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Springfield pension shocker! … Some ‘good news’

Then state Rep. David Harris, R-Arlington Heights, speaks to lawmakers while on the House floor during session at the Illinois State Capitol in 2014, in Springfield Ill. (AP Photo/Seth Perlman)

In a hugely unexpected bit of good news — due to a $1.14 billion increase in state revenue in April — Gov. J.B. Pritzker’s administration on Tuesday said the state will be able to make its full pension payment next year, delaying a hugely unpopular pension holiday by at least a year.

The news comes as legislators continue budget negotiations with just a bit over three weeks left in the legislative session. And it delays a controversial proposal that would have extended the state’s pension payment schedule to the pension systems by seven years — diverting about $800 million from the pension systems to reduce short-term costs. Many scoffed at the proposal, calling it another kick-the-can down the road initiative that got the state in its pension mess in the first place.

The pension holiday delay prompted a response from Illinois Senate President John Cullerton’s office: “This is good news arriving at a good time,” Cullerton spokesman John Patterson said.

The $4.1 billion brought in by individual and corporate income tax is up $1.14 billion from April 2018 and is also more than $1.5 billion more than the administration projected for April 2019, the state’s Department of Revenue head David Harris wrote in a letter to the legislative leaders and appropriations committee.

Harris said the stock market, federal reimbursement for Medicaid, the elimination of the federal state and local tax deduction and changes in the federal tax law meant that many taxpayers didn’t withhold sufficient taxes through payroll deductions, backloading their end-of-year tax payments, the letter says.

“As an immediate result of the strong April performance, coupled with revenue collections year-to-date, the State of Illinois will be able to address most of the $1.6 billion shortfall in the enacted FY19 budget because of the April revenues alone,” Harris wrote in the letter.

With the additional revenues, “the state will be able to meet the current funding commitment to the retirement systems without extending the ramp this year,” the letter says. “The Governor remains committed to finding ways to fund our pension commitments in a sustainable manner.”

The department is also projecting income tax revenues brought in this year, for next year’s budget, will be roughly $800 million higher than initially projected. Factors include strong employment numbers, including in Illinois, the letter says.

Gov. J.B. Pritzker meets with the Sun-Times Editorial Board in February. He was joined by Deputy Gov. Dan Hynes, left. | Rich Hein/Sun-Times
Gov. J.B. Pritzker meets with the Sun-Times Editorial Board in February. He was joined by Deputy Gov. Dan Hynes, left. | Rich Hein/Sun-Times

Despite the good news, Illinois Comptroller Susana Mendoza cautioned that the state is not out of hot water just yet.

“It is important to keep in mind that we still face a $6-to-$8 billion backlog of pending bills with no dedicated revenue stream to pay them,” Mendoza said in a statement. “We have aggressively targeted the state’s highest-interest-accruing bills with those receipts, bringing the backlog lower than it would otherwise be, to $6.07 billion as of today.”

Deputy Gov. Dan Hynes in February announced the administration’s pension proposal, which he called the “sensible” thing to do with an unsustainable ramp that forces the state to dedicate 21 percent of revenue to pensions.

Pritzker’s budget recommended reducing the scheduled pension payment by $800 million. But Hynes counted a progressive income tax — the administration’s top priority this legislative session — as a way to make further investments. The state also counted the transferring of state assets as a way to reduce the ramp.