Budget postpones tax debate until after election

By Jamey Dunn

The Senate approved the budget bills passed by the House earlier this week, essentially delaying the debate over a tax increase or deep cuts until after the November election.

This session, lawmakers had the challenge of crafting a budget with about $2 billion less revenue because the temporary income tax increase will begin to step down halfway through next fiscal year. The only options seemed to be deep cuts, new revenue or some combination of the two. Democrats eventually presented a third option, which relies on borrowing from special funds and increasing the state’s backlog of overdue bills

Chicago Democratic Sen. Heather Steans, who sponsored some of the budget bills in the Senate, said that the state could make it through the entire fiscal year on the spending approved today. “This budget is a full-year budget that can be executed for a full year without requiring any sort of a revenue vote. No tax increase is required for this budget.” But she said that if lawmakers do not approve any new revenues before the end of Fiscal Year 2015, many programs, such as in-home care for the elderly, would have to be cut. “We are going to have a huge issue that we cannot contend with without either mass cuts or revenue.” Steans said that there are about $700 million in new projected budget pressures that “are not probably totally funded” under the plan.

Republicans accused Democrats of setting the state up for a budget emergency, so they can push through an extension of the tax increase after the election. “This is an irresponsible budget seeking to create a crisis because you failed at convincing the people this year that there’s a sufficient crisis to require a tax increase. So now, you’re taking another stab at creating a crisis by making this huge cliff,” said Sen. Matt Murphy, a Palatine Republican.

Democrats say that they picked the least harmful option that was politically possible. “This maintenance budget allows us to provide level funding for key priorities and services. The effect of the budget is to avert doomsday cuts by deferrals, borrowing and increasing our backlog of bills,” Senate President John Cullerton said in a prepared statement. “Admittedly, this budget reverses some of the progress that we have made in recent years. Since we passed the income tax increase in 2011, we have paid down $3.6 billion in old bills and fully funded our ballooning pension payments. We have paid off $8 billion in pension debt. We have saved billions with responsible budget cuts and that demonstrated that we can be good stewards of taxpayer dollars.”

They FY 15 budget relies on $650 million in borrowing from state funds outside of the general operating budget. It would flat fund most areas of the budget with a slight increase in K-12 education. It would give larger agencies some lump sum appropriations so that they can have the flexibility to try to patch any holes that might spring up. The budget bills:

• House Bill 6093 contains K-12 spending.
• HB6094 contains higher education spending.
• HB 6095 contains general operating services spending.
• HB 6096 contains human services spending and required spending, including pension payments.
• HB 6097 contains public safety spending 
• HB 3793 contains capital projects, including school construction, and about half of the back pay owed to state workers. 
• Senate Bill 220 contains budget implementation provisions 
• SB 274 contains the authority for inter-fund borrowing and lawmaker’s pay. A mechanism in the bill would keep Gov. Pat Quinn from being able to cut off legislative pay, a move he made to try and push lawmakers to act on pension reform last summer. The bill would also put a freeze on legislative pay increases. 

Gov. Pat Quinn called the plan “incomplete” in a written statement he released after the Senate passed the spending bills. “The General Assembly didn't get the job done on the budget. ... In March, I submitted a balanced budget plan that continued paying down the state's bills, protected education and public safety and secured Illinois’ long-term financial future,” the statement said. Quinn called for an extension of the tax rates in his budget address earlier this year. “Instead, the General Assembly sent me an incomplete budget that does not pay down the bills but instead postpones the tough decisions. I will do my job. I will work to minimize the impact of cuts in vital services while continuing to cut waste and maintain our hard-won fiscal gains. There’s more work to do to continue moving Illinois forward.” 

Steans and Park Ridge Democratic Sen. Dan Kotowski, who also sponsored budget bills, would not say if they intended to revisit the income tax rates after November. But they did say that they believe more revenue is needed. However, on the topic of the tax rates, Cullerton did not mince words. “In order to return to [the state’s] path of fiscal progress, we will have to bring revenues in line with our growing liabilities. While a vote on our tax rates has been deferred, rising costs and pressures will force the issue at a later date.” Cullerton has said that he has the votes in the Senate to keep the current income tax rates of 5 percent for individuals and 7 percent for corporations. But House Speaker Madigan said that he was a long way off from being able to pass an extension of the rates in the House. If lawmakers do not opt to extend the current rates, they will step down to 3.75 percent for individuals and 5.25 percent for corporations in January.

Republicans took issue with giving Quinn the power to sweep funds in an election year. They also cried foul over areas of spending in the budget, such as money going toward a summer jobs program to prevent violence. The governor has recently come under fire for the Neighborhood Recovery Initiative (NRI). The program was funded primarily from discretionary funding that Quinn could access. NRI was the subject of a scathing audit that found that the program did not use a competitive bidding process to select the providers and dole out grants but instead relied on recommendations from Chicago aldermen. Documentation from providers implementing NRI was seriously lacking and at least $2 million was never accounted for. Contracts for NRI were agreed upon just before the 2010 election and Republicans have accused Quinn of using the program as a “political slush fund.”

Democrats argued that the problems in the program have been cleaned up and that violence prevention continues to be an important priority. They criticized Republicans for not presenting their own detailed plan for coping with the loss of revenue in FY 15. “There’s no place to really pretend in this budget. It is what it is. It’s very straight forward it’s very clear,” said Kotowski of the plan. “It’s clear where the pressures exist. It’s clear the actions that we’re taking to live within the means already provided by taxpayers.”

In his traditional end-of-session floor speech, House Speaker Michael Madigan noted that lawmakers have been faced with many tough issues in recent years. “This has been a difficult session, a very difficult session. Over the last few years, nothing seems to be simple; nothing seems to be easy. It’s just one difficult complicated issue after another.”

The legislature is not scheduled to return for fall veto session until November 19th.

Roads and bridges capital bill
The Senate sent a “mini” capital bill with road and bridge constructions projects to Quinn’s desk. House Bill 3794 calls for $1.1 billion in construction spending, $1 billion of which would go to road and bridge projects included in IDOT’s 5-year plan. The remaining $100 million would go to local street repair projects.

The bill does not list projects because they would be determined by IDOT. The department would prioritize projects that are ready to go in the summer construction season. The money for construction would come from funding sources approved as part of the 1999 Illinois First capital program. Borrowing for the plan has been paid off, but the increased fees and taxes remain. The Senate approved the bill with no debate.

Senate waiting for House support on graduated income tax vote

By Jamey Dunn

Democratic leaders in the Senate do not plan to move forward with a graduated income tax proposal unless there is indication that plan could pass in the House.

Senate President John Cullerton said that he is supportive of the proposed constitutional amendment. But he said he plans to “wait and see” what the House does on the issue because it likely has less support in that chamber. A spokesperson for Cullerton later clarified that he would consider a vote if there was indication that the House would approve the measure.

Oak Park Democratic Sen. Don Harmon, who sponsors the amendment, reportedly planned to call it for a vote this week. Supporters of the amendment are almost out of time. For Harmon’s Senate Joint Constitutional Amendment Resolution 40 to make it to the ballot under the current legislative schedule, it would need to pass in the Senate tomorrow and in the House on Thursday. The final deadline to approve constitutional amendments is May 4, but as of now, both chambers are scheduled to wrap us session this week on Thursday.) Harmon was not available for comment.

Constitutional amendments require the backing of three-fifths of both chambers. House Speaker Michael Madigan told reporters last week that a progressive income tax amendment was “significantly short” of the support needed to pass in the House. The proposal has no public support from Republicans, so all the Democrats in the House would have to vote for it. Rep. Jack Franks, a Democrat from Marengo, is a cosponsor of a resolution opposing a graduated income tax. There is a graduated income tax amendment in the House, too. But it is not as far along in the process as the Senate amendment after it failed to make it out of the House Revenue and Finance Committee in March.

Cullerton said today that his chamber would also take a wait-and-see approach on extending the current income tax rates. “We have two different budgets that we are contemplating.” Cullerton said one version includes an extension of the current rates. The other would allow the tax increase to begin its sunset in 2015 and would require substantial cuts. He said that since Madigan is still working to get the votes for it in the House, a tax rates extension should start in that chamber. “We will wait and see which of the two budgets we have to work with.” When asked if Democrats could vote in favor of the cuts that would be needed to allow the income tax rates to go down, Cullerton said: “It will be difficult, but we have to pass a budget.”

As lawmakers head into the last month of spring session, which ends at midnight on May 31, Cullerton says he hopes that the support can be mustered to pass an increase in the state’s minimum wage. He said that he thinks there is broad backing among voters for such and increase. “Now, the question is whether or not we have the votes for it here.” Madigan said last week that he is also still working to round up the votes needed to pass a minimum wage increase. A possible plan B of putting the issue to voters through a nonbinding referendum has also been floated. If the majority of voters cast a ballot in favor of a minimum wage increase as part of an advisory referendum, it would not actually change wages in the state. But the results of such a vote might help those in favor of an increase in their lobbying efforts. “We’re going to try to see if we can pass the bill, and if we’re short maybe we need to get public input through a referendum question. That would be an alternative if we don’t have enough votes to pass it,” Cullerton said.

What to watch: budget edition

By Jamey Dunn

Illinois lawmakers have had a two week break from the capitol, but they are scheduled to be back in session on Tuesday. As those who watch the legislature closely know, the action typically doesn’t truly get geared up until this point. But soon enough we will be immersed in the blur of activity that is May at the Statehouse. Here are some things to watch for on the budget front.

