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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.
[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
Friday, May 28, 10 @ 10:33 am
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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.
Comment by Reality Is Friday, May 28, 10 @ 10:40 am
Skipping a pension payment is still borrowing, because it still has to be paid back. (with interest!)
Comment by Pot calling kettle Friday, May 28, 10 @ 10:51 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’
Comment by John Bambenek Friday, May 28, 10 @ 10:54 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.
Comment by muon Friday, May 28, 10 @ 10:56 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.
Comment by 47th Ward Friday, May 28, 10 @ 10:57 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?
Comment by Quinn T. Sential Friday, May 28, 10 @ 11:04 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?
Comment by dupage dan Friday, May 28, 10 @ 11:10 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.
Comment by Quinn T. Sential Friday, May 28, 10 @ 11:11 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?
Comment by dupage dan Friday, May 28, 10 @ 11:14 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.
Comment by ShadyBillBrady Friday, May 28, 10 @ 11:21 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.
Comment by ShadyBillBrady Friday, May 28, 10 @ 11:23 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.
Comment by CircularFiringSquad Friday, May 28, 10 @ 11:24 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….
Comment by John Galt Friday, May 28, 10 @ 11:42 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.
Comment by inkers Friday, May 28, 10 @ 11:49 am
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
Comment by Quinn T. Sential Friday, May 28, 10 @ 12:15 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.
Comment by huh? Friday, May 28, 10 @ 1:13 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.
Comment by BigTwich Friday, May 28, 10 @ 1:28 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.
Comment by Rambler Friday, May 28, 10 @ 3:08 pm