Gov. JB Pritzker has the unenviable task of fixing an Illinois financial mess that has been decades in the making.
The state’s fiscal situation is so bad that in 2017 a study from the Institute of Government and Public Affairs at the University of Illinois said it would take a decade to get Illinois back on track.
We can’t say that the governor has put the state on the fast track, but there are encouraging signs in the budget proposal he announced Feb. 18.
Most people focus on the governor’s reliance on voters’ approval of a graduated income tax in November, but the governor seemed most excited during a visit with the Editorial Board about the efficiencies — and cost savings — his administration has been able to find and continues to search for.
It’s not a lot — $225 million so far — but it shows a willingness to look at the state’s operations with an eye toward rooting out waste, not just asking for more money.
Pension obligations eat up about 20% of the overall operating budget, but the good news is that retirees are getting paid and state pension payments are expected to start declining in 2023. Remember the 2011 study that said the state’s pension system would run out of money in 2018? Didn’t happen.
One reason is that the doomsday scenario was exaggerated, but a more important factor was the 2011 reform that created a two-tier pension system with new employees getting less generous benefits.
In 2023, Tier 2 employees will outnumber the Tier 1 workers, and the state’s pension obligations will begin to go down.
Yes, there’s still a large problem to deal with today and the governor has taken steps toward fixing the unfunded pension liability.
The most important step involves not just making the required pension payment — something that didn’t always occur under previous administrations — but pledging to contribute an additional $100 million if the graduated income tax is approved.
Legislation was passed in November to consolidate 650 local police and fire funds into two statewide programs. The move reduces costs on local governments and could generate as much as $2.5 billion over the first five years because of greater investment power.
Pritzker expanded a buyout program that started under his predecessor, Bruce Rauner. Only state employees were eligible this time around. Pritzker said about 20% of the employees who were offered the buyout took advantage, a $32 million savings for taxpayers. If employees in all five of the state’s systems become eligible, the savings could be substantial.
The state owns and maintains tens of billions of dollars in buildings and property. The value of those properties could be transferred into the pension system, decreasing the obligation.
Pritzker also talked about putting $50 million into the state’s rainy day fund, which has been depleted to nearly nothing. That won’t go far, but it’s better than zero.
There’s bipartisan criticism of the education spending component in the governor’s budget. The governor proposes adding “only” $200 million to education if the graduated income tax does not pass. Republicans and some Democrats think $350 million should be added for schools no matter what. Failure to meet the $350 million minimum funding increase required by the new education funding formula approved in 2017 would trigger a new distribution formula that prioritizes money for the highest-need schools.
We agree with the governor’s response to the critics: Show us where the money — $150 million — should come from. Cannabis revenues — projected to be $46 million — won’t get us there. Besides, $10 million of the new cannabis revenue is designated to help pay down the state’s bill backlog, which was $6.7 billion on Friday.
Pritzker’s high hopes for the graduated income tax to create a financially healthy state — it’s expected to generate $3.6 billion — give us pause. The tax isn’t a sure thing, even though the governor says most Illinoisans would pay less. (Check it out for yourself using the fair tax calculator at https://ift.tt/2TbmbGv)
That said, we’re optimistic about Pritzker and his budget. We lived through the Blagojavich boondoggle, the Quinn quagmire and the Rauner rut that saw the state’s credit rating dip to near junk bond status. It’s refreshing to see the governor’s office occupied by a man with a plan.
Region: Northern,Feeds,Region: Rockford,Opinion,City: Rockford
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February 29, 2020 at 01:25PM