After two credit downgrades in a week, Quinn calls special session

By Jamey Dunn

Gov. Pat Quinn has called a special legislative session later this month after Moody’s Investor Services made good on its threat to downgrade the state’s credit rating.

Quinn is calling for a special session starting on June 19. “Here we go again. Will two downgrades in one week be enough to convince the General Assembly that our pension crisis can't be ignored anymore? Time and time again over the past two years, I have proposed, asked and pushed members of the General Assembly to send me a comprehensive pension reform bill. Time and time again, failure to act by deadlines has resulted in the bond rating agencies lowering our credit rating, which hurts our economy, wastes taxpayer money and shortchanges the education of our children,” Quinn said in a written statement this afternoon. “Legislators and their leaders know what they need to do to return Illinois to sound financial footing.”

Today, Moody’s knocked the state’s rating for general obligation bonds down to A3 from A2 and gave the state a negative future outlook. Before the downgrade, Illinois already had the lowest rating of any state in the nation. Fitch Ratings dropped the state’s bond rating earlier this week. Both rating downgrades were spurred in part by the legislature’s failure to pass comprehensive changes to the state’s pension systems for public employees before the spring session adjourned last week. Lower bond ratings means the state may pay more interest for future borrowing.

Moody’s does not expect that a pension solution will be approved soon and doubts the General Assembly’s ability to make fiscal reforms in preparation of the scheduled roll back of the temporary income tax increase, which will begin in 2015 unless a vote is taken to stop it. “The Illinois General Assembly on May 31 concluded its session without addressing the severe pension liabilities that are the state's greatest credit challenge. Our rating now assumes the government will not take action to reduce the state's pension liabilities any time soon,” said an analysis from Moody’s. “The legislature's political paralysis to date shows not only the magnitude of Illinois' unfunded benefit liabilities but also the legal and political hurdles to legislation that would make pensions more manageable long term. Without significant reforms, substantial growth in both unfunded liabilities and in annual funding burden are likely in coming years. This trend may coincide with the expiration of most of the income tax increases the state imposed in fiscal 2011 to help cover pension costs.”

Moody’s announcement of the rating decrease was especially harsh on Illinois lawmakers. “An A3 rating, while very low for a U.S. state, is consistent with the General Assembly's inability to steer the state from a path to fiscal distress.”

Quinn’s call for special session comes with no indication that leaders have reached a compromise on pension reform. House Speaker Michael Madigan and Senate President John Cullerton fundamentally disagree on how to go about changing the pension systems for public employees. Madigan’s Senate Bill 1 was soundly rejected by the Senate during the last week of session, and the House did not take a vote on Cullerton’s SB 2404 before adjournment. Supporters of Cullerton’s plan say that model, which offers employees a choice in their benefits reduction, is constitutional. They argue that Madigan’s plan, which would unilaterally cut benefits, is not. Backers of SB 1 say Cullerton’s plan would not save enough to stabilize the pension systems, which have an estimated $100 billion unfunded liability. The House also approved a bill to gradually shift future pension costs to universities and community colleges, which the institutions agreed to. But the proposal failed in the Senate on the last day of session.

Republican legislative leaders are generally on board with Quinn’s call for a special session. “Our pension crisis is so severe that Illinois’ credit rating has been downgraded twice in one week,” House Minority Leader Tom Cross said in a prepared statement. “The sooner the Illinois General Assembly returns to Springfield to get the job done on pension reform, the better,” Senate Minority Leader Christine Radogno said she “appreciates” the call for session, but she has some reservations. “The governor did call today to tell me his intentions to call a special session. I appreciate the call — but I’m not sure what dynamics have changed in this pension reform discussion. Clearly there is a rift amongst Democrat leaders. Despite their supermajority status, they missed a prime opportunity to enact comprehensive pension reform. We hope that opportunity will still be there now that it will take a supermajority vote in each chamber to pass. Senate Republicans remain willing to work on advancing a pension reform plan that substantially solves the problem.”

When Quinn called a special session on pensions last summer, lawmakers came to the capital for one day, and no compromise pension reform plan materialized. Quinn then vowed to launch a “grassroots” campaign for pensions changes that produced an Internet ad campaign and the much-derided pension reform mascot, Squeezy the pension python. 

Democratic legislative leaders had less to say about the announcement. “The Senate president’s office is notifying members of the governor’s request to return to Springfield on June 19th,” said a statement from Senate President John Cullerton’s office. “Moody’s provides more damning evidence that we can’t afford a continual stalemate on pensions. It’s time to identify a reasonable compromise that can pass both chambers with a three-fifths vote.” Madigan spokesman Steve Brown said he has seen nothing that points to a new development on pensions. Madigan did not attend a meeting on pensions held by Quinn earlier this week. “The House will convene,” Brown said. “The House has passed two pretty decent bills: one that has pretty significant [pension] saving and one that ends the free lunch [of the state picking up pension costs for schools].” He said that it would be unlikely that the House would consider legislation that “does anything less” than the bills the chamber has already passed.

