Illinois Gov. J.B. Pritzker stepped back Tuesday from a proposal to defer pension contributions, citing a surprising increase in corporate and individual tax revenues.
In a letter to legislators signed by David Harris, director of the Illinois Department of Revenue, and Alexis Sturm, director of Mr. Pritzker's office of management and budget, a recorded $4.1 billion in tax revenues in April was more than $1.5 billion originally projected for the month, meaning the state will be able to "meet the current funding commitment to the retirement system without extending the ramp this year."
The deferred payments were part of Mr. Pritzker's fiscal-year 2020 budget proposal to extend the amortization schedule of Illinois' five pension funds by seven years to make the plans 90% funded by 2052 instead of 2045 and save the state $800 million annually. The unanticipated revenues, according to the letter, will mean the extension will not need to be made.
Ratings agencies Fitch Ratings and S&P Global Ratings had warned state officials in February, shortly after the budget proposal was announced Feb. 14, that it posed risks for the state as proposed. Fitch Ratings currently gives Illinois a rating of BBB with a negative outlook and said at the time it would lower the rating further "if Illinois returned to a pattern of deferring payments for near-term budget balancing."
In a Feb. 22 news release, S&P Global said that "deferring pension contributions has been a key contributor to Illinois' deteriorating credit position. Even if the state were to continue its current 2045 amortization schedule, its pension plans exhibit negative cash flows given that annual benefit payments exceed incoming contributions." S&P's rating for Illinois is BBB-.
Susana A. Mendoza, Illinois comptroller, said in a statement: "While we cannot confirm or deny the Department of Revenue's projection of $800 million more than expected for fiscal year 2020 at this time, we are hopeful and will continue to research this possibility thoroughly. My office has prioritized pension payments and debt service since I took office and that will be our policy going forward."
Jordan Abudayyeh, Mr. Pritzker's spokeswoman, could not be immediately provide further information.