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Gov. Quinn has a lot on the line with pension reform deal

Published: Tuesday, Dec. 3, 2013 5:30 a.m. CST

As I write this, the House Speaker, Senate President and the two Republican minority leaders have announced a deal on a long-awaited and much-anticipated pension reform bill.

Other than the obvious fact that pension payments are diverting billions of dollars from other state programs such as education and human services, Gov. Pat Quinn really wants this proposal passed before the end of the year for a couple of reasons, both political.

Illinois statute requires the governor to propose a new budget based on existing statutes. In the past, governors almost always would say they’d balance the budget if a new tax or fee was passed, or funds were transferred or programs were legislatively changed. That no longer is permitted.

Quinn’s Fiscal Year 2015 budget address is scheduled for Feb. 19. If a pension reform bill is passed and signed into law by the end of the year, it won’t take effect until June 1. But that’s after the budget address and before the start of the new fiscal year. So, Quinn still could use the proposal’s expected savings when he introduces his budget.

And that’s important because most of the temporary income tax increase expires smack dab in the middle of the coming fiscal year, which will blow more than a $3 billion hole in Quinn’s budget. And that means Quinn will be forced to introduce a budget that makes huge cuts if pension reform doesn’t pass.

If pension reform passes by the end of the year, the savings, which could be as high as $1.8 billion in the first year, can legally be used to “balance” Quinn’s introduced budget. With a strong revenue forecast, it’s possible that the coming year’s revenues could almost cover the remaining hole from the tax hike expiration.

That doesn’t mean, however, that Illinois’ finances would be in the clear. If past is prologue, a court will either set aside the new pension law while its constitutionality is adjudicated, or (perhaps more likely) require that any savings produced by the law be placed into an escrow account.

The responsible thing to do, of course, would be to not include the pension reform savings in a new budget if the bill is passed.

And that brings us to the second reason.

The state pension systems are in dire straits because the state never has made enough contributions to the systems. For proof, just look at municipalities outside Chicago, which are required to make full payments. The Illinois Municipal Retirement Fund is very close to being fully funded. No crisis at all.

Quinn and the legislative leaders have long pushed for a funding guarantee to make sure that the state doesn’t skip its payments again.

Passing this bill, in other words, is a must-have “twofer” for Quinn.

• Rich Miller also publishes Capitol Fax, a daily political newsletter, and CapitolFax.com.

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