22 @ 9:16 am:

    Aside from Chicago and Cook County, when Mr. Msall talks about other “municipal pension funds” has he not heard of IMRF?


  10. - Donnie Elgin - Wednesday, Oct 5, 22 @ 9:28 am:

    “The next step would be to take over the local… municipal pension funds ”

    So much to cover – first IMRF is the shining star of all the public pension funds its unfunded liability is very low, and the state run pensions are much worse. Secondly, each municipality has an individual plan with a separate employer contribution rate based on actuary studies for that particular plan. Third, the funding must be maintained by municipalities, unlike the state plans, there can be no holiday or ramps – if a municipality fails to fund IMRF their property tax dollars can be intercepted and the IMRF contribution swept away from them. And lastly, the property tax burden on these municipal plans will diminish as Tier II participants become dominate


  11. - Juvenal - Wednesday, Oct 5, 22 @ 9:29 am:

    1) It would be easier to find 30 votes to tax retirement income than 30 votes to get state government to take on the debt of local pension systems. Where are the votes to “bail out Chicago” gonna come from?

    2) Mendoza and Frerichs are arguably the best Comptroller and Treasurer Illinois has had. Pritzker is certainly the best Governor we have had in a generation, and you could even say he’s been a better fiscal manager than Edgar. They are in the position they are in politically because they have done their jobs well.

    3) I am so old, I remember when Republicans wanted the city to declare bankruptcy.


  12. - notsosure - Wednesday, Oct 5, 22 @ 9:29 am:

    There’s a balance somewhere here. Tilting at windmills is a waste of time if you’re looking for immediate change, and if that’s really what Laurence is expecting I’ve got a bridge to sell him.

    On the other hand long-term efforts to change minds and hearts can actually succeed, and if you keep your mouth shut simply because you don’t have the votes right now, the ball will never start rolling. More recently it’s been social issues (marriage equality and legalized cannabis for example), but it’s happened in the fiscal arena, too–the state income tax was terribly unpopular, until it wasn’t.

    But on the other other hand, it is annoying when people harp away about something that clearly isn’t going to happen, acting like it’s a clear and obvious solution that’s a hair’s breadth away from reality. (I’m looking at you, pension reformers–that constitutional amendment ain’t gonna happen)


  13. - Annonin' - Wednesday, Oct 5, 22 @ 9:32 am:

    Larry can be an entertaining guy, but once again he misses the key idea that a benefit can be diminished and/or survive a court challenge. The should be borne out the the two failed efforts to change law for 2 Chicago funds that had union support and the multi year struggle to consolidate and downstate/suburban police & fire accounts.


  14. - Roman - Wednesday, Oct 5, 22 @ 9:32 am:

    Rich is dead on target with this.

    For a moment, set aside Laurence’s almost fairy dust-level revenue suggestions. He wants the state assume the pension debt rolled up by local governments? Hundreds of towns ran up that debt by skipping payments for decades, while other cities did the right thing and paid off those obligations as they were accrued. Now Msall wants to bail out the deadbeat municipalities and socialize the costs across the state, effectively penalizing residents of towns who paid for their pension obligations and rewarding those who live in towns that didn’t?

    And aren’t the folks at the Civic Federation among the pension big-thinkers who in the past complained that the state teacher pension was broken, in part, because the costs are covered by the state instead of where they’re created — at the local school districts? They are advocating the exact opposite for public safety pensions now. Pick a lane, Laurence.


  15. - Ok - Wednesday, Oct 5, 22 @ 9:36 am:

    [up shot on tall Chicago buildings and gothic-looking architecture]

    “Big business finally tells the truth about their plan for Illinois….

    - tax seniors
    - tax small businesses
    - cancel pensions

    To pay for lowering their own taxes.

    But the Democratic party is standing up against them, to protect our most vulnerable and rebuild our neighborhoods.

    I’M JB Pritzker, I’m Speaker Emanuel Chris Welch. And we approve this message”


  16. - PublicServant - Wednesday, Oct 5, 22 @ 10:12 am:

    Did the Msall interview take place in Fantasyland, because that’s where Msall lives.


  17. - Jocko - Wednesday, Oct 5, 22 @ 10:18 am:

    ==consolidate, reform and fund local pension funds==

    Those all mean ’stiff’ in the legislative thesaurus.


  18. - Socially DIstant Watcher - Wednesday, Oct 5, 22 @ 10:21 am:

    Has Msall condemned Tom Demmer’s attacks on Mike Frerichs? Did the Civic Federation endorse Frerichs?

