WBEZ | pensions

Illinois House takes first major vote on pension reform

Thu, 02 May 2013 17:35:00 -0500

The Illinois House of Representatives took a major vote Thursday afternoon on pension reform. Many lawmakers said the plan is critical to the future of state government.

Shortly before House members passed the latest pension plan by a vote of 62-51, Speaker Michael Madigan (D-22) spoke about the proposal’s importance to the basic functions of government.

“In my judgment, this is a critical action that must be taken now,” Madigan said. “Must be taken for future budget-making. Must be taken for the fiscal well-being and reputation of the State of Illinois.”

State Representatives Esther Golar (D-6) and Camille Lilly (D-78) voted present.

Illinois has the worst-funded pensions of any state in the country. It has nearly $100 billion in pension debt.

The bill, which passed with two votes to spare, includes measures like raising the retirement age and capping pay increases state employees get in retirement. One of the most controversial aspects of pension negotiations, a proposal that would shift the cost of downstate and suburban teachers’ pensions from the state onto local school districts, was not included in the House-approved bill. Madigan said he wants to address that issue in a separate bill.

Labor groups vehemently oppose the plan and say it goes against Illinois’ constitution. Because they have vowed to sue, Madigan said he left judges’ pensions out of this bill so that there would not be a conflict of interest when the measure is debated in Illinois courts.

Instead, the measure approved by the House would affect teachers, university workers, lawmakers and other state employees.

The potential lawsuit and constitutionality of the bill were also on the mind of House members as they debated the plan.

“We have no choice,” said House Republican Leader Tom Cross (R-97). “If I’m a state worker or if I’m a teacher, a university worker, I have every right to be mad as hell.”

This is the first major bill the full House of Representatives has approved on pension reform, but its future is uncertain in the Senate.

Senate President John Cullerton (D-6th) supports a different plan that would give retirees the option of getting state-funded health care coverage in retirement, or getting pay increases. Cullerton has argued that option meets the standards set by the state constitution. On Wednesday, Cullerton’s office released a statement saying labor leaders have, “offered a credible and constitutional plan for consideration.” But no details of that plan have been made public. Before Wednesday, labor groups had asked lawmakers to change how the state taxes different industries as a way to pay for pensions, but that idea has garnered little attention from legislative leaders and the governor.

For his part, Gov. Pat Quinn has praised both Cullerton’s pension plan and the bill the House approved Thursday. He has said pension reform is his top priority, but some lawmakers from both parties have been critical of the governor for not doing more to pick a side in the debate. In a statement after Thursday’s House vote, Quinn said, “Today’s action sends a strong message to the people and businesses of our state: Illinois is ready for reform and we understand that this reform is critical to building a brighter future for all.”

Tony Arnold covers state politics for WBEZ. Follow him @tonyjarnold.

As Illinois House committee approves pensions plan, attention turns to Senate

Wed, 01 May 2013 14:44:00 -0500

An Illinois House committee approved a measure Wednesday that would change how the state pays for its severely underfunded pension systems. The committee voted 9-1.

The bill still needs a majority vote in the full House of Representatives. But House Speaker Michael Madigan said his plan takes concepts that have already been debated and approved, and combines them into one package. It proposes things like raising the retirement age for younger state employees and reducing pay increases for retirees.

Still, the bill could face a harder vote in the state Senate.

A similar measure fell seven votes short. State Sen. Dan Biss, who first proposed some of the same concepts Madigan is now backing, said he thinks he can flip seven senators to support this latest pension proposal.

“There’s lots of discussions,” Biss said. “This is a complicated issue and a very emotional issue and people have lots and lots of questions. And I think if this bill does come over from the House, we’re just going to have to spend a lot of time talking through those questions and concerns.”

Senate President John Cullerton has been critical of Madigan and Biss’s proposal over legal concerns. He supports a different plan that would give retirees the option of getting state-funded health care coverage in retirement, or getting pay increases. Cullerton has argued that option meets the standards set by the state constitution, but the rival plan does not.

Labor unions have said they plan to sue if the legislature passes either plan. A coalition of labor groups say legislators should look at changing the tax structure, arguing cutting pension benefits is unconstitutional.

