FROM THE ILLINOIS STATE
CAPITAL, THIS IS YOUR CAPITOL
CONNECTION.
IF YOU PAY ATTENTION TO
POLITICS VERY LONG OR CLOSELY,
YOU'RE PROBABLY FAMILIAR WITH
THE ILLINOIS POLICY INSTITUTE.
RIGHT NOW SUING THE STATE OF
ILLINOIS TRYING TO CANCEL OUT-14
PLUS BILLION DOLLARS IN DEBT.
SOMETHING THAT WILL HAVE
TREMENDOUS IMPACT ON THE BUDGET
PROCESS, PERHAPS IT'S STATE
CREDIT RATING.
A NEW POLITICAL ACTION
COMMITTEE, WHICH PAC, WE DON'T
KNOW WHO THE ORIGINAL DONORS ARE
AND GIVES FROM THAT POOL OF PAC
MONEY.
IT SAYS IT'S FIGHTING FOR
TAXPAYERS.
ALONG THE WAY IT'S ALSO TRYING
TO KILL GOVERNOR PRITZKER'S
INCOME TAX THAT WOULD RAISE
TAXES ON 3% OF THE RICHEST
PEOPLE IN THE STATE.
ILLINOIS POLICY INSTITUTE
EARLIER IN THE WEEK AND I SAT
DOWN WITH RESEARCHER TO
UNDERSTAND HOW THEY MAKE THEIR
ARGUMENT, WHY, AND WHAT THEY'RE
AFTER.
PENSION DEBT IS THE MOST
SEVERE PUBLIC POLICY CRISIS
FACING ILLINOIS.
I BELIEVE OUR PENSION CRISIS IS
THE WORST IN THE NATION.
AND YOU MEASURE THAT BY ABILITY
TO REPAY THE DEBT.
SO WHEN YOU COMPARE DEBT
NOMINALLY, THERE ARE MORE STATES
THAT HAVE MORE DEBT NOMINALLY
THAN WE DO.
BUT THE GDP IS THE WORST IN THE
NATION.
THAT'S A PROBLEM FOR TAXPAYERS
BECAUSE IT'S THE DRIVING FORCE
BEHIND PROPERTY TAX AND INCOME
TAX HIKES.
IT'S A PROBLEM FOR ILLINOIS
RESIDENTS WHO RELY ON ILLINOIS
SERVICES.
THE PENSION DEBT IS GROWING.
WHY IS THAT?
THE LIABILITY IS GROWING
BECAUSE THE PAYMENTS, THE
LEGALLY REQUIRED PAYMENTS ARE
NOT ACTUALARILY SUFFICIENT.
WE ALREADY SPEND THE MOST IN THE
NATION.
ABOUT DOUBLE THE NATIONAL
AVERAGE ON PENSIONS AS A
PERCENTAGE OF STATE AND LOCAL
REVENUE.
BOTH STATE AND LOCAL.
YOU CAN GET THE DATA.
WE'RE PAYING THE MOST AND WE
HAVE THE BIGGEST DEBT PROBLEM.
AS A PERCENTAGE OF OUR REVENUE.
YOU LOOK AT ALL REVENUES
COLLECTED BY ILLINOIS STATE AND
LOCAL GOVERNMENTS AND ALL
PENSIONS MADE BY STATE AND LOCAL
GOVERNMENTS.
BIGGEST PORTION OF THE PIE.
EXACTLY.
WE'RE ALREADY A VERY HIGH TAX
STATE.
WE JUST HAD AN INDEX TAX HIKE IN
2017.
WE'RE ALREADY A VERY HIGH TAX
STATE AND WE'RE SPENDING THE
MOST ON PENSIONS, TO ME, THAT
DOESN'T INDICATE THERE'S MORE
SLACK TO PUT THAT IN.
THERE'S NOT A TON OF ROOM TO
CUT IN OTHER PLACES.
I WOULD SAY THAT'S LARGELY
THE CASE.
