In a speech to the City Club and in a phone interview, Deputy Gov. Dan Hynes suggested the key to the plan is to extend the period of time the state has to reach full funding of its pension plans by seven years, to 2052. “Full funding” currently is defined as having 90 percent of the assets needed to pay promised benefits. (You can read Hynes' prepared remarks at the end of this story.)
Hynes told me the deferral would buy the state time to examine asset sales and other matters—and give Pritzker some leeway in dealing with a projected deficit of $3.2 billion in the new fiscal 2020 budget he’s set to unveil next week, on Feb. 20. Specifically, extending the full-payment ramp to 2052 will reduce the amount the state has to contribute next year by about $800 million. The state “still will have to contribute $8 billion,” Hynes noted. But by deferring the payment owed, the state will run up increased interest costs on debt it legally will have to pay, Hynes conceded, declining to give a cost figure.
The third way the administration proposes to help the state’s pension systems is to give them a guaranteed annual cut of revenues from the graduated income tax Pritzker hopes to enact into law after voters consider a constitutional amendment in 2020. Specifically, Hynes said the governor will give pension systems $200 million a year from those revenues, money that would be “over and above our legally required payments.”