Union officials are pushing for Cullerton’s bill. “Moody's rating downgrade makes clear that the House of Representatives must act swiftly to finish the work of sound pension reform the Senate has initiated. Moody's has concerns over ‘legal and political hurdles’ and calls for a ‘credible, comprehensive long-term pension funding plan’ to be implemented. They have laid out the path that should be followed, and it clearly leads to SB 2404. SB 2404 is the only legal, comprehensive, and responsible pension funding solution. It will restore fiscal stability and solvency to the state’s pension systems,” said a statement from the We Are One Coalition.

During the special session, lawmakers may also address concealed carry legislation if Quinn decides to veto House Bill 183, which was approved last week. It is possible the governor would use his veto pen to write in gun control measures that were not passed, such as a high-capacity magazine ban or a ban on assault weapons. Legislators would likely vote to override such a veto.  And of course, as happens with many special session, the specters of a host of issues that did not pass during the regular session will likely be raised. Keep an eye out for a renewed push for the legalization of same-sex marriage and a new version of a gaming expansion proposal. However, Quinn could limit the session to a specific topic. Any legislation passed at this point would require a three-fifths majority in both chambers to go into effect before next year.

Senate Republicans split on 'partial' pension reform

By Jamey Dunn

Republican legislative leaders predict little will come of tomorrow’s special session on pension reform.

House Speaker Michael Madigan said yesterday that any hope that a bill will pass lies with a meeting scheduled tomorrow between House Minority Leader Tom Cross and Gov. Pat Quinn.

Cross called Madigan’s remarks “disingenuous” and said all four legislative leaders have been invited to the meeting. “Let’s quit the games. This is kind of the old Mike Madigan school [of thought] We’ve read the book. We’ve seen the movie. This a problem that we all need to solve, and everyone needs to be an adult. Everybody needs to get in a room and work it out. I think we should have been in a room working it out weeks ago. We didn’t. We’ll be there tomorrow. We’re willing to stay as long as it takes,” Cross said. “This is very serious. That approach that the speaker used is really one of the reasons we’re in this mess. It’s politics after politics after politics.”

Cross has said that Quinn should keep lawmakers in session until a solution can be reached. Cross does not support any of the pension proposals that are likely to be up for consideration tomorrow. Madigan yesterday said House Bill 1447, which the Senate approved, would be “progress.” That measure would only apply to state workers or members of the General Assembly. Under the proposal, employees and retirees would have to choose between keeping either a 3 percent annual cost-of-living increase based on compounded interest or state-subsidized health care benefits. Current employees who choose to keep the compounded cost-of-living adjustment would also not be able to factor any future raises into calculating their pension benefits. But Cross said he will not support a plan that leaves out teachers and university employees. “We believe that we need to do something substantive, and we need to do something real, and this nibbling around the edges and then claiming, ‘We have pension reform and that we fixed it’ again is an old playbook. We saw it with campaign finance [reform]. We saw it with workers' compensation. We want something real. I think we have one shot at it.”

Senate Minority Leader Christine Radogno originally voted in favor of HB1447 but backed away from the proposal today. “When it was passed, we were pretty clear that we thought that it was inadequate in terms of the fact that it only covered two of the five systems,” Radogno said. She cited concerns over estimates that could put the unfunded liability pension at a higher figure than the oft-cited $83 billion. “That bill clearly is not enough.” Radogno agreed with Cross that passage of the bill in the House could stall efforts at more comprehensive proposals. “The concern is that it will stop forward progress because a lawsuit will immediately be filed, in which case probably the party in power would say, ‘Well, we’ve got to wait until that unfolds and see what happens.’ So it’s just inadequate on too many fronts at this point.”

But not all of her GOP colleagues see it that way. Sen. Bill Brady, a Bloomington Republican, called HB1447 a “half measure,” but he said that if it is the only option that can gain enough backing to pass, he would support it. “Something’s got to be done,” Brady said. “This is the only solution on the table. Rome’s burning, and we need some incremental solution for this problem.” Brady does not share Cross’ and Radogno’s concerns that passing the bill would freeze efforts to reform the other systems. “I would argue that if we pass this, it will lead to passage [of reform] in the other systems.”

Sen. Matt Murphy agreed. “For those that say that it’s not enough and passing this doesn’t qualify as real reform, I agree wholeheartedly.” However, Murphy, a Palatine Republican, said he doesn’t think passing HB 1447 would hurt the reform process, and he said he would support it. “Personally, I don’t think the fact that we pass some pension reform means anybody thinks we’re done. I don’t think we’re done with just this bill, and I don’t think it takes the pressure off to solve the rest of the problem,” he said. “I think you can take what you can get now and then don’t slow the momentum. Use it as a springboard to finishing the job on the other systems.”

