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* I went to Gov. Pritzker’s press conference today to ask him about this story in Crain’s Chicago Business…
According to knowledgeable sources in Chicago and Springfield, after weeks of preliminary maneuvering [Chicago Mayor Lori Lightfoot] is pitching nothing less than a state takeover of the city’s cash-short pension funds, which under current law will require upward of $1 billion in new city tax hikes over the next three years to reach a path to full actuarial funding. Her proposal would consolidate city pension money with smaller downstate and suburban pension funds in a new statewide system. In some cases, those non-Chicago funds are even worse off than the city’s.
Insiders say Chicago might be willing to forgo some revenue it now gets from the state in exchange for relinquishing responsibility for the funds, which now are about $28 billion short of the assets they’ll eventually need to pay promised benefits. To pay the cost, Lightfoot reportedly supports state legislation to tax retirement income of better-off seniors—taxing income above $100,000 a year would net roughly $1 billion annually, according to the Civic Federation—or extending the sales tax to cover high-end services such as accounting and legal advice.
Some of the money also could come from proceeds of the governor’s proposed new graduated income tax. Gov. J.B. Pritzker estimated it will pull in an additional $3.4 billion a year and so far has allotted only $200 million to state pensions but nothing to local pensions.
It’s far from clear that Lightfoot’s proposal will fly with Pritzker. But Chicago’s new mayor has some strong arguments, including the fact that, without state help, Chicago will be forced to impose property tax hikes so large they could cripple the city’s and state’s economy.
Lightfoot also will be able to argue that, if she has to implement huge property tax increases, Chicagoans may not be wild about backing Pritzker’s vaunted graduated income tax proposal in a referendum in November 2020. The measure is favored to pass, but it’s no slam dunk, requiring 60 percent voter approval.
* I asked the governor about this today and he pointed out that he’s always been opposed to a tax on retirement income and remains so.
Regarding the state taking over the city’s pension liabilities, Pritzker said he hadn’t heard of that before and stressed that he wanted to improve the state’s credit rating “and so we’ve got to be careful about what we did in that regard, so that’s challenging,” which is a polite way of saying “No.”
The governor did say that he was interested in working with all cities on their financial issues.
Pritzker also said he did not hear the proposals from Lightfoot herself, but noted that they had talked several times and said he looked forward to working with her on various issues.
The governor didn’t mention this, but the state doesn’t subsidize any municipal retirement funds, so making an exception for Chicago would be a major first. The state did step in to help Chicago Public Schools with its pension payments in 2017, but the state has historically picked up almost the full pension tab for Downstate and suburban school districts, so that had precedent.
Also, as I told subscribers today, obliquely threatening the governor’s Fair Tax probably won’t go over too well.
I asked the mayor’s press office today if Lightfoot still supports the “Fair Tax,” but never heard back.
* According to the article, the mayor also apparently wants to renegotiate the gaming bill to give the city a bigger share of the revenue pie beyond the one-third that the city is getting as well as lowering the overall taxation on the casino.
That would would be a big hit to the state’s infrastructure plan and I asked Sen. Terry Link (the Senate gaming sponsor) today what his reaction was. Link said the mayor had jumped the gun and should wait for the state-mandated study of the casino’s prospects. If the city would get shortchanged, then perhaps it could be addressed.
* Relevant presser video…
There’s more in Greg Hinz’s story, so click here to read the rest.
* I also asked the four legislative leaders for a response. Here’s Senate President John Cullerton’s spokesperson…
We have not had an opportunity to review it.
No briefing before the story surfaced? Not so good.
Speaker Madigan’s spokesman said his boss is prepared to work with the city on pension issues, but they’re looking for information on this plan before proceeding. In other words, Madigan wasn’t briefed, either.
* Senate GOP Leader Bill Brady’s spokesperson…
Leader Brady recognizes Chicago has a pension problem; but taxing retirement income will just drive taxpayers out of Illinois.
