Skip to main content
MENU
Subscribe
  • Subscribe
  • Account
  • LOGIN
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE Act 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2022 Retirement Income Conference
    • 2022 Managing Pension Risk & Liabilities
    • 2022 WorldPensionSummit
Breadcrumb
  1. Home
  2. PENSION FUNDS
February 14, 2019 12:00 AM

Commentary: Pritzker's pension prescription – borrow, defer payments and peddle assets

Greg Hinz
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Bloomberg
    Illinois Gov. J.B. Pritzker

    Gov. J.B. Pritzker's administration Thursday rolled out its plan on how to deal with the most watched issue in state government, describing in detail how it will deal with more than $130 billion in pension debt. And though the proposed solution includes some new items, such as a possible sale or reuse of state assets like the Illinois Tollway, much of it will seem familiar to Illinois voters: borrowing money to shore up the state's pension funds and deferring scheduled payments to them farther into the future.

    In a speech to the City Club of Chicago and a phone interview, Deputy Gov. Dan Hynes suggested the key to the plan is to extend the period of time the state has to reach full funding of its pension plays by seven years, to 2052. "Full funding" currently is defined has having 90% of the assets needed to pay promised benefits.

    Mr. Hynes said the deferral will buy the state time to examine asset sales and other matters — and give Mr. Pritzker some leeway in dealing with a projected deficit of $3.2 billion in the new fiscal 2020 budget he's set to unveil Feb. 20. Specifically, extending the full-payment ramp to 2052 will reduce the amount the state has to contribute next year by about $800 million. The state "still will have to contribute $8 billion," Mr. Hynes noted. But by deferring the payment owed, the state will run up increased interest costs on debt it legally will have to pay, Mr. Hynes conceded, declining to give a cost figure.

    3 step approach

    In exchange for extending the repayment ramp, Mr. Pritzker is proposing three steps to boost pension funding down the road.

    First, the state will issue a "small scale pension bond of about $2 billion." Unlike the $10 billion pension obligation bond issued by former Gov. Rod Blagojevich, this POB will not be used to offset regular state payments to its pension funds but instead will be a net increase of new money to the pension funds.

    Second, the state will consider transferring assets, starting with money from the sale or lease of unused office space scattered around the state. "The state has 20,000 fewer employees than it used to," but still owns or leases the space they used, he said. That asset can be monetized, he said, and it includes the Loop's Thompson Center, which Mr. Hynes confirmed that Mr. Pritzker wants to sell "as soon as possible" and will have authority to peddle under a bill awaiting his signature. (Negotiations with the city of Chicago on needed zoning and the approvals are not completed, Mr. Hynes added.)

    Mr. Hynes specifically refused to take a possible sale of the Illinois Tollway off the table. "That's the kind of issue" that a new commission Mr. Pritzker appointed last week is considering, and "I don't want to prejudge anything," Mr. Hynes said.

    The third way the administration proposes to help the state's pension systems is to give them a guaranteed annual cut of revenues from the graduated income tax Pritzker hopes to enact into law after voters consider a constitutional amendment in 2020. Specifically, Hynes said the governor will give pension systems a $200 million a year guaranteed cut of revenues from the graduated income tax, money that would be "over and above our legally required payments."

    That will be helpful, but is a small portion of the extra $2-billion-a-year boost the Civic Committee of the Commercial Club recommended in a separate budget proposal earlier this month.

    'Promised' and 'earned'

    Mr. Pritzker also wants to expand a program in which workers voluntarily can get some of their pension money earlier in exchange for reduced benefits later. But he would not cut worker benefits, with Mr. Hynes saying they "were promised" and "earned." Overall, he said, the proposal "will expand our revenue tax base, invest in priorities that will grow our economy, and we'll be able to put our pensions on a sustainable path that keeps our promises to retirees."

    In the interview, Mr. Hynes disputed the notion that, by borrowing and deferring needed payments needed into the future, Mr. Pritzker is engaging in the decades-old Illinois practice of kicking the fiscal can down the road.

    "What this plan does is recognize reality," Mr. Hynes said. "We're going forward" with the POB and related steps, "giving us time" to seriously consider asset sales and like.

    Mr. Pritzker also is pushing plans to consolidate hundreds of smaller pension funds, mostly downstate plans covering police and fire workers, to allow them to cut resources and get better returns on investment.

    Related Articles
    Section of Illinois pension reform ruled unconstitutional
    Chicago mayor proposes $10 billion in bonds to improve pension funding
    Illinois group pushes tax hikes to cover pension debt
    Recommended for You
    RStegmann IMG_0635_i.jpg
    Missouri State Employees' executive director to retire next year
    Dutch_Flag_i.jpg
    Dutch ABP pension fund to raise benefits 2.39%
    terminated_stamp_1550-main_i.jpg
    Contra Costa County terminating Jackson Square Partners
    Strong Demand Drivers Underpin Private Credit
    Sponsored Content: Strong Demand Drivers Underpin Private Credit

    Reader Poll

    June 6, 2022
    SEE MORE POLLS >
    Sponsored
    White Papers
    Nearing the finish line: Ideas on end-state investing for corporate DB plans
    The Meaning of "Portfolio Intelligence"
    Credit Indices: Closing the Fixed Income Evolutionary Gap
    Forever in Style: Benchmarking with the Morningstar® Broad Style Indexes℠
    Crossroads: Politics, Inflation, & Bonds
    Is there a mid-cap gap in your DC plan?
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    June 20, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2022. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE Act 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2022 Retirement Income Conference
      • 2022 Managing Pension Risk & Liabilities
      • 2022 WorldPensionSummit