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Property Tax Cap First, Pension Shift Second

August 12, 2012

By Bruno Behrend

Chicago Tribune Opinion

 

Illinois public policy has become such a Gordian knot that even good policy yields potentially horrible outcomes. With the state budget straining to meet payments — even after a huge tax increase — Illinois will soon be unable to meet its rapidly expanding pension bill.

This is why some legislators in Springfield are pushing to shift teacher pension costs back to local school districts. This is good public policy that reverses one of the worst policies ever enacted in Illinois.

Allowing the state to take responsibility for local contract decisions, combined with the state’s massive and unwarranted benefit expansions, has resulted in a massive subsidy to property-rich school districts. It has allowed districts to shower their employees with high salaries and benefits, putting the state taxpayer on the hook for sweet pension deals.

The most solvent pension fund in the state, the Illinois Municipal Retirement Fund, is solvent precisely because local government is mandated to pay for benefits as they are conferred. This means that unlike profligate school districts and other agencies with their state pension subsidy, municipalities must pay into the pension system in real time.

So, if it is such a good idea, and if Illinois is too tapped to meet its growing pension payments, why would anyone be against shifting the pension responsibility back to local entities? It’s quite simple. Your property taxes, already the highest-grossing tax in the state, will blow through the ceiling.

This can be proved by a simple resolution making the rounds in your local school districts. One such resolution, passed in Lemont, has a long-winded set of lamentations. Each one begins with a “Whereas” and ends with a “nothing is our fault.” It ends with a paragraph that should send shivers up the spine of every Illinois property owner.

Section 2(c) states that “if legislation shifting responsibility for paying for any portion of the state’s share … is enacted,” that any such spending on the part of the local district should be “specifically exempt” from the “limitations of PTELL.” Let me decipher that for you. Any extra spending on pensions will not be under Illinois’ already watered-down state property tax cap, the Property Tax Extension Limitation Law.

If this resolution should make it into any law that shifts pension responsibility back to local control, property taxes will spike. This is why so many legislators from suburban and rural districts are against shifting the pensions. What is a legislator to do?

The answer is quite simple. Tie any shift of pension responsibility to expanding and strengthening Illinois’ tax cap law. Make the cap apply to all counties, remove all exemptions for debt and new construction, and place every dime of local spending under the cap (inflation rate or 5 percent, whichever is less). If the local district wants more money for new spending, let them go to the citizens to ask for it in an even-year November election.

The property tax is currently the single largest tax in the state, collecting an estimated $24 billion this year. This is almost double the $13 billion or so hauled in by Illinois’ individual income tax. Cook County Democrats, Chicago Mayor Rahm Emanuel and Cook County Treasurer Maria Pappas included, are already warning of skyrocketing property tax bills before any discussion of a pension shift.

Every $100 of extra cost puts your home out of reach of more potential buyers. Therefore, shifting pension responsibility without a freeze on property taxes will destroy Illinois property values for a generation. The answer is simple. Freeze property taxes first, shift the pensions second and squeeze the fat and excessive debt out of local government. It’s simple, elegant and fair.

 

Bruno Behrend is executive director of For the Good of Illinois.

 

Read the article at the Chicago Tribune online: http://www.chicagotribune.com/news/opinion/ct-oped-0812-pension-20120812,0,1312985.story?track=rss&dssReturn


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2 Responses to "Property Tax Cap First, Pension Shift Second"


  1. Comment by karen on August 25, 2012 at 1:52 pm said:

    Thanks for showing us the terrible truth of reality. More people in Illinois need to be aware of what is on the table and try to make a difference in what the bureaucrats are doing with our hard earned money! Illinois will make it impossible for anyone to live here-which they should care, but don’t.

  2. Comment by Judy DeMent on December 3, 2012 at 3:49 pm said:

    Why stop at that. A full Pension rework is also needed. Pensions should be changed to follow the same rules of social secruity plan. Put the amounts based on the lifetime earnings instead of the last one or two years that their buddies gave them huge raises. I know several people that got a 30% raise their last year solely to increase their retirement pay. I also know that several friends of polititions work only one day at some school systems as a substatute teacher in order to get pensions for life there after. Pensions should not start until they are 65 or 70 just as Social Security. Also stop the payments if the person is working ANY other job over a set dollar amount just like Social Security. No more Supervisors or Supertendants retiring pulling full retirement, and then going back to the same job as a consultant and pulling a full sallary. Otherwise, taxpayers are still going to be choked with rising costs either through the state tax or the local, it is still the same people paying.