The General Assembly has until midnight on May 31 to approve a budget with a standard majority. After that time, any bills passed require a three-fifths majority to have an immediate effective date. Crafting a budget is not going to be easy this year. The temporary income tax approved in 2011 is set to begin its phaseout in the second half of Fiscal Year 2015. For months, heads of state agencies, lobbyists, public university presidents and others have come before budget committees to lay out what they say would be the dire consequences of the cuts that would be needed if the tax rates drop. Mass layoffs, facility closures, threats to public safety, spikes in K-12 class sizes and deep cuts to programs that provide care to seniors or children, have all been cited in the doom and gloom presentations. 

Meanwhile, Republicans argue that the state’s budget outlook is being framed as worse than it really is. They say that Democrats are pushing a doomsday version of the budget to lay the ground work for making the temporary income tax permanent. “The Democrats’ approach this entire spring has been to try to create as dire a picture as possible,” said Palatine Sen. Matt Murphy. “You can make it a lot more plausible that you can fund core services and still allow the tax rate to go back down as the Democrats promised it would, but they don’t want people to see that. They don’t want that argument out there because they want to continue to get the money that they’ve been getting.” Democrats passed the increase without Republican support in 2011. It seems likely that if the want to extend the rates, they will have to go it alone again. House Speaker Michael Madigan told reporters this week that the votes aren’t there to pass it in his chamber. He said that extending the tax would be a “difficult role call.” “Every person in the legislature is going to be called upon to make a budgetary decision — either a reduction budget or an as-is budget or a slight-increase budget,” Madigan said. “And they’ll be called upon to vote for the money to support the budget that they want.”

Gov. Pat Quinn advocated for extending the current rates in his budget address. He also wants to give homeowners a $500 tax credit that he has dubbed property tax relief. Madigan and Senate President John Cullerton quickly backed the governor’s call for keeping the current rates.

A potential extension of the income tax rates is not the only tax talk legislators are going to have in the coming weeks. The sponsor of a proposal to allow the state to have a graduated income tax has said he plans to call his proposal for a vote next week. Oak Park Democratic Sen. Don Harmon’s Senate Joint Constitutional Amendment 40 would overturn the current provision in the state’s Constitution that requires Illinois to have a flat income tax. The plan would not set the rates for such a tax, but Harmon and other supporters have issued proposed rates framework. If the amendment makes it through both chambers, it would appear before voters on the general election ballot. But that seems unlikely. Harmon may be able to get the amendment through the Senate, but Madigan said that it is “significantly short” of the support needed to pass on the House. Two constitutional amendments — one that would voters from discrimination and another that would strengthen the role of victims in the judicial process — have already been approved by lawmakers and will appear on the November ballot.

Proposed tax changes relating to business in the state could also be on the way. A House committee has been focusing on the tax climate faced by Illinois businesses. The group has been taking testimony on the issue for months, but has yet to publicly present any ideas.

Before the break, a Senate committee approved a plan to change the way that the state funding is doled out to schools. Senate Bill 16 would focus more heavily on the financial need of districts. The proposal would also eliminate the individual block grant that is given to Chicago schools, something Republicans on the committee have supported. The plan would also require more spending transparency at the district level. The committee debate became heated when Republicans accused sponsor Sen. Andy Manar, a Bunker Hill Democrat, of rushing the process. The Illinois State Board of Education is working to produce numbers that would show how the changes in SB 16 would affect each school district. Republicans say that they do not want to vote on the plan until they have that information.

Manar said that lawmakers from both parties agree that the current funding formula does not work. “The idea that we can have a few premier school districts in the state that exceed every expectation ... and have an incredible number that lag behind and call that a win in the state system is not a win in my book.” The ideas behind the legislation came from a report complied by a bipartisan committee that spent more than a year considering the topic. However, Republicans say they were not involved in drafting SB 16. Manar hopes that there will eventually be bipartisan support for the bill. He says he introduced it when he did to spur debate. “We could have waited until the last week of May, negotiated behind closed doors, popped a bill out and then had a vote. That’s not the way to do this,” Manar said. 

A gaming expansion always seems to be on the table as the end of spring session nears. But getting it done is a difficult task. Putting together a bill that will make all the powerful groups involved happy, or at least not irate, is a balancing act, so is figuring out how to spread around the potential revenues in a way that will please or at least appease lawmakers. And even when gambling expansions have passed, Quinn has vetoed them. This time around, the governor has made some positive comments about expanding gambling. “You’ve got to have strong ethical standards, and I think they need to be enforced, and it has to be done by the independent Illinois Gaming Board,” Quinn told reporters in early April. “I think we have kind of ironed that out. I think we’re on the right path.” The governor has said in the past that he would not support an expansion unless the revenues went to fund education. 

Blue Island Democratic Rep. Robert Rita is sponsoring a bill that would allow for the creation of new casinos, including one in Chicago, and slots at horse racing tracks. However, when compared to past proposals, Rita’s bill would scale back the number of slot machines racetracks could have. Rita has another version that would only create a Chicago casino. The racing industry opposes both. It also seems that Chicago Mayor Rahm Emanuel will not throw his weight behind a Chicago casino plan at this point. Emanuel is echoing past statements from Quinn, saying that he will not focus on a casino until the city’s underfunded pension systems are addressed. The General Assembly already approved changes to the systems for city workers. Emanuel also wants changes to stabilize the systems for teachers, police officers and firefighters. Before they passed changes to the state’s pension systems, Quinn warned lawmakers not to be distracted by the “shiny” object of gaming legislation.

Check back for a guide on bills to watch as legislators make the final push toward the end of spring session.

Quinn calls for making temporary income tax increase permanent

By Jamey Dunn with Caitlin Rydinsky contributing 

Gov. Pat Quinn called on lawmakers to make the temporary income tax increase permanent during his budget speech today.

“The truth is, while we've taken some difficult steps to balance the budget, the issue of expiring revenue this year is a real challenge that will require another hard choice,” Quinn said in his speech to lawmakers today. Quinn presented a budget that he says reflects the severity of cuts that would be needed if the current income tax rates, which are 5 percent for individuals and 7 percent for corporations, were allowed to step down in 2015. Under current law, the rates would go to 3.75 for individuals and 5.25 for corporations half way through next fiscal year. The reduction would take more than $1.5 billion in revenues with it. Quinn also presented an alternative budget that would include revenue from extending the tax rates, and it is this second plan that the governor advocates for. “Our plan is specific, concrete and responsible. It balances the budget and doesn't shirk our responsibility to our veterans, to our children, to our working families and to our most vulnerable citizens,” he said. 

Quinn offered property tax relief and an incremental doubling of the Earned Income Tax Credit as potential sweetener that might help the income tax proposal go down with voters. Homeowners would lose their current property tax credit and it would be replaced with a flat $500 refund for each owner occupied property. Quinn’s budget office estimates that such tax relief would cost $1.3 billion annually. The current credit costs about $600 million. While some homeowners currently get a tax credit that is larger than $500, Quinn’s staff said that 92 percent homeowners would be better off under his proposal. Quinn’s plan would also increase the EITC from 10 percent of the federal credit to 20 percent at a rate of 2.5 percentage points per year. The increase would cost more than $200 million annually once it reaches 20 percent. Quinn and his staff are packaging his pitch to make the tax increase permanent as a reform of the state’s tax system. His proposal also included a five-year budget “blueprint” that calls for spending caps, a rainy day fund and cutting the state’s bill payment cycle down to 30 days.

The governor's Republican opponents say he is going back on the promise of a temporary tax increase. “Pat Quinn first promised the working people of Illinois he wouldn’t raise taxes by 67 percent. He broke that promise, taking away nearly a week's worth of pay for Illinois families. Then he promised his tax hike would be temporary. Today he broke that promise too and is doubling down on his failed policies,” Republican candidate for governor Bruce Rauner said in a prepared statement. “After five years of Pat Quinn’s failed leadership, we have record tax hikes, outrageously high unemployment, massive cuts in education and there’s still a giant budget mess in Springfield. It’s now or never to save Illinois. We can balance the budget without more tax increases, if we create a growth economy, and restructure and reform our broken government. That’s what I’ll do as governor.”

They claim that Quinn and other Democrats are trying to make the fiscal situation look worse than it truly is to justify keeping the current tax rates. So what people need to remember at the end of the day [is], it’s still a tax increase. Your income tax is going to go up from where it should have been come January 1,” Senate Minority Leader Christine Radogno said. She said that Quinn’s property tax relief plan is not all it's cracked up to be because it would eliminate the current property tax credit that homeowners already receive. So they would not get $500 in addition to their current break, but in place of it.

House Minority Leader Jim Durkin said after Quinn’s speech, “the Democrats who run this building do not tell the truth about taxes and spending.” He said that spending has increased in recent years. Quinn’s staff is quick to point out that the governor never made any promises about whether he would seek an extension of the tax increase. They say that Quinn has signed budgets with billions of dollars of cuts to discretionary spending, but overall spending totals have increased some years because fixed costs, such as the required payments into the pension systems, have gone up. His campaign issued a statement this morning claiming that Rauner’s “budget plan” would result in devastating cuts to education. Rauner has yet to give details on his vision for the budget, other than saying he wants to the tax increase to roll back and that he is not prepared to take the possibility of taxing retirement income off the table. Quinn said today that he would not support taxing retirement income or charging a sales tax on many “basic” services, such as haircuts.

