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.”

After two credit downgrades in a week, Quinn calls special session

By Jamey Dunn

Gov. Pat Quinn has called a special legislative session later this month after Moody’s Investor Services made good on its threat to downgrade the state’s credit rating.

Quinn is calling for a special session starting on June 19. “Here we go again. Will two downgrades in one week be enough to convince the General Assembly that our pension crisis can't be ignored anymore? Time and time again over the past two years, I have proposed, asked and pushed members of the General Assembly to send me a comprehensive pension reform bill. Time and time again, failure to act by deadlines has resulted in the bond rating agencies lowering our credit rating, which hurts our economy, wastes taxpayer money and shortchanges the education of our children,” Quinn said in a written statement this afternoon. “Legislators and their leaders know what they need to do to return Illinois to sound financial footing.”

Today, Moody’s knocked the state’s rating for general obligation bonds down to A3 from A2 and gave the state a negative future outlook. Before the downgrade, Illinois already had the lowest rating of any state in the nation. Fitch Ratings dropped the state’s bond rating earlier this week. Both rating downgrades were spurred in part by the legislature’s failure to pass comprehensive changes to the state’s pension systems for public employees before the spring session adjourned last week. Lower bond ratings means the state may pay more interest for future borrowing.

Moody’s does not expect that a pension solution will be approved soon and doubts the General Assembly’s ability to make fiscal reforms in preparation of the scheduled roll back of the temporary income tax increase, which will begin in 2015 unless a vote is taken to stop it. “The Illinois General Assembly on May 31 concluded its session without addressing the severe pension liabilities that are the state's greatest credit challenge. Our rating now assumes the government will not take action to reduce the state's pension liabilities any time soon,” said an analysis from Moody’s. “The legislature's political paralysis to date shows not only the magnitude of Illinois' unfunded benefit liabilities but also the legal and political hurdles to legislation that would make pensions more manageable long term. Without significant reforms, substantial growth in both unfunded liabilities and in annual funding burden are likely in coming years. This trend may coincide with the expiration of most of the income tax increases the state imposed in fiscal 2011 to help cover pension costs.”

Moody’s announcement of the rating decrease was especially harsh on Illinois lawmakers. “An A3 rating, while very low for a U.S. state, is consistent with the General Assembly's inability to steer the state from a path to fiscal distress.”

Quinn’s call for special session comes with no indication that leaders have reached a compromise on pension reform. House Speaker Michael Madigan and Senate President John Cullerton fundamentally disagree on how to go about changing the pension systems for public employees. Madigan’s Senate Bill 1 was soundly rejected by the Senate during the last week of session, and the House did not take a vote on Cullerton’s SB 2404 before adjournment. Supporters of Cullerton’s plan say that model, which offers employees a choice in their benefits reduction, is constitutional. They argue that Madigan’s plan, which would unilaterally cut benefits, is not. Backers of SB 1 say Cullerton’s plan would not save enough to stabilize the pension systems, which have an estimated $100 billion unfunded liability. The House also approved a bill to gradually shift future pension costs to universities and community colleges, which the institutions agreed to. But the proposal failed in the Senate on the last day of session.

Republican legislative leaders are generally on board with Quinn’s call for a special session. “Our pension crisis is so severe that Illinois’ credit rating has been downgraded twice in one week,” House Minority Leader Tom Cross said in a prepared statement. “The sooner the Illinois General Assembly returns to Springfield to get the job done on pension reform, the better,” Senate Minority Leader Christine Radogno said she “appreciates” the call for session, but she has some reservations. “The governor did call today to tell me his intentions to call a special session. I appreciate the call — but I’m not sure what dynamics have changed in this pension reform discussion. Clearly there is a rift amongst Democrat leaders. Despite their supermajority status, they missed a prime opportunity to enact comprehensive pension reform. We hope that opportunity will still be there now that it will take a supermajority vote in each chamber to pass. Senate Republicans remain willing to work on advancing a pension reform plan that substantially solves the problem.”

When Quinn called a special session on pensions last summer, lawmakers came to the capital for one day, and no compromise pension reform plan materialized. Quinn then vowed to launch a “grassroots” campaign for pensions changes that produced an Internet ad campaign and the much-derided pension reform mascot, Squeezy the pension python. 

Democratic legislative leaders had less to say about the announcement. “The Senate president’s office is notifying members of the governor’s request to return to Springfield on June 19th,” said a statement from Senate President John Cullerton’s office. “Moody’s provides more damning evidence that we can’t afford a continual stalemate on pensions. It’s time to identify a reasonable compromise that can pass both chambers with a three-fifths vote.” Madigan spokesman Steve Brown said he has seen nothing that points to a new development on pensions. Madigan did not attend a meeting on pensions held by Quinn earlier this week. “The House will convene,” Brown said. “The House has passed two pretty decent bills: one that has pretty significant [pension] saving and one that ends the free lunch [of the state picking up pension costs for schools].” He said that it would be unlikely that the House would consider legislation that “does anything less” than the bills the chamber has already passed.

Union officials are pushing for Cullerton’s bill. “Moody's rating downgrade makes clear that the House of Representatives must act swiftly to finish the work of sound pension reform the Senate has initiated. Moody's has concerns over ‘legal and political hurdles’ and calls for a ‘credible, comprehensive long-term pension funding plan’ to be implemented. They have laid out the path that should be followed, and it clearly leads to SB 2404. SB 2404 is the only legal, comprehensive, and responsible pension funding solution. It will restore fiscal stability and solvency to the state’s pension systems,” said a statement from the We Are One Coalition.

During the special session, lawmakers may also address concealed carry legislation if Quinn decides to veto House Bill 183, which was approved last week. It is possible the governor would use his veto pen to write in gun control measures that were not passed, such as a high-capacity magazine ban or a ban on assault weapons. Legislators would likely vote to override such a veto.  And of course, as happens with many special session, the specters of a host of issues that did not pass during the regular session will likely be raised. Keep an eye out for a renewed push for the legalization of same-sex marriage and a new version of a gaming expansion proposal. However, Quinn could limit the session to a specific topic. Any legislation passed at this point would require a three-fifths majority in both chambers to go into effect before next year.

Illinois bond rating downgraded

By Jamey Dunn

Illinois was slapped with yet another credit downgrade today after lawmakers failed to pass pension reform before the spring legislative session ended at midnight last Friday.

Fitch Ratings downgraded the state’s rating from an A to an A- with a negative future outlook. Lower credit ratings can mean that the state will have to pay more when it borrows for long-range costs, such as capital construction. Illinois had the lowest rating of any state in the nation before the downgrade. The ratings are meant to reflect the risk to investors that buy the state’s bonds by predicting the likelihood that the state will repay its debts. General obligation bonds are at the top of the list to be paid under Illinois’ budget and are paid under an “irrevocable and continuing appropriation” from year to year.

The credit rating agency lists legislators’ failure to act on pension reform as a primary cause for the downgrade. “The downgrade reflects the ongoing inability of the state to address its large and growing unfunded pension liability, most recently through the failure to pass pension reform during the regular legislative session that ended May 31, 2013,” Fitch’s report said. “Fitch believes that the burden of large unfunded pension liabilities and growing annual pension expenses is unsustainable and that failure to achieve reform measures despite the substantial focus on this topic exacerbates concern about management's willingness and ability to address the state's numerous fiscal challenges.” Moody’s Investor Services warned on Friday that it also might downgrade the state’s rating if pension reform was not passed by the end of the session.