Expected.
* House Republican Leader Jim Durkin is a personal friend of the mayor’s, and here’s his response…
We all know the pension issues facing taxpayers in Illinois. I appreciate the mayor’s willingness to discuss the problem and look forward to working with her in an effort to find a solution that benefits all Illinoisans.
* React from Sen. Andy Manar, who was at today’s presser…
Let me be clear, I am a vocal supporter of the Fair Tax to make sure the wealthy will finally pay their fair share. The Fair Tax will provide record funding for our schools and propriety tax relief for working families across Illinois. Any effort that deviates in a major way from these core principles will jeopardize our ability to achieve lasting reforms.
*** UPDATE 1 *** Greg Hinz with an update…
Gov. J.B. Pritzker and Mayor Lori Lightfoot tomorrow will hold their first lengthy sit-down since Lightfoot took office, and you can bet that at the top of the list is the mayor’s evolving campaign to get the state to help the city deal with its staggering pension problems.
*** UPDATE 2 *** Emily Bittner at the governor’s office…
Earlier this week, the Governor reached out to the Mayor to invite her to sit down together at the Thompson Center. They are meeting this weekend.
Some carefully chosen words there. Not hard to read between those lines.
*** UPDATE 3 *** So, is this meeting about the mayor’s pension proposal? Not necessarily, says Bittner…
The governor asked for the meeting earlier this week. The mayor is welcome to bring up any proposal she would like, but that is not why the governor requested the meeting.
…Adding… Props to AARP’s PR department…
As @GovPritzker and @chicagosmayor prepare to meet, we thank Gov. Pritzker for understanding that taxing retirement income is not the way to solve the state's fiscal crisis. Not the way to fix Chicago's money problems, either. #twill (link: https://t.co/HT9jzYodog)
— AARP Illinois (@aarpillinois) June 28, 2019
posted by Rich Miller
Friday, Jun 28, 19 @ 12:03 pm
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This is interesting issue. Mayor Lightfoot is hinting that a lot of tax increases in a short period of time might jeopardize the progressive income change going to the voters. How many legislators thought of this before they voted on the resolution ? There are no easy answers here. Those public pensions have to be paid via cuts in other government budgets or tax increases on someone.
Comment by Steve Friday, Jun 28, 19 @ 12:08 pm
The State already covers pension costs for downstate school districts, with non say in teacher salaries, hence pension costs. No need to make it worse
Comment by Sir Reel Friday, Jun 28, 19 @ 12:11 pm
Too much talk about taxing retirement income could threaten passage of the Fair Tax in 2020.
Comment by Grandpa2 Friday, Jun 28, 19 @ 12:12 pm
This is probably “too far” by the Mayor, and going towards taxing…
===To pay the cost, Lightfoot reportedly supports state legislation to tax retirement income of better-off seniors—taxing income above $100,000 a year.===
… with no stomach or appetite, by voters, to go after one of the very-very few good things Illinois does in its taxing.
The political capital needed is… yikes… it borders on “Lame Duck / Veto Session / 11:59 pm” kinda propelling, and then try getting the votes… and Gov. Pritzker on board…
Comment by Oswego Willy Friday, Jun 28, 19 @ 12:16 pm
==Too much talk about taxing retirement income could threaten passage of the Fair Tax==
Ironic that taxing retirement income would actually make it “fair”.
But I agree that Lightfoot suggesting taxing retirement in the same breath as JB’s tax plan is only going to confuse voters. Confused voters either vote no or not at all.
Comment by City Zen Friday, Jun 28, 19 @ 12:17 pm
I would like the state to subsidize my city’s pension funds.
The property taxes are crippling and likely to become worse.
Comment by cdog Friday, Jun 28, 19 @ 12:18 pm
What is the flag upside down at the governor’s presser? That’s usually an SOS signal.