In his speech, the governor tried to walk a fine line between highlighting the improvements he says have happened during his time in office and making the case that the budget situation is still unstable enough to justify hanging on to the current tax rates. “Illinoia is in stronger financial position now then we were five years ago because of the hard choices we have made,” Quinn said today. Time will tell if this strategy will resonate with voters. Not surprisingly, a recent poll from the Paul Simon Public Policy Institute at Southern Illinois Carbondale found that 60 percent of voters oppose making the tax rates permanent. However, the majority of respondents liked major state services and were opposed to cutting them. Voters were also opposed to taxing retirement income or increasing sales taxes. The only new revenue source that more than half of those polled supported was expanding gambling. 

Democratic lawmakers said today that they do not think voters are really aware of the progress that has been made in terms of the state's budget. “I think voters do not grasp how much progress has been made. It’s unfortunate to me that one budget address will not necessarily emblazon that in people’s minds,” said Northbrook Democratic Rep. Elaine Nekritz, who was one of the key players on recently passed changes to the state’s pensions systems. But she said that while voters may not be as aware of some of the things, such as pension reform and cuts to Medicaid costs, that have been done to help the state climb out of its budget hole, the bond rating agencies that determine the state’s credit rating do seem to have taken notice. “We are getting there. It took us a long time to get in, and I always said it’s going to take us a long time to get out.” Nekritz noted that the property tax relief in Quinn’s plan has the potential to be very popular with voters. “The number one thing I hear from constituents back home is (complaints about) their property taxes.”

The chairmen of House budgeting committees, which are considering deep cuts for their areas of the budget, said they were glad Quinn came out strongly for more revenue. “I have always not shied away from the revenue conversation so I am encourage that the governor wants to look at ways to bring new revenue or additional revenue to the state,” said Lewistown Democratic Rep. William Davis, who is chairman of the House education budgeting committee. He said that K-12 education is currently facing a $900 million cut. Davis said he supports the concept of coupling tax relief for low-income workers and homeowners with a call for new revenue.

Marion Democratic Rep. John Bradley, who is chairman of the House revenue committee, said that he does not think that an extension of the tax rates has enough support to pass in his chamber at this point. “That’s going to be a difficult issue. That was a tough vote before. So I think a lot of people will keep an open mind to it but that’s a long way from happening right now.” He said that lawmakers should be open-minded about Quinn’s ideas. “He threw it out there, and I give him credit for putting ideas out there. So now the legislature will move forward.”

Quinn’s proposal has the backing of the legislative leaders in his party. “I would commend the governor for his political courage and honesty,” House Speaker Michael Madigan told Illinois Public Television’s Jak Tichenor, host of Illinois Lawmakers. Madigan said that he “demanded” property tax relief be included in a proposal to make the tax rates permanent. “I plan to support the governor’s position on the extension of the income tax increase,” said Madigan. “If we wish to continue to provide the level of services which we’ve become accustomed to for education and other purposes, then the income tax increase should be extended.” However, Madigan said he still supports his own “tax on millionaires” to fund education. The proposal is a constitutional amendment that would place a 3 percent surcharge on any income over $1 million. Madigan said he expects that the tax issue will be “resolved” before the spring legislative session ends.

Bradley said that his committee plans to move ahead with Madigan’s millionaire tax proposal “right away.”

 “I think the governor made a really bold stand basically saying ‘we’re going to keep the taxes the way they are, but we’re going to give back a whole bunch of money in property tax relief,’” Senate President John Cullerton told Tichenor. He said the proposal takes the state’s high property tax rates into consideration while also deferring “draconian cuts.” Cullerton said he did not expect Republican support, which he called “unfortunate.”

Judging from the reaction to Quinn's speech from across the aisle, Cullerton’s prediction seems dead on. “The governor is more interested in making the argument that if there is not another massive tax increase that school children would be thrown into mobile homes and would be dying in the streets. That’s the governor’s arguments here. It’s an argument of hysteria. I think the governor, his first job is not to run for governor and create a campaign based on class envy, it’s to govern,” said Sen. Dale Righter, a Republican from Mattoon. He said that Quinn should do a line-by-line review of the budget to find savings. “I think he is going to discover in his own budget there are a lot of areas that he could save money and in then the words he speaks on lower income and middle income Illinoisans can actually come to prevision. Because he will find out he doesn’t have to take more money from families.”

Republicans put conditions on budget negotiations

By Jamey Dunn

On Monday, Illinois Senate President John Cullerton called on Republicans to help address a looming budget deficit as lawmakers craft the state budget for next fiscal year. Today, Republicans shot back with a list of demands.

Cullerton said at a Chicago news conference earlier this week that Illinois faces a nearly $3 billion shortfall for Fiscal Year 2015. He said several factors are coming together to create the shortfall. The temporary income tax increase will begin to step down in the second half of the fiscal year, taking an estimated $1.6 billion in revenue with it. Expenses such as Medicaid, the state’s annual pension payments and personnel costs are expected to increase. Cullerton asked Republicans to present ideas to address the shortfall.

“We want to work with the Democrats, but they seem to view bipartisanship as a one-way street, and its not,” said Senate Minority Leader Christine Radogno. “We have offered — we as Republicans — offered numerous solutions that have been disregarded, buried in subcommittee and frankly, at times, even mocked.”

 Republicans say the state’s budget problems happened while Democrats were in power, and now they are being asked to help clean up the mess. They say their suggestions have been ignored in the past, and now they have a number of conditions for working with Democrats on the budget.

The Republicans want:

• The temporary income tax increase to be allowed to phase out, as is called for under current law. 
• A proposal to amend the state’s Constitution to allow for a graduated income tax to be taken off the table. 
• The approval of a workers' compensation reform bill that includes a requirement that employees prove they were hurt on the job. 
• A prohibition on new programs and the expansion of existing programs in the FY 15 budget. 
• Attorney General Lisa Madigan to request that the Illinois Supreme Court speed up its ruling on the pension changes that were recently passed into law. 
• More aggressive implementation of the cost-saving Medicaid reforms approved in 2012. 

Radogno said Republicans plan to “insist that bipartisanship includes their votes on our ideas and not just the other way around.” She said lawmakers must do more than just produce a budget for this year. She says they must address long-term budget issues and make policy changes to improve the state’s economy. “There’s no budget that can succeed unless we fix the underlying economy in this state because we may have a one-year budget document that may take care of the next few months, but then we’re going to be right back in that crisis mode because we’re losing employers and we’re losing families.”

While the two caucuses held dueling news conferences this week, exchanges at a Senate budget hearing remained relatively subdued today. Some Republican members called Cullerton’s math into question, saying that the governor’s own projections do not predict such a large deficit. “Try was we might sometimes, saying a figure doesn’t make a figure factual,” said Mattoon Republican Sen. Dale Righter.

However, Chicago Democratic Sen. Heather Steans, said the figure is based on newer information than the governor’s budget office used for its projections. “I do think it’s clear we’re going to have budget challenges.” Steans, who is the chair of one of the Senate’s budgeting committees, said cuts would be necessary but that new revenue should also be on the table.

“I think we’re going to have a real interesting year,” said Sen. Mike Jacobs, a Democrat from East Moline. “We may have disagreement on how we got here, but it behooves us all to try to work toward a solution.”

Cullerton: Lawmakers must address $3 billion budget shortfall

By Jamey Dunn

Illinois Senate President John Cullerton today highlighted the challenges lawmakers will face as they try to craft a budget for the next fiscal year.

Cullerton said at a Chicago news conference today that Senate Democratic staff members have been running the numbers as budgeting hearings will begin this week in the Senate. “We find that Illinois faces a nearly $3 billion budget hole for this coming [fiscal] year, and if not corrected, this could decimate classroom funding, send college tuition soaring and erode all the financial progress that we have made in the last few years.” Several factors are coming together to create the shortfall. The temporary income tax increase will begin to step down in the second half of Fiscal Year 2015, taking an estimate $1.6 billion in revenue with it. Expenses such as Medicaid, the state’s annual pension payments and personnel costs are expected to increase.

Gov. Pat Quinn’s budget address was scheduled to take place this week, but the General Assembly voted earlier this month to move it to March 26. Quinn’s staff says he needs more time because he intends to present a five-year budget plan. Republicans called the move political because the new date falls after the primary election, when Quinn would know whom his general election opponent would be. Quinn is the presumptive Democratic nominee, but four Republicans are vying for the GOP nomination. Two of them, Bloomington Sen. Bill Brady and Hinsdale Sen. Kirk Dillard, are sitting legislators.

Before the vote, Cullerton announced that the Senate would begin hearing budget ideas this week. “Surely people who have been running for governor for five years have some idea about what their budget should be,” he said. “For those who are disappointed in this, February 19th is the day to have your budgets ready.” A joint hearing of the chamber’s two budgeting committees is scheduled for Wednesday.

Today, Cullerton said he hopes to jump start a “discussion” on bridging the budget gap, and he called on Republicans in his chamber to present potential solutions. “We need to solve this $3 billion hole in our budget in a bipartisan way,” However, Cullerton said there is “no easy way to do it,” and he dismissed proposals such as cuts to Medicaid that Republicans have made in the past. “That would ignore the fact that we’ve already done that,” he said. Lawmakers approved and Quinn signed into law a package of Medicaid changes and new revenue in 2012.“This Medicaid reform package that was done in a bipartisan fashion — Republicans and Democrats — nothing was left on the table, and so it’s not like there’s $3 billion in savings that we ignored in our Medicaid reform bill.” Cullerton said lawmakers from both sides of the aisle have made tough choices to manage the budget in recent years, including approving changes to pension benefits for public employees. “We’ve gone right at the nature of the problems, pensions and Medicaid, and we’ve cut them.”

