* My weekly syndicated newspaper column was written Friday afternoon. Events have admittedly already overtaken some of it…
As I write this, the House Speaker, Senate President and the two Republican minority leaders have announced a deal on a long-awaited and much-anticipated pension reform bill.
Other than the obvious fact that pension payments are diverting billions of dollars from other state programs like education and human services, Gov. Pat Quinn really wants this proposal passed before the end of the year for a couple of reasons, both political.
Illinois statute requires the governor to propose a new budget based on existing statutes. In the past, governors would almost always say they’d balance the budget if a new tax or fee was passed, or funds were transferred or programs were legislatively changed. That’s no longer permitted.
Gov. Quinn’s Fiscal Year 2015 budget address is scheduled for February 19th. If a pension reform bill is passed and signed into law by the end of the year, it won’t take effect until June 1st. But that’s after the budget address and before the start of the new fiscal year. So, Quinn could still use the proposal’s expected savings when he introduces his budget.
And that’s important because most of the temporary income tax increase expires smack dab in the middle of the coming fiscal year, which will blow more than a $3 billion hole in Quinn’s budget. And that means Quinn will be forced to introduce a budget that makes huge cuts if pension reform doesn’t pass.
If pension reform passes by the end of the year, the savings, which could be as high as $1.8 billion in the first year, can legally be used to “balance” Quinn’s introduced budget. With a strong revenue forecast, it’s possible that the coming year’s revenues could almost cover the remaining hole from the tax hike expiration.
That doesn’t mean, however, that Illinois’ finances would be in the clear. If past is prologue, a court will either set aside the new pension law while its constitutionality is adjudicated, or (perhaps more likely) require that any savings produced by the law be placed into an escrow account. If that happens, then legislators and Quinn will have to deal with a new hole.
The responsible thing to do, of course, would be to not include the pension reform savings in a new budget if the bill is passed. But that would mean proposing an election year budget that slashes education and human services to the bone, and what governor wants to do that ever - let alone in an election year?
And that brings us to the second reason.
The state pension systems are in dire straits because the state has never made enough contributions to the systems. For proof, just look at municipalities outside Chicago, which are required to make full payments. The Illinois Municipal Retirement Fund is very close to being fully funded. No crisis at all.
Quinn and the legislative leaders have long pushed for a funding guarantee to make sure that the state doesn’t skip its payments again.
But Republican gubernatorial candidate Bruce Rauner, who now leads the GOP primary field in two recent polls, is dead set against a funding guarantee.
Does Rauner really want the state to have the flexibility to skip pension payments again, which could lead to even more problems down the road? Well, there’s something else going on here.
Rauner wants a complete revamp of the pension system. He’d immediately put employees into a 401(k) plan instead. The irony is a bit rich here. Rauner’s investment firm made a fortune off of investing state pension fund money. Rauner is now semi-retired and reported making $53 million from his investments last year. A retired teacher making $53,000 a year would have to live another thousand years to equal one year’s income for Rauner.
Anyway, the funding guarantee is mainly just an excuse to derail the pension deal. Once pension reform is passed, it’s doubtful that legislators will want to revisit it unless the courts strike it down as unconstitutional. And since the proposal has support from the most powerful Republicans in the Illinois General Assembly, it would be uncomfortable for Rauner to continue his harangues against the compromise over the next year. Better to just kill it up front.
So since Quinn could end up facing Rauner in the general election, defeating the wealthy Republican on the legislative battlefield now would take some air out of his well-funded campaign down the road.
Passing this bill, in other words, is a must-have “twofer” for Quinn.
- Oswego Willy - Monday, Dec 2, 13 @ 10:55 am:
Great read …
To the Post,
I would have thought the best political move for Rauner would have been to work against the Bill behind the scenes, and if it fails, he keeps his crutch, if it passes and signed, THEN come out and talk about the Constituionality (at least give an indication that a Constitution exists) and hope for the Courts to rule against it, claim victory, and the High Ground, and … if Rauner wins, have his justification to try his insane idea to ignore the Constitution and ram a proposal through a Democratic GA, or try to do it by Executive Order, which again, has large Constitutional implications …
But, to take on Quinn so frontal, Quinn’ leverage on the passing and signing of a Bill becomes larger, than had Bruce Rauner just held off until the GA met and let some of this play out, and work it beyond the media and the bloviating and the hyperbole.
Again, a Quinn “Win” on this, a “twofer”, is now more in focus due to an overplay of a hand, and a slow play by the Four Tops and keeping Quinn out of it, and Quinn gets to play “hero” without ruining the negotiations.
There is alot to be said to slow playing an issue like this, even if its your #1 Campaign issue.
- RNUG - Monday, Dec 2, 13 @ 10:56 am:
Dead on with the first part about counting the pension savings in the FY15 budget.
- wordslinger - Monday, Dec 2, 13 @ 10:57 am:
–But Republican gubernatorial candidate Bruce Rauner, who now leads the GOP primary field in two recent polls, is dead set against a funding guarantee.–
Big surprise. That, in the private sector, is how some people do business. Contract for the service, try to wiggle out of paying for it after the work is done.
In my experience, once you’ve identified that kind of “businessman,” don’t do business with them any more. They ain’t Midwestern.
- DuPage - Monday, Dec 2, 13 @ 11:01 am:
Does anyone think the SC will uphold this?
- anonymous - Monday, Dec 2, 13 @ 11:09 am:
What are the political consequences for Rauner if he has enough leverage to erode support for the bill? He is directly lobbying against this bill, while Republican leadership is working very hard for it. If pension reform fails to pass can Quinn blame this on a billionaire candidate for governor who made his fortune off public pensions.