In a statement, a Cullerton spokesman said the Senate President is continuing to work on pensions and, “ideally that bill will be constitutional.”

Gov. Pat Quinn, meantime, has voiced his support for Cullerton’s plan. But in a statement released Wednesday, Quinn said, “I commend the nine members of the House Committee who today voted to address the biggest challenge facing our state.”

Illinois has the worst-funded pensions systems in the country. It also owes about $96 billion in pension debt.

Tony Arnold covers state politics for WBEZ. Follow him @tonyjarnold.

Pension costs projected to take up nearly a fifth of Illinois' general budget

Wed, 06 Mar 2013 05:00:00 -0600

Illinois Gov. Pat Quinn is expected to announce Wednesday that the state will spend almost a fifth of its general budget on pension payments next year.

In his budget address to state lawmakers, Quinn is expected to detail how he wants the state government to spend about $35.6 billion in the 2014 fiscal year. His budget office estimated the state will spend 19 percent of its general budget, more than $6 billion, on pension benefits alone.

“This is extremely painful presentation that we’re making,” said Quinn’s budget director, Jerry Stermer.

Stermer said that because more money would be going to pay teachers, judges and other state workers’ retirement benefits, there would be less cash for other state programs, including public schools.

Lawmakers have proposed some various measures to address the state's growing pension costs and $97 billion in unfunded liabilities, but legislative leaders and the governor have not come to an agreement.

Stermer said the governor is not proposing new taxes or fees in next year’s budget. After Quinn won election in 2011, he raised the personal income tax and corporate income tax. Those rates are scheduled to drop somewhat in 2015, although it’s likely to be a key topic of debate during next year’s race for governor.

Meanwhile, the state is also dealing with a backlog of bills in the billions, often paying vendors late. The governor’s staff wouldn’t say how he’s proposing to cut the money owed, but his budget office projects the total backlog will be cut from $7.5 billion to $6.8 billion next year.

New report shows Illinois' finances could go from bad to worse

Mon, 25 Feb 2013 05:00:00 -0600

A new report projects Illinois’ state budget will go from bad to worse if legislators don’t address some key issues. If things stay as they are, Illinois can expect to see more money devoted to rising pension costs and more bills go unpaid, according to a new report by The Civic Federation, a financial watchdog group.

The report says pension contributions are eating up money for other essential government programs and will go from $5 billion this fiscal year to $7 billion five years from now.

“Illinois is in a horrible financial situation,” said The Civic Federation’s Laurence Msall. “It is continuing to get worse and we’re at the breaking point where core government services will not be able to be funded if we are going to maintain the existing pension structure.”

Legislative leaders have not been able to agree on the best way to pay for state employees’ pensions. They have disagreed on everything from which plan is considered to save the most money, to the legality of certain proposals, since the state constitution says a pension cannot be “diminished or impaired.”

The Civic Federation’s report says another factor why the state is expected to continue to struggle financially is the personal income tax rate. Gov. Quinn raised it from three percent to five percent two years ago, but the rate is scheduled to go down in 2015. Corporate taxes were also raised to seven percent. Those are also scheduled to be cut in 2015.

The decision to keep the income tax rate where it is or cut it is expected to be a big part of next year’s governor’s race.

“We might not be able to make it to 2015 if the state doesn’t address the pension crisis and reduce that $97 billion in unfunded liability,” Msall said.

Msall’s report also details the consequences of the state’s financial problems. Illinois is expected to have a backlog of unpaid bills owed to vendors of $21.7 billion in five years if the pensions stay where they are and the tax rates are cut. The state has $7.8 billion in unpaid bills in fiscal year 2013.

Quinn is scheduled to give his budget address next week.

Illinois lawmakers fail to pass pension reform

Wed, 09 Jan 2013 05:00:00 -0600

Illinois legislators ended their session without addressing pension reform. Illinois Gov. Pat Quinn has said his top priority is to deal with the state’s $95 billion pension debt because it’s eating into the budgets of other state programs.