He indicated that finding more to cut could be difficult, and any large spending reduction could result in slashing the state’s education budget. “We’ve already closed prisons, closed mental health facilities and other centers, cut payroll, head count is down thousands from years ago. So when someone says, 'Well, just eliminate the waste and fraud,' you have to cross-examine them and ask them what they’re really talking about.” While budget cuts have been made, the tax increase, which was approved with only Democratic support in 2011, also provided billions in revenue that helped Illinois partially climb out of the estimated $13 billion deficit it faced just a few years ago.

Republicans see this week’s hearing as another political maneuver in an election year. Senate GOP spokeswoman Patty Schuh said the hearing seems to be intended to provide the governor some “cover” for presenting his budget late. “Our members will be looking to see what the Democratic majority plans to do to keep the promises they have made.”

Quinn quietly signs pension legislation

By Jamey Dunn

Gov. Pat Quinn today signed sweeping public pension changes passed by lawmakers earlier this week. 

Hard-fought bipartisan compromises of this nature are usually signed with fanfare and speeches from lawmakers who helped make it happen. That was not the case today with Senate Bill 1. Quinn signed the legislation during a private ceremony in Chicago this afternoon.

SB 1 will reduce annual cost-of-living adjustments for retirees and base them on a formula that is tied to inflation. It will also require workers younger than 46 to work longer for full benefits. Some annual COLAs would be deferred for current employees upon retirement. The number of years an employee must skip the COLA is contingent on years of service. The plan caps pensionable salary at $109,971, but that number would increase annually based on inflation. The provision would not apply to employees who already earn more than the cap. Workers will contribute one percentage point less of their salaries toward retirement benefits. The law also allows pension systems to sue if lawmakers opt to skip out on the annual payment. (For a more detailed rundown on what the law does, see this post.) The proposal is projected to save $160 billion and fully fund the systems by 2043.

Quinn, who once said he was put on Earth to address the woefully underfunded pensions systems, issued a short statement thanking the legislative leaders, all the members of the pension conference committee and other legislative supporters of the bill. “Illinois is moving forward,” Quinn said in a written statement. “This is a serious solution to address the most dire fiscal challenge of our time.” 

While there were no public speeches, some legislative leaders took their victory laps in their statements, which were included in the governor’s news release. “The bill would not have passed without me. I was convinced that standing fast for substantial savings, clear intent and an end to unaffordable annual raises would result in a sound plan that will meet all constitutional challenges," House Speaker Michael Madigan said. “With today’s bill signing we have staved off a greater crisis,” Minority Leader Jim Durkin said. “I am proud many of the significant components are Republican ideas generated by the conference committee, and my predecessor through Senate Bill 1.” Former House Minority Leader Tom Cross had been a key player in pension negotiations over the years. However, he voted against SB 1. Cross left his leadership role in the legislature to run for state treasurer.

Senate Minority Leader Christine Radogno applauded the bipartisan efforts that produced the final compromise. “This is a major step forward in putting Illinois on the path to financial recovery,” Radogno said. “It is the result of bipartisan, bicameral negotiations, after a great deal of debate and discussions. It will demonstrate to the credit rating agencies and job creators that we are serious about turning Illinois around.

Senate President John Cullerton gave some credit to Quinn. “I applaud the governor for prioritizing this issue,” he said. “I look forward to working with him and all legislative leaders to ensure that we continue on this path of fiscal leadership and bipartisan cooperation.”

The measure will go into effect in June of 2014, but the next stop for the law will likely be the state’s court system. Pension benefits are protected by Illinois’ Constitution, and union leaders say the law violates that protection.

 “Gov. Pat Quinn has given hundreds of thousands of working and retired teachers, nurses, police, caregivers, first responders and others no alternative but to seek justice for retirement security through the judicial system. Contrary to his belief, every Illinois citizen loses today,” said a statement from the We Are One union coalition. “Senate Bill 1 is attempted pension theft, and it’s illegal. Once overturned, its purported savings will evaporate, and the state’s finances and pension systems will be left in worse shape. Our coalition has been consistently in contact with our attorneys, and today we directed them to prepare to file suit. We will challenge SB 1 as violating the Constitution and ask for a stay of the legislation's implementation pending a ruling on its constitutionality.”

Legislators approve changes to state's public pension systems

By Jamey Dunn

After years of debate and several failed attempts, the Illinois General Assembly passed changes today to the state’s pension systems for public employees.

After holding simultaneous floor debates, the Illinois House and Senate voted within minutes of each other to approve a new version of Senate Bill 1. The plan is the product of a special conference committee on pensions and negotiations among legislative leaders. Gov. Pat Quinn said he plans to sign the bill, which he called a “bipartisan victory for the people of Illinois.” Quinn, who voluntarily stopped taking pay until the bill was passed, said that after he signs it, he will look into picking up his back checks. “Today, this day, will always go down in history as the day that the people of Illinois through their elected representatives and senators took action for the future. The people have won. We have all won.”

The proposal is projected to save $160 billion over 30 years and fully fund the pension systems, which are currently underfunded by an estimated $100 billion, by 2043. It would reduce annual cost of living adjustments (COLAs) for current and future retirees. The bill would apply differently to employees and retirees, depending on how long they worked and which retirement system they belong to. The current COLAs are 3 percent compounding interest. Under the new SB1, the COLA would be determined by 3 percent of pension benefits or 3 percent of the product of years served multiplied by $800 for state employees or $1,000 for teachers and university employees. The COLA would be based on whichever number result is smaller. The numbers used in the formula, $800 and $1,000, would increase along with the Consumer Price Index. Some annual COLAs would be deferred for current employees upon retirement. The number of years an employee must skip the COLA is contingent of years of service.

Employees younger than 46 also would have to retire later. For each year an employee is younger than 46, an additional four months would be tacked onto the time he or she would have to work to receive full benefits. The proposal would also cap pensionable salary at $109,971, but that number would increase annually based on inflation.

The bill would reduce the employee contribution toward retirement benefits by one percentage point and allow the systems to sue the state if it does not make its required payment. However, lawmakers could vote to change the payment schedule and reduce the annual payment. The state would contribute 10 percent of the savings from the plan toward the unfunded liability starting in 2015. The state would also contribute an additional $1 billion after borrowing that was used to make pension payments in the past is paid off.

House Speaker Michael Madigan made his goals for pension changes clear during floor debate today. “We’re here today discussing the issue because of the cost, and what we want to do is get cost savings as a result of this bill.” Madigan said he did not call a union-backed proposal, Senate Bill 2404, for a floor vote in the House because it would not have produced enough savings. He said that the House had set the “high bar of achievement” when it passed an earlier version of SB 1 last spring. That proposal would have saved an estimated $163 billion. The plan failed to gain the needed votes to pass in the Senate. Madigan said that he was “severely criticized” for not allowing the SB 2404 to to be called in the House after it passed in the Senate. But he said today that he did not call it because he wanted to “shape the issue” and give people time to understand the difference in cost savings between the bills. He also wanted lawmakers “to understand that our goal is to achieve the most cost savings feasible as a result of the legislation.”

Madigan said that pensions had become “too rich” to be sustained, and that he and Republican leaders hoped to keep the savings from any new proposal near to those that would have been achieved by the previous SB 1. Madigan also said today that he believes COLAs, the biggest cost driver among the pension benefits, are not protected by the state’s Constitution. The speaker said that a smaller portion of the savings in the new version of SB 1 would be derived from benefit cuts. Under the old bill, almost two thirds of the savings were reductions, but under the new plan, the unfunded liability reduction would be split about half and half between cuts and additional funding.

Opponents argued that the issue is about more than the bottom line. “If this were only about picking the bill that saves the most money, we’d all pick the bill that saves the most money,” said Sen. Toi Hutchinson, an Olympia Fields Democrat. “It’s about taking people’s retirement benefits right when they need them the most, after they’ve worked hard and earned those benefits.”

Aurora Democratic Sen. Linda Holmes, the only member of the conference committee who did not support the bill, said that the plan was akin to theft. “I don’t know how there’s one person here with any understanding of business, with any understanding of contracts, who can sit there and say what we’re doing is right. This is wrong.” Homes and Hutchinson both said that the bill violates the state’s constitutional protection of pension benefits. That provision says: “Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”

Hutchinson said of the constitutionality of SB 1: “I’m not a constitutional lawyer. I’m really not. But I can read, and it’s in the Constitution.”

Supporters of the bill say that the reduction in employee contributions and the funding guarantee offer a consideration in exchange for the benefits that would be reduced. The idea behind their argument is that under contract law, a benefit could be reduced if something else of value is offered as a consideration for the reduction. However many argue — including Senate President John Cullerton at one time — that employees would have to agree to the swap for it to pass muster. Cullerton’s SB 2404 would have offered employees choices between COLA reductions or state-subsidized health care in retirement.

Not all who voted in favor of the law today say they are certain that the bill is constitutional. However, they say that the crisis is too big to ignore. “The legislative process involves compromise. When it comes to pension reform, a compromise was found at the intersection of policy and political feasibility. The General Assembly stumbled at this intersection for years. Now, it’s time to move forward and allow the courts to rule on the constitutionality of our approach,” Cullerton said in a prepared statement. 

