Illinois lawmakers expressed skepticism Wednesday that they’ll be able to pass a new pension reform bill this spring, despite pressure from Gov. Bruce Rauner and major credit rating agencies to quickly replace the 2013 overhaul that the state Supreme Court struck down.
The high court last week ruled that the plan to address Illinois’ worst-in-the-nation public-pension shortfall by reducing benefits was unconstitutional, sending lawmakers back to square one on an issue that has dogged them for years.
On Wednesday, House lawmakers held their first hearing on the Republican governor’s proposed solution, and Rauner was scheduled to meet with Senate President John Cullerton, who’s floating his own pension bill, about a path forward.
But Rep. Elaine Nekritz, D-Northbrook, chair of the House Pension Committee, called the odds of a deal before the session ends May 31 “slim.”
“You don’t just slap these things together,” said Nekritz, noting that the 2013 deal took years to negotiate.
Illinois’ five pension funds are short about $110 billion of what’s needed long term to pay out benefits as promised, largely because the legislature for years didn’t make the state’s required contributions. The payments now are taking up roughly one-fifth of the state’s general revenue fund, with next year’s payment reaching about $7 billion.
Major credit rating agencies have given Illinois the worst rating of any state. Moody’s Investors Service this week downgraded to junk bond status the credit rating for the city of Chicago and Chicago Public Schools, citing the Supreme Court’s ruling and the city’s deep pension debt. The rating agencies also have warned that the court decision puts additional pressure on the state to find a solution.
Rauner has said approving another pension reform plan is “essential” and that he believes it can be done before the end of the month.
He wants to allow state workers and retirees to keep the benefits they’ve earned but move them to a less-generous plan going forward that he says would save the state $2.2 billion next year. He also wants to put a constitutional amendment on the 2016 ballot that would allow future pension benefits to be cut, in hopes of heading off any future lawsuits from labor unions or retirees.
Cullerton, D-Chicago, is reviving a plan that he floated in 2013 but with some adjustments. His proposal would offer state workers a choice between keeping annual cost-of-living raises in retirement and being able to include future pay raises when calculating their retirement benefits. His office estimates that the plan would save about $1 billion in the first year.
Cullerton and Rauner believe their proposals would be found constitutional, though others have expressed doubt that anything short of raising taxes to keep current benefit levels in place would pass the court’s muster.
Labor unions, which sued along with retirees and other groups to get the 2013 law thrown out, supported Cullerton’s plan when he first proposed it. But armed with the Supreme Court’s unanimous decision, they’re no longer saying they back it.
Even so, Cullerton said he believes his proposal has the best chance of getting the Legislature’s approval because it’s been considered before and the Senate passed it in 2013. He said he’s willing to push the legislation through in the next few weeks, but he needs the governor’s support before calling it for a vote.
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Rauner’s office said the governor is willing to consider other options, but didn’t comment specifically about Cullerton’s plan.
“This is such an important issue for the state, we need to keep trying,” said Kim Fowler, general counsel for the governor’s office of management and budget.
Cullerton spokeswoman Rikeesha Phelon said the Senate president isn’t looking at a specific timeline, saying “what’s important is to get it right.”
State Rep. Art Turner, D-Chicago, also said it will take a while to get consensus on a solution to the pension crisis.
“It’s going to be an uphill battle,” he said.