SPRINGFIELD — Illinois lawmakers narrowly approved a historic, sweeping overhaul of government worker pension systems Tuesday, overcoming years of political and philosophical differences in an attempt to address one of the state’s most pressing financial problems.
The collective exhale from the state’s political leaders may be short-lived, however. Even before Gov. Pat Quinn carries through with his promise to sign the bill, unions are prepping a lawsuit to try to overturn it. They contend the benefit cuts are unconstitutional and unfair to employees and retirees.
Supporters hailed the bill as a solution that would “ensure retirement security” for current and retired state workers, public school teachers outside Chicago, university employees and state public officials. They also said it would end the squeeze on state tax dollars that increased pension costs have placed on education and social services.
But Republican opponents who argued that the measure doesn’t do enough to decrease the state’s costs contended it will lead to the continuation of a 2011 state income tax increase that was billed as temporary.
The Democratic governor, who is seeking re-election next year, would not discuss whether an extension of the tax hike will be required. He did, however, take a victory lap, relishing a breakthrough after years of stalemate on the controversial but pressing issue.
“The people have won,” said Quinn, who declared from his Capitol office that Tuesday, the 195th anniversary of Illinois’ statehood, was a “great day for the taxpayers of Illinois.”
“We have all won,” he said.
But Senate President John Cullerton, whose earlier union-backed plan to curb pension spending was stymied by House Speaker Michael Madigan, said he remained concerned that the package passed by lawmakers violated a state constitutional ban on diminishing or impairing public pension benefits.
Cullerton, whose Senate Democrats had been viewed as closer to the unions than Madigan’s House majority, said he viewed it important to get something before the courts to decide whether the approach is legal.
“I think the bill has serious constitutional problems, I’ve made that clear from the start, but now it’s in front of the court and they can decide,” Cullerton said.
He said if the measure is struck down, lawmakers might be more inclined to take up his Senate-passed measure, which Madigan never called for a vote.
Cullerton’s comments could be used as Exhibit A by union leaders who are less than happy with Quinn and Democrats who voted for the pension cuts.
“This is no victory for Illinois, but a dark day for its citizens and public servants,” declared a statement by “We Are One,” a coalition of several major unions.
Dan Montgomery, president of the Illinois Federation of Teachers, was blunt: “We call it theft.”
The measure would raise the retirement age for many state workers and scale back the size of and even skip some annual cost-of-living increases. In return, the state would put a few hundred dollars into most workers’ pockets by slightly reducing the amount of money they have to chip in from their paychecks.
The legislation also would keep intact current benefits for some of the longest-serving, lowest-paid workers who get the smallest retirement checks until their benefits grow to certain levels. In addition, it would allow an opportunity for some workers to join a 401(k)-style plan and have more input in managing their retirement nest eggs.
The changes are projected to erase a $100 billion pension shortfall over three decades. If no changes were made, the state would be on the hook for about $374 billion in pension payments over the next 30 years. With the proposed changes, the state’s price tag over that same period would drop to $214 billion — a savings of $160 billion.
About $90 billion to $100 billion of that savings is expected to come from benefit cuts. The other $60 billion to $70 billion in savings is expected to come from the state owing less as it seeks to pay down the pension debt sooner. The proposal would see the state putting an additional $1 billion a year into the systems by 2020.
After years of passive neglect, Illinois now holds the title of having the worst-funded state pension system in the nation. Rating agencies have repeatedly downgraded the state’s credit, which costs taxpayers tens of millions of dollars more when the state borrows money to build roads, repair bridges and launch other public works projects.
Governors and lawmakers shortchanged the system, skipped payments, improved benefits and carved out sweetheart windfalls for friends as the debt grew. The proposal attempts to shut down the gravy train for politically connected people who managed to get into the pension system through various associations, ranging from school administration groups to the state’s Special Olympics.
The differences in philosophy that had long held up approval of a pension fix were on display during debate in the House and Senate.
Speaker Madigan, a Chicago Democrat who performed shuttle diplomacy in recent weeks to close the deal, maintained the major changes are needed because the current Illinois pension systems “are just too rich” for the state to afford.
“Something’s got to be done. Something’s got to be done,” Madigan said, telling colleagues in an hourslong debate that the state must act immediately to solve its pension “crisis.”
Rep. Mike Zalewski said the legislation represented “the meaningful middle” between protecting retiree benefits and the state’s finances. The Riverside Democrat, who sat on a bipartisan House-Senate panel that built a framework for the final deal cut by leaders, supported the legislation, saying it will be “one of the most important votes” the General Assembly will ever take.