After this most recent credit downgrade was announced, politicians from both parties pointed to it as even more reason to come to a pension solution as soon as possible. “Today’s downgrade is no surprise. As I have repeatedly made clear to the General Assembly, this will continue to happen until legislators pass a comprehensive pension reform bill and put it on my desk,” Gov. Pat Quinn said in a written statement. “Every time the General Assembly misses the deadline, Illinois’ credit rating is downgraded, which hurts our economy, wastes taxpayer dollars and shortchanges the education of our children. If I could issue an executive order to resolve the pension crisis, I would have done it a long time ago. But I cannot act alone. Legislators must send me a bill to get this job done. I plan to meet with the speaker of the House and the Senate president tomorrow. I will keep fighting for pension reform until it is the law of the land.”

But it seems that each time there is movement toward a compromise, a fundamental dispute over the best way to accomplish fair and constitutional pension reform arises. Last spring, it seemed that Republicans and Democrats were close to reaching agreement on a bill, but in the closing days of the session, Democrats unveiled a provision that would have pushed future pension costs to schools outside of Chicago. The city already covers most of its pension costs. Republicans vehemently opposed the idea, saying it would increase local property taxes, and as a result, pension talks broke down, as did hopes for a bipartisan budget plan. Democrats eventually agreed to tackle the cost shift as a separate issue to break the stalemate. 

This year it was Democratic legislative leaders who did not see eye to eye. Speaker Michael Madigan and Senate President John Cullerton each have their own proposed legislation. And in the last days of the session, neither was willing to back down off his preferred plan. Supporters of Cullerton’s proposal say that model, which offers employees a choice in their benefits reduction, is constitutional. They argue that Madigan’s plan, which would unilaterally cut benefits, is not. Backers of Madigan’s SB 1 say Cullerton’s plan would not save enough to stabilize the pension systems, which have an estimated $100 billion unfunded liability. Madigan’s legislation passed in the House but failed in the Senate. Cullerton’s bill, which is backed by public employee unions and teachers' unions, was approved in the Senate but was not called for a House vote.

Union leaders today called on Madigan to bring Cullerton’s SB 2404 up for a vote. “Today's downgrade was totally avoidable. Before it adjourned, the House could have passed Senate Bill 2404 — a fair, constitutional, comprehensive pension funding solution,” said a statement from the We Are One Coalition of unions. “The House must now finish its work and pass SB 2404 as soon as it reconvenes. House members and Illinois citizens have been demanding a vote for weeks — the time is now.” However, Quinn supports Madigan’s SB 1.

Some are using the downgrade to argue that Quinn should call a special session on pensions. However, the last time the governor tried that tactic, nothing was accomplished. If lawmakers want to pass something that can go into effect in the next year, they will need the support of three-fifths of both chambers. Otherwise they will have to wait until Jan. 1, when the legislative clock resets and pension reform could pass with a standard majority.

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.

State pension reform postponed

Jamey Dunn

Backers of state-employee pension reform couldn’t get the support they needed to pass a bill before the General Assembly's spring session was scheduled to adjourn Thursday before midnight.

The process started to show cracks on Wednesday when Republicans refused to support a bill sponsored by House Speaker Michael Madigan. Among other things, Senate Bill 1673 would have shifted pension costs to school districts, universities and community colleges over the course of several years. House Minority Leader Tom Cross said  that would result in statewide property tax increases.

Madigan handed the bill over to Cross on Wednesday night. He said moving the bill forward without the cost shift that he supported came at the request of Gov. Pat Quinn. “I think that there ought to be a shift in responsibility in the normal cost so that going forward ... the people making the spending decisions will be called upon to pay the bills. Today it’s very simple: Spending decisions are made. The bill is sent down to the Teachers Retirement System. The state pays the bill. I think that ought to change,” Madigan said when he announced he was stepping away from the bill.

“I feel like … I’m the partner or the associate that was given a huge file the night before and [told] go try this case for me,” Cross said when he presented the bill in committee Thursday morning.“Try this jury trial tomorrow, and I have not been involved in the preparation of it. I have not put the case together, the file together. But nevertheless, here we are. We will proceed as best we can in all the amount of time we have, and we’ll see how things go.”

 Madigan made it known Thursday that he would not be voting for the measure, and Cross said Quinn was unable to rally enough support among fellow Democrats. Cross said 30 Republicans were willing to vote in favor of his version of the bill, which needed 60 votes to pass.

Democrats argued that having the state pick up pension costs favored wealthier school districts with higher payrolls. The state pays more for their employees' pensions, which are based on the heftier paychecks. “Does your proposal do anything to address that inequity?” Sen. Elaine Nekritz, who served on the pension reform working group, asked Cross during the committee hearing Thursday morning.

“If you have suggestions on that…we’re certainly open to having that conversation,” Cross said.

“We did. It was the cost shift,” quipped Nekritz, a Northbrook Democrat.

When it became apparent that the House was not going to vote on SB 1673, which would have affected state, university and K-12 employees, along with legislators, the Senate approved House Bill 1447, which would reduce benefits only for state employees and members of the General Assembly. However, many senators described the vote as “symbolic” and noted that there is still work to do on pension reform. “We’re all on the same track,” said Senate Minority Leader Christine Radogno. “I very much look forward to finishing the job.”

The vote in the Senate was 30-24 with one senator, Elgin Democrat Mike Noland, voting present.

The proposed reforms to the state employee and General Assembly pension systems did not contain the controversial cost shift, and Senate President John Cullerton said he called them for a vote because they had bipartisan support. “The other two systems, there still are some very contentious issues. We don’t have an agreement on them,” he said. Neither the Senate nor the House bill would have affected judges, who have their own state pension system.

While the Senate vote was more of a gesture than a genuine effort at change, it still upset public employee unions. “We are disappointed that the Illinois Senate voted in favor of legislation that attempts to shift the lion’s share of the burden for Illinois pension debt onto employees and retirees, who have faithfully contributed their share over their working lives. We do not believe that HB 1447 represents a constitutional or fair solution to the problem of pension underfunding,” Illinois AFL-CIO President Michael Carrigan said in a prepared statement on behalf of a union coalition. Carrigan said the unions are willing to continue working with lawmakers to find a solution.

Cross said that Quinn plans to call a special legislative session to take up pension reform after lawmakers regroup and negotiate some changes. “The last couple days, I think we would all agree, have gotten a little tense around here and emotional, and some things have happened, even that, frankly, I haven’t seen in a while. But nevertheless, it got that way. Pension issues and debates create controversy and a lot of emotion … and I think we’re realizing there will never be an easy solution on pensions,” Cross said on the House floor when he announced that he would not call SB 1673 for a vote.

 Cross said those who are negotiating pension reforms may need a little time to cool off before they give it another shot. “It got really ugly the last couple days,” he said. But he warned that Quinn should not wait too long to call lawmakers back to session and that the issue should be dealt with this summer and not pushed off until after the November general election. “We’re right there. I don’t think you want to lose that.” Legislative leadership in both chambers could also call a special session.

Quinn said that he plans to meet with the leaders next week. “As I have repeatedly made clear, inaction on pension reform is not a choice. We must fundamentally reform our pension system, and we must enact bold reform that eliminates the unfunded liability. We have made great headway on stabilizing our pension system, and we are very close to a solution, but we are not there yet,” Quinn said in a prepared statement.