Governor's Day at the fair turns into loud protest

By Jamey Dunn

Gov. Pat Quinn found few allies today in his push to reform the pension systems for retired state workers.

Quinn faced a wall of sound from union protesters as he spoke on Governor’s Day at the Illinois State Fair this afternoon. His speech was barely audible over loud booing and chants of “Respect Illinois workers.” Several protesters shouted out “Keep your promises” as the governor tried to make himself heard over the crowd. A plane circled overhead carrying a banner that read “Gov. Quinn — unfair to workers.”

The event, usually meant to be a sort of pep rally for the party holding the governor’s office, instead served to display deep divides among Illinois Democrats over pension reform, the closure of state facilities and budget cuts that Quinn has said necessitated  layoffs of state workers and a freeze on contractual raises.

Since lawmakers are scheduled to be in special session on Friday to debate pension reform, it was the issue of the day. House Speaker Michael Madigan laid the success or failure of pension reform in Friday’s special session at the feet of Quinn and House Minority Leader Tom Cross. He said the two are scheduled to meet Friday morning “So hopefully, we’ll get some resolve out of those discussions between Governor Quinn and Leader Cross,” Madigan said at a Democratic party breakfast this morning.

Quinn drew some protesters to the morning event, where union members handed out fliers and called out, “Act like a Democrat, Pat!” But it was little, compared to the pushback at the state fair, where protesters followed him on his way to the event booing and chanting and even crowded around him while he stopped for a snack.

“If you want to be governor of Illinois and you want to step into the arena, you’d better have a tough hide. I have a lot of people who may call me names, but I think there’s a lot of people in Illinois who agree with what I am trying to do, which is to make sure we invest in our children and have good education. And sometimes you have to make reforms like in the pension that are difficult but necessary for everyday people to have a good state,” Quinn said this morning. “We’re going to reform the pensions, and I know some of the state workers don’t like that, but they’re going to have accept what the voters — I think — at large want.”

Skokie Rep. Lou Lang, a member of Democratic leadership in the House, said that he applauds the union members for making their voices heard at the fair. However, Lang said: “I understand their concerns, and in many ways, I agree with them and may be voting with them. That still does not mean that we should not give the governor his due respect as the governor [and] as a person who has supported the things that matter to the men and women of organized labor for a very long time.”

Lang said he was disappointed that the party did not present more of a unified front today. But he also said that the scene was illustrative of the party’s history. “It was a bunch of Democrats getting together. And Democrats are pretty noisy when they get together, and we don’t always agree. I’m sure the Republican rally tomorrow will be a lot more homogenized, and I’m sure the Republican rally tomorrow will be a lot quieter. But having said all that, this is what the Democratic Party is. It’s what it’s about. It’s what it’s always been about. I’m proud of what happened today.”

Madigan, who is also the chair of the Democratic Party in Illinois, brushed off the acrimony over pension reform and other issues, saying he did not think it would do permanent damage to his party in the state. “We’re trying to balance the budget. We’re trying to improve the fiscal condition of the state of Illinois. People from organized labor are representing their people, and they ought to do that. ... It’s just a natural conflict that’s going to be there. I don’t think there’s any long-term adverse implications that are going to come out of it,” he said at the morning event. “Promises were made. But if you don’t have the money to pay the promise, I think you have to step back, bring everybody together, talk reality and look toward how we can restore some fiscal stability to the [pension] systems and to the state of Illinois.”

Madigan said that House Bill 1147, which would only apply to state workers and legislators and avoids the issue of shifting pension costs to local school systems and universities, would be progress. He said he presented a comprehensive reform plan during the regular session, but it was not approved by the House.

Quinn supports a plan from Rep. Elaine Nekritz, a Northbrook Democrat, that would apply to all state retirees. Nekritz’s bill would phase in a controversial cost shift to schools and universities more slowly than a plan that failed to gain Republican support at the end of regular session. “I really would like to see both leaders in the House of Representatives put 30 votes on a bill sponsored by Rep. Elaine Nekrtiz,” Quinn said. “It’s a good bill. It’s a reasonable bill. It will reform the pensions and do it once and for all in Illinois.”

Cross supports neither plan. He is opposed to proposals that would ask downstate and suburban schools and universities to assume the retirement costs for their workers. Cross said supporters claim that the cost would be 6 percent to 9 percent of payroll for most schools. However, he said that there are many factors that could make the numbers spike. “That’s a floor, and given the unfunded liability numbers out there, given the potential for market drops, given the potential for change in interest rates assumption, or [if] the General Assembly doesn’t make payments, that number climbs significantly,” Cross said at a Chicago news conference yesterday. Cross and other Republicans say a cost shift could result n increased property taxes and layoffs. Cross said he does not back a proposal that leaves out schools and universities. “If we do that bill, the day it becomes law, we’ll see litigation. It’s inevitable that we’re going to see litigation, and once that litigation starts, it’s our belief that we will cease the discussions on pension reform until the conclusion of a lawsuit.”