After pushing for a compromised deal for the last several days with no resolution, he offered up an unusual idea. Quinn said he wanted to create an eight-person commission outside the legislature to take on the pensions issue. Commission members would have the power to enact law.

"We have to take an extraordinary action to help break the gridlock," Quinn said while testifying before a House pensions committee.

Union leaders like Dan Montgomery with the Illinois Federation of Teachers quickly trashed the idea.

"For him to say, ‘OK, let’s create a system where I don’t have to sign a bill and it becomes law,’ why’d he become governor? No. He needs to be better than this," Montgomery said.

The committee idea never came up for a full vote before lawmakers adjourned.

Senate President John Cullerton says the new class of legislators who are sworn in Wednesday should take up the issue as soon as possible.

Quinn made repeated efforts over the past few days to encourage lawmakers to pass a plan that deals with the worst pension system in the country. But a meeting over the weekend between legislative leaders and last day imploring from the governor did not create a resolution.

Some of the hangups over pension reform include the constitutionality of any possible proposal, since many lawmakers believe labor groups will sue over any plan that calls for cuts in employees' pensions. Several suburban and downstate lawmakers also opposed a plan to shift the cost of teachers' retirements onto local school districts, saying it would increase local property taxes.

Committee considers Illinois pension commission

Tue, 08 Jan 2013 14:38:00 -0600

A House committee is considering a proposal to create a commission that could reform the public pension system without legislative input.

Pension-reform sponsor Rep. Elaine Nekritz called House Personnel and Pension Committee to a meeting Tuesday afternoon to consider an amendment to her bill.

She said earlier she didn't think she had enough votes to pass comprehensive reform.

The change would create an eight-member commission to come up with recommendations by April 30 for closing a $96 billion deficit.

It could enact those reforms with a majority of five votes unless overturned by the Legislature.

Gov. Pat Quinn told the committee the panel was like the federal commission that closes military bases.

He called the measure "extraordinary action" to help break the gridlock.

Quinn: Senate to reconvene to try for pension fix

Tue, 08 Jan 2013 11:15:00 -0600

SPRINGFIELD, Ill. — Gov. Pat Quinn says the Senate is coming back to Springfield.

The governor held a news conference Tuesday to urge senators to reach a compromise on pensions when they reconvene at 3 p.m.

Tuesday is the final full day of the lame-duck session.

Members of a House committee approved a proposal calling for more employee contributions and freezing cost-of-living increases.

The bill's sponsor, Democratic Rep. Elaine Nekritz, said Tuesday as she headed into a meeting with Quinn that it's an "uphill battle."

She said she was going to talk with Quinn about a possible vote on her legislation by the full Illinois House.

Quinn has previously voiced support for Nekritz's bill, but Tuesday he wouldn't repeat that support.

However he did reiterate that something needs to be done.

Pension proposals going up to the last minute in Springfield

Tue, 08 Jan 2013 05:00:00 -0600

The fate of a measure to reform Illinois’ pension system remains up in the air.

Illinois Gov. Pat Quinn has said repeatedly his top priority is dealing with the state’s pensions, the worst-funded in the country. He’s held countless press conferences and made the argument that pension costs take away money for other state programs.

House Republican Leader Tom Cross said Monday that proposals to deal with the pension funds have been around for two years.

“We’ve talked about these to a point where we don’t need to talk any more. We’ve gotta do this,” Cross said Tuesday before a House committee that debated the pensions issue.

That committee eventually approved a measure dealing with the issue, but it still needs the approval of the full House and Senate, which could be hard to do since the Senate is waiting to see what action the House takes and November’s election winners are sworn in Wednesday. Once the new members of the House and Senate are sworn in, all legislation starts from scratch.

Rikeesha Phelon, a spokeswoman for Senate President John Cullerton, said senators are “on standby until we see action from the House on pensions.” The Senate adjourned last week.

Several union leaders have voiced their opposition to many pension reform proposals, including versions passed in the House committee and the Senate, saying they’re unconstitutional and state employees shouldn’t be punished because the state didn’t pay its part for years.

Cinda Klickna is with the Illinois Education Association. She said her own father is a 95-year-old retired state employee, who has letters he wrote decades ago asking legislators to fund the pension system.