 Madigan said he was disappointed that pension reform did not pass but congratulated House members on their other efforts during the session, such as passing the budget for the next fiscal year and voting to end a controversial legislative scholarship program. “We’re all very disappointed that we did not resolve the pension question before the legislature. However, I think we should all recognize that there were significant accomplishments in this session,” he told House members just before adjournment.

No middle ground found in pension talks

By Jamey Dunn

Gov. Pat Quinn signed legislation today that will add a level of oversight to the state’s pension systems, but it seems as if little progress has been made in negotiations over comprehensive pension reform.

Quinn signed Senate Bill 179, which creates the position of a state actuary within the auditor general’s office. The actuary will review estimates that each pension system makes about its returns on investments. “It’s an independent person who has that authority to make sure that the actuarial assumptions of each retirement system are correct. We want that not to be higher than it should be or lower than it should be. We want a second set of eyes to make sure that it’s accurate,” Quinn told reporters in Chicago today.

Supporters said the actuary will give lawmakers another source of information to draw upon when making decisions related to the pension systems or pension benefits. Lawmakers compared it to the budgeting process, where they have access to information from both the Governor’s Office of Management and Budget and the legislative Commission on Government Forecasting and Accountability. “[The actuary is] not going to go back to ground zero and redo the estimates. It really is a second look over the shoulder from the actuaries of the systems from the systems themselves.. … This really is just a second pair of eyes,’ said Chicago Democratic Rep. Barbara Flynn Currie, a sponsor of the bill. “We do the same thing in budget making. You can’t be sure what the next fiscal year is going to bring, so you make some kind of judgment call. And we just want to make sure that the judgment calls that we’re getting from the systems are as close to reality as the human mind can make them.”

At today’s news conference, Quinn leaned hard on Republicans today to accept a cost shift that would ultimately result in school districts paying the retirement costs for their employees. “We need to kind of close that discussion so we can put that final plan into the bill,” Quinn said.

Republicans called the provision a “poison pill” when it was included in a pension reform bill, and it was the issue that caused a stalemate on pension reform in the closing days of the spring legislative session. Republicans say that reform can be achieved without the cost shift. “We are, and obviously have been, committed to pension reform — the cost shift is not a vital component to this package that will save tens of billions of dollars in our unfunded liability,” Sarah Wojcicki Jimenez, a spokeswoman for House Minority leader Tom Cross, said in a written statement.

Republicans say the shift to local districts would result in property tax increases across the state as cash strapped schools try to find the money to cover the costs. But Quinn said the cost shift is needed so that school districts are accountable for the pension benefits their employees earn based on their salaries, which are decided by the districts. He said a shift that is phased in over as many as 15 years would not result in property tax increases. “When you look at the facts, it’s pretty clear that if you phase in a requirement that local school districts have to pay the future retirement costs of those who work for them — for those who they negotiate contracts with over a period of time — if you phase in that requirement of having to pay for their future retirement costs say over 12 years to 15 years, there is, I think, to my mind an imperceptible impact on property taxes. There is no impact on property taxes. And that’s just a fact.”

In the closing days of the session, Quinn backed a bill that did not have the cost shift and said the issue could be revisited later. But the measure did not find enough support in the House to pass. Quinn now seems to have lost patience with the negotiations that have been going on since lawmakers left Springfield at the end of the regular session. “All four leaders believe in the fundamental principle of accountability and responsibility. That’s just public finance 101, and I think everybody agrees with that. It’s implementing this phase in — that seems to be the key point,” Quinn said. “It’s beyond me how you could let this one issue hold up a fundamental overhaul of our public pension system that has been in the waiting for three decades. …We have a reasonable plan that, frankly, a lot of folks have worked so hard on this year, and it’s got one last provision to work on [and to] negotiate.”

Patty Schuh, a spokeswoman for Senate Minority Leader Christine Radogno, said that Republicans are not the holdup when it comes to pension reform passing. “We are and have been committed to pension reform in the state of Illinois. We’ve pushed it. We’ve been for a variety of proposals that are out there.” She said that Quinn has changed his tune about the importance of the cost shift. She noted that it was an “afterthought” in the governor’s own pension reform framework, which mentioned the cost shift but did not provide details on how it would be implemented.

 “The cost shift is not an integral part of this pension reform discussion. We have $60 billion to $80 billion in pension savings, true savings, on the table, and we ought to be capturing those savings and making the reforms that are necessary. Then at the appropriate time, we can have the discussion on school funding, and that’s where the cost shift discussion needs to be,” Schuh said. Both spokeswomen said that legislative leaders plan to meet with Quinn’s staff again on Thursday.

 Quinn today also said he is not pleased with cuts to human services in the budget lawmakers approved last month. He is particularly upset about reductions to the Department of Children and Family Services that he called “just not acceptable.” “I’m not happy with the work of the General Assembly in this area,” he said. “We will have more to say about that when we lay out our decisions on the budget, but we have to make sure that children come first in Illinois all the time.” Quinn said he plans to make his decisions regarding the budget before the new fiscal year begins on July 1. He can sign off on it, veto it outright or make reductions using a line item veto.

House members propose new plan for state employee pensions

By Jamey Dunn

A group of Illinois House members are pitching a new pension reform plan, which they say they hope will move stalled negations forward.

“There is absolutely no question that the pension issue is the most serious public policy facing the state of Illinois. ... I think there is a frustration, a genuine frustration, on the part of many members of the legislature that there has not been meaningful negotiation, meaningful progress on this most serious issue,” said Rep. David Harris, who has signed on as a sponsor of House Bill 6258. Harris is joined by 20 other House members as sponsors, including one other Republican “I can tell you that there are others on my side of the aisle who feel very strongly that this bill moves us in the right direction,” said Harris, a Republican from Arlington Heights.

 The measure would:

•  Allow cost of living adjustments on only the first $25,000 of a retiree’s pension, or on only $20,000 for those who receive Social Security benefits. COLAs would not kick in until a retiree turns 67 or five years after retirement, whichever comes first. 
• Increase the retirement age for employees younger than age 46. Employees from age 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. 
• Increase the employee contribution by two percentage points, which would be phased in over two years. 
•  Limit the amount of pensionable income to the Social Security wage base, which will be $113,700 in 2013, or the employee's current salary, whichever is greater. 
• Create a hybrid 401K-type plan, also called a cash balance plan, for newly hired teachers and university and community college employees, with employer contributions and a guaranteed return on investment rate. Employees unhappy with so-called Tier 2 pension benefit could opt into this plan instead. 

Supporters say that they cannot estimate how much the bill would save until they get actuarial analysis from the state pension systems. Sponsor Rep. Daniel Biss, who developed the cash balance plan, said the bill would eliminate the unfunded liability after 30 years.

Unlike other proposals, the plan does not present employees with a choice of keeping one kind of employee benefit, such as retiree health insurance, or giving up some of the value of their pension benefit. Senate President John Cullerton has in the past said that such consideration must be given to employees for a proposal to pass constitutional muster. “The Senate president is encouraged that members are identifying ways to capture the local share of pension costs from local school districts. However, the larger proposal appears to impose unilateral pension reductions without offering voluntary acceptance by participants. We appreciate the efforts of [Northbrook Democratic Rep.] Elaine Nekritz and her colleagues, but we will take a closer look at the plan to see if it can be squared with the pension clause [of the state Constitution]," said a written statement from Cullerton's office.

