This week, Illinois Governor Pat Quinn and Chicago Mayor Rahm Emanuel came together for a Chicago Tribune Forum, one in a series on the region’s future sponsored by the newspaper. Questions from readers and journalists focused on the state’s ailing pension system and other economic matters.
One thing Mayor Emanuel emphasized is that Chicagoans are paying more than their fair share into the state’s teacher pension funds. This is part of the problem that lawmakers have refused to face head on for years -- balancing the state’s budget while meeting its pension obligations.
The Director of the Illinois Retirement System recently revealed that the system could be insolvent by 2029. One reason the system is on shaky ground is that the state doesn’t have the right tools in place to adequately fund its obligations – like a progressive income tax or a broad income tax base.
Illinois is unusual in two ways. It has a flat rate income tax so the state’s most affluent pay a relatively low tax rate, and it does not tax retirement income. Both of these are significant revenue sources for any state. Lawmakers interested in solving the state’s pension problems and budget shortfall would have to start a real conversation about tax reform that includes taking a hard look at taxing retirement benefits, especially for well-off retirees.