Chicago Democratic Sen. Kwame Raoul, who was chair of the conference committee, said that if the Illinois Supreme Court did strike down the bill, the justices would likely give some indication in their opinion of what steps they think lawmakers could take on pension changes. “We have the worst unfunded liability in the United States of America, and we can’t continue to be cemented into a stalemate,” he said. “We cannot continue to be the embarrassment of the nation. We must act to steer our ship in the right direction.”

Madigan said he thinks the courts will uphold the bill. “Something’s got to be done. Something’s got to be done. We can’t go on dedicating so much of our resources to this one sector of pensions,” he said. The changes will apply to four of the five state pension systems: teachers, university employees, legislators and state government employees. Judges' pensions will not be affected under SB 1. 

Union officials say SB 1 goes too far and is unconstitutional. They maintain that SB 2404 was the best choice. “There’s no victory in a bill that will get tied up in court, no victory in harming the lives of teachers and firefighters and nurses to a far greater degree than is just and necessary,” said Dan Montgomery, president of the Illinois Federation of Teachers. “We feel it's blatantly unconstitutional, and so claiming it saves $160 billion is a disturbing illusion. It will save no money at all.” There is some debate about whether opponents will have to wait until the law goes into effect in June before they can file suit. But at least one union leader indicated today that a suit could come sooner than June. “We would have to wait until the governor signs it, and then we can file a suit at any time. And then we’ll do it when we’re ready and when it’s most appropriate,” Montgomery said.

Other opponents said that the state should completely scrap its defined benefits system and move employees to a 401(k)-type plan for future benefits. Advocates for such plans argue that only employee benefits earned to date are protected by the Constitution. Rep. Thomas Morrison, a Palatine Republican, said that because the state has the worst-funded pension system in the nation, lawmakers have go to “go big” on reforms to solve the problem.

Senate Minority Leader Christine Radogno said she is aware of the human toll that cutting pensions would take. “We're very cognizant of the fact that this is not just a numbers issue, but it’s a people issue as well.” During negotiations, she pushed for a provision that would allow low-income retirees to keep their current COLAs until their pensions reached $30,000. But she said that that the changes must be made to address the state’s fiscal problems. She said that if the pension issue is addressed, other concerns such as the state’s overdue bills, will be easier to tackle. She also said that making the systems solvent should provide employees and retirees some piece of mind, even if they are upset that their pensions will be reduced. “They will be able to count on the benefits once we pass this bill,” she said on the Senate floor.

Several opponents on the Republican side argued only that lawmakers should slow down the process. They said there was not enough time for them to fully understand the more-than-300-page bill or for the public to grasp what was at stake. Republican gubernatorial candidate Sen. Kirk Dillard of Hinsdale was among them.

The proposal has the support of all four legislative leaders and Gov. Pat Quinn. Nonetheless. speculation that it might not pass was still floating around earlier today. (Those assessments may have been caution from supporters and wishful thinking from opponents.) Two other Republican candidates for governor, Illinois Treasurer Dan Rutherford and venture capitalist Bruce Rauner, both opposed the measure in the lead-up to the vote. Republican U.S. Sen. Mark Kirk also panned the bill, dismissing it as gimmicks that would not solve the problem.

Republican legislative leaders acknowledged that the political hubbub made their attempts to get votes for SB 1 more difficult. Radogno said she was glad that 10 members of her 18-member caucus voted in favor of the bill. “That’s more than half. I’m very pleased with it. It was a contentious vote,” Radogno said. “The caucus was a microcosm of the opposition that we heard outside. You had the folks that were very much from the union districts and were not going to be for the pension reform no matter what. And then you had people that were very ideological, saying that this isn’t good enough; we ought to just not do anything and let chaos reign and then we can come in and do something better.” New House Minority Leader Jim Durkin said that his vote count changed throughout the day. He said that the influence from people such as Rauner, as well as lobbying from union members, probably played a role. But he said that getting the vote done now was likely key to its passage. “I quite frankly believed that if we did not pass a bill today, that we would not see one next year because then it would get caught up in the governor’s election and all the drama that goes into it every four years.”

Madigan, who is known for delivering votes at crunch time, said it wasn’t easy. “Well, this was difficult because of the strength of the opposition and the intensity of the calls and contacts generated by organized labor among the Democrats. On the Republican side, their problem apparently was some of the gubernatorial candidates thinking about the campaign rather than the seriousness of the issue.” 

Northbrook Democratic Rep. Elaine Nekritz, who has been working on the pension issue for more than two years, said that today’s vote might be the first in a series of bills to address underfunded pension systems. “I think that this will free up a lot of energy and capacity in the General Assembly to start focusing on the needs of the city [of Chicago] and they are significant and in may ways more immediate than the state’s need in terms of addressing the shortfalls in their pensions systems.”

Chicago Mayor Rahm Emanuel came to Springfield in 2012 and appealed to lawmakers for changes to the city’s pension systems. Many other municipalities are also struggling with underfunded pension systems. “There are police and fire pension systems around this state that are funded in the 10 [percent] to 20[percent] to 25 percent range that are very much at risk of being insolvent. Our work on pensions is by no means done. But this [vote] will let a lot of air back in the room to start addressing the other systems,” Nekritz said. Cullerton agreed. “Pension reform isn’t done. I am committed to building on our momentum and providing relief for our local communities facing similar problems. Specifically, it is critical that we turn our focus to the financial crisis facing the Chicago Public Schools’ pension system. I look forward to working with all leaders on this critical issue.”

Quinn plans to appeal order to pay lawmakers

By Jamey Dunn

A judge has ordered the state to cut lawmakers' checks after Gov. Pat Quinn used his veto pen to cut off their pay. UPDATE Friday September 27: Cook County Circuit Court Judge Neil Cohen denied Quinn's request that lawmakers hold off from getting paid during Quinn's appeal of his ruling. Quinn is appealing Cohen's ruling directly to the Illinois Supreme Court and plans to go to an appellate court to seek a stay to block lawmakers' pay after Cohen denied the move today. Comptroller Judy Baar Topinka started processing checks yesterday, so some legislators, who use direct deposit, may already have the money in the bank. UPDATE: Quinn's appeal of the stay was denied by the appellate court. 

Quinn cut out the money for legislators' pay because they failed to pass pension reform legislation before a deadline he set in July. “Admittedly, this is a drastic measure, but I think it’s absolutely necessary to get a wake-up call to the members of the General Assembly that the people of Illinois are tired of excuses. They’re impatient with the fact that the taxpayers pay when the General Assembly doesn’t do its pension reform job,” Quinn said when he vetoed the pay. He also stopped taking his own paychecks and vowed to do so until pensions changes reach his desk.

But Cook County Circuit Court Judge Neil Cohen ruled today that Quinn violated the state’s Constitution when he changed lawmakers’ pay during their terms in office. The legislative article of the Constitution states that “changes in the salary of a member shall not take effect during the term for which he has been elected.” Quinn said he intends to appeal the ruling. Quinn’s lawyers argued that the provision was intended to keep lawmakers from increasing their own salaries, and as long as he was reducing them, he was constitutionally exercising his line-item veto power. Cohen did not agree. He looked to the common meaning of change as defined by Merriam Webster’s and the New Oxford American Dictionary, which describes change as “to make or become different.” The governor asked the court to consider the intent of the framers of the 1970 Constitution, but Cohen declined to do that because, he writes in his opinion, there is no “doubt as to the common meaning of changes.”

Cohen ordered state Comptroller Judy Barr Topinka to issue lawmakers’ paychecks, including interest for the time they have gone without pay. Topinka said she disagreed with Quinn’s move when he made the veto. However, she said that until there was a court ruling or the General Assembly voted to override the veto, she did not have a legal way to pay lawmakers. Topinka said today that she will begin the process immediately. “In light of today's court ruling, I have instructed my staff to begin processing salary payments for Illinois lawmakers. I have consistently said action was required by the General Assembly or the court to authorize restoration of those payments. That has now occurred, and the comptroller's office will comply. Processing of paychecks for August, September and October begins today,” she said in a written statement.

Democratic legislative leaders House Speaker Michael Madigan and Senate President John Cullerton brought the lawsuit against Quinn. “Today, the circuit court vindicated the Illinois Constitution as Judge Cohen ruled to protect and preserve the separation of powers. Now that the governor’s actions have been answered by a court, I trust that we can put aside all distractions and focus on the goal of pension reform,” Cullerton said today in a written statement. “Pension reform remains our top priority. Even while this case was pending, the legislature never stopped working on this issue. I applaud the progress of the pension conference committee as its members shape a pension plan that maximizes our savings and upholds a fundamental standard of fairness.” A spokesperson for Madigan said in an email that the speaker does not plan to comment until the issue is resolved.

Quinn said in a written statement after the ruling that he would appeal. “I respectfully disagree with the judge’s decision,” he said. “On behalf of Illinois taxpayers, I intend to appeal the decision and seek a court stay that would prevent any legislative paychecks from being issued until this case is considered by a higher court.” His statement went on to say: “However, this case is about far more than just the governor’s constitutional authority to suspend the appropriations for legislative paychecks The reason I suspended legislative paychecks in the first place – and refused to accept my own – is because Illinois taxpayers can’t afford an endless cycle of promises, excuses, delays and inertia on the most critical challenge of our time. ... I will not accept a paycheck until a comprehensive pension reform bill is on my desk, and neither should legislators. Nobody in Springfield should get paid until the pension reform job gets done.”

