Greising | Lightfoot to Pritzker on Pensions: It's Your Move

"The practical matter is that if you don't rein in the size of the growth in pension liabilities, all of these other things are just nibbling around the edges."

Chicago Mayor Lori Lightfoot, left, is putting the heat on Illinois Gov. J.B. Pritzker to make the next move on pension reform. (Joshua Lott and Paul Natkin/Getty Images)

BGA President David Greising writes a regular column for Crain's Chicago Business.

To make her 2020 Chicago budget plan work, Mayor Lori Lightfoot still needs Springfield's help on at least two key elements—a new tax on home sales and changes to a bill that would enable Chicago to build a casino.

For one other issue on Lightfoot's agenda, pension reform, she's looking toward Gov. J.B. Pritzker to make a move—in a bigger way than has previously been reported.

First things first: The mayor's proposed increased taxes on sales of homes over $500,000 has run into resistance from Chicago Democrats who want to see a majority of the projected $50 million in revenue go toward affordable housing and homelessness issues.

A flawed casino bill must be amended in order to make a proposed Chicago casino a reality. But the wide-ranging public corruption investigation, which is distressing and distracting key legislative leaders, has raised the odds on that one, too.

Add it up, and the budget Lightfoot carefully built is at risk of unraveling. If she can't get those two wins as part of her effort to fill an $838 million budget gap, a property tax increase will be in play.

All of this struggle is necessary because Lightfoot, for every year of her term, faces an inexorable increase in annual pension payments. By 2023, the city will owe an additional $1 billion a year to its retiree plans. Decisions Lightfoot makes now will affect her ability to handle the pension hikes in the years ahead.

Chicago and Lightfoot are hardly alone. Pensions are eating up budgets across Illinois—in Chicago, in dozens of downstate cities, for the state government, too. And year after year, every serious effort at pension reform has run into the barrier created by a clause in the state constitution that forbids any action that would diminish or impair pensions.

Until now, Lightfoot has called for pension reform but backed away from a change in the state constitution. She has rightly focused on the 3 percent annual cost-of-living allowance in many public pensions as unaffordable but has publicly opposed a constitutional amendment on pensions.

That may be changing now. In an interview with the Better Government Association, Lightfoot revisited the possibility of supporting constitutional change.

When Lightfoot called for pension reforms during the interview, I noted that she herself has stopped short of putting a constitutional amendment on the table. Instead of restating her opposition to the idea, she turned attention to Pritzker.

"The governor has been very clear that he does not favor a constitutional amendment," Lightfoot said.

True enough, I responded. But what about the mayor of the city of Chicago?

"Well, I'm dealing with political realities," she answered.

Lightfoot offered a thumbnail review of pension reform efforts—including two times the state Supreme Court has declared legislative solutions unconstitutional. After that, she said, "It's almost like people retreated to their neutral corners, but the problem didn't go away. It got worse.

"So, we have to re-engage. And whatever it takes to reignite that conversation, I'm all for."

This sounded like Lightfoot would even consider a change to the constitution, I noted.

"I'm very clear that the governor is opposed to a constitutional amendment. I think that makes it very difficult if not impossible," she said.

I asked Lightfoot if the governor made a mistake by not proposing a pension amendment at the same time he proposed a constitutional change that clears the way for a progressive income tax in Illinois.

Pension reform would appeal to conservatives; the progressive tax appeals to liberals. Together they might make a package the majority of Illinois voters could embrace.

"What I would have liked to see is a concerted effort to tackle pension reform for both the states and municipalities, whatever form that takes," she said. "We need to open up the conversation again."

Pritzker has proposed consolidation of municipal pension systems, to save administrative costs. His progressive tax is meant to help pay down the $130 billion underfunding of the state's five pension funds. A spokeswoman notes the governor believes any changes to existing pensions would not pass review by the U.S. Supreme Court.

Lightfoot isn't optimistic. "The practical matter is that if you don't rein in the size of the growth in pension liabilities, all of these other things are just nibbling around the edges," she said.

Lightfoot is right.

The fixes currently under consideration, including the progressive tax, will help on the margins. But they won't get the job done. The structural reforms needed will require the flexibility that can come only with constitutional change.

Lightfoot is leaving open the possibility of supporting constitutional pension reform—and putting the heat on Pritzker to make the next move.

Correction: A previous version of this story incorrectly stated the underfunding amount of the state's five pension funds.