Pritzker, Bailey skirt pension specifics ahead of election

[October 18, 2022]  By Brett Rowland | The Center Square

(The Center Square) – Illinois Gov. J.B. Pritzker and Republican challenger Darren Bailey have largely avoided specifics regarding plans to address the state's growing pension burden ahead of the Nov. 8 election.

Libertarian candidate Scott Schluter, the only other gubernatorial candidate on the ballot, has offered a more detailed plan on how he would address the issues surrounding the state's five underfunded pension systems. Schluter, a diesel technician from Southern Illinois, trails his opponents in both campaign fundraising and polling.

None of the candidates would push for changes to the state constitution to reduce promised pension benefits. All three have ruled out such a move and have vowed to make good on the state's pension promises despite decades of underfunding by state lawmakers, even as the cost of pensions continues to eat up more of the state's general fund budget.

The state's most recent budget report notes that annual pension contributions account for about 25% of the state's general fund spending. The fiscal year 2023 budget funds the certified pension contribution of $9.63 billion from the general fund, according to the report.

Addressing the state's pension costs had been a topic of frequent discussion in Springfield for years after the Illinois Supreme Court ruled a 2013 law designed to stabilize state pension costs was unconstitutional. The justices ruled that it violated the state constitution's pension protection clause. However, with an influx of billions of dollars in federal money amid the COVID-19 pandemic, pressure to deal with the growing pension costs and unfunded liabilities has faded, said Bill Bergman, a lecturer for the Quinlan School of Business at Loyola University Chicago who has four decades of financial market experience in both the public and private sector.

"It was on the tips of tongues for a while until the COVID pandemic arrived and the massive infusion of federal funds," Bergman said. "And I think we're going to have those discussions again in coming years."
 

Both Pritzker and Bailey, a state senator from Xenia, provided few details about how they plan to tackle the problem during the first gubernatorial debate this month. Schluter did not participate in the debate.

"If I would have been governor for the last four years, we wouldn't be having this conversation," Bailey said at the debate. "And every state employee, whether they're earning their pension or whether they're living off it, would feel comfortable and they wouldn't have to worry about that each and every day."

Bailey said state workers are concerned about the future of their promised payments under state-run pension systems that "political elites and union bosses have hacked the system for far too long."

Bailey mentioned switching new hires to 401(k)-style defined contribution plans rather than defined benefit plans. He also said he would not "infringe" on pensioners' benefits.

Bailey said the state budget contained $10 billion to $15 billion in waste that he would use to put the state on a path to firmer financial ground. The state's Democrat-controlled Legislature passed a $46 billion general fund budget for fiscal year 2023.

Pritzker used his time during the debate to reiterate his stance that state pensions are a promise that he plans to fulfill.

"I'm pleased to say that we've made real progress on our statewide pensions," Pritzker said.

Pritzker said he reduced the state's net pension liability during his term as governor through good investments and by putting more money in the state's pension systems. The governor also said he expanded the state's pension buyout program, which has helped save money for taxpayers.

The pension buyout program has saved the state money, but not near enough to dig taxpayers out of pension debt, Bergman said.

The state reported a net pension liability of $151.871 billion as of June 30, 2021, that's up from a net pension liability of $133.570 billion as of June 30, 2018, according to the state's annual financial documents. Other state documents show net pension liabilities have declined.

"It looks like the liability for the state based on its share of the plans rose, even as the total for the plans declined," Bergman said.

Bergman said televised debates aren't optimal for discussing issues like the state's unfunded pension liabilities.

"This is a deep, complex issue and the sound bites we get are sometimes hard to square with reality, in part because it's hard to put reality in so many short words," he said.

Bergman also said it's difficult for any candidate to have a comprehensive plan to put the state's pensions on a sustainable path.

"Well, it's hard to have a solid plan given the magnitude of the shortfall and as a result, I don't think we have a solid plan that's out there," he said.

Pritzker's campaign website says that the governor has "reduced state pension liabilities by fully funding pension contributions, going above and beyond with payments." His campaign did not respond to questions about what he would do during a possible second term as governor to address the state's underfunded pension systems.

Actuaries have said that the state's statutory funding method is inadequate to address the state's pension liabilities, according to letters included in pension reports.

Bailey's campaign website doesn't include the state's pension system in its issues section, and his campaign did not respond to a request for details about his plans to address the cost of promised pensions or the state's pension liabilities.

Schluter outlined his plan for the state's pensions on his campaign website. If elected, Schluter said he would work to close the General Assembly Retirement System of Illinois, which is the retirement system for state lawmakers. At 21.3%, GARS has the lowest funded ratio of the state's five pension systems. He said that if state lawmakers insist on taxpayer-funded retirement benefits, he will push for 401(K)-style plans for members of the General Assembly. Schluter further said that he would move state pensions to the private economy by working with lawmakers "to build a plan that will honor current contracts while phasing out the public pension system." His plan for that would be to offer only 401(k) or similar private plans to new hires, give existing employees the option to leave the pension systems and save for retirement through a self-managed plan, offer optional 401(k) to existing employees and optional buyout at 60% and "ensuring that former employees would continue to receive the original pension benefits with an option for a buyout at 60%."

Schluter did not respond to a request for comment.

Bailey and Pritzker are set to debate again on Oct. 18.

Brett Rowland is an award-winning journalist who has worked as an editor and reporter in newsrooms in Illinois and Wisconsin. He is an investigative reporter for The Center Square.