Can Illinois Seal the Deal on Pension Reform?
Legislators have moved slowly so far on the issue of pension reform. After a successful House vote last week, can lawmakers keep the momentum going?
By Ray Long and Rafael Guerrero
As state lawmakers begin a two-week spring break, the biggest question they left behind at the Capitol is whether they can build upon a House vote last week that was their first major step to solve Illinois' pension crisis.
Such action has been frustratingly slow in coming. The year started with Senate President John Cullerton predicting quick passage of a pension overhaul. House Speaker Michael Madigan simply said it would happen "as soon as possible."
It took until last week for the first major action: Madigan's House passed a bill with bipartisan backing that would cut back cost-of-living pension increases to save the state $100 billion over 30 years. Cullerton's Senate, meanwhile, defeated a bill that would have saved an estimated $150 billion. He then corralled enough Democrats to pass a bill to save much less.
As Democratic Gov. Pat Quinn and lawmakers lurch past the midway point of a session scheduled to end May 31, they face pressure on two other issues: gay marriage and concealed weapons. But the most intense pressure comes from the inescapable math of a pension system that is $96.8 billion in debt, forcing cutbacks in education, health care for the poor and social services.
Last week's breakthrough happened in the House on a 66-50 bipartisan vote to rein in the costs of the annual increase of a compounded 3 percent interest on pension checks for retired rank-and-file state workers, lawmakers, university employees and public teachers outside Chicago. But it is unclear whether the House plan can retain any momentum in the Senate.
"The process here in Springfield is sometimes not too fun to watch," said Rep. Lou Lang, the Skokie Democrat who often presides over the House from the speaker's podium. "Things sometimes progress in fits and starts slowly, at a glacial pace."
Lang voted against the House bill because he questioned whether it was constitutional. But he said passage of the legislation was "huge," saying it will set the stage to start work on a "final draft of a pension bill, whatever might be in it."
Along with $100 billion in long-term costs, the House legislation would cut the debt by $20 billion immediately. And there's a chance it could reduce the pension payment made in the upcoming budget by $800 million. Without changes, the payment is expected to rise in the next budget by nearly $1 billion. The potential for breathing room in a new state budget may serve as a powerful incentive for legislative support of this pension overhaul, but not everyone agrees that the potential savings can be counted right away.
The House pension legislation is championed by Rep. Elaine Nekritz, D-Northbrook, and praised as "monumental" by House Republican leader Tom Cross of Oswego.
Forty-one Democrats and 25 Republicans took rare bipartisan action over the pointed protests of every major union that can supply votes and troops against them in the next election. The pressure from labor did not stop after the vote. A statement issued by We Are One, a union coalition, again registered staunch opposition.
Under the House measure, the automatic 3 percent compounded interest each year would be replaced by 3 percent interest every year on only the first $25,000 of a retiree's pension -- the equivalent of a $750 annual increase. The bill also says retirees could not qualify for these increases until they hit age 67 or have been retired five years.
The proposal now sits in the Senate with two others that the House approved. One would gradually increase the retirement age for public employees under the state systems. The other would cap the salary on which a pension can be based at $113,700, plus annual inflation.
Madigan suggested the House is now queued to fashion a pension bill with the three key elements the House has passed and potentially add more. Still hanging out there are ideas ranging from requiring workers to chip in more from their paychecks to requiring the state to fund the pensions adequately -- a point aimed at avoiding the kind of crisis Illinois faces now.
Illinois pension costs are growing so fast that they are about to gobble up about 20 percent of the state's annual operating budget. The state's regular annual pension payments would rise from $5.1 billion in the current budget year to $6 billion under Quinn's proposed spending plan for the 12 months that begin July 1. Those figures don't include the $1 billion the state is setting aside to whittle down the amount owed on previous pension loans.
Madigan maintained that the House has moved legislation that will solve the pension problem in a way that has a "reasonable chance of approval from the Illinois court system."
But unions are not alone in contending that the House legislation fails to comply with the state Constitution's requirement that pensions not be impaired or diminished, a standard that has virtually prevented reductions in benefits for years.
Cullerton, a Chicago Democrat, has said there must be a trade-off with people covered by the pension systems to fulfill the state's obligations. Not everyone is going along with that notion, and he is having trouble getting support for his own approach despite his January prediction of quick passage.
Last week, Cullerton could muster only the bare minimum 30 votes -- all from his Democratic caucus -- to pass a stripped-down overhaul, though he holds an overwhelming 40-19 Democratic majority in the upper chamber.
Cullerton's proposal, now in the House, would apply only to teachers outside Chicago. They would be required to choose between a retirement plan with the current 3 percent compounded annual increases and no health insurance, or a scaled-back annual increase with health insurance.
In contrast to the one-party support for the Cullerton plan, Republicans contributed a dozen votes to a comprehensive overhaul sponsored by freshman Sen. Dan Biss, the Evanston Democrat who moved to the upper chamber from the House after the November election. The Biss plan included the elements in the House-passed bills, and Republican leader Christine Radogno of Lemont sent out positive vibes about the House actions.
"Our members will want to review the specifics -- and the total impact on our pension liabilities -- but I think we could have significant support if and when we have the opportunity," Radogno said.
Many Senate Democrats who refused to get aboard the Biss plan stuck by their leader, Cullerton, but the question now is how to bridge the gap between the proposals in play.
Sen. Kwame Raoul, a Chicago Democrat who formerly chaired a Senate pension committee, suggested common ground can be reached. He is not worried that the House passed a more comprehensive plan than the Senate.
"Au contraire," Raoul said. "Part of the concern for a lot of people was, 'What was the House going to do?'"
As legislators left the capital for two weeks, it was clear that the pension issue weighed heavily on them.
Nekritz, a member of Madigan's leadership team, was asked what she'd do with her spring break.
"Go home and think about pensions," she said.
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