Three Problems With Gov. Rauner’s FY2019 Pension And Retirement Proposals

This week, Gov. Bruce Rauner gave his fiscal year (FY) 2019 budget address, revealing his revenue and expenditure proposals for the upcoming year. The governor’s proposal relies on $1.5 billion in cost reductions to balance the budget, including:

• A shift of 25 percent of the “normal cost” of pension benefits from the state to local governments for employees covered by the Teachers’ Retirement System and State University Retirement System ($363 million), as well as a shift of 100 percent of the normal cost to the Chicago Teachers’ Pension Fund ($228 million); and
• The elimination of healthcare support for retired teachers ($129 million).

In addition, Gov. Rauner suggested he would like the state legislature to implement a “consideration model” to reduce pension costs, a longstanding proposal that would allow state workers to trade off lower pension benefits for some other benefit. The governor’s budget suggests such a move would save $900 million in FY2019, though that is not part of his plan to balance the budget. Rather, it would allow the state to reduce the individual income tax from 4.95 percent to 4.7 percent.

Each of these proposals pose serious problems, however. This brief highlights three of them.