SPRINGFIELD – Years of inaction on Illinois’ worst-in-the-nation public pension problem has produced what many had long predicted: A worst-ever budget.
At least that was Gov. Pat Quinn’s take Wednesday, when he declared his latest spending plan “the most difficult budget Illinois has ever faced.” It slashes money for schools, bringing districts to 2008 funding levels. Universities and local governments also would see a cut, as would other programs, though the full extent of the reductions wasn’t yet clear.
The proposed cuts are just the latest round of bad news for a state that’s grown accustomed to gloomy financial projections. Last year, Quinn closed 54 state facilities and reduced Medicaid funding by more than $1 billion. And Illinois still has a backlog of unpaid bills that’s approaching $9 billion, despite an income tax hike passed in 2011.
Quinn put the blame directly on lawmakers, saying their failure to fix the state’s $97 billion pension crisis meant the annual payment to the state’s public employee retirement funds – about $7 billion next year – is crowding out spending in other areas. Republicans pointed the finger right back at the Chicago Democrat, with the party’s Senate leader calling Quinn “woefully absent” from the debate.
Pension experts say there’s plenty of blame to go around in a state that skipped or shorted its payments for decades and has blown several deadlines Quinn has set in recent months to get a deal on reform.
“It’s heartbreaking, but at this point I don’t know what they’re going to do,” said Alicia Munnell, a professor at Boston College’s Carroll School of Management and director of the Center for Retirement Research at Boston College. “There comes a time when labor, legislators and everybody have to get together and say, ‘We don’t want our state to be destroyed.’ And this is the time.”
Quinn challenged lawmakers to send him a legislative fix and answered critics by laying out specific provisions he wants to be part of the solution. He warned that his budget would be “only a preview of the pain that is to come” if this General Assembly does not act.
But his speech barely addressed the “pain” that Quinn aides hinted at the previous evening, not even mentioning, for example, the $400 million cut in public education necessitated in large part because of the state’s required contribution to employee retirement accounts.
Quinn proposed closing tax “loopholes” to produce money to pay down the $9 billion backlog the state owes to vendors. He would eliminate three tax breaks, at least temporarily, to produce an extra $445 million annually for a “Bill Payment Trust Fund.”
“The more corporate loopholes we suspend, the faster we can pay down our bills,” Quinn said.
He hinted he would be open to a heavily regulated expansion of legalized gambling, as long as the new revenue generated went to education.
Later Wednesday, the Senate Executive Committee endorsed yet another proposal to add five riverboat casinos in Illinois, including a land-based operation in Chicago, which would direct up to $1 billion in revenue from the slot machines annually to public schools. Quinn has vetoed two similar bills in just the past year.
Quinn’s assistant budget director Abdon Pallasch stressed that Quinn wants a pension fix first but said the governor remains open to talks on gambling.
Quinn also did not talk Wednesday about a plan his aides revealed Tuesday night to change state law and allow him to use some of the $2 billion set aside in funds that automatically dole out money to aid local governments, transportation and programs from violence prevention to the Abraham Lincoln Presidential Library and Museum in Springfield.
Quinn was pointed in his challenge to the lawmakers to act on the pension crisis. “So, members of the General Assembly,” he asked, “what are you waiting for?”
Senate President John Cullerton, D-Chicago, responded afterward that he was already taking action, having planned a committee hearing next week on his combination legislation. It would offer employees a choice on whether they want retirement health care or reduced annual cost-of-living increases, combined with a House-authored backup plan that would reduce post-career benefits and increase employee contributions.
“He’s frustrated, and he wants us to do something, so we’re going to start next week,” Cullerton said after the speech, while noting the ongoing struggles that have prevented progress thus far.
House Democrats, with support from House Republican Leader Tom Cross of Oswego, have a separate plan.
Although Quinn didn’t hammer on the impact of budget cuts, such as the $400 million education reduction that will mean teacher layoffs, shorter school days and larger class sizes, Cross predicted taxpayers will start feeling the pinch and begin pushing for action.
“In the [House] speaker and perhaps the (Senate) president’s mind, you’re not going to lose an election because you haven’t passed a pension reform bill,” Cross said. “Now that we’re starting to talk about effect on other services, people will start to realize.”
The state’s employer contribution to pensions of $6.8 billion in the coming year will represent nearly one-fifth of the $35.6 billion general revenue – money spent for state operations such as education and public safety – expected to come in during the budget year that begins July 1.