Nekritz, who is spearheading the new push for reform, said the group reviewed several opinions on the constitutionality of the changes to the system. “I don’t think anyone can know in advance what the seven supreme court justices will do,” she said. “I think all of us would agree that without some changes, Illinois will be sent into fiscal oblivion, and we have to avoid that.” Backers of the new proposal said that such a choice is confusing to employees and creates uncertainty about how much a plan would save because it would be determined by which option employees picked.

The new plan includes a provision that sponsors say would ensure funding from the state. The pension systems would be able to sue if the state did not make its required contributions. “Right now, there’s no mechanism for anyone to say to the state, ‘You must make that payment,’” said Nekritz. “This would be a mechanism to allow the state pension systems to go into court and enforce that payment.”

The measure would call on school districts outside of Chicago, along with universities and community colleges, to pick up pension costs going forward, but would not require them to pay for the billions in current unfunded liability. The employers would pick up those costs at the rage of .5 percent of payroll per year. Biss, an Evanston Democrat, said of the phase in: “It’s very slow. ... The slowest of any proposal we’ve seen so far.” But Republican leaders do not seem to be warming to a cost shift, no matter how gradual. “I have met with the primary sponsors and welcome their effort to offer new ideas on moving comprehensive pension reform forward,” said Senate Minority Leader Christine Radogno. “As the supporters of this latest plan themselves indicated, we need a thorough actuarial analysis to determine if it could actually solve the problem. Illinois is desperate for pension reform – for the taxpayers and for those who are going to depend on a retirement check. But it has to be comprehensive and it has to work mathematically. And it cannot allow the state to set benefits but send the bill to downstate and suburban homeowners.”

House Minority Leader Tom Cross did say that he thought the measure is a good step in renewing negotiations. “There is a lot of merit to this proposal,” Cross said in a prepared statement. He said he was glad that the choice between COLAs or subsidized health care had been removed.

A coalition of unions commended the group of House members for moving the “pension conversation forward” but took issue with the specifics of the plan. “We were not consulted in the development of this plan, but our preliminary review suggests that there are significant problems with HB 6258 that need to be worked through. The pension debt was caused by the state's failure to make actuarially adequate pension contributions, not by public employees, but like its predecessors, this proposal essentially balances the pension debt on the backs of teachers, police officers, nurses, caregivers and other public servants, both active and retired. It is also unclear at this juncture whether this proposal is constitutionally or actuarially sound,” said a written statement from the We Are One Coalition. “We intend to thoroughly analyze this proposal's elements and provide a more comprehensive response in the coming weeks.”

Gov. Pat Quinn’s reaction to the bill was positive but vague. “As the governor has said, our focus is enacting comprehensive pension reform by January 9,” said a written statement from Quinn’s office. “As we continue negotiations and discussion on how to achieve comprehensive pension reform as soon as possible, this latest bipartisan proposal sponsored by Rep. Nekritz is a welcome contribution. We have been and will continue to work closely with the legislative leaders and members of the General Assembly until we get the job done on pension reform.”

Nekritz and Biss said their goal is to get legislation approved before the current legislative session ends on January 9, but Nekritz said if that deadline is not made, it does not mean the end of the push for pension reform. “We don’t fall off a cliff on January 9, so we would be able to continue this discussion through the spring session.” Both said they are open to tweaking the bill and hope to get feedback before the legislature is back in session in early January. They said that they think the new plan has momentum in the House because it has grown out of suggestions from rank-and-file legislators. “In order to produce the kind of comprehensive solution that has enough different ingredients to make it acceptable to a majority of the House, I think it makes sense for it to bubble up from the people who are going to have to vote for it,” Biss said.

Democrats set aside potential roadblock to pension reform

By Jamey Dunn 

Democratic leaders in Illinois have agreed to table a controversial component of pension reform proposals, potentially opening the door for a renewed push when the House returns for its lame-duck session.

Gov. Pat Quinn announced today that he and House Speaker Michael Madigan are willing to back off the so-called cost shift,which has been a sticking point in negotiations. “He indicated that he was willing to defer any discussion on the cost shift regarding pension reform until a later date,” Quinn said of a recent conversation with Madigan. He said Democrats are not abandoning the idea; they are simply acknowledging that it was holding up progress on pension reform.

There are several versions of the cost shift. but they all would produce the same result: public schools outside of Chicago, universities and community colleges would eventually pick up the tab for their employees’ pensions. Chicago Public Schools currently pays for most of the employer costs of its workers’ retirement, and legislators from the city argued that it is unfair that the rest of the state does not. Also, they said school districts need to have some skin in the game because they now set the benefits that state government ends up paying. Under the proposal that was up for consideration, the state would be responsible for the state’s estimated $96 billion unfunded liability and schools would take over the future costs gradually over several years. But Republicans and some downstate Democrats say the shift would increase local property taxes because schools would not be able to afford the cost. The also say they are concerned that if the pension investment funds do not perform as expected, schools could be on the hook for future unfunded liability.

 Quinn called the willingness to set aside the shift a “major step forward” in negotiations. “I think we’re on the eve of collaboration where people of good faith of both parties — Democrat and Republican, House and Senate — come together and do what has to be done for the common good,” Quinn told reporters in Wheaton today. He encouraged members of the General Assembly to look to the hard-fought compromise that was recently struck in Congress over the fiscal cliff. “I think we saw in Washington [D.C.] with the debate over the fiscal cliff that people, in order to solve a problem, oftentimes have to make reasonable compromises, make changes in their original position in order to get an outcome that benefits the public. It was bipartisan in Washington the other night, and it’s going to have to be bipartisan in Illinois in the next few days.”

Quinn shared few details about the reform plan that is currently being negotiated with legislative leadership from both parties. “We’ve been working on this really pretty feverishly over the last several weeks,” he said. “There were some breakthroughs concessions and compromises, and that’s sort of how it is in life, you know. You’ve got to sometimes concede this or that for the time being at least and move forward.” However, he did say that workers could expect to see their contributions increase and their Cost of Living Adjustments decrease under the proposal. He also said he is confident that it will survive a constitutional challenge. “It’s a very carefully balanced plan.”

Northbrook Democratic Rep. Elaine Nekritz said that the plan would likely be inserted into Senate Bill 1673, which is scheduled for a hearing on Monday morning. Negotiations are continuing over the weekend, and Nekritz is optimistic. “I think the momentum is continuing to build,” she said. Nekritz added that she thinks it is possible to get a plan approved before the new legislative session begins next week. While Nekritz is encouraged by the new development on pension reform, she said that she thinks a compromise on the cost shift is not out of reach. “I still think that the cost shift is the right policy goal. I feel that very strongly,” she said. “I still think we could have found a middle ground on the cost shift.” Setting that issue aside, she said, “was not my decision.”

Republicans are also speaking positively about the newest plan for tackling pension reform. “Not everyone agrees with all the nuances. We don’t know the numbers yet for the bills, but my gut is telling me this is moving in a really significant direction in regards to getting this thing shored up once and for all,” said Rep. Darlene Senger, a Naperville Republican. She said she hopes that both chambers can approve it. “We’ve got a new set of legislators coming in, and it’s a complicated process. And to start this over again is really not necessary. We know what we need to do.”

Republican House Leader Tom Cross said that leaders will continue to talk through the weekend, and a measure that House leadership from both parties agree on could emerge by Sunday or Monday. The House is scheduled to return for its lame-duck session on Sunday. Cross cautioned, “I don’t bet on pension reform anymore because I have lost that bet in the past.” But he said he is “cautiously optimistic.” Cross said that if the legislature can pass a bill that substantially reduces employee benefits, and therefore reduces the cost of their retirement that would be passed on to schools, Republicans might be open to revisiting talks about a cost shift. “A strong benefits package reform bill diminishes in a lot of ways the potential damage that a cost shift presents.”

