Illinois has a pension-fund shortage, and the continued solution for shoring up that fund has fallen on the backs of residential and commercial property taxpayers.
Now, the Chicago Fed has introduced the idea a statewide residential property tax of 1 percent for the next 30 years to pay off that pension fund debt.
Residential Property Taxes Will Rise Either Way
The authors of the report argue that one way or another, the dollars to pay down the pension-fund liability will come from property taxes—in the form of higher property tax rates—so having a controlled 1 percent hike would be less impactful.
However, for Cook County homeowners, this could have a larger impact because of how slow home prices have been to return to pre-recession levels. In fact, Illinois home prices are still almost 10 percent below pre-recession levels. Those homeowners that lost the most equity in their homes during the recession—young families and minorities—are already having a difficult time keeping up with their rising property tax bill.
In addition, the time it takes for an Illinois homeowner to sell a house was still double the national average in February 2018, 71 days compared to 37 days.
Pension Fund Payments Lopsided
This year, Cook County Treasurer’s Maria Pappas posted raw numbers online, revealing the number of active employees paying into the system and the number of retirees collecting those dollars through the pension system.
In most cases, the numbers are lopsided, with more people collecting than currently paying into the system. In the city of Chicago, four pension funds are supporting 47,592 pensioners. The number of active employees paying into that system numbers 35,655.
Historically, it has been property tax rates that have borne the brunt of the pension-debt burden. Illinois lawmakers are continually tasked with deciding how to raise more revenue to pay down that debt, and property taxes have been seen as a steady form of income. Economists, however, believe that taxing commodities, which have relatively stable prices, will actually maximize revenue with the least reduction to the tax base.
For the moment, the way for Cook County property owners to deal with the constant crunch on their wallet is to appeal their property tax assessments to bring them more in line with the property value.