Editorial Roundup: Illinois

Editorial: The great Illinois pension reckoning is drawing closer

Like many individual investors, public pension funds enjoyed a stretch of good returns over the last decade. Between 2011 and 2021, these retirement plans for public sector employees generated a 7.8% annualized gain. The better-than-expected performance combined with federal pandemic relief to provide fiscal breathing room for Illinois Gov. J.B. Pritzker and other politicians who continue to preside over grossly underfunded retirement systems.

This year, however, financial markets are putting pension underfunding back at the top of the agenda, where it belongs.

The median U.S. pension fund lost 9.7% in the second quarter, according to the Pensions & Investments trade book, and the first quarter was weak as well. Though markets have staged a modest summer comeback, 2022 is shaping up as a reminder of the time bomb embedded in state finances.

The bottom line: Illinois’ major pension systems have nowhere near the money needed to pay promised benefits, despite booking a decade of positive investment results.

The latest audit of the state’s five biggest pensions, conducted before this year’s market volatility, showed they have just 42.4% of the needed funds. At the same time, benefit obligations have kept accruing, and the state is doing nothing substantial to fix this miserable imbalance.

Pritzker evidently is hoping, like Democratic governors before him, to tax his way out of a mess that is, alas, far too big and fast-growing for the state to cover it with tax revenues, even if taxes were increased.

Pritzker evidently is hoping, like Democratic governors before him, to tax his way out of a mess that is, alas, far too big and fast-growing for the state to cover it with tax revenues, even if taxes were increased.

Those fantasizing about a federal bailout need to understand that Illinois has allowed its pension problem to get so much worse than most other states; a bailout would be unfair to the rest of the country. What’s left in this state are public pension systems on track to fail, and political leaders too cowardly to confront public employee unions with the truth.

Governor, where is your grand plan to fix this slow-motion disaster? As of now, nowhere.

Since the Illinois Supreme Court rejected the last big pension-reform effort in 2015, the state has seen only small-scale changes that help on the margin, but don’t come close to solving the problem. What’s needed is a deal that funds the benefits earned so far but relieves the state from piling up more obligations it can’t afford.

Billionaire Ken Griffin revealed in these pages that he pitched Pritzker with a plan to move public employees into the federal Social Security system (they currently don’t participate). That would require a change to the Illinois Constitution’s pension protections, which no union would support without assurances the promised money would be there for their members. It sure isn’t there now.

Even if the funds were available for the deal Griffin had in mind, union leaders are no less cowardly about telling their members the truth than Pritzker and his accomplices in Springfield. For evidence, look no further than the modest reform that Pritzker championed in 2019, when the General Assembly passed a bill to consolidate more than 600 police and firefighter pension funds into two statewide funds.

We welcomed the law, despite its relatively small impact, because it was obvious that consolidation would save money and increase efficiency. The vested interests behind those police and firefighter pensions treated the law as an existential threat and, predictably, challenged it by invoking the Illinois Constitution.

In late May, a Kane County judge ruled decisively in favor of the state. Finally, three years after the law was passed, some of the hometown pension funds reportedly are taking steps to turn over assets to the two state funds, which will be better positioned to professionally manage the portfolio. Even with that, appeals can continue to tie up the consolidation measure, and no doubt some fund administrators will hold on to their little fiefdoms as long as they can.

One of the most depressing aspects of this situation is how Illinois’ position keeps getting worse compared to most other states. If its pension funds were more fully funded, with more money to invest, that money would have grown: The years-long stretch of solid investment returns would have significantly reduced the state’s mammoth unfunded liabilities.

Instead, a recent report from the Reason Foundation predicts the Illinois’ pension hole will grow from $121 billion in 2021 to $143 billion this year — and that dollar amount is less than other credible estimates of what is really owed.

“The well-funded plans were able to rebound much faster,” Reason Foundation policy analyst Ryan Frost told The Center Square, “They flattened out their funding throughout the 2010′s, whereas some of the more poor(ly) funded plans like Illinois, they never flattened out and their debt just kept rising, even during the period of the best market performance in our country’s history,”

This should be red-alert time in Springfield. Illinois’ taxpayers — and the state’s public employees — need solutions.

Arlington Heights Daily Herald. August 23, 2022.

Editorial: Naperville sets example others should follow with weapons ban

Warned by angry commenters last week that City Council members’ votes regarding an ordinance banning the sale of certain high-powered rifles in Naperville would be “remembered” come election time, Councilman Paul Leong had a succinct and appropriate response.

“I want to assure everyone here,” he said, “that we are very aware of that. We’re accountable, always.”

Then, all nine council members put their consciences on the line and voted. Eight favored the ban. One opposed.