 Cross said Quinn should keep lawmakers in session until a deal can be reached. “This needs to happen. It doesn’t need to happen after the election. It needs to happen now. ... And so, call us back to special session. And people are going to yell and scream, and they’re going to complain, and it’ll be chaotic down there [in Springfield]. But my approach is.,you put us in a room, lock the key, and when we’re done, you let us out.”

Despite the lack of agreement, Quinn remains optimistic that things could still fall in line to pass a bill on Friday. “I think each of the leaders is waiting for the other to move forward. And I hope we can in the next couple of days get everybody to jump aboard at the same time. Hold hands and let’s go together.”

Unions pitch their own pension reform plan

By Jamey Dunn

Union officials laid out the broad strokes of their own pension reform plan today. 

Cinda Klickna, president of the Illinois Education Association, described the plan backed by We Are One Illinois—a coalition of public employee unions, which includes the Illinois AFL-CIO, the American Federation of State, Country and Municipal Employees, Service Employees International Union and unions representing teachers, police, firefighters and transportation workers. Klickna said that group seeks a guarantee that the state will make the required pension contribution. Under the proposal, the priority of the pension payment would only be second to the state’s creditors. Union officials argue that legislation that is currently up for consideration does not do enough to ensure that lawmakers make the annual pension payments. They point to skipped pension payments as the primary cause of the state’s more then $80 billion unfunded pension liability. “The pension crisis was caused by past governors and legislators that failed that people of the state,” Klickna said.

The group also is proposing that lawmakers reevaluate corporate tax breaks, such as the package of tax cuts recently passed to benefit Sears and the CME group. The collation is focusing on a group of tax breaks, the elimination of which they say could save the $80.7 billion over the next 34 years. On the list are tax exemptions for paper and ink given to news outlets, a tax exemption for foreign dividends and a tax break given to retailers for collecting the state’s sales tax. “We cannot longer afford to let these big corporations off the hook will vital services continue to be slashed,” said Henry Bayer, executive director of AFSCME Council 31. “We need to reform our tax system. It’s long, long overdue. ... We need to focus on where the money is -- what we can afford and what’s fair.”

All of the tax breaks have the backing of relatively powerful lobbying groups and could be a tough sell to legislators who are concerned about giving the appearance of being pro jobs and business friendly in the wake of the economic downturn.

The union coalition is also asking that any changes would not affect current retirees. In exchange for those three considerations, the group says that current workers would pay more toward the cost of retirement. Klickna said that such an increase would need to be negotiated, but she said the amount would likely vary across the different pension systems. “The employees didn’t cause the crisis, but we’re going on record today to say our members are willing to help fix it if the state will guarantee that the politicians will never again divert our pension money to other expenses,” Michael Carrigan, president of the Illinois AFL-CIO, said in a prepared statement.

The move comes as lawmakers are scheduled to return to Springfield this Friday to take up the pensions issue during a special session called by Gov. Pat Quinn. However, Quinn’s camp does not seem responsive to the plan. “This is nothing new, and all has been discussed before,” Brooke Anderson, a spokeswoman for Quinn, said in an emailed response to Illinois Issues. “This proposal would not solve the state's pension challenges, nor is it feasible.”

 House Speaker Michael Madigan reportedly plans to call House Bill 1447, which the Senate approved on the last day of the spring legislative session. The measure would require employees and retirees to choose between keeping either a cost-of-living increase based on compounded interest or state-subsidized health care benefits. Current employees who chose to keep the compounded cost-of-living adjustment would also not be able to factor any future raises into calculating their pension benefits.

Unions maintain that the pension reform plan is unconstitutional and presents workers and retirees with a false choice between two bad outcomes. “If I had to chose between my [COLA] and my insurance, it would be like asking me to cut off my right hand or my left hand,” said Barbara Gilhaus, a retired teacher. Gilhaus said she gets about $28,000 annually from her pension.

Supporters of the plan to offer employees a choice between health care and compounded COLAs say it passes constitutional muster because it allows employees to decide what benefits that may want to trade off to keep others. Quinn also recently signed Senate Bill 1313, which will result in retirees paying more for their health care coverage. While the state still plans to kick in to cover some of the health care costs for retirees, some retirees will have to start being premiums under the plan.

HB 1477 only applies to state workers and members of the General Assembly. Democrats and Republicans cannot agree on whether universities, community colleges and downstate and suburban schools should have to pick up the cost of their employees' retirement. There are multiple bills on the table that would sift the costs to schools over several years. But so far, Republicans have staunchly opposed them, and Democrats have been unwilling to back off the issue. Leaving the retirement benefits of teachers and university employees out of any pension vote that may happen on Friday would allow lawmakers to revisit the issue of the cost shift after the general election.

