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.


* Reader comments closed until Sunday afternoon
* *** UPDATED x1 - AFSCME responds *** Rauner: No
* Deal emerges on medical marijuana
* Stop ComEd/Exelon's $7 BILLION Rate Hike!
* *** UPDATED x1 *** Rep. Phelps counters HGOP robocalls
* *** UPDATED x1 *** Oops!
* "The safety net continues to crumble around us"
* "Picking the pockets of poor people" and stiffing the wrongfully convicted
* Radogno rips into the Democratic leaders
* Cullerton says he offered "practical way forward"
* Republican legislators want Rauner, AFSCME to restart talks
* *** UPDATED x1 *** Two non-scandals and a potentially serious one
* Rauner budget director to brief reporters at noon
* *** UPDATED x3 - Emanuel responds "Rauner Tax" - Rauner issues veto today *** Rauner expected to veto police and fire pension bill on Memorial Day
* "I have zero confidence that Springfield will get its act together"
* *** UPDATED x2 - Rauner audio *** Rauner to comment on collapse of negotiations
* Unclear on the history
* *** UPDATED x2 - Madigan: "No hostage-taking" - Talks collapse as Dems pull the plug *** Madigan likely to speak after leaders meeting
* SUBSCRIBERS ONLY - Supplement to today’s edition
* *** LIVE *** Session Coverage
* SUBSCRIBERS ONLY - Today's edition of Capitol Fax (use all CAPS in password)
* 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

  
* ZTE is entering the retail store space with several stores in China
* Sony Xperia X marketed on US YouTube account
* Google Daydream VR issues, Galaxy S7 deals & more – Pocketnow Daily
* Jawbone stops the factories for one last-chance wearable
* Twitter for iOS Gains Support for Peek and Pop 3D Touch Gestures
* Apple’s Trade Up with Installments grows in Europe
* Comixology CEO shows off new Unlimited subscription service

* Melky's slam isn't enough to flatten Royals
* Melky mashes mistake for third career slam
* Melky's slam isn't enough to flatten Royals
* Rodon aims for continued success against Royals
* Royals 7, White Sox 5: A five-pitcher inning
* Melky's slam isn't enough to flatten Royals
* Lawrie isn't dwelling on past incident with KC

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


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

Archives
May 2016
April 2016
March 2016
February 2016
January 2016
December 2015
November 2015
October 2015
September 2015
August 2015
July 2015
June 2015
May 2015
April 2015
March 2015
February 2015
January 2015
December 2014
November 2014
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


* Madigan plays double dare as session deadline l.....
* Illinois Budget Standoff Nears One-Year Mark - .....
* 7 Republicans call to resume union talks - Peor.....
* GOP accuses Dems of pulling plug on negotiation.....
* 7 Republicans call to resume union talks - East.....
* Illinois Policy | Illinois' comeback story star.....


* Illinois budget chief: 2nd year without deal 'devastating'
* 7-year-old Chicago girl dies in tractor accident
* Illinois budget negotiations appear to be going nowhere
* Drew Peterson's defense rests after calling 3 witnesses
* NBC's 'Red Nose Day Special' raises $30M for kids' charities
* Judge OKs copyright settlement over Vivian Maier photos
* Fatal carjacking suspect killed near St. Louis is identified
* Activist sues over denied deferred deportation renewal
* Runner dies after collapsing during 3.5-mile Chicago race
* Former Pinckneyville bookkeeper sentenced in fraud case

* Some House Republicans call for Rauner to resume talks with AFSCME
* GOP accuses Dems of pulling plug on negotiations; state budget approval chances seem slim
* Senate sends 2 more school funding revamps to House
* Bill to raise age for buying cigarettes stalls in House
* Rauner vetoes plan to reduce Chicago pension payments
* Senate sends 2 more school-funding revamps to House
* Illinois youth corrections director resigns
* Senate sends 2nd school-funding revamp to House
* Republicans: Democrats have 'pulled the plug' on turnaround agenda talks
* Rauner, Illinois legislative leaders to meet Friday

* Rich Miller on Springfield
* Madigan, Rauner steel themselves for all-out political war
* Rauner vetoes Emanuel's police and fire pension bill
* Peace or war? Dems, Rauner decide this holiday weekend
* Motorola-linked credit union branches out


