Sarah Wetmore, Vice President, Civic Federation February ... · Sarah Wetmore, Vice President,...
Embed Size (px)
Transcript of Sarah Wetmore, Vice President, Civic Federation February ... · Sarah Wetmore, Vice President,...
Sarah Wetmore, Vice President, Civic FederationFebruary 27, 2019
About the Civic Federation
• Members include major corporations and service firms
• Independent and nonpartisan
• Founded in 1894
• We promote:
• Sustainable tax and fiscal policies• Responsible long-term financial planning
• High quality, efficient government services
Membership opportunities and more information at civicfed.org
• What led Illinois to create Tier 2?
• What’s happened since Tier 2 went into effect?
• The impact of the budget impasse on state services, including higher education
What led Illinois to create Tier 2?
• State’s 50-year pension funding plan
• Pension holidays
• Great Recession à falling state revenue, severe contraction in pension assets
• Debt rating downgrades attributed in part to growing pension liabilities
What’s Happened Since Tier 2?• Borrowing to make pension contributions• More debt downgrades due mostly to public pension
underfunding• Various attempts to reduce benefit levels for current
Tier 1 employees and/or retirees of the state and local governments
• More debt downgrades when pension reform legislation was struck down by the Illinois Supreme Court
• Ever higher contributions by the State to the pension funds, crowding out other spending priorities, but still not sufficient to prevent the unfunded liability from growing
$7,643 $7,549 $8,055 $8,560 $8,593 $8,349
19.2% 20.7%23.3% 22.9%
28.0% 30.5% 25.9% 24.5%
80.8% 79.3% 76.7% 77.1%72.0% 69.5%
FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017* FY2018**FY2019**Pension Contributions and Debt Service Transfers for Pension Bonds***Pension Costs % of State-Source Revenues% State-Source Revenues Available for Other Purposes
* Preliminary.**Estimated.*** Pension contributions in FY2010 and FY2011 were made through issuance of bonds and are not included in this chart.Source:State of Illinois, Governor's Office of Management and Budget, General Funds Financial Walk Down, November 15, 2018; Illinois State FY2019 Budget, p. 62; State of Illinois, General Obligation Refunding Bonds, Series of September 2018, Official Statement, August 22, 2018, pp. 29-30; Illinois State FY2018 Budget, p. 78; Illinois State FY2017 Budget, p. 75; Illinois State FY2015 Budget, pp. 2-22; State of Illinois, General Obligation Bonds, Series of May 2014, Official Statement, April 25, 2014, p. 15; Illinois State FY2011 Budget, p. 2-10; Illinois State FY2010 Budget, p. 2-12; Illinois General Assembly, Commission on Government Forecasting and Accountability, Illinois State Retirement Systems, Financial Condition as of June 30, 2017, March 2018, pp. 123-127.
State-Source General Funds Revenue Available for Pension Costs Compared with Other Purposes:
FY2008-FY2019 (in $ millions)
Impact of the Budget Impasse on Services and Higher Education
• The damage:• Unmanaged spending
• Damage to social services, universities and most vulnerable citizens
• $16 billion in unpaid bills
• Challenges persist even with FY2018 and FY2019 budgets
• Lowest credit rating of all 50 states
Where are we now?
• Projected budget deficit for state fiscal year 2020 starting in July: $3.2 billion
• Governor Pritzker has proposed:• Extending the payment schedule 7 years,
• Issuing pension obligation bonds,
• Expanding buy-outs and
• Eventually putting more money into the pensions from a future graduated income tax.
• Would reduce contributions by over a billion dollars in FY2020
•Happy to answer questions
•Visit civicfed.org for more information