Senate Minority Leader Christine Radogno said that an appeal from Quinn would be a waste of time and money. “It will be unfortunate if the decision is appealed and a further waste of taxpayer dollars. Pension reform discussions are moving along with committed legislators meeting regularly, negotiating and working toward a compromise. Illinois desperately needs pension reform. Yet another legal maneuver is a distraction we don’t need.”

Northbrook Democratic Rep. Elaine Nekritz, who has been a key player on the pension issue in the House, has said before that she thinks Quinn’s veto was counterproductive. She said that some lawmakers might fear that a vote on pension reform could look more like a vote to get their paychecks than one to address the troubled retirement systems for state employees. Nekritz said today that the conference committee, which has been working through the summer to try to craft a bill that can pass in both chambers, has done its best to ignore the pay issue. “It didn’t really impact our timeline or our work schedule or our negotiations.” Some Republicans are reportedly unhappy with the framework that the committee is considering, and Nekritz said she has decided to stop trying to predict when the group will have a finished product. “We’re still at the table. We’re still negotiating.” And she said that as long as that is the case, she is hopeful that an agreement can be reached.

Democrats insist party unity remains, even as tradition is broken

By Jamey Dunn

Illinois Democrats stuck to the script of party unity today during annual political events centered on the state fair, even as primary rivals gave dueling speeches and the state party chairman, House Speaker Michael Madigan, was nowhere to be found.

Madigan and Senate President John Cullerton recently sued Gov. Pat Quinn over his veto of the funds for lawmakers’ salaries. “It’s something that will be resolved in court. It’s in litigation right now. It’s a major constitutional issue. And we have a resolution probably in a month, and we’ll now what the court says,” Cullerton said this morning at the party's annual breakfast. Cullerton and Madigan have argued that Quinn’s veto of lawmakers’ pay sets a dangerous precedent that would give the governor too much power over legislators. But in his speech at the breakfast, Cullerton likened the dust-ups among members of his party to the arguments he and his eight siblings had as children. “You’re still in a family. There’s never any doubt that you’re all in it together. That’s true of the Democrats. We share the same goals and the same values.”

Madigan was notably missing from the day’s festivities. When asked about the absence, Cullerton said on his way into the event that he was not aware the speaker was not attending. Quinn brushed aside the idea that the powerful House speaker was snubbing him. “I don’t know why he’s not here. But I talked to him this week, and I think he’s fired up and ready to go for [the] 2014 [election],” Quinn said. A call to Madigan's spokesman for comment was not returned.

Musicians sit behind Quinn on the stage that has held party leaders in past years.

Sen. Andy Manar, a Bunker Hill Democrat, got a joke in about the pay freeze as he gave his speech this morning. “I saw some of my colleagues here this morning enjoying their breakfast, but I don’t think you got the memo from the governor’s folks that you’re not allowed to eat until there’s pension reform.”

But the digs that Quinn and primary opponent Bill Daley traded in each of their speeches were far from lighthearted. Daley painted Quinn as an ineffective leader and a candidate who can’t win the general election. “We have a pension crisis and a job crisis. Our most serious crisis is the crisis of confidence in Springfield’s ability to get things done.” Daley touted his experience and the connections he made while working with former President Bill Clinton and President Barack Obama “We need a leader who can call business people and labor leaders throughout the country and the world to build support for investment and job creation here in Illinois.”

Meanwhile, Quinn pointed the finger at “bankers” and “big shots” for wrecking the country’s economy. Daley has worked in the banking industry — job experience that he mentioned in his own speech.  Quinn closed his remarks with a populist appeal that has become one of his signatures on the stump. “There may be some things you haven’t agreed with me over the last four years on, but I think everybody agrees that I work as hard as I can every single day for the common good and the public interest, and that’s what we need in a governor,” he said. “We need somebody who understands everyday people, who knows how to work together with folks who don’t have lobbyists in Springfield, who don’t have necessarily big-shot friends. But they understand that they’re the heart and soul of America. They volunteer for tour military. They work hard on their job. They’re raising their kids. That’s what Illinois is all about, and that’s how we’re going to make the will of the people the law of the land.”

Quinn was greeted by enthusiastic applause and cheers from the crowd of Democratic county officials and other party members. In contrast, Daley was met with measured applause that came across as more of a courtesy than an endorsement. Daley said the reaction did not worry him. “It’s Springfield. He’s ... got a lot of people that work for the state,” Daley said after the speeches. “I think there may be a lot of people who obviously have known or worked for Pat, or work for Pat now or over the years, and they’re appreciative of those jobs.” He called Quinn unelectable in the general race. “Pat Quinn will not win if he’s the nominee of Democratic Party.”

Quinn said that many did not believe he could win in 2010, and he plans to use a similar strategy to pull off a victory next year. “I won an election in the primary in 2010, and I won again in the general election in 2010. There were a lot of folks who counted me out, but I won the election because I had everyday people on my side. And I’ve been doing that my whole life. That’s the only way you run an election: You organize your supporters and the people of Illinois and I think that we can come through again.”

Both Quinn and Daley could face another primary opponent. Chicago Democratic Sen. Kwame Raoul is considering jumping into the race. Raoul had planned to make a bid for Attorney General Lisa Madigan’s job if she ran for governor, but Madigan has decided to stay put. Raoul said people have been reaching out to him about the possibility of challenging Quinn. “There are a lot of people asking me the question, and so I have to consider those questions that are being asked, quite frankly, from all over the state.” He said the idea of running is new. “I didn’t enter this year, I didn’t enter this summer, I didn’t enter this month thinking that I was going to be running for governor or even considering running for governor.” Raoul said he thinks some people want more “options” in the primary.

Raoul and Quinn have publicly disagreed about some of Quinn’s recent headline grabbing moves, such as trying to use his veto pen to rewrite a bill dealing with concealed carrying of firearms. The General Assembly voted to override Quinn’s changes. “I like him as a person. I just wish he would embrace a different leadership style," Raoul said of the governor.

Raoul has been a key player in some of the biggest pieces of legislation to come out of the General Assembly in recent years, including the abolition of the death penalty and concealed carry legislation. He is now the chairman of a special committee working to hammer out an agreement on changes to public employee pension systems that can pass in both legislative chambers. He said that job comes first. “The top priority is pension reform. It’s the most important issue that our state is facing.”

Raoul said he does not want his political considerations to interfere with the committee’s work. “It’s a very delicate balance. You don’t want to do anything to undermine the work that we’ve done in a bipartisan, bicameral basis.” He said that there is a possibility that the committee’s timeline on presenting a recommendation to lawmakers could keep him from running for higher office. “There are time challenges, and certainly I anticipate the conference committee will be coming out with something soon,” he said. “We’ve moved the ball way forward from where we were as a legislature at large in a stalemate in June.”

Cullerton said that he has talked to Raoul about a potential bid for governor but is not encouraging him one way or the other. He said that he expects that neither he nor Madigan will endorse any primary candidate. But he said he does think that Raoul is up to the job. “Kwame’s very capable. He’s qualified to be the governor. There’s no question about it.” Raoul said he will not run unless he thinks he can be a viable candidate. “I wouldn’t put myself out there on a political suicide run.”

So far, Quinn has not received endorsements from any prominent Democrat — not even Lt. Gov. Sheila Simon, who will not be Quinn’s running mate for 2014. Simon’s own race for the state comptroller office got a little bit easier today when her primary opponent, Will County Auditor Duffy Blackburn, announced in his speech this morning that he was suspending his campaign and endorsing her for the office. There are no other Democrats running for comptroller, but Simon faces a difficult race against well-liked and well-funded incumbent Judy Baar Topinka.

Instead of giving more stage time to a group of Democrats who have not endorsed him, and potentially even his challengers, Quinn opted to break tradition at the Governor’s Day rally at the Illinois State Fair after the breakfast. The governor made a brief speech, and the rest of the time was filled with musical acts and entertainment. Historically, party leaders have given speeches at the event. However, their addresses were often just shorter versions of the remarks they gave at the morning event.  Quinn said that the political breakfast, which lasted about three hours today, provides plenty of time for public speaking. “I don’t think we need to double up on political speeches at the state fair,” he said. “I think it’s a great opportunity to have fun.”

Legislative leaders sue over pay freeze

By Jamey Dunn 

Democratic legislative leaders filed a lawsuit today to halt Gov. Pat Quinn’s move to suspend lawmakers’ pay until a pension reform bill is passed.

Quinn used his veto pen earlier this month to strike out the money for lawmakers’ pay from the budget. At the time House Speaker Michael Madigan’s public reaction to Quinn’s decision was not negative. He noted that lawmakers had made much effort to try to get pension legislation passed. “The governor’s decision follows my efforts, and I understand his frustration. I am hopeful his strategy works,” Madigan said in a prepared statement. Senate President John Cullerton called Quinn’s splashy strategy “unproductive.”

Today, both leaders are the plaintiffs in a lawsuit against Quinn claiming that his move to cut off paychecks is unconstitutional. In a letter to lawmakers, they called Quinn’s action “purely political” and an “unconstitutional attempt to coerce the legislature to comply with his demands.” The suit says that if the governor were allowed to cut lawmakers’ pay, it would break down the separation of powers between the branches of government because any governor going forward could hold paychecks hostage to extort votes from legislators.

“If the governor’s line-item veto is upheld, the independence of each member of the General Assembly will be forever compromised. Any governor will hold a trump card over a co-equal branch of government, attempting to bend the members of the General Assembly to his or her will with the threat of eliminating their salaries, which for some legislators is their only source of income,” the complaint says. “In this particular instance, Gov. Quinn has stated that his dispute with the General Assembly is over the lack of pension reform legislation. Next time, it may be gun control or abortion rights or tax policy.”