Quinn pushes forward on pension reform

By Jamey Dunn 

Gov. Pat Quinn continues to push for pension reform and says he will decide on a controversial energy policy bill tomorrow.

“It shouldn’t take that long really. It’s something that everybody’s talked about all year,” Quinn said. “We just cannot postpone this matter any longer. It isn’t an election calendar that we’re looking at here, I think some members may be in the legislature. But we’re dealing with the bond rating agencies.” He said that if lawmakers don’t pass pension reform soon, the state may face a downgrade of its credit rating. “If we don’t act, we’re asking for trouble.”

Lawmakers are scheduled to return for a special session to address pension reform on August 17. Quinn said the legislative pension working group met Wednesday and plans to hold more meetings leading up to session next week. “We’re pretty close, I think, on what needs to be done.” However, Quinn seems to be the only player in the negotiations who is taking such an optimistic view.

The governor is throwing his support behind legislation sponsored by Northbrook Democrat Rep. Elaine Nekritz, a member of a legislative working group negotiating pension reform. Nekritz filed her plan, House Bill 6209, last week. It is similar to a version of Senate Bill 1673, which was under consideration at the end of the regular legislative session. The major difference is that it would make a shift of pension costs from the state to colleges and school districts outside of Chicago more gradual. Many Democrats believe that schools should pick up the cost for their employees' retirement benefits, but Republicans argue that shifting the expense would mean layoffs and increased property taxes.

However, House Minority Leader Tom Cross continues to oppose the cost shift to schools “The bottom line is that a pension cost shift is exactly that — a cost shift, not reform. We remain in total support of comprehensive pension reform of our pension systems. We have been and are willing to work with the other legislators and the governor to come up with a comprehensive solution as soon as possible,” said a prepared statement from Cross spokeswoman Sara Wojcicki Jimenez.

Quinn said that it is “curious” that Republicans do not support the plan because “ a lot of the interest groups that tend to support the Republican candidates” back Nekritz’s proposal. House Speaker Michael Madigan reportedly plans to call another bill, HB1447, for a vote. The Senate passed the bill on the last day of regular session. It only applies to the General Assembly and state workers, so it dodges the touchy subject of a cost shift altogether. Quinn has continually called for a “comprehensive” plan that applies to all the pension systems in the state. “I think it’s important that we get a good start. ... I think it would be a good thing if the House addresses [HB 1447], but I also want them to address Elaine Nekritz’s bill, which is really a comprehensive bill that will cover everything. It think that’s the best way to go.”

On that issue, Cross and Quinn say they agree. Cross also backs a “comprehensive” solution that would affect all workers, including teachers.

Nekritz has another bill, HB 6210, which she said could be a “companion” to HB 1447. It applies to university workers, community college employees and teachers. The measure also contains a cost shift. As they stand now, Nekritz’s bills cannot be passed in a single day. But Quinn thinks there are other ways to get the job done. “There’s a lot of different parliamentary techniques you can use in order to get a vote done in one day. That may be one of the ways to go.” One option would be to put the language of the legislation into another bill that has already been moved through much of the legislative process. Nekritz said she introduced her measures to start a conversation but is uncertain of the likelihood of their passage. “I think the plan is to put this out for discussion purposes,” she said on Monday.

Both bills have immediate effective dates, so they would require a three-fifths majority to pass in 2012. While Quinn said that he wants reform as soon as possible so the state can start to reduce its pension liability, he conceded that it might not happen. “I would hope to have three-fifths of both houses voting [yes], but if it was a majority, that’s definitely significant progress. We may have to adjust certain of the bills if there’s only a majority available.” If a three-fifths majority cannot be found, the earliest any reforms could go into effect would be June 1, 2013.

Quinn also said he plans to make his decision on Senate Bill 3766 by tomorrow. That measure would override a ruling from the Illinois Commerce Commission and clear the way for the construction of a coal gasification plant on Chicago’s southeast side. Without the bill, Leucadia National Corp., financial backer of the project, says it will not go forward. However, the plant is opposed by several environmental groups and business organizations, who say it will increase the price of natural gas for customers statewide. “I’ve been working on that one. That bill — I have my stuff with me, my files. So tonight, I’ll look at it and make a decision by tomorrow. That’s a complicated matter. You’ve just got to look at it from top to bottom.” Quinn is in an awkward position because the Citizens Utility Board, a consumer watchdog group he founded, opposes the bill, but the governor has backed the Leucadia project in the past.

Quinn pushes pension 'compromise' as state's bond rating is downgraded

By Jamey Dunn

As the state’s credit rating takes another hit, Gov. Pat Quinn has thrown his weight behind a pension reform proposal backed by Senate President John Cullerton.

Standard & Poors downgraded the state's bond rating from an A to an A-, which means Illinois could pay more interest on the $500 million in general obligation bonds it plans to sell next week. S&P also gave Illinois a “negative” outlook for the future.

 “The downgrade reflects what we view as the state's weakened pension funded ratios and lack of action on reform measures intended to improve funding levels and diminish cost pressures associated with annual contributions,” S&P credit analyst Robin Prunty said in a written statement.

The report from S&P said the state could face a further downgrade if there is no progress on pension reform. “While it is unusual for a state rating to fall into the 'BBB' category, lack of action on pension reform and upcoming budget challenges could result in further credit deterioration, particularly if it translates into weaker liquidity.” The report said that the outlook could move to stable if lawmakers address the underfunding of the pension system, reduce the backlog of unpaid bills and address structural budget issues. However, the analysts at S&P appear doubtful that all of that can be accomplished. “We believe there is limited upside potential for the rating in the next two years, given the size of the accumulated deficit and the liability challenges Illinois faces, but will evaluate the state's progress in addressing key budget and pension challenges.”

After having no luck trying to get pension changes through the House during the lame-duck session earlier this month, Quinn today called on lawmakers to support Senate Bill 1. “We’re concerned obviously at all times about our credit rating,” Quinn told reporters in Chicago. “The credit rating agencies aren’t going to give us better marks until the legislature deals with Senate Bill 1 and gets the job done. And that’s really — I think — the message that the credit rating agencies are screaming at the top of their voice[s]. I’ve heard, and I think members of the legislature need to pay attention, as well.”

Cullerton opposed legislation under consideration in the House during the lame-duck session because he said it is unconstitutional. “The Constitution says you can’t unilaterally pass a law taking away people’s pension benefits. You have to ask them to do it contractually,” Cullerton said on the last day of the lame-duck session. He believes that to pass constitutional muster, some consideration must be given to workers for any reduction in their benefits. Legislation that passed in the Senate last year would have asked employees to choose between their compounded-interest cost-of-living adjustments or state-subsidized retiree health care. “Their bill unilaterally takes away people’s rights in exchange for nothing. That’s why it’s unconstitutional.”

Cullerton has pitched SB1 as a compromise. It contains the proposal that was being considered in the House. That provision would temporarily freeze cost-of-living increases, require higher contributions from employees, put a cap pensionable salary and include a guarantee that the state makes its annual required contribution to the pension systems. The bill also tacks on the proposal that Cullerton believes is constitutional. If the Supreme Court were to rule the House plan constitutional, it would become the law. But if the court rejected the House proposal, the Senate version could then be considered.

