SPRINGFIELD – Gov. J.B. Pritzker’s administration is putting together what it calls a comprehensive plan to restore the state’s pension system to financial health that might include issuing up to $2 billion in new debt and selling off state-owned real estate.
Deputy Gov. Dan Hynes discussed those ideas Thursday, Feb. 14, in a speech to the City Club of Chicago, an organization made up of prominent business, civic and government leaders in the Chicago area.
“Let’s start with this critical point: These are pensions that workers earned – workers who served as teachers, as janitorial staff, as laborers, as nurses,” Hynes said, according to a text of the speech released by the governor’s office. “These are pensions that were promised to them — and these workers have planned around and relied upon them for their retirement.”
In addition to issuing bonds and selling assets, Hynes said the administration hopes to earmark a portion of the governor’s proposed new graduated income tax to fund increased payments into the pension funds, extending an optional pension buyout program that lawmakers authorized last year, and extending the period for paying down the state’s unfunded pension liabilities by an additional seven years.
“Collectively, these five actions will expand our tax revenue base, invest in priorities that will grow our economy, and we’ll be able to put our pensions on a sustainable path that keeps our promises to retirees,” Hynes said.
The state’s pension systems have a combined $134 billion in unfunded liabilities. That’s the difference between the value of all the pension obligations the state has incurred, and the current value of the pension funds plus the funds’ expected earnings over the anticipated length of those obligations.
Hynes said the goal of the plan would be not only to pay down the unfunded liability within a reasonable period of time, but also to do so in a way that does not starve other state programs like education and social services for scarce financial resources.
Under the current plan, payments into the pension funds are expected to consume 25 percent of all state general fund spending by 2025.
The idea of issuing what are known as “pension obligation bonds” is that it would provide an immediate infusion of cash into the funds, and the earnings from the funds’ investments would be greater than the interest paid on the bonds.
But he said the administration would consider taking that step, “only if the calculation makes sense for taxpayers — and if the interest rates are lower for the bond than what we are currently paying for the pension debt.”
Hynes was less specific about the possibility of selling off state assets, a move he said could be worth “tens of billions of dollars.”
Pritzker announced Monday that he was forming a task force to study the possibility of transferring state assets to the pension system, but Hynes’ speech Thursday offered a more detailed glimpse into what the administration is, and isn’t, considering.
When asked by an audience member what kinds of assets they were considering to sell, Hynes jokingly said, “Don’t say tollway; don’t say tollway; don’t say tollway.”
“I joke about the tollway, but like that’s what everyone’s going to think,” Hynes said, according to a video of the event that was posted online. “And you have the Lottery. Any kind of cash-generating asset is a logical place to think of. But it’s not that simple. Those are actually complex because there are bonds attached to it. There are stakeholders.”
More likely, he said, the administration would look at some of its office buildings and other real estate.
“The state of Illinois in 2000 had 80,000 employees. Today, we have 60,000 employees,” Hynes said. “So not only does that contribute to the whole unfunded problem because we have fewer people paying into the pension system, but from a capacity and utilization of our properties standpoint, it begs the question: What are we doing with this excess space? Has it been looked at? Have we consolidated office space? Have we sold buildings of the state that we don’t need? And that’s what we’re going to be looking at.”
Pritzker is scheduled to deliver his first budget address to the General Assembly on Wednesday, Feb. 20.