“He pulls out letters he wrote back in the ‘70s and ‘80s asking for the state to finally fund the pensions and here we are,” Klickna said after the committee vote Monday, addressing both the emotions that go along with the issue and how long it’s been since the state paid its part for retirement plans.

“I just find it immoral and wrong and the proposal’s just unconstitutional,” she said.

Legislators have continued to debate a menu of proposals to address the $95 billion pension debt and making the system sustainable going forward. Those plans range from increasing the retirement age to increasing employee contributions. But among the sticking points that remain to be resolved include finding a plan that could pass constitutional muster and a legal challenge that’s likely to come from employee unions.

In 2012, the Senate approved a plan that would force some employees to choose between receiving pay increases in retirement or getting state subsidized health care.

The plan approved by the House committee calls for a cut in employee pay raises in retirement. It also does not address one of the most controversial proposals involved in pension reform negotiations, which would shift the cost of downstate and suburban teachers’ pensions onto the local school districts.

Over the weekend, House Speaker Michael Madigan said those districts had been receiving a “free lunch” by not having to pay for their own teachers’ retirements. Both Quinn and Madigan had supported the cost shift proposal as part of pension negotiations, but several Republicans have said it would force local property taxes to increase and the cost shift proposal has temporarily been taken off the table.

With clock ticking, still no pensions deal after Illinois leaders meet

Sat, 05 Jan 2013 17:45:00 -0600

Despite meeting for two hours on Saturday, legislative leaders and Illinois’ governor were not able to come up with a compromised deal to address the state’s $95 billion unfunded pension obligations.

The political stalemate appeared to make some progress toward finding a solution on Friday, after House Speaker Michael Madigan said he was taking a controversial proposal off the table in an effort to pass a bill.

That proposal called for shifting the costs of suburban and downstate teachers onto the backs of local school districts rather than the state. Madigan said Saturday those school districts have been getting a “free lunch” for years. Many Republican lawmakers say shifting those costs would put a financial burden on schools and could force local property taxes to go up.

Madigan told reporters Saturday the closed-door meeting was productive, but no deal has been made yet.

“I’m just anxious to pass a bill,” Madigan said Saturday. “I think that we ought to find a bill that we can all agree upon and pass that bill. Unfortunately there are still differences among the participants and my recommendation is that we move beyond the differences and just find a bill that we can pass so that there will be some action taken on the question of funding for these pension systems.”

Madigan said he still thinks it’s possible to pass a deal before Wednesday. The winners of November’s election are sworn in on Wednesday, marking the start of a new session. If legislation is not passed by then, lawmakers would have to start the legislative process of passing a pension proposal from scratch.

Madigan said the main sticking points are not new issues. State Senate President John Cullerton has raised concerns that cutting pay increases in a state employee’s retirement is unconstitutional. Earlier in the session, the Senate approved a bill that deals with part of the pension systems, offering state employees a choice between cutting pay increases they would receive in retirement or receiving health care benefits.

Senate Republican leader Christine Radogno called Saturday’s meeting “marginally productive.”

Gov. Pat Quinn announced Friday that a “breakthrough” on pension reform discussions had been reached when Madigan said he would take the cost shift to local school districts off the table temporarily. Quinn has said reforming the pensions is the state’s top priority and that the costs of pensions are so great that it is forcing cuts to the funding of education and other state programs.

Talks on Illinois pension crisis end without deal

Sat, 05 Jan 2013 17:09:00 -0600

Discussions between Gov. Pat Quinn and legislative leaders on Illinois' massive pension crisis have ended without agreement even though at least one major sticking point has been set aside for now.

Democratic House Speaker Michael Madigan, however, says Saturday's meeting in Chicago allowed key players to better understand one another's positions. He says they will keep working toward a proposal to take to lawmakers before the end of the current General Assembly on Wednesday.

Madigan says he's "anxious to pass a bill" and remains willing to defer a decision on a proposal to shift pension costs for public school teachers from the state to local districts.

But he says other obstacles remain, including differences over cost-of-living adjustments for employees and retirees, and whether to require workers to contribute more.