Image shows the Illinois State Capitol building.
The Illinois State Capitol in Springfield. Credit:

In an effort to help fix the state of Illinois’ burdensome pension problem, the Civic Committee of Chicago has made a bold proposal: Raise income taxes for 10 years; pour the $28.5 billion of proceeds into the state’s pension funds, and turn the corner on eliminating $140 billion in pension debt.

To make it happen, the Civic Committee and backers of its idea will need to get past “No.”

No is the opening response from Andy Manar, deputy governor for budget and economy, communicating on behalf of Gov. J.B. Pritzker. And that rejection, Manar explained, can be traced to the Civic Committee’s opposition to the governor’s first-term proposal to introduce a graduated income tax, of which around $200 million a year Pritzker was expected to allocate for pension funding.

“One of the reasons the governor doesn’t support the Civic Committee report is because his plan was more fair to the people of the state, and he doesn’t support raising taxes on middle- and low-income families to fund pensions,” Manar said.

Of course, getting past an initial “no” is what negotiating is all about.

Even Manar didn’t completely slam the door on the Civic Committee plan. “The governor is open to ideas,” he said. It would help if the group can build political support for its plan, he added.

Manar didn’t get specific, but the administration has made clear to supporters of pension reform that this plan, with its call for a tax hike, will not move forward without at least some Republican support. Pritzker and fellow Democrats in the General Assembly will not raise taxes in an election year unless Republicans join the effort.

And if that happens, a source close to Pritzker told me, the governor could well sign on to the Civic Committee’s plan.

Welcome to the next step of the effort to solve Illinois’ chronic pension underfunding: the politics of it all.

It’s hard enough to develop promising ideas, as the Civic Committee has done. But it will mean little if the ideas can’t attract political support.

The same goes for other plans, such as the reamortization of pension debt proposed by the Center for Tax and Budget Accountability. The CTBA plan involves selling pension bonds in order to fund bigger pension payments for seven years, as well as stretching out the amortization of pension debt and aiming for a lower target than in current state pension law: 80% funding by 2045.

Manar said he is familiar with the CTBA plan and saw some merit in the draft he discussed, when still a state senator, with the group’s executive director, Ralph Martire.

Overcoming indifference

Pritzker tried for sweeping pension reform with the five-point plan in his first budget address. But he was unable to enact the plan — including his treasured graduated income tax plan.

Since then, Pritzker’s approach has been more piecemeal and less ambitious.

Steadily rising pension payments are stretching the state’s budget. A state law requires them to nearly double by 2045 to $15 billion. Illinois’ $140 billion in pension debt is damaging its credit rating and putting retirement checks at risk. High debt levels and the deeply underfunded pension plan are a negative for the state’s credit rating.

Despite all this, pensions still have a hard time competing for visceral political attention with schools, hospitals, policing, road repair and other issues affecting daily life.

“There’s a lot of people in the General Assembly, and a lot of people who represent public employee unions, who think that continuing to strengthen pensions and solve some of those problems out there are priorities,” said former state Rep. Greg Harris, a lead budget negotiator for years. “But now there’s just a lot of other very equally important needs for a lot of folks. And if the solution is going to be we need to find some more resources somewhere, they’re all going to be competing for that solution.”

The politics of pension reform are complex, and pension funding doesn’t have a natural constituency. Teachers and parents protest or complain if schools are underfunded; public health suffers if hospitals and residential centers are not well run.

More in This Series: Erasing Illinois’ $140B in Pension Debt

Part Two: Lessons from Other States’ Reforms

Part Three: Solutions to Illinois’ Pension Debt

But pension underfunding is about interest rates, investment returns and amortization tables. Today’s teachers and other union workers don’t seem to make the connection that the pension checks they’ll collect in the future are robbing their kids of a better education today. And state retirees, whose monthly checks depend on a well-funded system, do not agitate for one.

The CTBA’s staff is very limited, and the group does not have capacity for an all-out push in Springfield. The Civic Committee does have resources, and it is seeking to overcome that indifference in order to help turn its plans into policy. Since releasing its plan, the group has met with Democratic and Republican leaders in both chambers of the state legislature: House Speaker Emanuel “Chris” Welch, House Minority Leader Tony McCombie, Senate President Don Harmon and Senate Minority Leader John Curran. Sources in two of the leaders’ offices told me not to make too much of the meetings: The discussion has been perfunctory so far.

