For example, Pritzker wants to set aside $500 million to pre-pay pensions. To do that, he would take $300 million out of the unexpected extra revenue this year, and $200 millino will come out of the 2023 General Fund budget.
In Illinois politics, pension underfunding is like the weather. Everyone complains, but no one does anything about it. Why? It’s hard to do, and laboring to fix pensions doesn’t resonate with voters. There is little political bang for the buck. That’s why state pensions have been underfunded year after year for a century.
There is value in prepaying pension debt beyond what is required by the so-called ramp, as Pritzker proposes. Because of double compounding — less money must be borrowed to be repaid with interest and investments on the added money yield more returns — $500 million spent now will save the state $1.8 billion later.
Author(s): Editorial Board
Publication Date: 6 Feb 2022
Publication Site: Chicago Sun-Times