Quinn defended his veto again today. “My action to suspend the appropriation for legislative pay is clearly within the express provisions of the Illinois Constitution,” he said in a written statement. Quinn also is not taking a paycheck.

The Illinois Constitution does address the salaries of lawmakers, as well as those of constitutional officers and judges. The document says that salaries cannot be changed during their terms. From the legislative article: “A member shall receive salary and allowances as provided by law, but changes in the salary of the member shall not take effect during the term for which he has been elected.”

However, the Constitution also states that the governor may “reduce or veto any item of appropriation in a bill presented to him.” Comptroller Judy Baar Topinka said last week that she did not have the authority to pay lawmakers with out the appropriation, which Quinn had vetoed. She said that the only way legislators would get paid is if they voted to override the veto or a judge ordered that they get their checks.

Madigan and Cullerton likely do not want an override vote because continuing in the standard process would be tacit acknowledgement that the veto was legitimate and constitutionally sound. “The purpose of this lawsuit is to protect the independence of the legislature and preserve the separation of powers. It is our hope that the court will remedy this constitutional violation and that future governors will not feel empowered to use such coercive tactics,” they said in their letter.

Quinn said that instead of focusing their efforts on a lawsuit, lawmakers should be working on formulating changes to the pensions system that can pass in both chambers. “Today's lawsuit filed by two members of the Illinois General Assembly is just plain wrong. If legislators had put forth the same effort to draw up a pension reform agreement that they did in crafting this lawsuit, pension reform could have been done by now. Instead of focusing on resolving the state's pension crisis — which is costing taxpayers millions of dollars a day — legislators have chosen to focus on their own paychecks and waste taxpayer time and money on this lawsuit. Legislators should not be rewarded for an endless cycle of promises, excuses, delay and inertia on the pension problem.”

Members of a special committee that is working on pension reform say they are making real progress. However, they say that it may be mid-August or later before the have a proposal to present to the General Assembly at large. Barring immediate court action, lawmakers will miss a their first paycheck under the veto this Thursday. Credit Union 1, which serves state employees, has offered to loan lawmakers half of their $68,000 monthly base salaries for 60 days. Non-members would have to join the credit union and would be charged interest on the loans.

Quinn said he plans to fight the issue in court. “I will defend the interest of Illinois taxpayers in the courts. Nobody should be paid until the pension reform job gets done for taxpayers.”

Union leaders took the lawsuit as a chance to remind lawmakers that public workers’ pension benefits are also protected by the state's Constitution. “Today, legislative leaders sued over the constitutionality of Governor Pat Quinn’s line item veto of legislators’ salaries. We remind lawmakers that the entirety of the Illinois Constitution must be upheld for all citizens, including public employees and retirees — teachers, police, nurses, caregivers, and others — whose modest pensions are protected in Article XIII, Section 5,” said a written statement from the We Are One Coalition. The coalition called on lawmakers to support the union-backed proposal, Senate Bill 2404. “Legislators take an oath to support this constitutional provision — just as they promise to support all constitutional provisions equally. Lawmakers must not cherry-pick or apply a double standard in determining what parts of the Constitution should be defended. They shouldn't adhere to the Constitution only when it's convenient.”

Quinn to lawmakers: No pay until you pass pension reform

By Jamey Dunn

After threatening that there would be “consequences” if lawmakers did not pass pension reform this week, Gov. Pat Quinn used his veto pen today to cut the funding for their pay.

“Admittedly, this is a drastic measure, but I think it’s absolutely necessary to get a wake-up call to the members of the General Assembly that the people of Illinois are tired of excuses. They’re impatient with the fact that the taxpayers pay when the General Assembly doesn’t do its pension reform job,” Quinn said at a Chicago news conference today. He used a line item veto to remove the money for legislator’s pay and stipends from a budget bill.

A special committee is working to produce a compromise, and Quinn set yesterday as the deadline for that committee to produce legislation. He wanted lawmakers to vote on a bill while they were in Springfield yesterday to take up concealed carry legislation. Members of the committee say negotiations are going well. However, they are waiting on savings projections from each of the public employee pension systems so they can be sure of the impact of the changes they are considering.

“I think that the conference committee has made good progress. I don’t think that the governor’s actions today are part helpful in achieving the goal,” said Northbrook Democratic Rep. Elaine Nekrtiz, who serves on the committee. The group expects to get some of the savings projections on Friday and should have them all by next week. In the meantime, she said committee members continue to meet and work together. “The committee has not been shy about being in touch with each other seven days a week.” Nekritz said that Quinn’s move today is counterproductive because it puts the focus on the back and forth between Quinn and lawmakers instead of on the task at hand. “We’re talking about this rather than talking about pension reform.”

But Quinn said today that lawmakers continue to ignore the deadlines he sets for them and that there always seem to be excuses for not agreeing on changes to the state’s underfunded pension systems. “Over and over again, they blew through the deadlines, ignored those deadlines and didn’t put a bill on my desk. Up until now, the only ones who have had to pay when pension reform was not put on my desk by the General Assembly have been the taxpayers of Illinois,” Quinn said. “The state’s credit rating has been downgraded several times, due in part to the fact that there has been no progress on pension reform. These downgrades have led to higher interest rates when the state borrows for things like capital construction projects. They must have that alarm bell ringing in their ears, and the best way to do that is to hit them in the wallet.” Legislators’ next paychecks are scheduled for August 1. Quinn has also volunteered to forgo his own pay until he signs pension reform legislation. Quinn said that once lawmakers eat their vegetables on pension reform, they can have their paycheck desserts. “When they get their pension reform job finished, they’ll have my blessing on getting their pay.”

Because of the failure to pass pension changes, Quinn has accused lawmakers of not doing their jobs, which they take an oath to fulfill. But some lawmakers think that pension proposals that unilaterally cut employee benefits are unconstitutional. “I have voted against bills that I have felt are unconstitutional,” said Rep. Lou Lang — who voted against House Speaker Michael Madigan’s preferred proposal, Senate Bill 1. “One of the very first things you say in your oath of office is that ‘I will uphold the Constitution of the state of Illinois.’ ... We have a responsibility to fix this, but we have a responsibility to fix it credibly and constitutionally.”

Lang, a Democrat from Skokie, has put forth his own bill, which would extend the temporary income tax increase to help pay off the nearly $100 billion unfunded liability. His plan would also increase the retirement age and require employees to contribute more of their salaries to their retirement benefits. The bill has failed to gain any traction in the legislature. Lang agrees with Nekritz that the committee must know what savings any plan they propose would yield. “We can’t just pick a bunch of concepts and throw them together and say we solved the problem without knowing if we solved the problem,” he said.

Lang does not think Quinn’s move will make the process go any faster. “The issue of whether we get paid or not is not going to move to many legislators from point A to point B. I think it’s wrong. I think it’s silly. I think it’s political. But most importantly, I think it will not have the desired impact.” He said that instead of making threats and laying down punishments, Quinn should become more hands-on in the process and more specific about what he wants. Quinn has yet to present his own pension legislation and declined an invitation to appear before the conference committee this week. He instead sent his budget director, Jerry Stermer, who would not go into detail about what sort of proposals the governor would prefer. “You’re left with the impression that he’ll sign any damn bill that comes to his desk, and that’s not good government either,” Lang said. He said Quinn should treat the General Assembly, his coequal branch of government, as a partner with which to solve a problem. “He can be part of the fix, or not part of the fix. So far, he has not been part of the fix.”

Senate President John Cullerton agreed that the pay cut would not help the situation. “Lawmakers have worked hard this session. That work included passing a balanced budget, paying off hundreds of millions of dollars in old bills, cutting their own pay and numerous, serious bipartisan efforts to enact comprehensive pension reform,” Cullerton said in a written statement. “The governor’s actions today are as unproductive as yesterday’s arbitrary deadline. Responsible leaders know that unworkable demands will only delay progress.”

While many lawmakers predictably had a negative reactions the Quinn’s move, he did have some on his side. Oak Park Democratic Sen. Dan Kotowski took to Twitter with his support for Quinn’s action. “What governor in our state's history has ever volunteered to suspend his own pay? Way to lead Gov. Quinn,” he wrote.

Madigan put up no protest to Quinn’s plan. “I have been working for many months to pass real, comprehensive pension reform. During the first Democratic caucus of this General Assembly, I admonished our members that doing nothing or passing only a half measure on pension reform was not an option,” Madigan said in a written statement. “This issue must be solved in order to put Illinois on a more secure financial path. I, along with Rep. Nekritz, [House Minority] Leader [Tom] Cross and the members who supported House Amendment 1 to Senate Bill 1, have been the only lawmakers willing to take a difficult vote that would lead to solvency in our pension systems. The governor’s decision follows my efforts, and I understand his frustration. I am hopeful his strategy works.”

The General Assembly could vote to override Quinn’s veto, but Madigan would have to call the House back for that to happen. Cullerton said yesterday that he would consider overriding any budget vetoes from Quinn.

Cross had a  fairly lukewarm response to Quinn's announcement. “We’ve been committed and working on comprehensive pension reform for years. We will continue to work on a solution and to get it accomplished as soon as possible. We’ve filed bills, participated in committees and worked with both sides of the aisle. This session, we helped pass a comprehensive bill out of the House,” said a written statement from Cross’ office. “The governor’s action today is certainly not a traditional approach, but it is a strategy to come to a conclusion on pension reform. We remain committed to get the job done.”