Quinn calls special session with no deal reached on pensions

By Jamey Dunn

Gov. Pat Quinn has called the General Assembly back into session to address pension reform, but it seems that legislative leaders are no closer to reaching an agreement.

Quinn announced today that lawmakers would be required to return to Springfield on Aug. 17. The Illinois House is already scheduled to be in session that day to vote on a recommendation from a disciplinary committee to eject Rep. Derrick Smith from its ranks. Smith is accused of taking a $7,000 bribe in exchange for helping a business seeking a state grant.

Quinn called on lawmakers to pass pension reform legislation this year, but negotiations fell apart in the final days of the regular spring session. Democrats argued that downstate and suburban schools, state universities and community colleges should pick up more of the cost of their employees’ retirement benefits. Chicago schools already pay most of their employee retirement benefits. Democrats argue that because districts are setting the pay upon which benefits are based, they should not be able to pass the pension bill off to the state. But Republicans said that shifting the costs to local districts when state funding to schools is also being cut would lead to layoffs and local property tax increases.

The governor made the special session announcement today when he addressed the City Club of Chicago. “We’ve accommodated repeated requests for study and analysis, and it’s pretty clear that the school districts of Illinois can have a stake in their own pensions. This is not a good situation, where a school district can negotiate a contract with its employees, then shift the retirement costs over to taxpayers who did not have a seat at the table. It’s about accountability,” Quinn told the Chicago-Sun Times. “We must have a system that’s accountable, and that’s what we’re going to have, and we’re going to get it done on Aug. 17.”

Talks among the four legislative leaders reached a standstill earlier this summer when no agreement on the issue was found, and it would appear that nothing has changed since those negotiations stalled out. “I’m not aware that there’s been any more progress in terms of conversation between leaders,” said Northbrook Democratic Rep. Elaine Nekritz, who was the representative for the House Democrats on a pension reform working group. She said that at this point, trying to predict what, if anything, the special session might produce would be pure “speculation.” Nekritz told the Daily Herald earlier this summer that she thought it was likely that pension reform would not pass until after the general election in November. When asked whether leaders were any closer to reaching an agreement, Steve Brown, spokesperson for House Speaker Michael Madigan said, “I’m not aware of anything.”

Republican leaders took a positive tone when reacting to Quinn’s announcement. “We are encouraged by the governor’s call for a special session on pension reform on Aug. 17. As many people know, we have been and continue to be supportive of comprehensive pension reform that solves the major crisis facing us today. The time to act has been upon us,” said a prepared statement from House Minority Leader Tom Cross and Senate Minority Leader Christine Radogno. “We are continuing to encourage Gov. Quinn to take a leadership role to get a comprehensive pension bill passed in the General Assembly. We will continue to be available to discuss this very important matter in the coming weeks.”

There are a few pension proposals out there that lawmakers could take up. Senate Bill 1673 would have shifted costs to schools, universities and community colleges. After it became clear that Republicans would not support that plan, Madigan turned control of the bill over to Cross, who added amendments to remove the cost shift. Also, the Senate passed House Bill 1447, which would reduce benefits for state employees and legislators only. The measure avoids the controversial topic of who would pay for school benefits. However, both bills have immediate effective dates so, they would require the approval of a three-fifths majority or amendments to change the effective dates. If the effective dates are changed, the earliest the legislation could become law is next June 1.

It is unclear whether House Republicans could get behind a plan -- or whether Quinn would sign it -- that only covers state workers and legislators and does not address the pension systems for teachers and university employees. According to Quinn’s budget office, those systems would account for the bulk of pension costs for 2013. Multiple attempts to contact Quinn's office for comment were not returned. The announcement for the special session also mentions Quinn’s plan, which was never drafted into bill form.

Meanwhile, Senate President John Cullerton is urging Quinn to call off the special session. He has volunteered to call back his members on August 17th in order to cut costs associated with a special session. “I share the governor's interest in resolving the lingering pension issues, but it makes no sense to spend thousands of taxpayer dollars when there is an easy, no-cost alternative,” Cullerton said in a prepared statement. He estimates that the cost of one day of special session would be about $40,000. If the Senate returns voluntarily, some travel costs would not be covered by taxpayers.

Quinn calls for special session to keep projects rolling

By Jamey Dunn

Calling for a special legislative session, Gov. Pat Quinn said today that lawmakers must approve spending for capital projects or construction could begin to shut down as early as next week.

“[The capital bill] was the largest investment in the history of Illinois in our roads, our highways, our bridges, our schools, our water systems, our rail systems, our broadband deployment. It was a huge public works agenda and project, and it’s the law of Illinois,” Quinn said as a Chicago news conference today. “Unfortunately the legislature went home last week without passing legislation to fund this year — this coming [fiscal] year beginning July 1 — the money necessary to pay for these projects.”