Comment by Downstate Illinois Friday, Jun 28, 19 @ 12:26 pm
Durkin doesn’t seem to stand for anything.Whatever way the wind blows
Comment by Anon Friday, Jun 28, 19 @ 12:28 pm
Late June has always been a good time to unveil legislative proposals.
Comment by Michelle Flaherty Friday, Jun 28, 19 @ 12:30 pm
===This is probably “too far”===
Ain’t no “probably” about it. lol
Comment by Rich Miller Friday, Jun 28, 19 @ 12:31 pm
The new mayor’s decision to fight a multi-front war, throw elbows, and seemingly fancy herself atop a white horse riding past the scum that is all other elected officials…may not work out so well for her.
As the new governor has demonstrated, there are constructive, cooperative ways to pursue change.
I truly hope that Lori Lightfoot does not join Pat Quinn and Bruce Rauner in the ranks of holier-than-thou, phony populist politicians, focused on getting cheers from the ed boards instead of getting things done.
Comment by Moe Berg Friday, Jun 28, 19 @ 12:34 pm
== Leader Brady recognizes Chicago has a pension problem; but taxing retirement income will just drive taxpayers out of Illinois. ==
Can’t we just tax the government pensions of those that collect and have already left our state?
We could call it the Snake Plissken tax.
Comment by Walleye Soup Friday, Jun 28, 19 @ 12:36 pm
Obliquely threatening the fair tax is bad (if it did come from MLL’s staff) and so is not briefing the leaders. More than any of that, this is a humongous ask for the Governor and GA with very real political risks for the Governor and the caucuses, especially non-Chicago members. Maybe, big maybe, it could happen with weeks or months of preparation and a willingness to compromise. But it is going nowhere fast the way it came out, and it is pretty amateur for the Mayor to just make a demand of Springfield and expect it to happen.
Comment by Three Dimensional Checkers Friday, Jun 28, 19 @ 12:36 pm
===Ain’t no “probably” about it. lol===
Spoiler Alert.
lol
Comment by Oswego Willy Friday, Jun 28, 19 @ 12:39 pm
== No briefing before the leak? Not so good. ==
A disconnect seems to be forming between the mayor and her would-be allies in Springfield.
The McCormick Place expansion had to be tabled after it had been cleared for take-off and state financing of the transit-related development east of Soldier Field passed only to have the mayor trash it. Those two things could be excused because they happen so quickly after her election. But not checking in with Madigan/Cullerton/JB before sitting down with Crain’s?
So far, Team Lightfoot is doing the Springfield part of their job wrong.
Comment by TNR Friday, Jun 28, 19 @ 12:40 pm
===I would like the state to subsidize my city’s pension funds.===
It’s my understanding the Comptroller’s Office is already diverting grant funds payable to Chicago to the Chicago Fire Fighter’s pension as a result of a lawsuit, so in a roundabout way, that is already happening.
Comment by JSS Friday, Jun 28, 19 @ 12:45 pm
Taxing retirement income over 100K is estimated to generate about 1 billion/year - about the same as the increase in Chicago’s pension payment by 2023. Since the increase would only hit small number of voters - arguably affluent seniors, it should be salable. Seniors tend to be less likely to move due to tax considerations so migration shouldn’t be a factor except at the margins. Chicago’s pension overhang is a disincentive for business that would be removed at least in part. Not bad.
Comment by Looking down the Road Friday, Jun 28, 19 @ 12:56 pm
Hey Lori- welcome to the majors. Pritzker is kind of imitating Jerry Ford when NYC asked for a bailout. Lori- your on your own good luck
Comment by Sue Friday, Jun 28, 19 @ 1:07 pm
==and it is pretty amateur for the Mayor…==
This. I really very badly want the mayor to succeed but the number of amateur hour stumbles is beginning to pile up and its worrisome. Chalk it up to learning curve in the first 90 days if you must, but you need political capital to spend political capital, and every day that passes from her landslide election erodes that capital. Not sure what today’s leak was designed to accomplish except force allies like JB, Madigan, and Manar to awkwardly disavow you.
