*** UPDATED x3 *** Pritzker not receptive to Lightfoot’s huge state bailout proposal Friday, Jun 28, 2019 * I went to Gov. Pritzker’s press conference today to ask him about this story in Crain’s Chicago Business… According to knowledgeable sources in Chicago and Springfield, after weeks of preliminary maneuvering [Chicago Mayor Lori Lightfoot] is pitching nothing less than a state takeover of the city’s cash-short pension funds, which under current law will require upward of $1 billion in new city tax hikes over the next three years to reach a path to full actuarial funding. Her proposal would consolidate city pension money with smaller downstate and suburban pension funds in a new statewide system. In some cases, those non-Chicago funds are even worse off than the city’s. Insiders say Chicago might be willing to forgo some revenue it now gets from the state in exchange for relinquishing responsibility for the funds, which now are about $28 billion short of the assets they’ll eventually need to pay promised benefits. To pay the cost, Lightfoot reportedly supports state legislation to tax retirement income of better-off seniors—taxing income above $100,000 a year would net roughly $1 billion annually, according to the Civic Federation—or extending the sales tax to cover high-end services such as accounting and legal advice. Some of the money also could come from proceeds of the governor’s proposed new graduated income tax. Gov. J.B. Pritzker estimated it will pull in an additional $3.4 billion a year and so far has allotted only $200 million to state pensions but nothing to local pensions. It’s far from clear that Lightfoot’s proposal will fly with Pritzker. But Chicago’s new mayor has some strong arguments, including the fact that, without state help, Chicago will be forced to impose property tax hikes so large they could cripple the city’s and state’s economy. Lightfoot also will be able to argue that, if she has to implement huge property tax increases, Chicagoans may not be wild about backing Pritzker’s vaunted graduated income tax proposal in a referendum in November 2020. The measure is favored to pass, but it’s no slam dunk, requiring 60 percent voter approval. * I asked the governor about this today and he pointed out that he’s always been opposed to a tax on retirement income and remains so. Regarding the state taking over the city’s pension liabilities, Pritzker said he hadn’t heard of that before and stressed that he wanted to improve the state’s credit rating “and so we’ve got to be careful about what we did in that regard, so that’s challenging,” which is a polite way of saying “No.” The governor did say that he was interested in working with all cities on their financial issues. Pritzker also said he did not hear the proposals from Lightfoot herself, but noted that they had talked several times and said he looked forward to working with her on various issues. The governor didn’t mention this, but the state doesn’t subsidize any municipal retirement funds, so making an exception for Chicago would be a major first. The state did step in to help Chicago Public Schools with its pension payments in 2017, but the state has historically picked up almost the full pension tab for Downstate and suburban school districts, so that had precedent. Also, as I told subscribers today, obliquely threatening the governor’s Fair Tax probably won’t go over too well. I asked the mayor’s press office today if Lightfoot still supports the “Fair Tax,” but never heard back. * According to the article, the mayor also apparently wants to renegotiate the gaming bill to give the city a bigger share of the revenue pie beyond the one-third that the city is getting as well as lowering the overall taxation on the casino. That would would be a big hit to the state’s infrastructure plan and I asked Sen. Terry Link (the Senate gaming sponsor) today what his reaction was. Link said the mayor had jumped the gun and should wait for the state-mandated study of the casino’s prospects. If the city would get shortchanged, then perhaps it could be addressed. * Relevant presser video… There’s more in Greg Hinz’s story, so click here to read the rest. * I also asked the four legislative leaders for a response. Here’s Senate President John Cullerton’s spokesperson… We have not had an opportunity to review it. No briefing before the story surfaced? Not so good. Speaker Madigan’s spokesman said his boss is prepared to work with the city on pension issues, but they’re looking for information on this plan before proceeding. In other words, Madigan wasn’t briefed, either. * Senate GOP Leader Bill Brady’s spokesperson… Leader Brady recognizes Chicago has a pension problem; but taxing retirement income will just drive taxpayers out of Illinois. Expected. * House Republican Leader Jim Durkin is a personal friend of the mayor’s, and here’s his response… We all know the pension issues facing taxpayers in Illinois. I appreciate the mayor’s willingness to discuss the problem and look forward to working with her in an effort to find a solution that benefits all Illinoisans. * React from Sen. Andy Manar, who was at today’s presser… Let me be clear, I am a vocal supporter of the Fair Tax to make sure the wealthy will finally pay their fair share. The Fair Tax will provide record funding for our schools and propriety tax relief for working families across Illinois. Any effort that deviates in a major way from these core principles will jeopardize our ability to achieve lasting reforms. *** UPDATE 1 *** Greg Hinz with an update… Gov. J.B. Pritzker and Mayor Lori Lightfoot tomorrow will hold their first lengthy sit-down since Lightfoot took office, and you can bet that at the top of the list is the mayor’s evolving campaign to get the state to help the city deal with its staggering pension problems. *** UPDATE 2 *** Emily Bittner at the governor’s office… Earlier this week, the Governor reached out to the Mayor to invite her to sit down together at the Thompson Center. They are meeting this weekend. Some carefully chosen words there. Not hard to read between those lines. *** UPDATE 3 *** So, is this meeting about the mayor’s pension proposal? Not necessarily, says Bittner… The governor asked for the meeting earlier this week. The mayor is welcome to bring up any proposal she would like, but that is not why the governor requested the meeting. …Adding… Props to AARP’s PR department…

As @GovPritzker and @chicagosmayor prepare to meet, we thank Gov. Pritzker for understanding that taxing retirement income is not the way to solve the state's fiscal crisis. Not the way to fix Chicago's money problems, either. #twill (link: https://t.co/HT9jzYodog) — AARP Illinois (@aarpillinois) June 28, 2019

- Posted by Rich Miller

45 Comments Sorry, comments for this post are now closed.