    Maybe I missed that?


  19. - Rich Miller - Wednesday, Oct 5, 22 @ 10:35 am:

    ===Has Msall condemned Tom Demmer’s attacks on Mike Frerichs?===

    Pretty sure the treasurer would rather Msall and anyone else not talked about that particular topic. lol


  20. - yinn - Wednesday, Oct 5, 22 @ 11:03 am:

    Always talking about magic wands, which they can get away with because so many people don’t understand how things work (or are supposed to work).

    It is beyond tiresome to listen to leadership at the local level, who whine that the state is doing nothing yet never take responsibility for overly-generous contracts that are easy to say yes to because the piper seems way down the road.

    Many Illinois municipalities have always paid the required annual contributions to these pensions but are still growing their liabilities due to using fairy tale investment return assumptions to keep annual contributions lower.

    Deceit and laziness it seems, at every level.


  21. - 47th Ward - Wednesday, Oct 5, 22 @ 11:38 am:

    ===Pretty sure the treasurer would rather Msall and anyone else not talked about that particular topic. lol===

    That event is happening tomorrow, the Civic Federation Treasurer candidate forum. Frerichs should probably skip breakfast and eat after.


  22. - Socially DIstant Watcher - Wednesday, Oct 5, 22 @ 11:55 am:

    ===Pretty sure the treasurer would rather Msall and anyone else not talked about that particular topic. lol===

    That event is happening tomorrow, the Civic Federation Treasurer candidate forum. Frerichs should probably skip breakfast and eat after.

    Frerichs may want it all to go away, but does anyone think Demmer will play ball? So tomorrow, when Demmer throws the pitch, will Msall step out in front of it?


  23. - Just Another Anon - Wednesday, Oct 5, 22 @ 11:55 am:

    Local government in Illinois made the mistake of the century during the Convention for the 1970 Constitution. Counties and Municipalities agreed to forgo their ability to charge a local income tax in exchange for what has become the LGDF and Home Rule authority. They basically bought the assumption that the State wouldn’t play dirty financial pool with the state income tax funds and that they could legislate their way around it other issues with Home Rule. Fairly short sighted on their part. Perhaps, if they had the ability to impose a modest income tax to fund their pension shortfalls, there wouldn’t need to be some sort of magic wand solution to fix these pension funds.


  24. - Oswego Willy - Wednesday, Oct 5, 22 @ 12:17 pm:

    There’s so much here…

    ===Municipalities agreed to forgo their ability to charge a local income tax in exchange for what has become the LGDF and Home Rule authority.===

    The idea of a local income tax, you look at a NYC and other munis where that “works”, it’s not conducive to what a place like Chicago wanted to advocate, as now the same argument of having a local income tax for Chicago would be catastrophic

    ===They basically bought the assumption that the State wouldn’t play dirty financial pool with the state income tax funds and that they could legislate their way around it other issues with Home Rule===

    Example?

    Thanks.


  25. - Donnie Elgin - Wednesday, Oct 5, 22 @ 12:42 pm:

    “Many Illinois municipalities have always paid the required annual contributions to these pensions but are still growing their liabilities due to using fairy tale investment return assumptions to keep annual contributions lower”

    Examples? IMRF adjusts each employer rate annually based on actuarial assumptions. The Entire IMRF universe is 94% funded. There also is no way to keep contributions lower; municipalities pay what they owe – IMRF sets the rate not the employer – no way to game it.

    2020 Assets and Growth
    IMRF’s funded status grew during 2020 from 90.7% to 94.1% on an actuarial basis.


  26. - Rich Miller - Wednesday, Oct 5, 22 @ 12:45 pm:

    ===IMRF===

    I think the topic is police and fire, which are badly underfunded.


  27. - Friendly Bob Adams - Wednesday, Oct 5, 22 @ 1:54 pm:

    The Civic Federation gets a lot of attention for an organization with two full-time employees.


  28. - RNUG - Wednesday, Oct 5, 22 @ 2:54 pm:

    Yes, Illinois is one of the few States that exempt ALL retirement income from the State income tax. But that is a half truth. A lot of States have some partial exemption of retirement income, usually opting to not tax Social Security and / or only partially tax various retirement financial accounts.

    Depending on the type of account, 12 to 24 States don’t tax certain retirement income. So Illinois isn’t quite the outlier that Msall implies.


  29. - The Velvet Frog - Wednesday, Oct 5, 22 @ 2:55 pm:

    Lawrence who?


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