THERE ARE A LOT OF PROGRAMS THAT
ARE BEING CUT IN ORDER TO MAKE
THESE PENSION PAYMENTS.
THE RESEARCH I DID FROM 2000 TO
TODAY.
SPENDING ON PENSIONS AFTER
ADJUSTING FOR INFLATION, IS
OVER.
GOVERNMENT HEALTH INSURANCE AND
EDUCATION IS ACTUALLY DOWN IN
REAL TERMS BY 2%.
SO NEARLY A THIRD.
WE'RE SEEING PROGRAMS LIKE THE
DCFS BUDGET TO PROTECT AT RISK
CHILDREN.
THE STATE POLICE BUDGET.
ALL THESE SORT OF CORE
GOVERNMENT SERVICES ARE BEING
CROWDED OUT BY THIS EVER RISING
COST FOR THE PENSION BURDEN.
THE SKY IS FALLING.
PENSIONS ARE TOO BIG.
WHAT'S THE FIX?
I THINK THE ONLY BALANCED FIX
AND THE WAY THAT WE CAN BEST
MANAGE THE INTEREST OF ALL THE
STAKEHOLDERS IN THIS ISSUE IS A
CONSTITUTIONAL AMENDMENT THAT
ALLOWS US TO CHANGE THE FUTURE
GROWTH RATE OF PENSION BENEFITS.
BUT STILL PROTECTS EVERY DOLLAR
EARNED BY RETIREES TO DATE.
FUTURE GOVERNMENT WORKERS.
SO SOME PEOPLE HAVE SAID THE
IMPORTANT DISTINCTIONS BETWEEN
EXISTING WORKERS AND FUTURE
WORKERS.
THE DEBT BURDEN IS ALL WITH
EXISTING WORKERS AND RETIREES.
WHEN WE TALK ABOUT THAT
$134 BILLION IN DEBT, THAT'S ALL
CURRENT WORKERS AND RETIREES.
SO THE DISTINCTION FOR ME ISN'T
BETWEEN EXISTING HIRES AND NEW
HIRES.
IT'S THE MONEY THEY'VE ALREADY
EARNED, ACCRUED BENEFITS, AND
THE FUTURE GROWTH RATE.
IF YOU'RE A CURRENT RETIREE AND
YOU'RE RECEIVING $3,500 A MONTH
IN YOUR MONTHLY CHECK, THEN THAT
AMOUNT CAN NEVER GO DOWN.
BUT THINGS LIKE THE COST OF
LIVING ADJUSTMENT WOULD BE OPEN
TO CHANGE BY THE LEGISLATURE,
POTENTIALLY BY LOCAL OFFICIALS
TO MAKE SURE WE'RE BRINGING THEM
IN LINE WITH CURRENT ECONOMIC
REALITY.
WHAT IS THE ANNUAL PENSION
FOR PUBLIC SECTOR WORKER?
WELL IT VARIES QUITE A BIT
FROM SYSTEM TO SYSTEM.
THERE'S FIVE STATE SYSTEMS.
DEPENDING ON THE SYSTEM,
SOMETHING IN THE RANGE OF
$60,000 FOR AN AVERAGE PENSION.
BUT IF YOU'RE A CAREER WORKER,
MEANING YOU WORK 20, 30 YEARS,
THOSE AMOUNTS GO UP A LOT.
WHAT DO YOU THINK THAT NUMBER
SHOULD BE?
IF SOMEBODY WORKS IN GOVERNMENT,
WHAT SHOULD THEIR PENSION BE?
I DON'T THINK THAT'S A RIGHT
WAY TO FRAME THE QUESTION.
WHAT WE NEED TO BE LOOKING AT IS
WHETHER THE SYSTEM ITSELF IS
STRUCTURED IN A WAY THAT IS
SUSTAINABLE AND AFFORDABLE AND
DOESN'T PLACE TOO MUCH OF A
BURDEN ON STATE FINANCES.