Comment by Lurker Friday, Jun 28, 19 @ 1:14 pm
No way a “Chicago pension bailout” happens in Springfield. I trust the mayor and her people get that.
Merging the approximately 600 local police and fire pensions (including Chicago’s) into one statewide system funded by Springfield could be sold as a property tax relief measure akin to proposed education funding tax swaps. But, of course, how does the state pay for it?
As mentioned, taxing retirement income is politically dubious. The new school funding formula contemplates pumping an additional $350 million each and every year into K-12 spending, which the new revenue from the progressive tax is supposed to cover. I suppose some or all of that could be diverted, but not without a war.
Comment by Roman Friday, Jun 28, 19 @ 1:16 pm
===I trust the mayor and her people get that===
lol
Nope.
Comment by Rich Miller Friday, Jun 28, 19 @ 1:21 pm
===it should be salable===
LOL
A billion dollar tax hike on Illinois seniors for Chicago pensions. Try to sell that.
Actually, take out Chicago. Still not gonna happen.
Comment by Rich Miller Friday, Jun 28, 19 @ 1:22 pm
== Nope. ==
That’s scary.
Comment by Roman Friday, Jun 28, 19 @ 1:24 pm
Somewhere, Rahm is laughing his tail off.
Comment by SSL Friday, Jun 28, 19 @ 1:26 pm
I disagree that seniors are less likely to move due to tax considerations. Seniors are able to go anywhere they want at this stage of their lives. Unless of course, they’re disabled, ill or mentally incompetent. In which case, shame on those wanting to take more of these peoples’ money from them. Not like these “wealthy” seniors are out on the town every night, living the life…….like when they were young……….
Comment by AnonymousOne Friday, Jun 28, 19 @ 1:31 pm
The mayor should use the crisis to switch new employees to defined contribution retirement plans with a march. Or at least a hybrid 403(b)-pension system.
Comment by Matt Friday, Jun 28, 19 @ 1:41 pm
In fairness to Mayor Lightfoot , if /after a progressive income tax passes in Illinois taxing wealthy retirees is more viable.
Comment by Steve Friday, Jun 28, 19 @ 1:43 pm
State bailout of Chicago’s pension plan when the property tax rate is far lower than other cities? Hard pass.
Comment by Jibba Friday, Jun 28, 19 @ 1:46 pm
Chicago needs much richer residents. And higher taxes may accomplish this. The poor move out, and the rich move in. The northside lakefront west to western could be a real estate bonanza.
Comment by Cook County Commoner Friday, Jun 28, 19 @ 1:48 pm
I’m going to sound totally downstate and partisan on this one. Plus commenting without reading the other comments.
Chicago wanted to control all their own pension funds because they didn’t trust the State. They made the same mistakes the State did; they can solve it themselves without State help.
Comment by RNUG Friday, Jun 28, 19 @ 2:16 pm
== tax retirement income of better-off seniors—taxing income above $100,000 a year. ==
I could support this if it was a state-wide fund and not just a Chicago bailout.
But then the Mrs and I might have to look at switching to filing single to stay under that amount …
Comment by RNUG Friday, Jun 28, 19 @ 2:22 pm
== Can’t we just tax the government pensions of those that collect and have already left our state? ==
Think that would run into several legal issues … starting with just targeting government pensions, then getting into state jurisdictional issues.
Comment by RNUG Friday, Jun 28, 19 @ 2:24 pm
Specifically to Lightfoot’s rookie moves … she just burned at least 3 if not 5, bridges she is going to need to cross in the future. Somebody better explain the Facts of Life in Springfield / State Government politics to her.
Comment by RNUG Friday, Jun 28, 19 @ 2:27 pm
Asking the state to help with the Chicago pension funding issue is like asking an arsonist to put out a fire.