Thanks for the great coverage Rich
- The Obvious - Monday, Dec 2, 13 @ 11:09 am:
The statehouse are in a bubble on pensions. Attacking the livelihood of those working for the top two employers in Illinois is a losing issue statewide, no matter how much newspapers editorialize, and will likely cost Quinn the election.
If Dan Rutherford defies expectations by coming out against pension reform he will likely be the next Governor.
- RNUG - Monday, Dec 2, 13 @ 11:11 am:
DuPage @ 11:01 am:
I expect the severable parts that allow a fully informed choice or the parts that only affect new hires will be upheld.
- facts are stubborn things - Monday, Dec 2, 13 @ 11:16 am:
RNUG - Monday, Dec 2, 13 @ 11:11 am:
=I expect the severable parts that allow a fully informed choice or the parts that only affect new hires will be upheld.=
Do we know if there are parts that are indeed severable?
- low level - Monday, Dec 2, 13 @ 11:17 am:
The irony is Rauner says he knows how to “beat Madigan” or whatever it is he says. He runs campaign ads with his $18 watch while everyone knows he’s one of the richest guys around. Everyplace he goes he announce he has the answer.
Madigan quietly goes and gets an agreement from the 3 other leaders and works with people in his customary methodical way.
Rauner = customary campaign rhetoric.
Madigan = quiet leadership that gets results.
- Ruby - Monday, Dec 2, 13 @ 11:18 am:
Just remember that someone in Springfield is playing three dimensional chess while the rest of us are playing checkers. If the pension bill is defeated, who will really be blamed?
- PublicServant - Monday, Dec 2, 13 @ 11:18 am:
===Other than the obvious fact that pension payments are diverting billions of dollars from other state programs like education and human services===
And all this time I thought it was a long term structual deficit that was affecting payments to education and human services, and that if not for the pension fund diversion, those worthy state programs would have been affected decades ago. Oh, and you’re welcome.
- RNUG - Monday, Dec 2, 13 @ 11:30 am:
acts are stubborn things @ 11:16 am:
Yes, it’s on the last page of the draft bill … but I haven’t taken the time to slice and dice all the crossreferences as to which provisions are and aren’t.
- Cassandra - Monday, Dec 2, 13 @ 11:39 am:
The notion of this all being an elaborate mostly Democratic (but not all) charade to free up a couple billion pretend dollars for the next budget does keep coming into my mind. But the Republicans won’t get to say how most if any of that extra money is spent, right, in our one-party govt. And there is no guarantee there won’t be a tax increase anyway. What will be the rewards for Radogno and Durkin and their supporters? Bipartisanship is nice, but quickly forgotten.
- 47th Ward - Monday, Dec 2, 13 @ 11:54 am:
Early on, when Madigan agreed to the conference committee, didn’t he also say that it would be up to Quinn to find the votes to pass a bill? Has that changed, or is Madigan giving Quinn exactly what he wanted, good and hard?
- Judgment Day (Road Trip) - Monday, Dec 2, 13 @ 12:33 pm:
“Just remember that someone in Springfield is playing three dimensional chess while the rest of us are playing checkers. If the pension bill is defeated, who will really be blamed?”
This entire situation reminds me of the saying that the best way to hide in plain sight is to flood the stage with actors.
That’s what in effect Mike Madigan has done. And he’s (most amazingly) forced all the other actors onto the stage. Don’t know if the man ever laughs, but he’s outdone even himself this time.
And even more amazingly, Madigan has created a situation of strange bedfellows all over the stage. Who would have thought Bruce Rauner and the “We Are One” coalition on the same side of the pension issue?
- east central - Monday, Dec 2, 13 @ 12:37 pm:
Beside the excellent points raised by Rich in his column, it seems that the Maag case may also be a factor in motivating a vote now. A Maag ruling upholding the contractual rights of retirees could become a serious obstacle to passing any of the pension proposals under consideration.
On a related point, the comment by Nekritz about wiggle room in funding pensions suggests there is no additional contractual consideration for retirees, as others have mentioned this morning. Interesting that the leaders are willing to almost assure the success of a constitutional challenge by those already retired.
- springfield native - Monday, Dec 2, 13 @ 2:42 pm:
The problem with the first part of this is that the bill does not require recertification, nor does it allow for it. The systems will have certified the amount for FY 2015 by the end of this week, meaning that that will be the legal budgeted amount, and do to the continuing appropriation, will be the legally required and appropriated amount. Quinn is stuck with the 2015 number as it exists under current law.
- cod - Monday, Dec 2, 13 @ 6:43 pm:
Education costs consist mostly of compensation to teachers and educators, which includes vacations, sick days, salary, insurance, and pension funding contributions. How can compensation take away from education if they are education costs?!
- Just The Way It Is One - Monday, Dec 2, 13 @ 7:50 pm:
If it passes, it’ll be at LEAST a “twofer” for PQ IF he ends-up with BR as the opponent–and if somehow the Court picks it up to review right away and actually approves it with the money ($1.8 Bil.) freed-UP for the Governor to balance the Budget–it’d be even more than THAT for Quinn: a “threefer,” or Triple Play…! (Maybe what Hilary Clinton said about Quinn being the “luckiest Politician in the World” IS true)…!
- Quinn is the Grinch - Monday, Dec 2, 13 @ 9:55 pm:
Governor Quinn is the Grinch that stole Christmas to State employees and retirees. He is heartless. He lied in his last campaign when he said that he had a heart. He has an ice cold heart like all Chicago machine democrats.
- RNUG - Monday, Dec 2, 13 @ 10:40 pm:
acts are stubborn things @ 11:16 am:
In case you didn’t see my comment in another thread, the AAI change, the funding guarantee and the bond prioritization are tied together and non-severable. Most the other provisions appear to be individually severable.