RIGHT NOW, THIS NUMBER I KNOW
FROM THE DATA I RECENTLY POLLED.
ACROSS ALL FIVE STATE SYSTEMS,
THE AVERAGE PUBLIC WORKER
CONTRIBUTES 4 TO 7% OF WHAT THEY
EXPECT TO SEE IN BENEFITS.
THERE'S NO WAY TO MAKE THAT MATH
WORK.
ESPECIALLY WHEN WE HAVE LOW
FUNDING RATIOS.
INVESTMENT RETURNS ARE A BIG
PORTION THAT KIND OF REDUCE THE
BURDEN ON EMPLOYEES AND
EMPLOYERS BECAUSE INVESTMENT
ACCOUNTS FOR ABOUT 62% OF
REVENUE.
THE LOWER YOUR RATIO GOES, THE
SMALLER THE ASSET POOL IS.
I'VE ALREADY SAID THE EMPLOYER
CONTRIBUTIONS ARE ACTUALARILY.
I PAID MY FAIR SHARE, IT WAS
THE STATE THAT DIDN'T PAY
THEIRS.
THAT IS A COMMON TALKING
POINT.
BUT I DON'T THINK IT GETS TO THE
HEART OF THE ISSUE.
IF YOU WERE MAKING PAYMENTS THAT
WERE INSUFFICIENT PAYMENT TOS
COVER THE SIZE OF THE BENEFIT,
THEN THAT'S NOT REALLY
INSTRUCTIVE.
YOU'RE SAYING WE WERE LIED
TO.
I'M SAYING I DON'T BLAME A
SINGLE GOVERNMENT WORKER.
I DON'T BLAME A SINGLE TEACHER
FOR THE PENSION CRISIS.
IT'S THE POLITICIANS WHO SET UP
A SYSTEM THAT'S UNSUSTAINABLE.
TAXPAYER CONTRIBUTIONS WERE TOO
HIGH THAT WE EVER WERE ABLE TO
AFFORD THEM OR EVER WILL BE ABLE
TO AFFORD THEM.
CHANGE THE SYSTEM, THE BENEFITS
THEMSELVES, SO THE PAYMENTS ARE
SUFFICIENT TO COVER THE SIZE OF
THE BENEFIT.
SOME PEOPLE WHO ARE HEARING
YOU MIGHT THINK YOU'RE SAYING IT
SOUNDS ALMOST LIKE FROM 1970
UNTIL NOW, ILLINOIS TAXPAYERS
WEREN'T PAYING ENOUGH IN TAXES.
NO.
THE POINT IS WE ALREADY HAVE
SUCH A HIGH TAX BURDEN AND WE'RE
ALREADY PAYING SO MUCH IN TO THE
PENSION SYSTEM.
AGAIN, ONE OF THE HIGHEST TAX
BURDENS, THE HIGHEST PENSION
PAYMENTS OF REVENUES, THIS SAYS
THERE'S NOT ROOM TO PAY IN MORE
AND WE'RE ACTUALLY PAYING TOO
MUCH.
THE BENEFITS HAVE BEEN SET AT A
LEVEL THAT TOO HIGH.
TOO HIGH.
THE BENEFITS ARE
UNSUSTAINABLE.
MEANING BOTH THE EMPLOYEE
CONTRIBUTIONS AND THE EMPLOYEE
BENEFITS.
IF YOU WANTED TO HAVE EMPLOYEE
BENEFITS LIKE WE CURRENTLY HAVE,
THERE'S A WAY TO SUSTAIN THOSE.
THAT WOULD BE A WAY JACK UP
EMPLOYEE CONTRIBUTIONS.
THERE'S AN ANALYSIS FROM MICHAEL
SEMBLIST, WHO IS AN ANALYST FOR
JP MORGAN BANK.
WHAT WOULD IT TAKE.
BETTER INVESTMENT RETURNS,
BETTER TAXPAYER CONTRIBUTIONS OR
BETTER EMPLOYEE CONTRIBUTIONS.