Northbrook Democratic Rep. Elaine Nekritz, who spearheads the issue in the House, said she is open to the idea of a bill that combines both concepts, but she thinks SB1 is not quite there yet. “I’m all for compromise and for finding a way to work this out,” she said. “The challenge is making them work together in a way that we can present a fair case to the Illinois Supreme Court on both.”

Even if a compromise that combines the plans can be reached, there is no guarantee that the court would rule either plan constitutional. The S&P report today took a pessimistic tone about Illinois realizing any pension savings in the near future. “While legislative action on pension reform could occur during the current legislative session and various bills have been filed, we believe that legislative consensus on reform will be difficult to achieve given the poor track record in the past two years. If there is meaningful legislative action on reform, we believe that there could be implementation risk based on the potential for legal challenges, and it could be several years before reform translates into improved funded ratios and budget relief.” Nekritz said of today’s credit downgrade: “We had to think if we didn’t take action, that this would happen. It’s distressing to me.”

New pension proposals emerge but still no clear solution

By Jamey Dunn

As a special legislative session on pension reforms draws near, one lawmaker has filed new legislation that she hopes will move negotiations forward.

Rep. Elaine Nekrtiz, who serves on a General Assembly pension reform working committee, introduced House Bill 6209 and House Bill 6210.

Gov. Pat Quinn called a special session for August 17. The Illinois House was already scheduled to be in session that day to decide the fate of Chicago Democratic Rep. Derrick Smith, who is accused of taking a bribe. A House disciplinary committee recommended that Smith be kicked out of his seat. Lawmakers plan to take that issue up for a floor vote. But Quinn also wants them to tackle pension reform, and he has called the Senate back on the same day in an effort to push the issue.

Nekritz’s bills are similar to Senate Bill 1673, a proposal she backed at the end of the spring session. Employees would have a choice of either giving up the compounding cost of living adjustments [COLAs] they receive after retirement or sacrificing their state subsidized retiree health care.

Republicans balked at SB 1673 because it would have required school districts, community colleges and universities to pay for their employees’ pension benefits. At present, those entities only pay part a portion of the cost, while the state picks up the bulk of the expense. Republicans said that such a shift would result in layoffs and increased property taxes. They dubbed the provision a “poison pill” that made them unable to support the underlying changes. Democrats say that the cost shift would require school districts to consider pension costs when offering raises. Chicago lawmakers also argue that it is unfair that the city covers the bulk of pension costs for its teachers while the state picks up most of the tab for suburban and downstate districts.

Nekritz’s new plan, House Bill 6209, would shift the cost more gradually than SB 1673. Under the new plan, schools would pay .6 percent of payroll in Fiscal Year 2014, with the cost stepping up by .6 percent each fiscal year through FY 2024. After that time, the cost would step up by .5 percent. The amount schools would have to pay would increase until they had taken over the entire employer cost for retiree benefits. “The concept of the longer phase-in on the cost shift was the results of negotiations, and it never has made its way into bill form,” said Nekritz, a Northbrook Democrat.  

The Senate dodged the cost shift issue by passing HB 1447 on the last day of regular session. The bill only applies to state employees and members of the General Assembly, leaving out teachers and university employees. Nekritz said that HB 6210, which would apply to teachers and university employees, could be a “companion” bill to HB 1447. HB6210 also contains the more gradual cost shift.

But both of Nekritz’s bills would require more than one day of session to pass through both legislative chambers in their current forms, and she is not expecting lawmakers to be in session for multiple days next week. “I think the likelihood of us staying over the weekend is not high.” Both of the bills also have an immediate effective date, which means they would require a three-fifths majority to pass in 2012. It is unlikely that proponents would be able to drum up such support on a controversial issue this close to the November general election.

Nekritz said her intent in presenting the bills was instead to push forward the conversation about pension reform. “The goal is to put this down and say: 'This is the latest thinking. How can we move ahead?'” However, the language in her legislation could be moved into a vehicle bill, which would allow for passage in a single day, and the effective dates also could be changed.

Quinn supports both of Nekrtiz’s bills. “The governor continues to feel that pension reform should be resolved as soon as possible. The governor feels that that there can be no more delay on an issue that is costing taxpayers $12.6 million a day and putting the state at risk of a future downgrade. That’s why he is calling the legislature back for a special session on pension reform, which will give them the opportunity to vote on this critical issue,” Brooke Anderson, a Quinn spokeswoman, said in a prepared statement.

House Minority Leader Tom Cross has reservations about even a gradual cost shift. The Teachers Retirement System may reduce its expected rate of return on investments, which could increase the system’s unfunded liability. A statement from Sara Wojcicki Jimenez said Republicans are concerned that if a change occurred, school districts and colleges would on the hook for a lot more than what is currently being discussed. “The bottom line is that a pension cost shift is exactly that — a cost shift, not reform. We remain in total support of comprehensive pension reform of our pension systems. We have been and are willing to work with the other legislators and the governor to come up with a comprehensive solution as soon as possible,” she said. Jimenez said that the pension working group plans to hold more discussion this week.

However, union officials say they have not been included in negotiations. “We had hoped that the failure of the various unfair bills introduced in the spring would provide an opening for our union coalition to once again sit down with legislative leaders, and particularly the governor, to get serious about solving this problem cooperatively. That hasn’t happened. There have been no such meetings,” said Anders Lindall, spokesman for the American Federation of State County and Municipal Employees, Council 31.

Lindall said these new bills would have negative effects on employees that are similar to the proposal considered at the end of the regular session. “The general concept is to force workers and retirees to choose between losing their health insurance and future pensionable compensation or seeing their COLA gutted. The cost-of-living adjustment is the provision that allows retirees on fixed income to keep pace with rising costs.” He said that unions are “willing to be part of a pension solution that is negotiated collaboratively.” However, Lindall said, “We are strongly opposed to any legislation that’s unfair and unconstitutional in putting practically the entire burden of the pension debt on the backs of employees, and in this case, [current] retirees.”

Quinn calls special session with no deal reached on pensions

By Jamey Dunn

Gov. Pat Quinn has called the General Assembly back into session to address pension reform, but it seems that legislative leaders are no closer to reaching an agreement.

Quinn announced today that lawmakers would be required to return to Springfield on Aug. 17. The Illinois House is already scheduled to be in session that day to vote on a recommendation from a disciplinary committee to eject Rep. Derrick Smith from its ranks. Smith is accused of taking a $7,000 bribe in exchange for helping a business seeking a state grant.

Quinn called on lawmakers to pass pension reform legislation this year, but negotiations fell apart in the final days of the regular spring session. Democrats argued that downstate and suburban schools, state universities and community colleges should pick up more of the cost of their employees’ retirement benefits. Chicago schools already pay most of their employee retirement benefits. Democrats argue that because districts are setting the pay upon which benefits are based, they should not be able to pass the pension bill off to the state. But Republicans said that shifting the costs to local districts when state funding to schools is also being cut would lead to layoffs and local property tax increases.

The governor made the special session announcement today when he addressed the City Club of Chicago. “We’ve accommodated repeated requests for study and analysis, and it’s pretty clear that the school districts of Illinois can have a stake in their own pensions. This is not a good situation, where a school district can negotiate a contract with its employees, then shift the retirement costs over to taxpayers who did not have a seat at the table. It’s about accountability,” Quinn told the Chicago-Sun Times. “We must have a system that’s accountable, and that’s what we’re going to have, and we’re going to get it done on Aug. 17.”