Lawmakers adjourned the regular legislative session last week without passing a bill that would approve the spending for construction projects for the next fiscal year. Senate Democrats tried to force a vote on about $430 million in spending that they wanted to tack onto the House’s budget proposal. Instead of voting on the measure, House Speaker Michael Madigan called for the creation of a conference committee, a group of members from both chambers and both parties tasked to hash out differences when the Senate and House cannot agree on a piece of legislation. Senate President John Cullerton did not follow suit, and the Senate wrapped up regular the spring session without putting its own members on a conference committee.

Now Quinn says lawmakers failed to get the job done, and he plans to meet with the four legislative leaders to “promptly” schedule a specially session to avoid what he called a “job crisis.” Quinn said that if the funding is not approved, he would have to start the process of shutting down construction projects on June 17. “This is something that has to be done. This is not a matter that’s optional. This is mandatory. These men [working on construction projects], they have to work. And they don’t want to be told on the 17th of this month that Springfield didn’t work for them and, ‘You’re off the job.’”

According to the Illinois Road and Transportation Builders Association, a full shutdown would put 31,000 people out of work and cost the state about $30 million initially and $3 million a day for as long as work is called off.

Some House members say there is no need for the construction projects to be shut down so quickly. They maintain that an extension of the state’s lapse period, the time the state has after the close of the fiscal year to continue paying off bills from that fiscal year, would allow ongoing construction projects to continue. “We’ve sold bonds and the money is there. … The bond proceeds are there. The projects will continue,” Spring Valley Democratic Rep. Frank Mautino, a House Democratic budgeting point man, said on the last day of regular session.

He added that the extension of the lapse period from August through December would allow contractors on existing projects to continue submitting bills past the end of this fiscal year, and the state can continue paying for ongoing work. “So now, all those projects that are ongoing can just continue without a re-appropriation. … So we don’t need to do that bill.”

Steve Brown, spokesman for House Speaker Michael Madigan, echoed Mautino’s take on the issue. “The lapse period would allow the state to continue to pay bills and beyond that, we will continue to cooperate with the governor.” When asked if he thought lawmakers would return to the Statehouse next week, he repeated, “We’re cooperating with the governor.”

However, Kent Redfield, an emeritus political science professor at the University of Illinois Springfield, said that the House’s attempt to use lapse period spending to keep the capital projects going won’t fly. “You appropriate money for a certain period of time, and that’s the authorization to spend, and once that’s up that’s up. … You can’t engage in new spending after July 1 because it’s a new fiscal year, and you don’t have any statutory authority.”

Illinois Comptroller Judy Baar Topinka said she has asked her legal counsel to review the issue and determine how long she can continue to pay bills for capital projects. “My office will continue to pay state contractors for as long as legally possible, but ultimately, this question must be addressed by the General Assembly and governor. If that means calling an immediate special session, so be it. One thing is certain: Our families and businesses are already struggling and paying more than ever before to state government; they deserve better than to be subjected to a high-priced game of legislative chicken over the capital bill,” Topinka said in a written statement.

None of the legislative leaders would give specifics on when they might return for a special session. “It is our understanding that there is a bill in the Senate that would give the governor the authority to continue the capital program for the next fiscal year. We encourage the senators to pass that bill as soon as possible. Unfortunately, at the end of session last week, Senate Democrats tried to tack on an extra $400 million of extra spending, which was unacceptable in the House. We are always willing to discuss our options, but the clearest one at this point is for the Senate to pass [House Bill] 2189, without additional spending amendments, to the governor. This bill appropriates funds for the FY12 capital and road programs immediately. This important jobs creation bill should not be held hostage by additional requests for more spending in the budget,” Sarah Wojcicki, spokesperson for House Minority Leader Tom Cross, said in a written statement.

But Quinn today continued to back the Senate Democrats’ call for additional spending. “I think the General Assembly gets an incomplete when it comes to their budget. I don’t think they properly invested in important things like schools and other things that matter to everyday people.”

Redfield said, “[The issue at hand ] is obviously not the capital bill. It’s about the Senate Democrats and the governor wanting to appropriate additional dollars for education and human services.”

But adding more spending seems even less likely in a special session, when Republican votes would be needed to pass the appropriations for the capital bill. “They’ve already taken the tough votes. They’ve already voted to cut this stuff,” Redfield said.

He predicts there may be minor concessions on both sides, but that the dispute will instead likely be pushed off into the fall veto session, when there will likely be a clearer picture of how much money lawmakers have to work with. “This is a lot easier to play out in the fall, where you know where you are on gaming, and you know where you are in revenue.”

Quinn has yet to act on a large gaming package passed in the last days of the session that could potentially bring in billions of dollars in new revenue. While he supports a casino in Chicago, he has said that he thinks the bill, which calls for five new casinos and slots at horse racing tracks, may be too large of an expansion.

Quinn also lost a large potential bargaining chip when he signed off on the new legislative districts for state lawmakers last Friday. When asked about the move today, he told reporters, “This isn’t a matter to bargain.”