IN ALL THREE CASES GIVEN THE
PLACE WE ARE NOW, NONE OF THIS
IS REALISTIC.
TAKE 11.5% INVESTMENT TO COVER
IT.
IT COULD TAKE DOUBLING THE TAX
BURDEN IN ILLINOIS.
GOVERNOR PRITZKER PROPOSED IN
THIS CONSTITUTIONAL AMENDMENT HE
WANTS TO RAISE TAXES ON THE RICH
SO HE CAN FILL THAT PENSION GAP.
WHY IS HE WRONG?
THERE'S TWO REASONS: THE
FIRST IT'S GOING TO HARM THE
ECONOMY, AND LIKELY ACCELERATE
OUR WORST IN THE NATION
POPULATION LAWS.
LET ME ASK YOU ABOUT THAT.
THE FEDERAL GOVERNMENT IN 30
PLUS STATES HAVE A PROGRESSIVE
TAX.
HOW DO YOU MAKE THAT STATEMENT?
IF YOU CHERRYPICK A SINGLE
POLICY DIFFERENCE BETWEEN STATES
AND TRY TO COMPARE THEM JUST ON
THAT, IT CAN PAINT A VERY
MISLEADING PICTURE.
SO WHAT AN ECONOMIST WOULD DO IS
CONTROLLING FOR ALL FACTORS, ARE
STATES BETTER OR WORSE THAN
STATES WITHOUT THEM.
WE HAVE THAT DATA ON OUR
WEBSITE.
IT'S FEDERAL GOVERNMENT DATA
THAT ANYONE CAN PULL DOWN AND
VERIFY.
BUT WHAT IT SHOWS IS THAT JOBS,
WAGES, TOTAL ECONOMIC OUTPUT ARE
ALL SLOWER IN STATES OF
PROGRESSIVE INCOME TAXES.
YOU MIGHT HAVE SEEN THAT WALL
STREET JOURNAL ARTICLE THAT
SHOWS HOW PEOPLE IN MIDDLE CLASS
ARE GOING FURTHER IN TO DEBT TO
STAY IN MIDDLE CLASS AND THEY'RE
BORROWING MONEY TO DO ALL THAT.
DO YOU AT LEAST UNDERSTAND THE
GOVERNMENT'S INSTINCT TO SPARE
ALL THEM.
WELL OUR OPPOSITION TO THE
PROGRESSIVE INCOME TAX HAS
NOTHING AT ALL TO DO ABOUT
DEFENDING RICH PEOPLE.
IT'S ABOUT DEFENDING OVERALL THE
STANDARD OF LIVING IN THE STATE.
I AGREE THAT THE TAX BURDEN ON
EVERYBODY IN THIS STATE IS TOO
HIGH.
THE BIGGEST PORTION IS THE
PROPERTY TAX BURDEN.
THAT'S WHAT'S CAUSING TAXES ON
LOW INCOME AND MEDIUM INCOME
PEOPLE TO BE TOO HIGH.
AND THE PROPERTY TAX BURDEN IS
SO HIGH BECAUSE OF THE LOCAL
PENSION CRISIS.
SO I THINK IF WE WANT TO REDUCE
TAXES ON EVERYBODY, BUT
INCLUDING LOWER INCOME AND
MIDDLE INCOME PEOPLE, THERE'S A
WAY TO DO THAT WITHOUT HIKING
TAXES AND HARMING THE STATE'S
ECONOMY.
YOU CAN WATCH MORE OF THAT
INTERVIEW ONLINE IF YOU CARE TO.
WHEN WE COME BACK, THE ILLINOIS
POLICY INSTITUTE, HOW THEY SAY
THE STATE SPENDS A LOT OF MONEY
ON ADMINISTRATIVE COSTS IN
EDUCATION.
WHY THOSE NUMBERS MIGHT NOT BE
ENTIRELY THE FULL STORY.
ALL THAT, COMING UP.