$10 Billion Illinois Pension Bailout Request Ignites Controversy

GOP critics call the plea from Democratic state lawmakers, folded into a coronavirus relief package, ‘infuriating.’ 

Republicans are furious after a leaked letter showed Illinois Senate Democrats asked US members of Congress for a $10 billion pension bailout, nearly one-quarter of a requested $41 billion coronavirus relief package. 

State and local governments, which are facing depleted tax revenues and constrained operating budgets because of the coronavirus pandemic, have been calling for federal aid for weeks. Illinois, which generates revenue from personal income, corporate income, and sales taxes, could lose up to $14.1 billion in the coming year, according to the letter obtained last week by research firm Wirepoints. 

But Illinois, with a notoriously underfunded public pension fund, also asked for $10 billion in direct cash assistance—as well as a low interest federal loan—for its retirement systems over the next three fiscal years until early 2022, according to the letter from Illinois Senate President Don Harmon on behalf of the 40-member Democratic caucus. The figure amounts to about one year’s full payment into the state pension fund, or about 2.5 years of normal costs.

It also asked for $9.6 billion in direct aid to municipalities to support challenges in funding pensions for police, firefighters, and other first responders in the state. 

“So far, the federal relief targeted costs directly related to the COVID-19 outbreak,” Harmon said in an emailed statement. “The massive negative effects to state and local economies across this country have not been addressed and need to be.”

But the request angered Republican lawmakers and other critics both in and out of the state who derided it as both grossly inappropriate and an irresponsible bailout for what they see as poorly run retirement funds. 

The Illinois pension fund, which is among the nation’s poorest, has a $138 billion unfunded liability, as well as other retiree benefit liabilities of $54 billion.

“IL Dems brazenly using a global pandemic as an excuse to ask the Fed govmt to bail them out of the fiscal disaster they manufactured over the last two decades,” read a tweet from the Illinois Republican Party. 

“This is infuriating. We can’t bail out Illinois’s notoriously corrupt and mismanaged pension system,” Nikki Haley, former Republican governor of South Carolina and former US ambassador to the United Nations, said in a tweet on Sunday. “States should not get windfalls. It All has to be paid back.” 

On Sunday, the Chicago Tribune editorial board wrote: “Even by this state’s low standards, asking federal taxpayers from California to North Carolina, from North Dakota to Texas—farmers, small business owners, teachers, nurses, bus drivers, bartenders—to help dig Illinois out of its pre-coronavirus, self-inflicted, financial hellhole is astonishingly brazen.” 

Other fiscal relief provisions in the COVID-19 aid package sought by state lawmakers include a $15 billion grant to stabilize the state’s operating budget, as well as $6 billion to fund unemployment benefits. 

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