Thursday, May 22, 2008

The puzzle gets another piece

The Senate unleashed its $16 billion pension deal tonight in a tense but brief hearing. The House did not include a pension package in its series of budgets approved yesterday, indicating a rough road ahead for the plan that the governor has tried for two consecutive years.

The governor achieved a $10 billion pension deal in 2003, and higher than expected savings resulted. This time, market forces change the equation a bit.

Sen. Don Harmon, an Oak Park Democrat, said the deal would take care of the next payment and reset a payment cycle set in 1995 for state contributions. The goal is to knock down Illinois’ $42 pension liability 11 years earlier than scheduled.

It’s “similar but not identical” to the plan floated in 2003. Gov. Rod Blagojevich secured a lower interest rate and generated money that could pay down the ballooning liabilities. But the plan had a twist. While it still ramped up payments in future years, the General Assembly allowed the governor pay the required amount that year and then skip $2.3 billion in state contributions in fiscal years ’06 and ’07.

Harmon said this deal would only go into the state's five pension systems and would not include a “pension holiday.” Instead, he said it would ease the budget deficit. “It’s less money we don’t have.” He also said it would result in a $55 savings over the life of the bond issuance and allow a more manageable and regular payment schedule through 2038.

Senate Republicans on the committee, including Sen. Bill Brady of Bloomington, said the state still has the same unfunded obligation, $42 billion, and adds to its bond debt that it still has to repay. Counter to Harmon, Brady said the proposal would undercut the state’s payment by $500 million. If the state did nothing, the schedule calls for a $3.3 billion payment next fiscal year. Under the proposal, Illinois would contribute $2.8 billion, Harmon said.

Tension mounted as vice chair of the committee, Sen. Michael Noland, an Elgin Democrat, kept trying to cut off debate to avoid dramatics. It didn’t work, and Harmon invited more questions. In the end, Republicans walked out of the room to protest the 15-minute debate on a $16 billion proposal.

The Taxpayers’ Federation of Illinois opposes the new proposal because it lacks pension reforms that the group has called for for numerous years. The measure also pushes back the ramped up payments until later and sparks concern when playing with a significant amount of state dollars in the stock market, said David Eldridge, the group’s legislative director. In other words, there’s no guaranteed savings that the state achieved in the 2003 deal.

Some common ground
By Patrick O’Brien
Earlier Thursday, a Senate committee moved the budget proposals for 69 state agencies, including the Department of Natural Resources and each statewide executive office. According to Sen. Donne Trotter, a Chicago Democrat and point person on the budget, most agencies would receive little or no increase over last year’s funding.

One notable exception is higher education. The House and Senate proposals are almost identical. State universities would receive a 2.8 percent increase, which follows years of stagnant funding or decreases.

The Senate’s higher education budget was a “very optimistic sign,” said Rep. David Miller, a Chicago Democrat. “There’s going to be some changes at the end, but we’re not simply starting from scratch.”

IDOT: It’s that bad
By Bethany Jaeger
The Illinois Department of Transportation will spend a majority of $10.9 billion on fixing existing bridges and repairing old roads during the next six years. It’ll spend a fraction, $633 million, on building new roads. Milton Sees, transportation secretary, said in a Statehouse news conference Thursday that lower-than-expected motor fuel tax revenues and increased costs of materials means state dollars buy less than they did a few years ago.

He said, it is that bad. “We continue to struggle with deteriorating roads, urban congestion problems and [miss] rural economic growth opportunities as a result of the situation we find ourselves in.”

The department has felt the effects of higher gasoline prices as drivers find ways to reduce their consumption, whether it’s by buying hybrid vehicles or just not driving as much, Sees said. And because the motor fuel tax is a flat amount per gallon, it doesn’t increase with the price of gasoline. “So as consumption goes down, our revenues decline along with that.”

According to Dick Smith, IDOT’s director of the office of planning and programming, the motor fuel tax usually generates about $1.2 billion a year. So a 1 percent decrease expected for the current fiscal year translates to about $12 million. The department expects only about 1 percent growth in revenues during the next six years, as well.

The $30 billion infrastructure program announced by the governor’s capital coalition Tuesday, would help, and Sees called it “doable.” (The six-year plan released Thursday does not depend on the approval of a pending capital plan.)

Sees said there is a specific list of projects that would be funded under a capital plan, but it’s a “working document that’s not ready for release.” He did say the projects would include adding lanes to relieve traffic congestion and building new interchanges along the state highway system. It also would provide some much-needed money for resurfacing projects that otherwise wouldn’t get attention in the six-year plan.

‘Pay to play’ may be voted on Friday
By Patrick O'Brien
The ethics measure that seeks to divorce state contracts from political contributions to officeholders may see a vote on the Senate floor Friday, according to Harmon, who also is sponsoring the reform package. He said Thursday night that he believes the plan would pass the House if it makes it out of the Senate first. A last-second change to include nonprofit groups cleared a Senate committee today, and Harmon said the bill won’t be further altered.

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