K-12 Tax & Spending Climate: Three New Governors Face Three Old Pension Disasters

Brian Chappatta:

Illinois, among other things, wants to issue $2 billion of debt and inject the proceeds directly into its pensions, on top of its annual payment:

The potential borrowing is part of a broader plan by the new governor to tackle Illinois’s $134 billion debt to its pension funds, one that also includes raising taxes and potentially handing government assets like office buildings over to the retirement system. [Deputy governor Dan] Hynes said last week that the $2 billion would supplement Illinois’s annual contribution — not be used to cover it — in a wager that the investment earnings will reduce what the state owes.

Pritzker’s approach, if enacted as proposed, would mark a break from how previous governors used pension bonds to cover their annual payments or hold down such contributions. That practice drove Illinois deeper into the hole as it failed to set aside enough money each year to ensure that the state will be able to pay for all the benefits that have been promised to employees.

Connecticut, which last year took the unprecedented step of bailing out its capital, Hartford, is considering a plan to shift a quarter of its teachers’ pension costs to municipalities 1 :