Pritzker administration may sell buildings, a toll for pension money | Government-and-politics

Dan Petrella and Rick Pearson Chicago Tribune

SPRINGFIELD – Gov. JB Pritzker’s administration on Thursday released a plan to deal with Illinois’ chronically underfunded public pensions that called for injecting more money from a proposed progressive income tax, spreading out the payments over a longer period, adding $ 2 billion in debt and selling state assets that could include the Illinois toll highway.

But the plan, which Deputy Governor Dan Hynes unveiled at a meeting of the City Club of Chicago, also raised many questions.

With the new governor set to present his first budget proposal to lawmakers on Wednesday, Hynes sought to portray an administration working to tackle Illinois’ most difficult budget problem. Pritzker pledged he would not cut retirement benefits for state employees and teachers to tackle the state’s nearly $ 134 billion unfunded pension liabilities, leaving his administration to seek more money to fill the gap.

As has been the case with all of Pritzker’s plans to spend more money on social services and education, the cornerstone of his pension proposal would require the state to drop its current flat-rate income tax. to a progressive federal style system in which higher incomes be taxed at a higher rate. This change would require a constitutional amendment, which would take nearly two years to be submitted to voters for approval.

If voters approve, the state would devote $ 200 million of the new revenue each year to make additional pension contributions on top of the payments required by law, Hynes said. This money is far from guaranteed.

While Hynes has said Pritzker will put “the weight of his office behind a progressive income tax,” the issue promises to be one of the state’s costliest election battles in the next election cycle. Political action committees – one linked to the governor and another linked to business groups – have already formed to defend both sides.

To provide a faster cash injection, Pritzker wants to sell state assets and deposit the proceeds into pension funds. Hynes estimated that they “could be worth tens of billions of dollars. He did not suggest which assets could be sold, and Pritzker set up a task force to assess options. Among the largest holdings in the State include the Illinois Toll Highway Authority, the Illinois Lottery, and real estate such as the James R. Thompson Center in the Loop, among others.

When a member of the public at Thursday’s City Club meeting asked for an example of an asset the state could sell, Hynes replied, as if talking to himself: “Don’t say ‘highway toll ‘. Don’t say “toll highway.” Don’t say “toll highway.”

Afterward, Hynes said the priority would be to identify assets, such as buildings and land, that could be sold quickly to generate money for the retirement system.

“The toll highway doesn’t really meet that standard, quite frankly, because it’s not something that could be done quickly,” he said. “There are bond covenants that are attached to the toll highway. There is a complicated history and a governance structure there. It really is a long term process.”

However, he didn’t take the idea off the table.

“We’re going to be relying on the task force to do a full inventory,” Hynes said.

A sale or lease of Illinois’ 294-mile toll system would be the largest privatization of a government asset in state history, and it’s not the first time it’s been discussed in part of managing a burgeoning public employee pension debt.

In April 2006, then-government. Rod Blagojevich – who is now in federal prison – opened the door for such a move, fueled by the $ 1.8 billion Chicago Skyway privatization deal by then-mayor Richard M. Daley. The income was envisioned to help alleviate pension debt and attract federal funds for highway construction.

At the time, it was estimated that the privatization of the toll highway could generate up to $ 24 billion for the state. Such a figure, even at the 2006 estimate, represents almost 18 percent of the state’s current unfunded pension obligation of about $ 134 billion.

The estimate, provided by Credit Suisse, said the value of the lease or sale would depend on issues such as rising toll rates. The finance company said the state could raise $ 23.8 billion if it leased the toll highway for 75 years, increased tolls by 50% every 20 years, and also increased tolls by 3% every 20 years. the other years of the lease.

Just months after tackling the idea, Blagojevich ruled it out amid the expansion of electronic toll collection and open road toll collection. Signs bearing Blagojevich’s name on the new toll plazas have been removed following his impeachment and dismissal for corruption.

Initiated in the 1950s to speed up construction of segments of the federal interstate highway system, tolls at the time were considered only temporary until construction obligations were paid off. But over time, additional bonds were levied for repairs and expansion of highways. Bondholders first took charge of the toll revenue, a potentially complicating factor in any rental or sale.

The privatization of the toll motorway system could also have political ramifications. Much of the toll highway is located in suburbs that were Republican until recently, as well as more rural areas of the GOP. When Blagojevich introduced the problem, Republican leaders warned him of the potential backlash from suburban drivers who may have little protection from increased tolls by a private operator.

Additionally, the 2008 privatization of Chicago’s parking meters by Daley for $ 1.15 billion, which the mayor quickly spent as parking rates rose, created a negative public attitude toward renting or selling parking lots. major public assets in the region.

Another pillar of Pritzker’s pension plan is extending the time frame for the pension system to reach 90 percent funding. State law requires funds to reach that level by 2045, but the administration wants to extend that for seven years.

“We will still meet the 90% fundraising target, but we will do so without crowding out the investments our state needs to grow its economy,” Hynes said at the City Club event. “After nearly a quarter of a century of losing ground, a seven-year extension is reasonable in the context of billions contributing to our pension systems.”

Extending the funding deadline will not be an easy sell and could spark criticism that the state is once again delaying legally required contributions to pensions.

On Wednesday, the non-partisan budget watchdog Civic Federation released a report calling on the state to target 100% funding by 2045.

“A target of 100 percent helps ensure the stability of a fund by protecting it against market downturns,” says the Civic Federation’s annual “budget roadmap”. “No well-managed pension fund has a target funding level below 100 percent.”