SUBSCRIBE to Capitol Fax      Advertise Here      Mobile Version     Exclusive Subscriber Content     Updated Posts    Contact
CapitolFax.com
To subscribe to Capitol Fax, click here.
A look at the pension borrowing debate and what’s ahead

Friday, May 28, 2010

* Budgetary cluelessness

On what could be the final legislative day until November, Gov. Quinn’s bid to borrow $3.7 billion to pay for state pensions stalled in the Senate, where GOP gubernatorial nominee Bill Brady and fellow Republicans withheld support.

“We’ve been able to stave off more pension borrowing on the backs of our children and grandchildren,” said Brady, of Bloomington.

The governor proposed borrowing for the pension payment over 8 years. That’s hardly an intergenerational debt. However, skipping the pension payment will cost tens of billions of dollars due to lost interest on investments over the next few decades. That truly is intergenerational, and that’s what Brady and his fellows just caused, unless the Senate can find the votes for the borrowing plan. From Kate Grossman, a Sun-Times editorial page editor…

Skipping a pension payment costs much more than borrowing. If the state skips, it could lose at least $20 billion in investment income over 20 years. Borrowing $3.7 billion now would cost about $1 billion.

We urge the Republicans and the two wayward Democrats who don’t support pension borrowing to mull over this simple math for the next two weeks.

* Political cluelessness

[Democratic Sen. Heather Steans] said she may be able to support a smaller borrowing effort if it was part of a budget package that also included more spending cuts and a way to raise revenue, such as an income tax increase.

Yeah. An income tax hike in a year like this. That’ll happen.

* Logrolling isn’t illegal, but it doesn’t appear to have happened on the pension borrowing proposal in the Senate

[Senate Republican Leader Christine Radogno] also said the Quinn administration approached Republicans with “promises of facilities or perks or money for their districts in exchange for votes. It’s unsavory at best or illegal.”

Sen. Larry Bomke, R-Springfield, said previously he had been contacted by Quinn about supporting the borrowing plan. He said nothing was offered.

“No, and I didn’t ask for anything,” Bomke said. “He just asked if I would vote for it. I said, `Governor, why do you need me? You’ve got 37 (Democratic senate) votes.”’

Notice that Bomke didn’t say he was opposed to borrowing, just that the Democrats should do it on their own. The State Journal-Register is fed up with this attitude

Their political party before their state. Their Republican colleagues before their constituents. The leader of their caucus before the taxpayers.

Those were the choices state Reps. Raymond Poe, R-Springfield, and Rich Brauer, R-Petersburg, made on Tuesday night. Poe and Brauer voted against a plan to borrow $3.7 billion to make the state’s full payment, on time, to the pension systems.

And the Pantagraph makes a good point

Consider Tuesday’s vote on a borrowing plan.

Two Republicans were said to have “broken ranks” because they voted with the Democratic majority to approve the proposal.

Republican state party chairman Pat Brady almost seemed more concerned that Rep. Bob Biggins, R-Elmhurst, missed a Republican caucus meeting than the fact that Biggins was one of only two Republicans who voted for the borrowing plan. State Rep. Bill Black, R-Danville, was the other.

Does anyone think it was a coincidence that the two Republicans who voted in favor of the plan aren’t up for re-election?

* This is what will happen now

“Without the borrowing to make the pension payment, the pension payments get in line with everybody else,” Madigan said. “They become a matter for the governor and the comptroller in terms of managing the cash-flow.”

Also, the governor received some extraordinary powers from the General Assembly this week…

But other options may exist. Part of the emergency budget powers granted to Quinn allow him to tap surpluses in special state accounts to cover state spending, though the money must be paid back within 18 months with 1 percent interest.

Quinn already proposed borrowing $1 billion from those accounts, but lawmakers didn’t limit how much he could take so long as it doesn’t impede the cause or effort for which the account was created. The Senate’s budget pointman said upward of $3 billion might be available for the governor’s use.

A few budget highlights

*Borrow $1.2 billion against future tobacco settlement proceeds.

*Allow Gov. Pat Quinn to hold up to $2 billion of state spending in reserve.

*Allow Quinn to borrow money from restricted state funds.

*Give state until Dec. 31, instead of Aug. 31, to pay bills left over from this year.

*Eliminate cost-of-living pay increases for state lawmakers next year.

