Ken Griffin, founder and CEO of Citadel, spoke in his Chicago office to Editorial Page Editor Chris Jones on Aug. 2. This transcript has been edited for length.
Gov. J.B. Pritzker has said you and he met privately and that you agreed to drop your opposition to his graduated tax proposal if he took on pension reform in Illinois. True?
The Illinois pension crisis is rooted in the issue that politicians of the moment are able to make promises to the public sector workers where the cost of those promises are borne by taxpayers, far into the future. So we have an intrinsic lack of accountability within the state when it comes to that dynamic between the leaders in Springfield and the public sector unions. (Former Gov.) Bruce Rauner and I actually would speak about this problem from time to time because it’s pretty well known that Bruce felt that the state should move to a defined contribution program for the state employees.
And there are elements of that I think are attractive, but because the state employees do not participate in Social Security, a strictly defined contribution proposal leaves the state employee, in my opinion, at undue risk of adverse events, if they do not invest their money successfully. … And there’s another issue, which is that the costs of the promises made by cities and counties are not borne by the cities and counties directly, they’re socialized across the entire taxpayer base of the state. So it’s pretty easy for the behavior of a number of Illinois cities to offer incredible increases in pay in final years to boost pension benefits. And that cost comes back to all Illinois taxpayers.
So these are some of the areas in which the average man in the street is really being handed a very significant bill. And the most tragic part of this whole story is that when the state hires people early in their careers, they’re not even placing that much value on these pension plans. Twenty-two-year-olds don’t make lifetime career decisions on pension benefits. So, from my perspective, as a state, we’re much better off having higher starting salaries to attract really good people to serve in the public sector. And, as with Bruce, my advice to the governor was consistently that either the state should mirror the benefits of Social Security as a baseline, or even better, go back to the federal government and get into Social Security again. We should reverse our opt-out from decades ago. And then to the extent that a city wants to offer benefits in excess of the Social Security baseline amount, that’s pay-as-you-go through a 401(k)-equivalent program. …
The proposal that I gave to J.B. to solve the state’s pension problems is exactly what I just shared with you. … It would, in all likelihood, require us to amend the constitution for the state to head in this direction. It might be for new employees only. I’m very sensitive to a promise made and earned. That’s your benefit. That’s a very different talking point than you’re 22 years old and it’s your first day working for the state.
But, big picture, we get the state into a program that looks like what I just described. And it’s gonna accelerate, in all likelihood, the costs of the current system. It may require revenue increases. And like many of the business leaders in this city, I was very direct. I said, “If you’re willing to engage in pension reform, I’m willing to publicly support you in a tax increase.” It wasn’t graduated versus not graduated. It was just a tax increase.
I would’ve assumed that this meeting would’ve been private for the rest of my life until J.B. decided to open the door and talk about this. What he did talk about in terms of fiscal reform for the state was to restructure the state’s (information technology) budget. And he felt that he could achieve $50 million in budget savings for the state of Illinois by taking an ax toward our IT budget for the state. And that was going to be his victory lap for fiscal discipline in the state of Illinois. Here we have a multibillion-dollar problem on the left and 50 million (dollars) on the right. I was like, “J.B., we’re not having the same conversation here.”
To be clear, that was a fracturing moment between the two of us. … He does not want to use his political capital for good. He wants to maintain that capital to maintain the certainty of staying in power. Which I find perplexing in a state with a two-term limit. (Editor’s note: Illinois does not have term limits for governor. Through a spokesperson, Griffin acknowledged he misspoke.)
There are other races.
The national race is the prize he’s playing for. And unfortunately, he’s going to sacrifice us for his ambition. And the problem continues to grow by the day — the day of reckoning clearly pushed off by the amount of federal money infused into the state during the pandemic. And the question’s gonna be is how much of an outlier Illinois will be compared to other states with respect to the possibility of a federal bailout.
And what’s your assessment there?
We’re an outlier. And I think that puts us in a precarious position. … The good days are not necessarily going to continue. If we have to roll our federal debt at interest rates that correspond to inflation rates, which historically has been the case, you can see how the entire country can head toward a very difficult fiscal position very quickly. And in that state of the world, the likelihood of a federal bailout falls dramatically, and then you end up with, how is the suffering allocated between the taxpayers and the pensioners and the state? So you might have to look to Detroit, for example, as to what that might look like down the road. These are not places you want to be.
