Illinois cannot assume the unfunded pension liabilities of Chicago and other municipalities across the state because its credit rating would be reduced to junk status if it did, Gov. J.B. Pritzker said Monday.
But the state is still looking for ways to help offset municipalities’ soaring pension debt and he left open the possibility of a consolidation in which the local governments could pool their money for better investment returns.
Mayor Lori Lightfoot reportedly wants the state to consolidate Chicago’s pension funds with more than 650 suburban and downstate police and firefighter pension funds, according to a recent Crain’s Chicago Business story.
The state, city and local pension funds across Illinois all are facing billions of dollars in funding shortfalls, squeezing budgets at all levels of government. The five state pension funds together have $134 billion in unfunded liabilities.
“To be clear, the state is at just above junk status in its credit rating, so there are not liabilities that can be adopted by the state that would not drive us into junk status,” Pritzker said at a news conference at CTA headquarters on the Near West Side to tout his $45 billion infrastructure improvement plan. “So that is not something that we can do.”
Pritzker, however, said allowing smaller police and firefighter pension funds to pool their money to make investments could provide better returns and ease the burden on taxpayers.
“If they would consolidate simply the investment dollars they had, let alone other functions or liabilities, just the investment dollars, the improvement there would have a substantial impact on those pension funds,” the governor said.
Pritzker created a task force on pension consolidation in February, and said he didn’t “want to jump the gun” on any forthcoming recommendations by going into specifics.
He did not close the door on Chicago being included in potential consolidation, saying, “There’s no part of the conversation that’s being left out.”
Pritzker spokeswoman Jordan Abudayyeh said the task force will release its proposal “this summer.”
After lawmakers approved a balanced $40 billion state budget in early June, Moody’s Investors Service affirmed the state’s credit rating at one notch above junk, noting that “substantial assumption of debt or pension liabilities incurred by local governments” could lead to a downgrade.
The governor and Lightfoot met privately over the weekend, but the mayor said they did not discuss her pension proposal that was first reported by Crain’s Chicago Business.
By 2023, Chicago will need to come up with nearly $1 billion in additional annual pension payments. Speaking to reporters following the joint appearance with Pritzker, Lightfoot elaborated on recent comments she made about being willing to sacrifice her political future by dealing with the city’s pension problem.
Lightfoot said the pension situation facing Chicago is a major structural problem that hurts the city next year and beyond.
“If we don’t get some substantial relief, we’re going to continue to keep having the same conversation over and over again,” Lightfoot said. “We’ve got to get this problem solved and I’m committed to doing everything I can personally and certainly to invest my political capital to get this done.
“I came into this job to solve problems, not continue to kick the can down the road.”
Lightfoot didn’t offer specific proposals to fix the city’s pension woes or plug its looming budget shortfall, but acknowledged looking at the possibility of expanding a service tax to include large law firms such as Mayer Brown, where she once worked as an equity partner.
“We’re not looking at expanding (the) service tax on ma and pop companies, but (expanding the tax on large professional services firms) is an option we are looking at, and when we have a package of options finalized, we’ll present them to the governor and senior leadership in the General Assembly,” Lightfoot said.
After her appearance with Pritzker, Lightfoot touched on a number of other topics, including criticism from aldermen over an executive order her team unveiled last week to further centralize City Hall control over cherished ward-level services such as trash bin distribution, tree trimming and the placement of Divvy bike stations.
“The same people who have been complaining from day one,” the mayor said in response to aldermen upset over her moves to curtail their power. “It’s one or two people that have the courage to go on the record and say something dumb.”
Aldermen who questioned Lightfoot’s order included Ald. Raymond Lopez, 15th, Nick Sposato, 38th, and George Cardenas, 12th. Lopez is a frequent Lightfoot critic while Sposato and Cardenas chair committees under her leadership plan.
Lightfoot said aldermen “are still going to be able to do their job” under her proposed reforms.
“What they will not have and they do not have since May 20 is a unilateral veto right over everything that happens in their ward. That’s antidemocratic, it clearly leads to corruption, and it’s the kind of thing that every person who has to go through the gantlet of that system finds oppressive whether it’s a small business person or it’s a person on a block that wants to get something done,” Lightfoot said.
“So this notion that somehow I’m stripping them of their reason for being and all of their ability to get things done for their constituents is a complete misnomer.”
Lopez did not back down, writing on Twitter: “You know what’s ‘dumb’: twiddling around with garbage cans & Divvy stations and calling that fighting corruption while the shootings go unchecked on the South & West sides. Stop flooding the zones with CPD biz officers that already exist and do something new & productive.”
Lightfoot also commented on the Chicago Teachers Union contract negotiations, saying that “progress is being made.” The CTU’s contract expired Sunday and the union has been critical of the city’s position, going on the attack once again later Monday with a news release headlined “CTU blasts Lightfoot, CPS for pushing Rahm (Emanuel) agenda, stonewalling at bargaining.”
“What you hear outside doesn’t (match) the reality of what’s actually going on at the bargaining table. I can imagine why they’re putting this message out, but it is far from accurate,” Lightfoot said.
“We are bargaining in good faith, we’ve got a great team in place, we’re meeting with them on a regular basis. I think it’s really important for people to recognize that the contract regarding CTU, there’s no reason why we can’t get that done in a timely fashion. I’m committed to making sure that we do that, that’s why our negotiators are meeting with them on a regular basis.”
In the union’s release CTU Vice President Stacy Davis Gates was quoted saying: “The bottom line is that today is the first day we stand here without a contract, still stuck in neutral. Under Rahm, our members were forced to absorb lost wages and worsening working conditions that hurt our students — yet we’ve seen no real remedies from the new mayor.”
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