New face forward

The Civic Committee enters the fray carrying baggage that is visible to many of the players. This goes beyond its public opposition to the graduated income tax — still clearly a sore subject with the Pritzker administration.

The group’s 2006 “Illinois Is Broke” campaign, which raised fears of pension insolvency, was widely viewed as alarmist. A letter in 2012 from then-Civic Committee President Ty Fahner raised eyebrows with a warning to then-Gov. Pat Quinn that even extreme measures, such as eliminating inflation adjustments for retirees, would not ward off insolvency for Illinois’ pension funds.

The new public face of the Civic Committee is Derek Douglas, a former special assistant for urban affairs in President Barack Obama’s administration who previously headed civic engagement at the University of Chicago. Douglas said the group is taking a low-key approach, seeking to be collaborative and open to ideas that might improve its plans.

Part of the disconnect between the group and Pritzker is one of scale. Pritzker has said the $700 million in added stabilization payments contributed to pensions since mid-2022 will save taxpayers $2.4 billion by 2045. The Civic Committee is seeking $2.3 billion in added payments in the first year of its plan alone, climbing to $3.4 billion in the 10th year. It projects $40 billion in savings.

The Civic Committee would need to persuade Pritzker, legislative leaders and key rank-and-file lawmakers. Springfield legislative sources told me the group’s proposed tax hike may not even be introduced in the General Assembly without at least some bipartisan support.

Union support will be key, too. Representatives of the Civic Committee have met with leaders of several private-sector unions. But the group has not yet gotten a meeting with the state’s largest public sector union, Council 31 of the American Federation of State County and Municipal Employees, or its president, Roberta Lynch.

The union vote is not necessarily a monolith on this topic. One union leader who met with the Civic Committee, who asked me not to identify him, told me that union members in the private sector hold their public-employee brethren accountable for putting up with the state’s underfunding for years, focusing almost exclusively on pay hikes rather than insisting that the state fund their retirements adequately.

One prospective negotiating point: Increases of 3% in retirement checks under Illinois pension plans at times have lagged inflation in recent years. Union representatives might see an opportunity to gain protection against such gaps by entering reform negotiations.

The governor’s role

In the end, the key decider will be the state’s governor, Pritzker. Without his support, pension reform in Illinois will not pass.

Both the CTBA and the Civic Committee have stressed the efficacy of front-loading pension payments, but with the administration opposed to a tax increase levied on low- and middle-income people, the Civic Committee may need to find a different idea.

Might there be a way, say, to add a new pension tax, levied only on individuals and companies earning above a certain amount? Even in a flat-tax state, such a plan might pass constitutional review.

Pritzker has earned acclaim for his efforts to improve Illinois’ fiscal health. The political rewards would compound, substantially and nationally, if he could find a comprehensive fix for the worst-funded pension system in the nation.

The Civic Committee has a role to play here. But as a political matter, the group has made a mistake focusing on an improved credit rating as a “key pillar” of its fiscal turnaround plan. A Double-A credit rating from Standard & Poor’s has no power to stir peoples’ souls.

Instead, the group needs to find a way to persuade lawmakers the ways in which pension reform might affect their quality of life.

Jay Henderson, a retired executive now leading the Civic Committee’s pension effort, when I asked him what will happen if the General Assembly enacts their proposals, framed his response with a vision that just might get the job done.

“Parents wouldn’t have to worry about education funding being cut to pay for legacy obligations. The residents themselves would be confident that the state would have the resources to pay for the government services. The pensioners themselves won’t have to worry about whether their retirement income payments are secure,” he said.

“We also believe that jobs and opportunities are plentiful, because of increased levels of investments by companies operating in Illinois, creating more jobs for working families. And so in many ways, we believe that this is more than a financial exercise, that in fact, it provides important value for parents, for residents, for engineers, and for job opportunities for people around the state.”

Now they’re talking. And if the right people in Springfield and across Illinois just listen, there might be a path to “Yes” after all.

David Greising is president of the Better Government Association.

Part One: Erasing Illinois’ $140B in Pension Debt

Part Two: Lessons from Other States’ Reforms

Part Three: Solutions to Illinois’ Pension Debt

David Greising is the president and chief executive of the Better Government Association, joining the BGA in 2018. For nearly a century, the BGA has fought for honest and effective government through investigative journalism and policy advocacy.