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 A new report from Truth in Accounting challenges
Gov. J.B. Pritzker’s claims Illinois’ improved credit rating shows the state is
becoming more fiscally responsible. The report argues it could lead to more
borrowing.
Experts at the government watchdog group contend Illinois’ recent credit
upgrades, touted as signs of economic improvement by public leaders, are largely
unrelated to the state’s fiscal condition.
The accountants explain the credit improvements instead came from authorities
paying down existing debts with billions in pandemic relief dollars. Author
Sheila Weinburg notes despite the upgrades, Illinois still boasts the worst
credit rating among the 50 states.
“The state’s credit rating has little to do with the government’s overall
financial condition,” Weinberg told the Center Square. “It has to do with
whether or not the bonds they have borrowed will get paid off or not.”
Weinberg reported Moody’s upgrade was in part because authorities allocating $1
billion in federal relief to financial reserves, such as the rainy-day fund. At
one point during 2020, this emergency fund only held enough money to operate the
state government for 30 seconds.
But Weinberg argues the federal funds would have been better used to pay down
growing interest payments on Illinois’ nation-leading pension debt. Instead,
this short-term credit improvement has accelerate state borrowing.
“What is going on is they are borrowing money to pay off the pensioners,” she
said. “So they are borrowing from one lender to pay off another lender
ultimately.”
Weinberg said scoop-and-toss borrowing and other tactics, such as Gov. J.B.
Pritzker claiming to contribute an “extra” $300 million to the teachers’
retirement system while still paying $2.9 billion less than was necessary to
balance the fund, can mislead Illinoisans on the true state of the pension
crisis.
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Polling finds a supermajority of Democratic and Republican voters in Illinois
want pension reform. Putting a referendum on the ballot to vote on
constitutional pension reform would put that choice back in the hands of
Illinoisans.
A “hold harmless” constitutional amendment developed by the Illinois Policy
Institute would save taxpayers money and protect the retirement of government
workers. It would save taxpayers nearly $2.4 billion in its first year and
nearly $50 billion through 2045. It protects workers’ benefits by treating
benefits earned for work already performed as an inviolable contract.
With the reform, future adjustments can be made to ensure pensions are
sustainable and affordable in the long run. This plan would replace the 3%
compounding post-retirement increase and instead attach it to the rate of
inflation. Members of state pension systems typically receive more than $2
million in retirement benefits and cover just 5% of the cost through employee
contributions.
But for pension reform to be a possibility, voters must first decide whether to
increase the government union powers that have stopped past reforms to the state
retirement systems. Amendment 1 on the Nov. 8 ballot would enshrine government
union powers in the state constitution, complicate efforts to fix Illinois’
pension crisis and guarantee a $2,149 property tax increase during the next four
years as taxpayers are forced to fund those new contract demands.
Pension reforms are possible, but Amendment 1 would make them remote
possibilities.
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