*Cut daily expense money for lawmakers from $139 to $111 next year.

*Cut mileage rate paid to lawmakers from 50 cents to 39 cents.

* Related…

* Borrowing out; $6.6 billion deficit still in for Illinois budget

* Madigan: Lawmakers Won’t Return to Springfield Yet: The House approved — but the Senate would not consider — a bill to borrow the money to make pension payments. Madigan says an “emergency budget act” gives Gov. Pat Quinn enough latitude to try to make things work. “We acknowledge that we’re running a deficit, like 47 other states,” says Madigan. “Gov. Quinn is entitled to extraordinary budget powers, the ability to borrow from other funds.”

* Kadner: Miller says his vote just the ‘Right Thing’

- Posted by Rich Miller        


18 Comments
  1. - Reality Is - Friday, May 28, 10 @ 10:40 am:

    I could be wrong but I think they have to make the pension payments by law. I dont think they put a stop to that. So while the pension system may have to be in line to get paid they will be at the front of the line.


  2. - Pot calling kettle - Friday, May 28, 10 @ 10:51 am:

    Skipping a pension payment is still borrowing, because it still has to be paid back. (with interest!)


  3. - John Bambenek - Friday, May 28, 10 @ 10:54 am:

    Did they put an appropriation for the pension payment in the budget/BIMP or in the borrowing bill? Because if its in the borrowing bill, I’m not sure the “ramp up” law on the pensions is sufficient to authorize the payment. Granted, I haven’t looked.

    The obvious solution here is to blame the Republicans. Sure, they asked for things like cuts in return but that just shows they are obstructionary. They should know there place is to be ignored and to simply give their votes as Mike Madigan and Pat Quinn direct.

    Or maybe, you shouldn’t do a budget in a backroom for 3 months, not invite Republicans and then expect them to backstop your inability to draw up a budget your own caucuses can support.

    Just sayin’


  4. - muon - Friday, May 28, 10 @ 10:56 am:

    I find the talk of a $20 billion pension hit to be over the top. That would assume an outright pension holiday, which has not been part of any discussion in the legislature. There has been talk of a pension deferment for six months or so, which means making the payment, but late.

    Consider three cases: one where the state makes its regular payments over the next six months, one where the state borrows money by selling bonds by September, and one where the payment is deferred to the start of the new year when either cuts or new revenue provide relief. Selling bonds costs about $1.1 billion extra over the next 35 years due to bond interest and since the proposed plan still deferred a couple months of payments until the bond sale is complete. Deferring the first six months of payments until January costs the interest that those payments would have earned, which is about $50 million. After 35 years the effect of that interest loss would be $800 million.

    Note that the deferred payment costs the state less than borrowing would. At the worst, if the state resorted to borrowing the full payment after deferring for 6 months, the cost would be the combination of the costs of the two alternatives. That is still less than $2 billion over 35 years, and is nowhere near the $20 billion that is reported.


  5. - 47th Ward - Friday, May 28, 10 @ 10:57 am:

    ===“We’ve been able to stave off more pension borrowing on the backs of our children and grandchildren,” ===

    Brady also noted that from now on, the sun will rise in the west, up is now down, the sky is green and the grass is blue.

    Seriously, if Brady believes what he said is true, how can you argue with him? I mean, facts and logic clearly aren’t going to work with Brady. It’s like he’s just reading the script they gave him.

    The Illinois GOP: creating its own reality since 2003.


  6. - Quinn T. Sential - Friday, May 28, 10 @ 11:04 am:

    {Quinn’s bid to borrow $3.7 billion to pay for state pensions stalled in the Senate, where GOP gubernatorial nominee Bill Brady and fellow Republicans withheld support}

    If all the Republicans voted for it; how many more votes would be necessary in order to achieve the necessary Super Majority required to pass?

    If all the Democrats voted for it; how many more votes would be necessary to achieve the Super Majority necessary for it to pass?

    Since nobody voted for it; how can the author indicate that Brady as an individual withheld support, and that the Republicans collectively withheld support? Why doesn’t this story indicate that Democrats; individually and collectively withheld support?

    {Their political party before their state. Their Republican colleagues before their constituents. The leader of their caucus before the taxpayers.}

    How about the Democrat Senators that will not vote for the scheme are placing the taxpayers before their party or the leader of their caucus, by not playing along with this scheme?


