civic federation

Illinois Issues: The Next Pension Time Bomb

Jul 2, 2015

Illinois has more than $100 billion in pension debt. So far, attempts to fix it have been mostly illegal.

Pensions' big day before the Illinois Supreme Court has been set for next month, on March 11. 

I was honored to be on a panel recently (before Gov. Bruce Rauner's budget address, so no talk about his latest proposal), along with the Civic Federation's Laurence Msall, Sen. Daniel Biss D-Evanston and Sen. Matt Murphy R-Palatine, to discuss one of the state's most controversial, pressing and expensive issues.  

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Next week, Gov. Bruce Rauner will unveil his spending proposal. The non-partisan Civic Federation has some suggestions.

The Civic Federation’s Director, Laurence Msall, says Illinois’ budget isn’t just in bad shape; its condition is terrible ... and climbing out of it won’t be easy.

“These are not politically attractive answers. There are financial, reality-based suggestions on how the state can stabilize its finances,” he says.

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Illinois is about a quarter of the way into its fiscal year and building up debt along the way. A new report from the Civic Federation says it's a return to detrimental policies that landed Illinois in an unstable financial position in the first place.

There was one, glaring question for lawmakers last spring: what were they going to do about the temporary income tax?

Illinois is about a quarter of the way into its fiscal year and building up debt along the way.

A new report says it's a return to detrimental policies that landed Illinois in an unstable financial position in the first place.
                     
There was one, glaring question for lawmakers last spring: what were they going to do about the temporary income tax?

Illinois hiked rates in 2011, but only until midway through this fiscal year.  The 5% rate rolls back to 3.75%  in January.

Hannah Meisel/WUIS

  The debate over state retiree pensions has been a consistent backdrop for the Illinois gubernatorial election, bringing older voters to the forefront of many debates. It's this senior voting bloc that could make all the difference this election.

The Illinois Building on the State Fairgrounds in Springfield is buzzing with activity. But it's not prized cattle or blue-ribbon pies fair attendees are taking in. Along one wall, it's an array of motor scooters. Along another, it's rows of booths offering different kinds of home care.

Brian Mackey / WUIS

  Taxes have been in the spotlight at the state Capitol this spring, most visibly the fate of the state's income tax rates. But another tax plan, floated by Governor Pat Quinn, is also attracting ire of Republicans and economists alike.

Governor Quinn's plan for the Illinois budget calls for extending the state's 5-percent income tax rate, instead of allowing it roll back.

It's coupled with a $500 property tax rebate for every homeowner in Illinois.

  As more baby-boomers retire, Illinois is increasingly missing out on a revenue source. Of the 41 states with an income tax, Illinois is one of only three that exempt all pension income.

A new report from the Chicago-based Civic Federation says Illinois needs to take a longer-term approach to budgeting; one that is rooted less in politics, and more in reality. Most notably. the group recommends Illinois extend its current income tax rate for a year before gradually rolling it back.

Civic Federation

The Civic Federation is releasing a new proposal it says will balance Illinois' budget, eliminate its bill backlog and reduce taxes.  

The plan includes capping spending to help the state pay off its $5.4 billion backlog of unpaid bills over the next five years.  

It also would extend the state's temporary income tax increase by a year before reducing tax rates gradually, and calls for taxing pension and social security income.