Comptroller Judy Baar Topinka, who is responsible for cutting the state’s checks, said she is concerned about the legality of Quinn’s idea. “This morning, the governor notified my office of his intention to eliminate the salaries and stipends of members of the General Assembly,” she said in a written statement. “While I understand and appreciate the governor’s focus on pension reform, real questions have been raised about the legality of his action. Specifically, Section 11 of our state Constitution states that ‘changes in the salary of a member shall not take effect during the term for which he has been elected.’ Therefore, I have requested a legal review, which should be completed before lawmakers are scheduled to receive their next paychecks on August 1, 2013.”

Whatever the outcome, Nekritz said the committee will continue with business as usual. “My motivation to work on this issue is not tied to my paycheck. And I think I’ve demonstrated my willingness to put in the time and effort necessary to get things done,” she said. The group has agreed on a number of ideas, which they presented to the pension systems for the actuarial savings projections. Nekritz, who has been a key player on the issue for some time, sees this agreement on a framework by members of both chambers and both parties as a milestone. “It does feel different to me because we’ve never had all four caucuses agree on anything,” she said. “That is a place we’ve never been on this issue.”

Committee likely to mine old ground for pension compromise

By Jamey Dunn

On Wednesday, the Illinois Senate and House voted to hand over pension reform to a group of 10 legislators who will try to produce a compromise that can pass in both chambers. Several pension ideas have been floated in recent years, and components of those proposals will likely make their way into the committee’s recommendations.

“I think the healthy way to do this is to walk into the room and say, ‘We’ve got a lot of different things that have been Frankensteined together, and let us now examine all of them and see what we can assemble that can get 30 votes in the Senate, 60 votes in the House and achieve adequate savings to put the state on a manageable fiscal course,’” said Sen. Daniel Biss, an Evanston Democrat. Biss was chosen by Senate President John Cullerton to serve on the conference committee. He has been a key player in the efforts to pass changes to the state’s pension systems. However, Biss has been in favor of Senate Bill 1, a measure opposed by Cullerton but backed by House Speaker Michael Madigan. Supporters of SB 1 say that it creates enough savings, by reducing employee benefits, to ensure that the public employee pension systems would be stabilized for the foreseeable future. They argue that the state’s shaky fiscal situation and the nearly $100 billion unfunded liability would justify the Illinois Supreme Court granting lawmakers special powers to fix the problem, despite a constitutional protection for pension benefits.

SB 1 would:

• Increase the retirement age for employees younger than 46. Employees from 40 to 45 would see a one-year increase, employees 35 to 39 would see a three-year increase and employees 34 and younger would see a five-year increase. 
•  Require employees to contribute 2 percent more of their salaries. The increased contribution would be phased in over two years. 
• Cap pensionable salary at $109,000, the limit that is currently used for Tier Two employees. The cap would increase at the rate of one half of the Consumer Price Index that is set for urban consumers. Base the amount of pension benefits that would be eligible for cost-of-living adjustments (COLAs) on the amount of time employees worked. For each year of employment, $1,000 (or $800 for employees who receive Social Security benefits) of pension income would be eligible for a cost-of-living adjustment. For example, if an employee worked for 30 years, then $30,000 of his or her retirement benefit would see an annual COLA. Before employees reached their cap, they would receive a compounding COLA. After they reached the cap, they would get a flat annual increase. 

SB1 passed the House in early May with 62 “yes” votes, but it fell short of the 30 votes needed in the Senate. Only 16 senators voted in favor of the bill when it was called for a vote on the floor on May 30. Senate President Cullerton believes that SB 1 is unconstitutional because it does not offer employees anything in return for cutting their benefits. He worked out a compromise with the unions that would offer employees a variety of choices.

Under Cullerton's preferred bill, SB 2404:

• Option 1 Employees would give up their current 3 percent compounded cost of living adjustment for a flat 3 percent COLA that would be delayed for three years after retirement. In exchange, the employees would receive access to retiree health care plans, and future raises would count toward their pensions. They would also have the option of enrolling in a 401(k)-like plan to supplement their pensions. 
• Option 2 Under this option, employees would keep their compounded COLAs but would lose access to retiree health care, which is currently subsidized by the state. Their future raises would not count toward pension benefits 
•  Option 3 Employees would keep their COLAs and access to retiree health care, but they would pay 2 percent more of their salaries to their retirement benefits. Their COLAs would be delayed for three years after retirement. 

 Employees who are retired or who had given notice of their retirement by Jan. 1, 2013, would have two options:

• Option 1 Workers would keep the 3 percent compounded COLA but give up access to retiree health care. 
• Option 2 They could still have access to retiree health care and a 3 percent compounded COLA, but the COLA would be frozen for two years. 

Cullerton’s other appointees to the conference committee, Aurora Democrat Linda Holmes and Chicago Democrat Kwame Raoul, seem committed to the Senate president's focus on constitutionality. “You can’t just say: ‘Oh, screw the Constitution. Let’s just proceed without it,’” Raoul during Senate floor debate of SB 2404. He said of SB 1: “It’s not constitutional just because you declare it's constitutional. You’ve got to make an argument based on the law.”

But Cullerton’s plan apparently would save far less than SB1. There is also a level of uncertainty because they savings would hinge on which choices employees made. Madigan refused to call Cullerton’s plan for a floor vote in the House despite Cullerton’s insistence that the bill had the support needed to pass in that chamber. Cullerton argues that Madigan's SB1 will save nothing if it is tossed out by the Illinois Supreme Court.

“There needs to be some consensus around what makes it constitutional and a consensus around an adequate level of savings,” says Northbrook Democratic Rep. Elaine Nekritz, who is one of the members Madigan chose to serve on the conference committee. Like Biss, Nekritz has been a point person on the issue for some time and a strong supporter of SB 1. Nekritz said the House will likely never vote on Cullerton’s proposal, but she said, “That doesn’t change the fact that we all recognize that ‘just say no’ is not going to be an active response right now.” So the key for the committee will be finding something that satisfies Cullerton’s demand that employees be offered some kind of consideration for cuts to benefits, while still saving enough money to gain the backing of those who supported SB 1 — most important of all, Madigan.

The presumption is that to reach this compromise, the committee will pull largely from legislation and concepts that have already been debated. “You can cook the soup a number of different ways, but the ingredients are pretty limited at this point,” said Kent Redfield, an emeritus professor of political science at the University of Illinois Springfield.

Biss said he knows that the final product will likely not save the $187 billion that SB 1 is expected to cut. “My view is that there’s room to give on both sides. I think that we’ll need to land in the triple digits. I think if we land in the $125[billion] to $150 billion range, that’s likely to provide the level of fiscal relief that the state needs.” Cullerton this week indicated that he might be open to a model of consideration that does not involve a choice.

A proposal from the Institute of Government and Public Affairs at the University of Illinois would swap the current 3 percent compounded annual COLA, which is the largest cost driver in the pension systems, for a COLA that is tied to inflation. Under SB 2591, which a Senate committee took testimony on this week, the COLA would be one-half of the adjusted Consumer Price Index from the previous year. That means that in times such as recent years, when inflation has been low, retirees would receive small COLAs or sometimes no COLA at all. But in years when inflation is high, retirees would get larger COLAs.

The framers of this proposal say that other factors would help to negate the cost for COLAs in high-inflation years. “Linking COLA to inflation will also reduce the cost of providing the increases during periods of low inflation. Costs would increase when inflation is high; but the impact of this higher cost is mitigated by the fact that the state’s tax base, and thus the state’s tax revenue, rises more quickly when inflation is high,” said a report on the plan from the IGPA. The authors of the report say that this change to COLAs would constitute consideration and would make their plan constitutional. “The truth is that the current COLA provision offers no protection against high inflation — which is an essential feature of any good pension system. It is for this reason that we believe that annuity increases should be linked to some measure correlated with inflation,” the report says. “In our view, it would be constitutionally permissible to reduce the expected average future increase in exchange for the valuable insurance protection that individuals would receive during periods of high inflation.”

Cullerton did not indicate he was in favor of the idea this week, but did say that the plan is something to be considered. The proposal would also require employees to contribute an additional 2 percent of their pay toward retirement benefits. The legislation has the support of the public university presidents and is intended to be coupled with a bill that would gradually shift the future costs of employee retirement benefits to the universities. SB 2591 would apply only to the State University Retirement System, but concepts from the plan could be applied to the other systems for state workers, teachers and lawmakers. Cullerton also said this week that it is possible that different changes would be made to the different systems.

Other pieces may end up in a final plan, such as a funding guarantee that would allow the systems to sue if the state does not make its required annual contribution. Both SB 1 and SB 2404 had some version of a guarantee. Some who back SB 1 have even floated the idea of the guarantee being the thing that is given as consideration in exchange for benefit reductions. However, Cullerton has not warmed to this idea in the past. Recent proposals have also called for money that is currently being used to pay off borrowing that was made to make past pension payments to be redirected to pay down the unfunded liability once the bonds are retired. That could mean an additional $1 billion annually for pensions costs.

Redfield said that even though pension changes are now in the hands of the committee, in the end it will be legislative leaders who are still calling the shots. “Certainly, in terms of the Democrats, I don’t think Cullerton and Madigan have delegated their power to negotiate to those people. They can’t cut a deal independently of their leader. I don’t think that’s going to happen,” he said. “It still comes down to the leaders, and to a certain extent it comes down to one of the [Democratic] leaders backing down from where they were a week ago.”