  7. - dupage dan - Friday, May 28, 10 @ 11:10 am:

    I don’t like to say this but 47th Ward is both funny and right. There, I said it.

    I wonder who “they” is?


  8. - Quinn T. Sential - Friday, May 28, 10 @ 11:11 am:

    47th, take a look at David Einhorn’s OP/ED piece in the NYT from yesterday.

    Easy Money, Hard Truths
    http://www.nytimes.com/2010/05/27/opinion/27einhorn.html?partner=rss&emc=rss&pagewanted=all

    While this is directed at the federal government, the same principles apply to the state government here in Illinois. The only difference is that we are way ahead of the curve here compared to many other states; and the feds may just redraw the boundaries when this territory is taken into receivership.


  9. - dupage dan - Friday, May 28, 10 @ 11:14 am:

    Having just agreed w/4yth Ward, I would say, however, that the need for borrowing to fund the pension comes from the failed policies of the democrats since MJM’s rise to majority leader and the election of RB as gov. I wish the GA would seriously look at true budget cuts and fiscal responsibility as opposed to the gimmicks mentioned above. How long can you count on the tobacco settlement? How long can you stiff the contractors? How much do you save cutting mileage reimbursments?


  10. - ShadyBillBrady - Friday, May 28, 10 @ 11:21 am:

    Reality, they did “appropriate” the funds to make the payment. But, as we’ve seen, when there is no money, the payment is “delayed”.

    Bambino, stop with the “shouldn’t do a budget in a backroom and not invite Republicans” mantra. The Republicans in Springfield have the responsibility for governing too. And as made evident on the McPier stuff, when there’s something worth doing together, they can do it together.

    What’s interesting, besides Brady’s tired “children and grandchildren” line is that he’s again out there saying how this budget is so bad for social services, education, etc. As if his “plan” would be any better for those folks? Quinn has at least said he’s in favor of a tax increase to fund such things. Brady’s been saying he wants “across-the-board” cuts, which would include such things, and then trying to whack Quinn and the dems for cuts to those things? What?

    Brady has also said he think the entire pension payment should be made (of course he’s also been in favor of borrowing), but he doesn’t seem to be able to explain exactly how he’d make such a payment.

    Unbelievable.


  11. - ShadyBillBrady - Friday, May 28, 10 @ 11:23 am:

    And Dupage Dan, our pension funding issues in this state date WAY BACK before the Dems were in control and RB was elected governor. We’re talking decades here, not just the last 8-10 years.


  12. - CircularFiringSquad - Friday, May 28, 10 @ 11:24 am:

    The following slop was offered by Kadner in the generally reader free Southtown (Sorry Capt. Fax but it is what it is)…

    “It has become impossible to believe that any elected official in Illinois would do anything just because he thought it was the right thing to do. ”

    Let’s play the same game with the media.
    Why did Phil write this slop?
    a. TugBoat Annie shared her Pall Malls with Phil or an editor or both.
    b. Tugboat Annie promised to buy an ad
    c. Gags Brady offered to buy an ad
    d. Gags Brady offered Kadner a baloney sandwich

    We all know how desperate newspaper finances are these day. Editors and writers must be looking for some extras before putting words to paper

    See how easy that was
    Thanks Phil

    And maybe that’s worse than the budget crisis itself.


  13. - John Galt - Friday, May 28, 10 @ 11:42 am:

    ==
    “Without the borrowing to make the pension payment, the pension payments get in line with everybody else,” Madigan said. “They become a matter for the governor and the comptroller in terms of managing the cash-flow.”
    ==

    How does cash-flow management work? It’s not just simply “oldest bill gets paid first” is it? Because if it isn’t, I could see how a mini cottage-industry amongst lobbyists could spring up around this. Not to secure any new contracts for state vendors, but to simply jockey for a better position RE: receiving payments already owed. I could see lots of clients willing to pay a 10%-20% commission to get their state money now as opposed to 9 months from now….


  14. - inkers - Friday, May 28, 10 @ 11:49 am:

    Looking at my SERS statement I just received and noticed that the State Board of Investment has lost 3.7 billion in the past two fiscal years. I would hope that some Senator or Representative would introduce a resolution to have the Auditor General audit the investments for the last 10 years. I know we are in a downturn but 3.7 billion? That is approximately a 30% loss. The board is making poor investments with our retirement money and should be held accountable.