Redfield said the short time frame Quinn is giving could make it very hard for lawmakers to do more than pass a bill that extends capital spending into the fall and possibly take up the issue later. He said Quinn’s oft-repeated tactic of threatening to cut off a popular state program or service to spur the legislature to action does not have a track record of success. “That’s just a recipe for disaster. Either because you’re always kind of wimping out, or you’re going to blow something up with horrendous consequences because this time you’re really serious and nobody thinks you are.”

He added, “We’ve got a mess that they are going to have to clean up somehow.”

Federal funds may require special session

By Jamey Dunn

As Gov. Pat Quinn tries to piece together a budget with billions in unpaid bills piling up, the federal government will be chipping in to help cover Medicaid and education costs. This new revelation could mean the General Assembly will have to hold a special session to dole out the education funds.

President Barack Obama signed a $26.1 billion spending package intended to preserve public sector and education jobs. The measure also extends an elevated Medicaid match — which works out to 62 cents on the dollar for Illinois instead of the usual 50 cents — that was set to expire at the end of the year. Illinois would likely get about $400 million for education and $550 million for Medicaid.

Officials at the Illinois State Board of Education believe that the General Assembly will have to return to Springfield to appropriate the federal dollars for education. From a newsletter written by State Superintendent Christopher Koch:

Illinois stands to receive an additional $400 million in federal education funding. We believe that if the spending measure becomes law, the Illinois General Assembly would have to come back to Springfield to pass a supplemental appropriation, and these funds would likely be distributed through General State Aid.

Quinn’s Office of Management and Budget and the legislative leaders are all reviewing the bill to determine if a special session is needed. Kelly Kraft, a spokeswoman for the governor’s budget office, said a decision could come by next week.

ISBE spokesperson Mary Fergus said the federal government estimated the money could save up to 5,600 education jobs in Illinois. She added that applications for the funds should be available to states in about a week.

Note a possible pension plan

By Bethany Jaeger
Watch for a new pension proposal that could help buy some time for the state to recover from the economic slump and free up about $2 billion during the next cash-strapped year.

Gov. Pat Quinn’s administration could propose issuing pension obligation notes, which differ from pension obligation bonds. A note is a form of short-term borrowing that would have to be repaid within five years. The state does short-term borrowing all the time. The notes could carry a lower interest rate than pension obligation bonds, which are repaid over much longer periods of time.

The idea was talked about at a recent meeting of a new pension reform task force. Rep. Roger Eddy, a Hutsonville Republican, serves on that panel of legislators, labor organizations, unions and business groups. “This has some hope,” he said.

The idea could come up this week, when the governor called legislators back to Springfield for a special legislative session.

The legislature is scheduled to return Tuesday, seven days before Illinois’ new fiscal year starts. Quinn’s special session proclamation says he urges the legislature to consider measures, particularly an income tax increase, that would result in a balanced budget, as well as measures needed to implement a major construction program and a constitutional amendment to allow voters to recall elected officials. Quinn and Senate President John Cullerton specifically mentioned House Bill 174, the education-funding bill formerly known as a “tax swap,” as a potential solution for the state to generate revenue and knock down some of the deficit and to provide some property tax relief.

House Democrats didn’t have enough votes needed at the end of May, which means it could be even harder to acquire an extra majority of votes needed now that the legislative session has stretched into June. An extra majority would require at least some Republicans. GOP leaders, however, have strongly opposed the idea of a tax increase until they see progress on government reforms, including cheaper models of Medicaid health insurance programs and ways to reduce the state’s long-term pension debt.

One of the largest pressure points on the state budget for the next fiscal year is the contribution to the public employee pension system. Illinois is supposed to pay about $4 billion. Quinn proposed skipping next year’s payment to free up about $2 billion to help fill what his office estimates will be an $11.6 billion deficit. The legislature rejected the idea of skipping the payment; however, the Democratic-approved budget only authorized $1.5 billion for the state’s contribution into the pension system. If enacted, money would have to be skimmed from other state programs to cover the full $4 billion payment, which is required by law.

The idea to issue pension notes could take some pressure off to find the extra money needed to make the full payment, according to Eddy.

With the $1.5 billion already approved, one idea would be to issue about $2.2 billion in pension notes. That would get the state to about $3.7 billion, leaving only about $300 million that the state needed to find to get all the way up to $4 billion.

Eddy added that once the economy recovered and revenue started flowing into the state again, the state would be better able to cope with the annual contributions.

Any money freed up by the pension notes could help ease some pressure to cut human services, as well as buy some more time for the pension reform task force and a separate Medicaid reform task force to recommend ways to save money. The pension panel is supposed to issue a report to the General Assembly November 1, which is just before the regularly scheduled fall veto session. The panel is scheduled to meet once a month through October, and all meetings are public and subject to the Open Meetings Act and the Freedom of Information Act, which Eddy said prevents a 200-page report being dropped on legislators’ desks 15 minutes before they’re supposed to vote on it.