We side with the eight. We respect all nine. We have no doubt that the early morning vote of Wednesday, Aug. 17, will not fade gently into the ether before the spring municipal elections. The truth is, as Leong indicated, that regardless of how the council voted, each member’s decision would stir an angry response from passionate voters who feel differently.

Such is the lot of the generous citizens who step up to serve in little heralded and even littler-rewarded elected local offices. We have a lot of experience with such officials and have generally found them to be sincere and dedicated community servants. It can be amusing to think that voters might “punish” one by failing to re-elect him or her because of a single vote. It is more likely they are doing the person a favor.

So, we are slow to call the Naperville council’s vote on the controversial ban “courageous” on its face. The members are courageous merely for taking on the job.

More important is the consideration that their vote was right.

Yes, holdout Paul Hinterlong had a point in fearing their action would generate a long period of expensive litigation with no assurance of victory. But, we’re more swayed by Councilman Patrick Kelly’s hope that, void of help from the state or federal governments, Naperville “can set an example for other municipalities and for our state and potentially the federal government.”

We desperately need such examples, and we fervently hope other governments are watching.

Gun advocates like to argue that weapons alone are not to blame for the outrageous carnage we are seeing across the country and, as in neighboring Highland Park and DeKalb, our own communities. And they are right. In an editorial just last week, we reflected on the many additional factors policy makers must address in this crisis.

Gun advocates also like to flaunt their superior knowledge of the high-powered weaponry at issue in such cases and suggest that lack of such experience makes others unqualified to express their outrage. On that point, they are only half right. We may not all have their depth of knowledge, but we have all seen the men, women and children made sitting ducks to horror in classrooms, theaters, nightclubs and holiday parades. We have a right and an obligation to demand action.

Finally, gun advocates also like to describe such actions as Naperville’s as mere “political theater.” On that point, they could not be more wrong. Naperville’s action may not prevent a horrific tragedy. A similar ban in place in Highland Park obviously could not protect that community. But it does send a message that needs to be heard and that needs to spread across the state and the country.

None of us should have to live under the constant threat that someone insisting on an unfettered right to own a weapon of human destruction will easily turn a pleasant group outing into a scene of bloodshed and terror.

No, the Naperville council’s action was not futile or a mere show. It was recognition that a solution to this crisis must start somewhere, and an expression of willingness to be such a place. That may not in and of itself define courage, but certainly it is welcome, and it deserves to be commended.

Champaign News-Gazette. August 27, 2022.

Editorial: State revenues, bolstered by federal money, are pouring in

While not doing as well as its neighbors, Illinois’ economy is relatively strong.

Illinois’ long-range financial picture remains as ugly as it is clear — debts and deficits as far as the eye can see.

Nonetheless, Illinois’ revenue picture remains strong — at least for the time being. That’s thanks to the massive infusions of federal money stemming from the coronavirus pandemic.

The July report from the Illinois Commission on Government Forecasting and Accountability referenced “the spectacular year of revenues” for the 2022 Fiscal Year (July 1, 2021, to June 30, 2022). At the same time, it stated the 2023 Fiscal Year (July 1, 2022, to June 30, 2023) is off to a great start, again on the strength of federal money.

The COGFA report said the new fiscal year started “on a positive note, as July general funds revenues were up $395 million for the month.”

“The reimbursement of $584 million in federal COVID-19 relief funds was the driver of this overall increase,” the report states.

“The inclusion of the one-time revenues in FY 2023 will provide an influx of revenues that were not assumed in the adopted FY 2023 budget — perhaps serving as a safety net as the state navigates through the next 11 months of this fiscal year.”

The future — there’s the rub. What does the rest of the year have in store for the people of Illinois and the nation? If the country has slipped into a recession — two consecutive quarters of negative growth — it’s a strange one, as unemployment is quite low and there are plenty of jobs available.

At the same time, price inflation is a real threat to the pocketbooks of low- and middle-income earners because it wipes out gains in earnings. In effect, price inflation leaves people running in place or falling behind in the race to maintain hearth and home.

One example is $5-a-gallon gasoline. That devastated people’s budgets, forcing them to choose which bills to pay. The subsequent decline in demand — ordinary people just couldn’t afford it — has dropped the price to between $3.50 and $4 a gallon — but that still represents an affordability issue.

That, however, is a problem for individuals. It’s a different story for state government, which relies on revenue to maintain services.

COGFA reports that the “big three” of revenue sources — state income taxes, corporate income taxes and sales taxes — “started off the year with solid gains.”

Given Illinois’ overall financial picture, the revenue report provides about as good a news as it can get for the immediate future. The tide can turn in a hurry, but for now, Illinois’ financial seas are relatively calm.