Comment by Demoralized Friday, Jun 28, 19 @ 2:28 pm
=The measure is favored to pass, but it’s no slam dunk, requiring 60 percent voter approval.=
Is it really favored to pass at this point? I find it hard to believe that there is a path to 60 percent at this point but I know there is a long time until this is actually voted on.
Seems like people are too focused on the potential for the graduated income taxes to eventually get moved around without taking into account the fact that the flat tax can be adjusted upwards without a constitutional amendment.
As far as the state taking over the city’s pension system, I doubt that happens. Taxing retirement income over $100,000 might also be tricky as well.
Comment by Former State Worker Friday, Jun 28, 19 @ 2:45 pm
===No briefing before the leak? Not so good.===
Hmmm. I was under the impression that there was some sort of conversation about the outlines of this plan with the Democratic leaders before the legislature adjourn. Clearly that was something less than a full briefing, but the timing of the transition didn’t help matters.
Hinz quotes so-called “knowledgeable sources in Chicago and Springfield,” and “weeks of preliminary maneuvering” which tells me there have been discussions with some of the key players in the Capitol.
Team Lightfoot may be a little naive about what’s possible in Springfield, but I find it hard to believe they are stupid enough to not have discussed the concept with MJM and Cullerton prior to now.
This is a legislative bombshell and there was no chance of it being even whispered during that remarkably productive session, much less proposed. There might be some help for the city in veto, but it ain’t going to be this plan.
I hope the Mayor has a backup plan ready to go because the cavalry isn’t coming to the rescue this time.
Comment by 47th Ward Friday, Jun 28, 19 @ 2:54 pm
==Somebody better explain the Facts of Life in Springfield / State Government politics to her.==
Funny how things always look simpler and easier to pols from the outside looking in than when they are actually on the inside. I wish the best for Lori and for Chicago but things do not look good right out of the gate.
Comment by Responsa Friday, Jun 28, 19 @ 2:57 pm
=== I was under the impression that there was some sort of conversation about the outlines of this plan with the Democratic leaders===
I wrote about it for subscribers in May. However, I’m not sure that it involved the leaders themselves, and there was no actual plan, just, as you said, an outline.
Comment by Rich Miller Friday, Jun 28, 19 @ 2:57 pm
Why not do property taxes rates just like everyone else in the State.
All other counties, except Cook, property is assessed at 33 1/2% rate. While in Cook County it’s 10% residential 25% industrial.
Hit your residents with that and let us know how it goes. The collars have been paying that why don’t you? That’d be a Fair Tax for sure.
Comment by DuPage Bard Friday, Jun 28, 19 @ 2:59 pm
From Hannah Meisel’s interview with State Rep. Kelly Cassidy:
My advice to Lori Lightfoot is to start listening to the advice of Kelly Cassidy.
– MrJM
Comment by @misterjayem Friday, Jun 28, 19 @ 3:42 pm
I note that the meeting this weekend is at the Thompson Center, not on the Gov’s boat, so Lori lucked out there.
Comment by Responsa Friday, Jun 28, 19 @ 3:45 pm
The updates are doing little to boost confidence that the mayor has a well-planned Springfield strategy. How can she not have some kind of understanding with JB worked out? She’s new to this game, so I’m willing to cut her some slack. But who the heck is advising her on this stuff?
Comment by TNR Friday, Jun 28, 19 @ 3:57 pm
Responsa wins the internet today.
Comment by Rich Miller Friday, Jun 28, 19 @ 4:18 pm
Dumb move by the rookie mayor. Her state relations staff didn’t earn their salaries this week. They better learn quickly that there is an entire state outside of the City of Chicago.
Comment by Just Me Friday, Jun 28, 19 @ 4:27 pm
Bail out the City in part, in return for the Mayor taking down 90% of the red-light cameras and speed cameras.
Comment by Ares Friday, Jun 28, 19 @ 4:29 pm