  15. - Quinn T. Sential - Friday, May 28, 10 @ 12:15 pm:

    Inkers,

    I am sure you won’t be surprised to find:

    Treas. Alexi Giannoulias
    Investment Policy Committee

    at the ISBI

    You might want to check to see how much of the Oppenheimer Core Bond Fund they held.

    If it was substantive, then you could see how it feels for the parents holding the Bright Start Plans


  16. - huh? - Friday, May 28, 10 @ 1:13 pm:

    What in the world is Sen. Steans thinking? I’m sure her colleagues who DO have toss-up districts really appreciate her avoiding this vote. There little chance she could ever have a real Republican challenger, so where is this stubborn stance coming from? Bizarre.


  17. - BigTwich - Friday, May 28, 10 @ 1:28 pm:

    “the need for borrowing to fund the pension comes from the failed policies of the democrats since MJM’s rise to majority leader and the election of RB as gov.”

    I have been asking around and the first instance of skipping the pension payment I have heard of was 1969. So, all this began with Richard B. Ogilvie.


  18. - Rambler - Friday, May 28, 10 @ 3:08 pm:

    The Repubs are holding together because they think they have a winning issue — portraying the Dems as borrow and spenders, waiting only until November to convert “borrow” to “tax.”

    The Sun-Times parrots the guv’s office estimates of lost income without explaining where the numbers come from. If borrowing $3.7 billion is such a good idea, why not borrow $10 or $20 billion or more and invest it? Most people have a sense that borrowing to invest is a tangled path to fiscal solvency.


Sorry, comments for this post are now closed.


* Good morning!
* Ginning up the base
* Yesterday's blog posts

Support CapitolFax.com
Visit our advertisers...

...............

...............

...............

...............

...............


Search This Blog...

Search the 98th General Assembly By Bill Number
(example: HB0001)

Search the 98th General Assembly By Keyword

          
        * Andy Rubin leaving Google to help new hardware tech startups
        * New tones for Lumia
        * Motorola DROID Turbo vs Moto X 2014 (Video)
        * Microsoft Band unboxing and first impressions (Video)
        * Samsung Galaxy A5 specs
        * Samsung Announces The Galaxy A5 And Galaxy A3, Its “Slimmest Smartphones To Date”
        * Samsung announces ultra-thin Galaxy A5 and Galaxy A3

        * Gold’s Gym Offers Fitness Plans, Free 2 Week Trial For Microsoft Band Users
        * MCX’s CurrentC Will Not Support Windows Phone Or BlackBerry
        * Analyst: Larger Displays Lead To Better App Engagement
        * Touch and Go
        * The Apple Watch Just Got the Perfect Rival: Microsoft’s Band
        * Why Tim Cook’s ‘Proud to Be Gay’ Essay Means So Much to the Workplace
        * The Gadgets and Gear We Couldn’t Get Enough of in October

        * Minnie Miñoso belongs in the Hall of Fame
        * Development of young core in '15 can define Chicago's future
        * Abreu leads White Sox GIBBY hopefuls with five noms
        * Allen, Wills among new faces on Hall's Golden Era ballot
        * The offseason begins with a new Chicago manager and old arguments
        * World Series Game 7: Notes and discussion
        * Guillen, White Sox look back on '05 championship


        Main Menu
        Home
        Illinois
        YouTube
        Pundit rankings
        Obama
        Subscriber Content
        Durbin
        Burris
        Blagojevich Trial
        Advertising
        Updated Posts
        Polls