Pensions have receded from attention.
At some point, this will turn back into an A1 story. Somebody’s gonna have to take this issue on.
You were disappointed in the meeting?
It wasn’t like I thought there were going be results right there. I expected it would be something that we would talk about over the months to come. I would’ve expected him to say, “I appreciate you seeing me today. And it gives me some things to think about, and we’ll be in touch.” Because that’s how the whole idea-generation process starts. With the seed. And you want to think about that idea. You want to talk about with others, you wanna see where it goes. …
Operation Warp Speed came from a conversation between myself and members of the (Trump) administration. And we only saved a few hundred thousand lives with that phone call. Scientists and Moderna are heroes, but the entire U.S. pharma complex came together to win that war. But it started with an idea.
In running my business, I’m exposed to a whole litany of ideas. We should be engaging with our leaders in government sharing the best ideas that we’ve been exposed to. This is one thing that I do think President (Donald) Trump did really well. He had an extensive Rolodex of people he spoke to, especially in business. Good leaders are always keeping their ears open for good ideas.
You’ve moved to Miami.
Woke up in Miami this morning. Will fall asleep in Miami tonight. And I have a variety of my friends from Chicago there. I will say, though, coming back to Chicago today, it’s really great to hear how Lollapalooza was a big success in the city last week. It’s wonderful to see some people on the streets. I hope that momentum stays.
It’s possible we could see Pritzker running against Ron DeSantis for the presidency. How involved will you get?
If I’m Ron DeSantis, I’m hoping I’m running against J.B. (California Gov. Gavin) Newsom would be a much more intimidating candidate to face off against him. Ron is gonna be able to run on the issue of crime and education. And, to be clear, the American public has had enough of the progressive prosecutors. DeSantis will sweep the White House.
How big of a supporter do you plan to be?
If Ron decides to run for president (I’m pretty confident), I’m gonna be a big supporter of his.
Let me give you the quote. When you live in Florida, the optimism about the future of the city, the state and the country is palpable. It is so refreshing to experience that. I have no words for it. The other great thing is, you never sit down and talk about crime.
It’s just so refreshing to be out with friends, talking about the business you’re creating, talking about where your kids are hoping to go to college, or the camps they’re in, or the classes they’re taking, or about sports teams. You’re engaged in the present. And then in the future. This is how I felt when Chicago was so positive when Rahm (Emanuel) was mayor. Or when (Richard M.) Daley was mayor of this city.
And are you planning further involvement in the Illinois gubernatorial race?
I care deeply about Chicago. I care deeply about my (Citadel) team members and their families. Many are staying here. There are several hundred people moving to Miami. There will be hundreds of people here in Illinois, and I want them to have a great life here, and they’ll continue to try to recruit talent here. And the stronger the city is, the stronger the state is, the more successful my colleagues will be. And that’s really important to me. Even in leaving, I made a series of continued philanthropic gifts to a number of institutions here in Chicago. That, I think, make this a better city.
By way of a parting gesture?
Let’s say, for now, it’s a parting gesture. But I have other partners here who serve on the boards of many of these institutions, and they’ll continue to be big supporters.
Your mental state surrounding your exit?
I would love to find out a Wikipedia page on the stages of grief. Because I think I’ve passed through all of them. I spent 30 years here. There are some things that I have passionately cared about: for example, public education. Enough that I had thousands of teachers protesting in front of my apartment building over the fact that I was trying to drive the teacher evaluation program. And then I see J.B. Pritzker trying to push for the unionization of principals. And I realize that all the work that we did to make Chicago schools better, he’s willing to sacrifice for his political ambition. I look at the fact that we’re gonna go to an elected school board. And I think about all the good work that Daley and Emanuel did by having the ability to appoint their school board and how that goes up in flames.
So, for me, it’s more about the shattering of so much effort that so many of friends and I have put into making Chicago better, being sacrificed to a political agenda that I think will ultimately fail our children and our city.
But I say this with some degree of hope in the future. I have very good friends in San Francisco, and they successfully recalled (District Attorney Chesa Boudin). The school board recall is another step in that direction. So if you look at San Francisco, which is a city that’s really borne the brunt of a very progressive agenda, you see the city now starting to coalesce around how do we get crime under control? How do we make sure that our children have an education?
And if it can happen in San Francisco, it can happen in Chicago.
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August 9, 2022 at 06:12PM