“This is not how we approached the problem before,” which is a good thing, he said, adding, “Any hint that we’re going to become serious about pension modernization, Medicaid reform, looking at job creation, all those are good signs that we’re really moving off the dime.”

The strategy of issuing pension notes differs from when former Gov. Rod Blagojevich’s administration issued an unprecedented $10 billion in pension obligation bonds in 2003. He and the legislature skipped that year’s payment and planned to use the interest earned on the investments to repay the debt. The strategy backfired when the economy tanked last fall. Pension notes, on the other hand, would be obligated directly to the state pension fund rather than to an investment bank.

Ready, set, repeat

Reminiscent of last year, a whole host of state policy issues remain up in the air throughout the summer. Inaction mostly rests on the shoulders of Democrats, who are repeating history by agreeing on practically nothing. The main culprits are Gov. Rod Blagojevich and House Speaker Michael Madigan, each of whom blames the other for lack of action. Meanwhile, Illinois is in its ninth year without a capital construction plan, campaign funding reform remains dormant, many state services and agencies are operating with stagnant or decreased funding and long-term costs of health care and pensions continue to compound.

Legislators and the governor will return to Springfield this week with lots to talk about, but little progress is anticipated. Here’s a chronological list of activities with some context.

Today: Comptroller Dan Hynes issued a statement that he would not cut the checks for pay raises for state legislators and officers if they are enacted because the General Assembly never gave him authority to spend the necessary money. “We cannot implement the pay raises without an appropriation. But more importantly, I am of the opinion that this is no time for pay raises,” he said in a release, citing budget cuts for social services and Medicaid providers. The House rejected the pay raises, but the Senate has yet to do so. In the larger scheme of things, the pay raises simply are a battle of public perception. While such state services as substance abuse treatment struggle to meet demand because of $43 million in budget cuts, it would look disingenuous if legislators received their annual 3 percent cost-of-living adjustments at the same time they receive significant pay raises, costing about $1.1 million just for constitutional officers, legislators and top state agency officials, according to the comptroller’s office. That doesn't count pay raises for judges.

Tuesday: Expect Gov. Rod Blagojevich’s idea to move about 140 state employee positions from Springfield three hours south to be rejected by a bipartisan legislative review panel. Expect that rejection to be followed by the governor’s statement that the move is going to go forward, anyway. Lots of union-backed employees will be up in arms again. Meanwhile, they’re still working under last year’s contract with the state while their union, the American Federation of State, County and Municipal Employees Council 31, remains gridlocked (click this link and scroll down) with the administration. Among the key sticking points are employee wages and employee contributions to health care and pension benefits.

Tuesday and Wednesday: Gov. Rod Blagojevich called legislators back to the Capitol to address two major issues: funding for education on Tuesday and funding for capital construction projects Wednesday. But neither session meets until late in the afternoon, giving legislators time throughout the day to attend various events at the annual State Fair in Springfield. Governor’s Day (a.k.a. Democrats’ Day) is Wednesday and Republican Day is Thursday. Watch for political fireworks off stage.

Ongoing: The governor says he’ll “rewrite to do right,” his slogan for changing agreed-upon bills to include his agenda. If the General Assembly rejects his changes, then the underlying bill dies. So far, he’s changed two bills. One would allow all adults up to age 26 to remain on their parents’ health insurance plans. The original intent was limited to college students who took a medical leave or who reduced their course loads to part time because of an illness or injury. They would have been covered for a year on their parents' plans. A second amendatory veto would extend property tax exemptions to all veterans with service-connected disabilities certified by the U. S. Department of Veterans’ Affairs. The original bill regarded a tax increment financing district in the Village of Downs. Blagojevich has said he will continue amending numerous bills in his Rewrite to Do Right campaign, “to take positive action on legislation that has been sent to him by the General Assembly,” according to a statement from Brian Williamsen, his spokesman.

August 29: Later this month marks the deadline for the governor to sign, change or reject ethics reforms sent to his desk in June. His office repeatedly has said he doesn’t think the ethics reforms go far enough. One potential amendment could include banning state contractors from donating to statewide political parties. The original legislation, which received unanimous approval by the General Assembly in May, only prevented state contractors holding contracts worth $50,000 or more from donating to statewide officeholders who sign the contracts.

Also coming up: One of the House Democrats’ point people on education, Rep. Mike Smith of Canton, announced that he’ll host a series of public hearings to consider a proposal to abolish property taxes for school funding by 2010. It’s been floated by Sen. James Meeks, a Chicago Democrat who previously threatened to run against Blagojevich for governor in the absence of education funding reforms. Meeks didn’t run, but he also didn’t get what he wanted. So here we go again. Add education funding reform to a huge pile of politically sensitive Statehouse issues that likely will grab some headlines but will remain stalled, at least before the November elections.