        Archives
        October 2014
        September 2014
        August 2014
        July 2014
        June 2014
        May 2014
        April 2014
        March 2014
        February 2014
        January 2014
        December 2013
        November 2013
        October 2013
        September 2013
        August 2013
        July 2013
        June 2013
        May 2013
        April 2013
        March 2013
        February 2013
        January 2013
        December 2012
        November 2012
        October 2012
        September 2012
        August 2012
        July 2012
        June 2012
        May 2012
        April 2012
        March 2012
        February 2012
        January 2012
        December 2011
        November 2011
        October 2011
        September 2011
        August 2011
        July 2011
        June 2011
        May 2011
        April 2011
        March 2011
        February 2011
        January 2011
        December 2010
        November 2010
        October 2010
        September 2010
        August 2010
        July 2010
        June 2010
        May 2010
        April 2010
        March 2010
        February 2010
        January 2010
        December 2009
        November 2009
        October 2009
        September 2009
        August 2009
        July 2009
        June 2009
        May 2009
        April 2009
        March 2009
        February 2009
        January 2009
        December 2008
        November 2008
        October 2008
        September 2008
        August 2008
        July 2008
        June 2008
        May 2008
        April 2008
        March 2008
        February 2008
        January 2008
        December 2007
        November 2007
        October 2007
        September 2007
        August 2007
        July 2007
        June 2007
        May 2007
        April 2007
        March 2007
        February 2007
        January 2007
        December 2006
        November 2006
        October 2006
        September 2006
        August 2006
        July 2006
        June 2006
        May 2006
        April 2006
        March 2006
        February 2006
        January 2006
        December 2005
        April 2005
        March 2005
        February 2005
        January 2005
        December 2004
        November 2004
        October 2004

        Blog*Spot Archives
        November 2005
        October 2005
        September 2005
        August 2005
        July 2005
        June 2005
        May 2005

        Syndication

        RSS Feed 2.0
        Comments RSS 2.0
        WordPress

        Loading


        * Why I'm voting for Pat Quinn - Chicago Tribune..
        * Illinois Dems dig deep to keep governor's office..
        * Christie in Arkansas, Kansas & Wisconsin today..
        * Groundbreaking at UI Labs..


        * Illinois Dems dig deep to keep governor's office
        * A look at Ebola guidelines in some states
        * 3 die when train strikes SUV in southern Illinois
        * Illinois schools report has host of new features
        * 3 killed when train strikes SUV
        * Waukegan teachers approve contract ending strike
        * 2 killed, 8 injured in construction zone wreck
        * Suburban judge attacked by inmate in courtroom
        * Man charged in death of Rockford attorney in crash
        * Inmate freed in landmark Illinois case

        * Attorney general seeks clarifications from Topinka’s former nonprofit
        * Inmate freed from Jacksonville prison in landmark Illinois case
        * Cross opposes income tax hike extension
        * Gay marriage, abortion issues take back seat in governor’s race
        * Madigan’s office seeks clarifications from former Topinka nonprofit
        * Cross says no to income tax hike extension, sales tax on services
        * Gay marriage, abortion issues take backseat in governor’s race
        * Illinois inmate freed in landmark capital punishment case
        * Rauner says women will decide governor's race
        * Judge denies ex-representative new bribery trial

        * Illinois Lottery manager scratches off $20 million investment
        * Lake Shore Drive ramps by McCormick Place set for early 2015 construction
        * Groupon forecast falls short of estimates
        * Groupon mulls overseas options as forecast falls short
        * Groupon hires advisers top find partners for Asia businesses


        * Garcia: I'm a serious mayoral candidate, not just a protest vote
        * A higher standard of criminal justice
        * Ex-Northwestern doctor to pay $475K to settle fraud claims
        * Sad day  when  Catholic  schools  close
        * Chicago bead merchant Ronnie Klein, whose Loop business drew stars, dead at 65
        * Chicago bead merchant Ronnie Klein, whose Loop business drew stars, dead at 65
        * Durbin, Oberweis square off for final time
        * State’s attorney investigating alderman’s prize offer to voters
        * Face it: Animator has found a great way to pass time on his commute
        * Refund those unfair yellow-light tickets


        * Alleged lieutenant of drug kingpin 'El Chapo' seeks minimum prison term
        * Off-duty police officer beaten and robbed in the Loop
        * Installation begins on Wallenda's tightrope over Chicago River
        * Teen wounded in Morgan Park shooting, at least 3 others injured across city
        * Waukegan district, teachers come to terms after monthlong strike
        * Judge again orders Crystal Lake South bleachers to come down
        * Naperville high school cancels activities after bomb threat
        * Officials: Defendant in Maywood court attacked judge
        * Rauner, Quinn squabble over who deserves credit for digital lab
        * Coroner: Body buried in Indiana is missing relative of dead woman, slain man