Talks among the four legislative leaders reached a standstill earlier this summer when no agreement on the issue was found, and it would appear that nothing has changed since those negotiations stalled out. “I’m not aware that there’s been any more progress in terms of conversation between leaders,” said Northbrook Democratic Rep. Elaine Nekritz, who was the representative for the House Democrats on a pension reform working group. She said that at this point, trying to predict what, if anything, the special session might produce would be pure “speculation.” Nekritz told the Daily Herald earlier this summer that she thought it was likely that pension reform would not pass until after the general election in November. When asked whether leaders were any closer to reaching an agreement, Steve Brown, spokesperson for House Speaker Michael Madigan said, “I’m not aware of anything.”

Republican leaders took a positive tone when reacting to Quinn’s announcement. “We are encouraged by the governor’s call for a special session on pension reform on Aug. 17. As many people know, we have been and continue to be supportive of comprehensive pension reform that solves the major crisis facing us today. The time to act has been upon us,” said a prepared statement from House Minority Leader Tom Cross and Senate Minority Leader Christine Radogno. “We are continuing to encourage Gov. Quinn to take a leadership role to get a comprehensive pension bill passed in the General Assembly. We will continue to be available to discuss this very important matter in the coming weeks.”

There are a few pension proposals out there that lawmakers could take up. Senate Bill 1673 would have shifted costs to schools, universities and community colleges. After it became clear that Republicans would not support that plan, Madigan turned control of the bill over to Cross, who added amendments to remove the cost shift. Also, the Senate passed House Bill 1447, which would reduce benefits for state employees and legislators only. The measure avoids the controversial topic of who would pay for school benefits. However, both bills have immediate effective dates so, they would require the approval of a three-fifths majority or amendments to change the effective dates. If the effective dates are changed, the earliest the legislation could become law is next June 1.

It is unclear whether House Republicans could get behind a plan -- or whether Quinn would sign it -- that only covers state workers and legislators and does not address the pension systems for teachers and university employees. According to Quinn’s budget office, those systems would account for the bulk of pension costs for 2013. Multiple attempts to contact Quinn's office for comment were not returned. The announcement for the special session also mentions Quinn’s plan, which was never drafted into bill form.

Meanwhile, Senate President John Cullerton is urging Quinn to call off the special session. He has volunteered to call back his members on August 17th in order to cut costs associated with a special session. “I share the governor's interest in resolving the lingering pension issues, but it makes no sense to spend thousands of taxpayer dollars when there is an easy, no-cost alternative,” Cullerton said in a prepared statement. He estimates that the cost of one day of special session would be about $40,000. If the Senate returns voluntarily, some travel costs would not be covered by taxpayers.

No pension reform for the 97th General Assembly

By Jamey Dunn

The Illinois House and Senate adjourned their two-year legislative sessions today without approving a pension reform measure, dashing the hopes of those who were striving to get legislation approved during the General Assembly's lame-duck session.

“We didn’t quite get there, so we are going to regroup and start up again,” said Northbrook Democrat Rep. Elaine Nekritz, who sponsored a pension reform proposal a committee approved yesterday but that was not called for a floor vote. She said there is no single component of reform that is holding it up. “It remains a range of issues that members are concerned about. Look, when you’re impacting people’s retirement security, it’s a tough vote, and people have a lot of different concerns about it. It would be great if we could have one thing we could focus on and get it corrected, but that’s not the way this works.”

In what many described as a Hail Mary attempt to get something done on pension reform, Gov. Pat Quinn pushed the idea of creating a special pension commission with the power to create a plan that would become law unless the General Assembly intervened. Under a proposed amendment to Senate Bill 1673, a special commission appointed by the legislative leaders would be required to present a plan by April 30 that would ensure that the pension systems were 100 percent funded by 2045. The proposal from the commission would become law unless both chambers voted to reject it.

“We have to take extraordinary action to help break the gridlock,” Quinn said when he testified in favor of the plan before a House committee today. Quinn said that failure to act would eventually result in the state’s bond rating being downgraded yet again. “We have to understand that this is an emergency.” Quinn compared the idea to the federal Base Closure and Realignment Commission, a federal entity that was created to recommend military bases for closure after it become clear that regional interests were making it all but impossible for Congress to approve closures. If the bill would have passed, Quinn said he would have signed it and then no longer would have been a part of the process. The bill would not have required that the governor sign off on the commission’s proposal.

But detractors questioned the constitutionality of such a plan, and it was not called for a vote in the House. “I myself thought that his late proposal was perhaps not the very best public policy pronouncement. I think there are constitutional questions about it,” Chicago Democratic Rep. Barbara Flynn Currie said after the House adjourned. Nekritz said she sponsored the measure, which Quinn brought to her, because she thought it deserved consideration. “Clearly, some dynamic needs to change. We have been working at this a very long time, and it’s been challenging to get the necessary votes on the bill, obviously. An idea to sort of shake that up, I think we had to look at that,” she said.

Currie said that those who have been working on pension reform should not take the days events as a failure. “It’s not as if any of this is new. This is very very tough. And I think there’s going to be no matter what we do if we do something there will be constitutional challenges,” she said. “I’m not embarrassed that we didn’t get it done today. I am embarrassed we haven’t done anything so far, but I am encouraged that we, as of yesterday, seemed really to have a renewed focus renewed energy renewed effort on the whole issue of pensions.”

Nekritz and newly sworn in Sen. Daniel Biss, an Evanston Democrat, said they each plan to introduce a pension reform plan in their respective chambers when the new legislative session starts tomorrow. “It’s not at all back to the drawing board,” Biss said. “We feel like we had tremendous momentum yesterday. We still have tremendous momentum today, and we want to carry that forward.” He said the legislation they plan to file would be nearly identical to a proposal, House Bill 6258, which more than a dozen House members brought forward in December. The plan a House committee approved Monday was based on that proposal. But Biss said he and Nekritz want to return to the initial legislation because he said it is a “good negotiation platform.” He and Nekritz both emphasized that they are open to changes to the legislation, and no ideas are off the table. “This issue is tough and complicated, and different people have different challenges with it, and so it’s really a matter of cobbling that majority together one vote at a time. And we’ll learn as we work with these new members one at a time what those issues are. And we hope it will be easier, and we know it won’t be very easy. But we know it can be done,” Biss said.

Senate President John Cullerton believes that the framework for HB 6258 is unconstitutional. “The Constitution says you can’t unilaterally pass a law taking away people’s pension benefits. You have to ask them to do it contractually,” Cullerton said. He maintains that some consideration must be given to workers for any reduction in their benefits. A plan that passed in the Senate would have asked employees to choose between their compounded-interest cost-of-living adjustments or state subsidized retiree health care. “Their bill unilaterally takes away people’s rights in exchange for nothing. That’s why it’s unconstitutional.”

However, Cullerton said he would be willing to call a bill that he believes is unconstitutional as long as it is approved in tandem with a plan that he thinks is constitutional. “I said that I would support that bill and work to pass it in the Senate as long as they had a backup.” Cullerton called on the House to pass a fail-safe proposal that was approved by the Senate. He said  if the Supreme Court were to rule the House plan constitutional, it would become the law. But if the court rejected the House proposal, the Senate version could then be considered. He said he plans to introduce a new Senate bill tomorrow that covers all the pension systems except judges. He said that bill would not include a controversial cost shift of the entire employer portion of pension benefits to downstate schools, public universities and community colleges. “For us to pass a bill which is unconstitutional and to pretend like we did some kind of reform with no backup, only to have it thrown out a year later — a year of lost time of trying to fix the pension system — to me is cynical.”

