SPRINGFIELD (AP) – Gov. Pat Quinn proposed severe spending restrictions Wednesday telling a joint session of the General Assembly that the state is virtually paralyzed until it fixes its public employee pension crisis.
With a scolding tone, the Democrat facing re-election in 20 months used tough language to describe the pension hole that will suck nearly $7 billion of the state’s general revenue in the coming year. He challenged lawmakers to send him a legislative fix and answered critics by laying out specific provisions he wants to be part of the solution.
“This is the most difficult budget Illinois has ever faced, and it is only a preview of the pain that is to come if this General Assembly does not act decisively on comprehensive pension reform,” Quinn said in a 30-minute address that focused almost entirely on the pension mess.
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 necessary in large part because of the state’s required contribution to employee retirement accounts. After years of state underfunding, the five systems have a whopping $96.7 billion deficit in the amount necessary to pay benefits to everyone they cover.
Quinn proposed closing tax “loopholes” to produce money to pay down the state’s gaping backlog of $9 billion it 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 bulk of that would come from ending tax-free foreign dividends, which Quinn’s staff says could encourage multinational corporations to move operations to overseas subsidiaries.
“The more corporate loopholes we suspend, the faster we can pay down our bills,” Quinn said. “Why should we give costly, ineffective loopholes to some of the biggest and most profitable corporations on earth when we have bills to pay?”
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 budget spokesman Abdon Pallasch stressed Quinn wants a pension fix first but said the governor remains open to talks on gambling.
But he did not talk 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 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 more teacher layoffs, shorter school days and larger class sizes, Cross predicted taxpayers will start feeling the pinch of lack of pension action, 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.
Perhaps answering critics such as Senate Republican Leader Christine Radogno, who said the governor has been “woefully absent” in the pension debate, Quinn laid out specifics of the bill he wants to sign. It must guarantee the state pay its obligated share each year and dedicate $1 billion a year to pensions beginning in 2020, the year pension loans are paid off.
He praised a coalition of public-employee unions that has pledged to contribute more to their retirement, but also said traditional, 3 percent cost-of-living increases, compounded annually, are “unsustainable.”
“For those with higher pensions, the cost of living adjustment should be suspended until the entire pension system achieves better balance,” Quinn said, without elaborating, but then added, “The basic pension amount that has already been accrued by our current and former employees should not be touched.”
Associated Press writers Sara Burnett and Regina Garcia Cano contributed to this report.
Contact AP Political Writer John O’Connor at https://www.twitter.com/apoconnor