        * Prisoner Freed After Recanting Testimony "Angry"
        * The Choice Of Choice: Gov. Candidates On Abortion
        * Group Has A Goal Of Improving Access To Preschool In Macon County
        * Turn out for what? Will young voters make it to the polls, or stay home as usual?
        * As Infrastructure Crumbles, Trillions Of Gallons Of Water Lost
        * Authorities: Springfield Woman's BAC Three Times The Legal Limit
        * 2014 Election Coverage: Citizens, here's your homework!
        * Aldermen skip chance to ask about city’s handling of police commander
        * Immigrant Rights Groups: Demand Oustrips Slots For Driver's Licenses
        * U-S Senate Candidates Differ On Ebola Response And More


        * Esther Cepeda: Elizabeth Pena: Trailblazer on the big screen
        * Andy Shaw: Voter turnout instrumental to reform
        * Ty Fahner: What if the Court rejects pension reform?
        * Attorney general seeks clarifications from Topinka’s former nonprofit
        * Quote of the Day: Friday, Oct. 31
        * Inmate freed from Jacksonville prison in landmark Illinois case
        * Cross opposes income tax hike extension
        * Gay marriage, abortion issues take back seat in governor’s race
        * Illinois inmate freed in landmark capital punishment case
        * Rauner says women will decide governor's race


        * Upcoming Services (Oct. 31, 2014)
        * Kum & Go chain settles disabilities lawsuit
        * Superheroes unite to raise $10K for charity
        * Lake Decatur dredging kickoff
        * Attack leaves psychiatric ward nurse blind in one eye
        * Picking up trash no trick for Soy Capital employees on patrol
        * Desire to inspire nets Stewart Scout award
        * 103114-dec-loc-bell
        * Candidates face busy weekend
        * Memories of city making 4,500-mile trip


        * State officials want to shoot up to 130 deer in Kane County forest preserves
        * State officials: No more 'failing' schools this year
        * Dawn Patrol: Cold Halloween weather coming; Neuqua Valley to reopen
        * Focused Cary-Grove a regional champ
        * Harper women's volleyball squad faces difficult regional challenge

        * Patrick Cannon defense strategy rare but n...
        * Feds fine Jesse Jackson Jr.'s campaign com...
        * Ex-Congressman Jesse Jackson Jr. faces sen...
        * Representative Jan Schakowsky Sends Letter...
        * Rep. candidate pushes to uphold marriage b...
        * Reps. Schakowsky and Waxman Introduce Bill...
        * Statement by Representative Jan Schakowsky...
        * U.S. House Passes Resolution Condemning An...
        * FAA Rejects Call For New O'Hare Noise Stud...
        * Representatives Quigley, Duckworth, Schako...

        * Final Senate Debate...
        * Final Senate Debate...
        * Education Dept. cracks down on for-profit ......
        * Education Dept. cracks down on for-profit ......
        * Education Dept. cracks down on for-profit ......

        * How first lady, Rauner factor into their p......
        * ISIS Has More Land, Money, and Fighters Th......
        * Celeb Spotting...

        * Trick Or Treat Safety Tips For Drivers & Pedestrians
        * The Week In Chicago Rock
        * Op-Ed: Google Car Gives The Blind More Independence While Saving Illinois Millions
        * Will Chuy be the new Karen Lewis?
        * Op-Ed: Google Car Could Give The Blind More Independence While Saving Illinois Millions
        * Poll: Downstate Could Go Either Way In Guv's Race
        * South Siders To Rally For Trauma Center Outside U of C Gala
        * Google Car
        * DNA Info: Englewood Whole Foods Developers Looking for More Tenants
        * Sorry Mark Brown but I don't think it is about the money...


        * Editorial: Rauner best choice as governor to begin to reverse Illinois’ fortunes
        * Quinn to celebrate Rauner’s UI Labs accomplishment
        * Another Democrat Runs Away From Pat Quinn
        * Governor Pat Quinn Statement on Tentative Agreement to End Waukegan Teacher Strike, Return Students to Classrooms - State Education Chief Worked Overnight to Reach Common Ground, Students Heading Back to School on Monday
        * Governor Quinn Joins UI LABS to Break Ground on New Digital Manufacturing Hub - Digital Manufacturing and Design Innovation Institute Set to Open in 2015, Create Jobs




            Hosted by MCS SUBSCRIBE to Capitol Fax Advertise Here Mobile Version Contact Rich Miller