But opponents criticized the pension changes, especially those hitting hardest on older retirees who will have no opportunity or ability to get a job or otherwise make up for future financial losses.
Rep. Tom Morrison, R-Palatine, warned the pension money problems will remain in place even after the legislation takes effect.
“All we’ve done is delayed the day of reckoning just a little bit longer,” said Morrison, adding that Illinois should learn from the mistakes that prompted Detroit to file for bankruptcy.
“You cannot continue to make promises to workers that can’t be kept. You cannot overtax the private sector for very long. You cannot force them to foot the bill.”
Rep. Jim Durkin, who stepped into the role of Republican leader only months ago, argued that failing to take action will fuel efforts to support higher taxes and portrayed the $160 billion in savings “real money.”
“This is not Monopoly money,” Durkin said.
Across the Capitol, Sen. Linda Holmes, D-Aurora, dismissed Madigan’s assertion that the pensions are “too rich,” putting the blame on state officials who failed to keep retirement funds in better shape over the years.
“What we are doing is quite simply wrong,” Holmes said, her voice echoing off the Senate chamber’s ornate walls. “This is actually no different than a thief coming into your house at night and stealing your valuables. The difference is this isn’t a thief coming in the night, this is your elected representatives coming to you, looking you straight in the eye and saying, ‘I’m going to take away your future.’ That is more than a promise broken. That is reprehensible.”
But Senate Republican leader Christine Radogno of Lemont dismissed reasons for voting against the bill.
“If someone’s looking to tank this process and preserve the status quo, which is financial chaos, you can find that excuse,” Radogno said. “However, I implore everyone … to do the right thing and to get our state back on the process of recovery.”
In spring, the House and Senate each treated the other chamber’s version of pension reform poorly. Given the rancor generated by the different approaches to pension reform, it took some heavy arm-twisting to pull together the votes.
Democrats control the House and Senate by wide margins, and as such had to tap into that power to pad the roll call.
In the House, rookie GOP leader Durkin could round up only 15 Republican votes, less than the party was able to put up for prior bills, and Madigan’s Democrats supplied 47 votes. The bill passed the House 62-53, getting two more votes than the minimum needed. One lawmaker voted present.
In the Senate, Radogno had hoped to put together a dozen Republican votes but collected just 10. Early on, Cullerton had hoped to put up only 18 Democrats, but he came through with 20. The bill received the minimum 30 Senate votes, with 24 voting against and three voting present.
By the time the votes fell into place, said Rep. Elaine Nekritz, D-Northbrook, several lawmakers wanting to address the pension funding issue realized “this is the time, this is the moment.”
The events unfolded Tuesday as a government office across the street from the Capitol was evacuated for several hours after an employee in the mail room of the governor’s constituent services office found white powder in an envelope. Springfield fire Chief Ken Fustin said tests showed the substance was baby powder but added that an accompanying letter indicated a “credible threat.”
While the pension bill passed and Quinn said he’d sign the measure soon, the issue is expected to wind through the courts. Unions said they’ll sue under a clause in the Illinois Constitution that prohibits action that would impair or diminish a public pension once it is in place.
The teacher union’s Montgomery predicted that’s why the Illinois Supreme Court ultimately will throw out the plan.
In spring, Madigan said he was confident his version of pension reform would be found constitutional by at least four of the high court’s seven members. The speaker said employees were given consideration in the pension bill that was approved, pointing to the extra money the state says it will put into the pension systems and a 1-percentage-point drop in worker paycheck contributions. That, Madigan said, will help the Illinois Supreme Court uphold the legislation.
Left out of the mix Tuesday was Chicago’s financially out-of-whack government pension systems. Mayor Rahm Emanuel faces major financial pressure next year in the form of increased police and fire pension payments and had hoped to piggyback on the state fix.
That didn’t happen, and it’s unclear whether lawmakers will want to dive back into the thorny pension debate again next year.
For his part, the mayor applauded the vote but reminded the state’s political leaders the city still needs to be taken care of.
“The work is far from finished. The pension crisis is not truly solved until relief is brought to Chicago and all of the other local governments across our state that are standing on the brink of a fiscal cliff because of our pension liabilities. Without providing the same relief to local governments, we know that taxpayers, employees and the future of our state and local economies will remain at risk,” Emanuel said in a statement.
Cullerton, the mayor’s chief Springfield ally, said lawmakers should not wait for the courts to rule before lawmakers attempt to revamp several Chicago-based pension systems, including those for Chicago Public Schools and police and firefighters. He vowed to tackle the issue next year.
“There’s no question that the Chicago pension system and the Chicago teachers are in much worse shape than the state,” Cullerton said.
“They have a crisis.”