* Person shot in West Garfield Park
* Irving Park shooting leaves man seriously wounded
* Man wounded in Back of the Yards shooting
* Teen boy wounded in North Lawndale drive-by
* Teen girl, man shot on Lake Shore Drive in Lincoln Park
* 3 shot in East Garfield Park
* Man, woman shot in South Deering
* While Sox start to fade, Cubs are rolling again
* While Sox start to fade, Cubs are rolling again
* Dear Abby: Girl, 18, befriends a 51-year-old man


* Fox Valley mom's battle against synthetic marijuana nears climax
* Changes at Navy Pier make it more authentic, less tacky
* Madigan plays double dare as session deadline looms
* Beyonce fans brave rain, long drives to attend 'Formation World Tour'
* Memorial Day weekend keeping police watchful
* Dioner Navarro has rare perspective into Chris Sale-Jake Arrieta debate
* Quick trip around Major League Baseball
* Multi-faceted Royals out to continue baffling the sabermetric systems
* Small WWII-era plane crashes in Hudson River; body recovered
* Everything you missed from Beyonce's first night at Soldier Field


* Some House Republicans call for Rauner to resume talks with AFSCME
* GOP accuses Dems of pulling plug on negotiations; state budget approval chances seem slim
* Senate sends 2 more school funding revamps to House
* Charles Krauthammer: The arrow of history
* David Orr: Automatic Voter Registration makes government more efficient
* Bill to raise age for buying cigarettes stalls in House
* Rauner vetoes plan to reduce Chicago pension payments
* Illinois youth corrections director resigns
* Senate sends 2nd school-funding revamp to House
* Republicans: Democrats have 'pulled the plug' on turnaround agenda talks


* Top of the morning, May 28, 2016
* Cobras baseball starts march to national title
* 'Never a dull moment' with Parkland's Stokowski
* Rough first round leaves golf tied for 15th
* UI golf 'brothers' reach their final ride
* RTHS Graduation 2016
* Vukic reaches NCAA quarterfinals
* Track 2A/3A prelims notebook: Danville relay impresses
* Unity boys' track thinking big
* Primer for Championship Saturday


* Chinese developer Wanda opens theme park to take on Disney
* Argentine court sentences ex-dictator for Operation Condor
* True grit: suburban rowers find their stroke on Chicago River
* Girls soccer: Friday, May 27 scoreboard
* Fulmer throws 7 2/3 shutout innings in Tigers' 4-1 win

* House lawmakers overcome hurdle on key tra...
* Rodney Davis talks funding with Bloomingto...
* The agency that fought Illiana gets a new ...
* Rep. Dold takes educational cruise down Ch...
* Lawmakers decry high turnover rate of VA h...
* CBD Oil, and politics
* Simon considering state Senate bid
* Killer Congressman Tom MacArthur trying to...
* Shutdown? State may not notice
* Rep. Bob Dold

* Senator Durbin Statement on TSA Security D......

* Defence sales: US Senate may vote to bring......

* “The Driver’s Side” – News From The Motorist’s Perspective
* Save The Date: Sheridan Park Neighborhood Yard Sale
* A License to Vote
* Martial arts demonstration 1919
* Illinois House passes budget bill, including school funding with no special education funding cuts. Rauner says he will veto it.
* Union democracy: compare and contrast.
* UPDATE x1: Madigan fails to deliver veto override on AFSCME arbitration bill
* CDC Whistleblower exposes autism-vaccine link coverup in "Vaxxed"
* An Unexpected Surprise: Leland Is Open to Thru Traffic
* Thorner: What if Environmental Laws Make Things Worse?


* Emergency Management Officials, National Weather Service Encourage Winter Preparedness - November is Winter Weather Preparedness Month in Illinois
* Keep Your Family Safe This Winter - November through February are leading months for carbon monoxide related incidents
* Governor Takes Bill Action
* Illinois Department of Labor Director Hugo Chaviano Awards Governor’s Award for Contributions in Health and Safety to the Illinois Refining Division of Marathon Petroleum Company LP
* State Regulator Elected Treasurer of Interstate Medical Licensure Compact




Hosted by MCS -- CapitolFax.com Privacy Policy -- SUBSCRIBE to Capitol Fax -- Advertise Here -- Mobile Version -- Contact Rich Miller