Finance

As Special Session Starts, Illinois Legislature Forms Compromise Committee for Pension Reform

Lacking agreement on a comprehensive plan to reduce a pension debt that's approaching $100 billion, the state's Democratic leaders are opting to line up in punt formation. They expect to approve a conference committee of lawmakers from both parties to spend weeks looking for common ground on the issue.
June 19, 2013

By Ray Long and Monique Garcia

State lawmakers return to the Capitol on Wednesday to consider fixes to Illinois' financially woeful government worker pension system, but the heaviest lifting they're likely to do is to vote to form a committee to seek an elusive compromise.

Lacking agreement on a comprehensive plan to reduce a pension debt that's approaching $100 billion, the state's Democratic leaders are opting to line up in punt formation. They expect to approve a conference committee of lawmakers from both parties to spend weeks looking for common ground on the issue.

The rarely used approach allows a frustrated Gov. Pat Quinn to avoid coming away with nothing from the special session he called, even if he's settling for far less than the sweeping reforms he wants. It also buys legislators more time as the lack of pension reform hurts the state's credit rating and retirement costs consume money that could otherwise go to education, health care or paying down a pile of bills.

Still, it's questionable at best whether the special panel of 10 lawmakers -- three Democrats and two Republicans from both the House and Senate -- will be able to resolve the stalemate between House Speaker Michael Madigan and Senate President John Cullerton, who will appoint the Democratic conference committee members.

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"Let's do a new start. Let's get good appointments to the conference committee," Madigan said Tuesday. "Let's expect that they'll do work and they'll go in, in good faith, and that they'll give us a good compromise."

At the philosophical heart -- if perhaps not the political core -- of the Madigan-Cullerton disagreement is a clause in the Illinois Constitution that says membership in any government worker pension or retirement system "shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired." The phrase has stood as a bulwark for more than four decades against any reductions in government worker pensions.

Madigan's plan would require workers to kick in more from their paychecks, wait longer to retire and get smaller cost-of-living increases. Cullerton's version would offer government workers choices centering on reduced benefits in return for keeping health care, and vice versa. As such, Cullerton says his pension bill is legal and Madigan's bill will be found unconstitutional.

The way Madigan, a Southwest Side Democrat, and Cullerton, a Northwest Side Democrat, have approached the constitutionality question offers a look at their political styles.

In large part, Cullerton is trying to outsmart the state constitution by doing an end run around the "diminished or impaired" provision. Madigan's plan depends a bit more on clout, apt for a politician who doubles as Illinois Democratic Party chairman and is known for his hold on power, keeping control of the House and building a long-term strategy to get his agenda enacted.

This spring, the speaker said he expected four justices on the Illinois Supreme Court to rule that his plan is constitutional. It was lost on no one that the high court has a 4-3 Democratic majority, although the speaker sought to make it clear that he had not spoken to any of the justices.

Madigan may need Republican justices to go along with his proposal for the unilateral pension cutbacks, but his declaration brought attention to how the speaker has made his own mark on the state Supreme Court by throwing his backing and party funds into successful political races.

The highest-profile example is Chief Justice Thomas Kilbride. When Kilbride won a district long held by Republicans in 2000, he did it with an influx of hundreds of thousands of dollars that Madigan poured into the race. When Republican-allied business interests tried to deny Kilbride's bid to win another 10-year term in 2010, Madigan again came through with money and troops.

Adding to the political intrigue: Cullerton and Quinn have their own longtime personal and political friends on the court, including Justice Mary Jane Theis for Cullerton, and Justice Anne Burke, who swore in Quinn on his first day as governor.

Madigan is one of the authors of the state's 1970 constitution that features the disputed pension clause, having served as a delegate to the convention that drew it up.

Legal experts are split on whether the Madigan or Cullerton plans are constitutional.

"What I believe is that, if you interpret the constitutional provision literally on its face, then I believe Madigan's bill is unconstitutional," said John Colombo, law professor at the University of Illinois.

With Cullerton's proposal, Colombo said, the baseline argument is the state supplies health care to retirees, but that is not guaranteed under the constitution. It is something of value that can be offered as an option for employees to keep, for example, in exchange for reduced pension benefits. Under that theory, Cullerton's argument is that the state's contractual obligation with employees to pay their pensions could be altered if the employees have a choice to change it.

"At least that's an argument," Colombo said. "That's a pretty good argument. When you get to Madigan's bill, there really is no argument."

Laurie Reynolds, a colleague of Colombo's at the university's law school, suggested the Madigan-styled plan could withstand a constitutional challenge if the state could provide "clear and convincing" evidence of a disastrous fiscal crisis.

"If the state of Illinois can establish that there are no reasonable alternatives to reducing benefits that have accrued -- and that, for instance, tax increases and spending decreases just can't fill the hole -- then I don't think the Illinois Supreme Court is going to issue an opinion that would in essence push the state of Illinois into default," Reynolds wrote. "If, in contrast, a strong case can be made that the state can meet its unfunded pension obligations without running itself into the ground, then the court is more likely to invalidate the legislative cuts."

State finances are still foundering despite the 67 percent increase in the income tax rate that Quinn, Madigan and Cullerton championed two years ago. The bad finances argument may have been undercut, Colombo said, by a new state budget that's projected to spend about $2 billion more than the current one.

Even so, the Cullerton plan is not free of potential fault lines. Colombo and Reynolds agreed that "the problem is that his approach may not save enough money to defuse the (pension) funding crisis."

On Tuesday, Cullerton insisted he wasn't moving away from his central argument on pensions, even as he said he was "intrigued" by a pension cost-cutting plan for the State Universities Retirement System. The proposal, which would have universities gradually pick up more pension costs, would require university employees to contribute 2 percent more from paychecks to cover pensions.

Other provisions include tying annual cost-of-living increases to one-half of the rate of inflation instead of a compounded 3 percent yearly increase. But Madigan pointed out that the proposal needed to address compounded interest, which has been a major driver of rising pension costs.

On Wednesday, lawmakers are expected to agree to form a House-Senate conference committee on the pension issue.

"I expect we'd have public hearings and people can testify and people can perhaps learn how complicated this issue is," said Cullerton, who added that any plan the committee comes up with would need to be studied by actuaries to make sure it is solid and the math holds up, a process that "usually takes weeks."

The committee is Quinn's fallback plan after enough support could not be rounded up to pass Madigan's version of pension reform in the Senate. Even if the committee is able to come up with a pension compromise, both the House and Senate would have to vote to approve it.

Meanwhile, Republican lawmakers, many of whom support the Madigan plan, are trying to exploit the Democratic rift.

House Republican leader Tom Cross of Oswego said last week he thinks the stalemate is a scheme by Madigan and Cullerton to help Attorney General Lisa Madigan, the speaker's daughter, as she considers whether to run for governor against Quinn -- a conspiracy theory Democrats deny.

A top aide to Senate Republican leader Christine Radogno suggested the attorney general may wish to weigh in on the matter -- a position she has rebuffed because she might later have to defend a pension reform bill in court -- because the state lawmakers are not constitutional lawyers.

"Absent that," said Patty Schuh, Radogno's spokeswoman, "we have always been pushing for the most comprehensive solution that has the biggest savings for the taxpayer in order to get that before the court, and then the justices on the court will decide what is constitutional. That's their job."

(c)2013 Chicago Tribune

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