* There was one surprise yesterday…
Already slim chances that Friday’s special session of the Illinois General Assembly will result in state pension changes might have vanished altogether Thursday, when Senate Republican Leader Christine Radogno revoked her support for a halfway measure GOP senators previously helped pass.
Top aides to Gov. Pat Quinn said they were stunned by Radogno’s reversal, but they still hope to salvage the pension session. They said they have received positive feedback from credit-rating agencies about the partial pension proposal.
The bill, House Bill 1447, applies only to pension systems covering state employees and legislators, not to those covering downstate teachers, university employees and judges.
Speaking before Republican Day at the Illinois State Fair, Radogno said lawmakers should act to bolster funding for all five systems. She dismissed the idea that approving HB1447 would help the state’s bond rating.
“That’s ridiculous, to think that it would somehow avert a downgrade,” Radogno said.
* Senate GOP Leader Radogno has now allied herself with House GOP Leader Tom Cross and against a couple of key members of her own caucus on pension reform…
Senate Minority Leader Christine Radogno originally voted in favor of HB1447 [which passed the Senate with bipartisan support in May] but backed away from the proposal [yesterday]. “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.”
* Not everybody is happy with this development…
“They want to raise our property taxes to help fix a broken pension system,” Illinois House Minority Leader Tom Cross (R-Oswego) told the crowd.
It’s that kind of rhetoric that frustrates advocates pushing pension reform.
“It’s unadulterated nonsense. Everybody talks a great game, they go nowhere,” Ty Fahner says.
* Some pension background…
Legislators wrestling with the pension problems today are getting hammered by payment increases dictated by a law passed in 1995. Back then, Republican majorities in both chambers wanted to shore up the pension system, whose assets had dipped to only 54 percent of the money required to meet its obligations. So they passed a plan to return the pension systems to a 90 percent funding level over 50 years.
But the 1995 plan laid out a gradual path, and for 15 years the state’s payment increased only slightly. The bills started growing steeper in 2010, in the immediate aftermath of the Great Recession. Kelly Kraft, a Quinn spokeswoman, says leveling out the “ramp” must be part of a comprehensive deal to get pension payments under control.
State officials have deviated from the 1995 plan several times. For example, during former Governor Rod Blagojevich’s first two years in office in 2003 and 2004, the state issued pension obligation bonds and invested the borrowed money in the market, counting its projected profits as those years’ pension contributions.
Under Quinn, the state borrowed money for two years to make the pension payment. Now it has to pay those loans back, with interest, while also finding money for the ramped up payments.
Ralph Martire, executive director of the Center for Tax and Budget Accountability, a group that advocates better services for the poor, argues that worker benefits are not the root of the problem. The normal cost of providing pensions, he says, actually decreased slightly this year.
The real problem, Martire says, is that lawmakers skimped on pension payments for decades. They kept taxes low and provided more services than they could afford by depositing IOUs instead of cash into the pension funds. Now those IOUs are coming due. “In Illinois,” Martire says, “it isn’t a pension crisis. It’s a debt crisis.”
A bipartisan report from earlier this year shows that about 44 percent of the debt is because lawmakers and governors didn’t pay enough into the retirement funds over the years — sort of like skipping payments on a 401(k).
About 22 percent of the problem comes from poor investment returns, especially recently during the recession. About 9 percent is because of increases in benefits over the years.
The other 25 percent stems from a variety of other factors.
* You can follow the special session on pensions today by clicking here.