Alton, IL

Bulk Of Illinois Tax Increase Aimed at Tackling Pension Crisis

Story by WBGZ Radio

The entirety of the $5 billion in tax increases the legislature imposed on Illinoisans will be eaten up by this year’s pension payment, and that’s still not enough to address the growing liability.

Lawmakers overrode Gov. Bruce Rauner’s veto of a $36 billion budget July 6, enacting it into law. Under the newly enacted budget, the state will spend around $7 billion for public sector pension funds.That means the entirety of the $5 billion income tax increase will go to pay for pensions, and nearly 20 cents of every dollar taxpayers send the state will go toward public sector pensions this year.


Sheila Weinberg, the founder and CEO of the government finance watchdog group Truth In Accounting, said the planned payment is actually short of what’s needed. “One thing that we’re concerned about in this current budget is they are actually reducing the contributions into the plan as the liabilities are increasing,” Weinberg said. “It is similar to me saying that my budget is balanced, but I won’t be making the minimum payment on my credit card.”


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Truth in Accounting Director of Research Bill Bergman said it’s another example of kicking the pension can down the road. “It’s remarkable, but at the same time it’s consistent with past practices – taking your time to catch up and meanwhile unfunded pension benefits and the growth rate is accelerating.” Illinois’ unfunded pension liability is $130 billion and growing.

The Pew Charitable Trusts’ Matt McKillop said Illinois’ debt is among the largest of all states.

Unfunded pension costs, unfunded retiree health care costs and debt –…measure that against the state’s personal income, or the size of the economy. Illinois’ [debt] is third-largest in the country,” McKillop said.


Weinberg said paying down the growing debt will squeeze out vital services taxpayers deserve.

State Rep. Jeanne Ives, R-Wheaton, said the same thing happened with the 2011 temporary income tax hike, where the increase went to pay off growing pension obligations.She worried lawmakers won’t actually address the root cause of the pension crisis – generous benefits – until things really start falling apart.“I don’t think that until a pensioner is subject to possibly losing money in their paycheck because the systems literally have run out of money, or when you start to see layoffs occur because we can’t fund anything but pensions – until you see that in the state of Illinois, people will refuse to wake up and figure this out,” Ives said.


Ives said state government needs to move all new hires into a sustainable system similar to a 401(k)-style plan prevalent in the private sector.Critics of the tax hike and budget have said it does nothing to address the state’s debt issues and could prolong the problems of digging out from the mess.


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