The 98th General Assembly will be sworn in tomorrow.

Pension reform passes both chambers

By Jamey Dunn

A pension reform bill to create a two-tiered benefits system for state retirement systems moved swiftly and successfully through both legislative chambers today with bipartisan support, propelled partly by a potential threat to Illinois' bond rating.

David Vaught, Gov. Pat Quinn’s budget director, said he was concerned that Illinois’ bond rating, which determines the interest rate the state will have to pay on borrowed money, could be downgraded again when the state seeks to borrow about $1 billion in April to fund the capital construction plan.

Vaught said pension reform could help Illinois avoid a slip in its rating because it would show investors that the state is taking steps to address its structural deficit and “the straitjacket of skyrocketing pension costs.” The state’s total pension liability is $126.5, billion, $77.8 billion of which is unfunded.

Moody’s Investors Service downgraded the state’s bond rating in December to the second lowest in the nation, just above California.

The changes to the pension system would only apply to newly hired employees and would not affect the benefits of anyone currently working for state entities.

State employees hired after the bill takes effect would have to wait until age 67 to get full benefits. They could start receiving benefits at age 62 with a 6 percent reduction for each year they draw their pension before 67.

An alternative formula, which lets employees retire at 60 after working for 20 years, would be limited only to Department of Corrections security workers, Illinois state police officers and state firefighters.

Benefits would be determined by averaging the highest paid consecutive eight years in an employee’s career. They are currently determined by the highest consecutive four years of the last 10 years. The amount benefits can be based on would be capped at $106,800, the threshold for Social Security benefits.

Survivor benefits, which vary throughout the different systems, would be set at 66.7 percent of the employee’s annuities.

One part of the bill does apply to current and past employees. If they leave one state job and go to another, they would not be allowed to collect pension benefits while getting a paycheck from Illinois. They would be able to collect both pensions once they retire.

“The General Assembly tonight took an important and vital step toward rescuing Illinois from fiscal calamity by passing public pension reform. The legislation approved by the General Assembly will stabilize the public pension system, protect current state employees and provide attractive pension benefits to future state workers,” Quinn said in a written statement. The governor backed a two-tiered plan that stalled last session.

The bill also exempts Chicago Public Schools from “ramp-up” of payments for the next three years. House Speaker Mike Madigan, who sponsored the bill in the House, said the school district asked the legislators to allow it to make smaller payments into its own pension fund and will use the extra cash to plug holes in its operating budget.

House Republicans opposed that part of the measure. Danville Republican Bill Black said it would set the system up for an “Armageddon-type situation.”

“I would really like to vote for this bill, but there’s one thing that the pension task force made very clear, that the most important thing you can do in pension reform is, you have to make the payments,” Black said.

Will Lovett, a lobbyist for the Illinois Education Association, said that raising the retirement age could drive talented teachers to neighboring states.

Henry Bayer, executive director of Council 31 of the American Federation of State, County and Municipal Employees, said that shorting pension fund payments in the past to shift money to other areas of the budget has landed the state in a crisis.

“The problem of our pensions is not a problem of rich benefits. The problem of our pensions is that we have not funded them year in and year out,” he said. “The solution to the crisis is to come up with the revenue to pay the $80 billion we already owe.”

Senate President John Cullerton, the sponsor of the bill, agreed that underfunding of the pension system is a big part of the problem, but added, “We are where we are.”

The changes in the proposal would not apply to local firefighters and police officers. Sen. Terry Link, a Waukegan Democrat, and Sen. Pam Althoff, a McHenry Republican, are in negotiations with both groups.

“Hopefully, we will see step one of that when we return from break,” Althoff said.

The bill that passed today rolled in a measure, passed unanimously by the House last week, which makes changes to the retirement benefits of future Illinois judges and General Assembly members. The proposal also requires judges and lawmakers to wait until age 67 if they want to collect full benefits.

Senate Republicans split on 'partial' pension reform

By Jamey Dunn

Republican legislative leaders predict little will come of tomorrow’s special session on pension reform.

House Speaker Michael Madigan said yesterday that any hope that a bill will pass lies with a meeting scheduled tomorrow between House Minority Leader Tom Cross and Gov. Pat Quinn.

Cross called Madigan’s remarks “disingenuous” and said all four legislative leaders have been invited to the meeting. “Let’s quit the games. This is kind of the old Mike Madigan school [of thought] We’ve read the book. We’ve seen the movie. This a problem that we all need to solve, and everyone needs to be an adult. Everybody needs to get in a room and work it out. I think we should have been in a room working it out weeks ago. We didn’t. We’ll be there tomorrow. We’re willing to stay as long as it takes,” Cross said. “This is very serious. That approach that the speaker used is really one of the reasons we’re in this mess. It’s politics after politics after politics.”

Cross has said that Quinn should keep lawmakers in session until a solution can be reached. Cross does not support any of the pension proposals that are likely to be up for consideration tomorrow. Madigan yesterday said House Bill 1447, which the Senate approved, would be “progress.” That measure would only apply to state workers or members of the General Assembly. Under the proposal, employees and retirees would have to choose between keeping either a 3 percent annual cost-of-living increase based on compounded interest or state-subsidized health care benefits. Current employees who choose to keep the compounded cost-of-living adjustment would also not be able to factor any future raises into calculating their pension benefits. But Cross said he will not support a plan that leaves out teachers and university employees. “We believe that we need to do something substantive, and we need to do something real, and this nibbling around the edges and then claiming, ‘We have pension reform and that we fixed it’ again is an old playbook. We saw it with campaign finance [reform]. We saw it with workers' compensation. We want something real. I think we have one shot at it.”

Senate Minority Leader Christine Radogno originally voted in favor of HB1447 but backed away from the proposal today. “When it was passed, we were pretty clear that we thought that it was inadequate in terms of the fact that it only covered two of the five systems,” Radogno said. She cited concerns over estimates that could put the unfunded liability pension at a higher figure than the oft-cited $83 billion. “That bill clearly is not enough.” Radogno agreed with Cross that passage of the bill in the House could stall efforts at more comprehensive proposals. “The concern is that it will stop forward progress because a lawsuit will immediately be filed, in which case probably the party in power would say, ‘Well, we’ve got to wait until that unfolds and see what happens.’ So it’s just inadequate on too many fronts at this point.”

But not all of her GOP colleagues see it that way. Sen. Bill Brady, a Bloomington Republican, called HB1447 a “half measure,” but he said that if it is the only option that can gain enough backing to pass, he would support it. “Something’s got to be done,” Brady said. “This is the only solution on the table. Rome’s burning, and we need some incremental solution for this problem.” Brady does not share Cross’ and Radogno’s concerns that passing the bill would freeze efforts to reform the other systems. “I would argue that if we pass this, it will lead to passage [of reform] in the other systems.”

Sen. Matt Murphy agreed. “For those that say that it’s not enough and passing this doesn’t qualify as real reform, I agree wholeheartedly.” However, Murphy, a Palatine Republican, said he doesn’t think passing HB 1447 would hurt the reform process, and he said he would support it. “Personally, I don’t think the fact that we pass some pension reform means anybody thinks we’re done. I don’t think we’re done with just this bill, and I don’t think it takes the pressure off to solve the rest of the problem,” he said. “I think you can take what you can get now and then don’t slow the momentum. Use it as a springboard to finishing the job on the other systems.”