Reps. Mark Batinick (R-Plainfield) and Grant Wehrli (R-Naperville) were not happy with the figures presented to them at a recent House Personnel & Pensions Committee hearing regarding amortization and pension buyout plans.
After showing committee members a Commission on Government Forecasting and Accountability slide show, Center for Tax and Budget Accountability Executive Director Ralph Martire shared Illinois' pension forecast, noting the issue before the committee was not ideological but mathematics, forced by debt service rather than a benefit-driven problem.
“We are only 39 percent funded across all five systems,” Martire said. “We have an unfunded liability in the aggregate north of $131 billion. This is considered problematic since you are not considered healthy at the public-sector level unless you are at least 80 percent funded according to the Congressional Budget Office.”
However, increased benefits are an issue, according to Batinick.
“I had a conversation with someone who said 25 percent of the pension liability is due to the COLA (cost of living adjustment),” Batinick said. “So 25 percent of the pension liability would be more like $50 billion due to one benefit increase.”
He also addressed the headcount in the proposed pension figures.
“I assume teachers aren’t considered state employees, right,” Batinick asked. “We have way more units of government; and though we don’t have a high headcount at the state, we have a high headcount overall with the units of government in our pension liabilities just for state workers.”
After figuring out the headcount, Batinick then questioned estimated tax burden figures and Martire’s comment "that though we have a usually high number of units of government" and “are not efficiently structured,” the overall tax burden was low compared to other states before 2010 even after the most recent increase.
“I would love to see that information, because I see some stuff that shows that we are one of the top burdens; and I do want to say just because you are a larger state, doesn’t mean you should pay a larger percent of your income toward taxes,” Batinick said. “Those are apples and oranges.”
That is when Wehrli stepped in and said he would “piggyback” on Batinick’s point.
“USA Today today ran a ranking of states, and Illinois ranks 46, and total taxes paid as percent of income is 11 percent,” Wehrli said. "Only California, New Jersey, Connecticut and New York are worse."
Martire said USA Today’s numbers “seemed off,” and maybe the ranking was based on isolating taxation at state level versus combined state and local, compared to Wehrli’s noted income, property and general sales taxes collections per capita.
“Collection per capita though is different than percentage of income,” Martire said. “We are an overall higher median-high income state. Our median income is 12th highest in the nation; so at a lower tax burden as a percentage of income on a per capita basis, we raise more revenue per person than other states.”
Wehrli still did not agree.
“I offer that just to show that there is tangible evidence that what you are saying could be refuted by others,” Wehrli said.
Werhli then addressed the 6.5 percent bond yield and the 11.2 issuances and the debt service of $900 million that would reach Illinois to 70-percent funded by 2045, noting he does not know if he can trust the source Martire cited.
“Earlier on page six you and the Congressional Budget Office, which I am not sure I want to take fiscal guidance from, say 80 percent is considered healthy,” Wehrli said, asking if there is a scenario that can get them to that 80 percent. “That’s why I am wondering why you choose those numbers.”
Wehrli closed by asking for Martire to forward him more information via email.