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IL: Week in Review — All quiet in Springfield a week after pension reform fails

By   /   August 24, 2012  /   3 Comments

The Illinois Capitol.

By Jayette Bolinski | Illinois Watchdog

SPRINGFIELD — Things were mostly quiet here a week after lawmakers failed to reach an agreement on comprehensive pension reform during a special legislative session.

Rutherford: Pension inaction could have ‘very serious impact’ by year end

State Treasurer Dan Rutherford sounded the alarm on Illinois’ financial crisis Friday, after a Moody’s report said lawmakers’ inaction on pension reform continues to be an issue for the state’s credit rating.

“I know we keep hearing these things about potential downgrades … but the fact is it is now to the point that (the credit rating agencies) are repeatedly saying this. The inaction on Friday helped substantiate the fact that these entities are very, very serious about this,” Rutherford said.

“I’m not sure that the General Assembly really understands what a downgrade could mean. I’m relatively sure the general public probably doesn’t deep down understand what it means.”

Moody’s lowered the state’s general obligation bond rating to A2 in January because of the state’s failure to address pension underfunding and delays in paying its bills. Downgrades affect the interest rate at which Illinois can borrow money.

In a report Friday about the state’s plan to issue $50 million in general obligation bonds in September, Moody’s said its “stable” outlook for Illinois acknowledges the state’s ability to reach consensus on a temporary tax increase in 2011.

However, Moody’s said, “it remains to be seen whether the state has the political will to impose new pension reforms and other measures that restore fiscal strength in the near term.”

Gov. Pat Quinn has warned that the state’s credit rating could be downgraded further, if lawmakers can’t address Illinois’ unfunded pension liability, which is believed to be $83 billion but could be $130 billion or more under new accounting guidelines.

Rutherford said he believes that if lawmakers don’t approve pension reform at least by the end of the fall veto session, “that it very well could have a very serious impact by the end of the calendar year.”

“The problem with this is it isn’t seen as serious. It doesn’t affect today. If there’s a downgrade and it costs the taxpayers of Illinois more money to go into capital bonding, in a sense I think the attitude is, ‘OK. So what?’” he said.

“Well, here’s the ‘so what:’ It will cost the taxpayers of tomorrow even more money. It’s the generation that’s coming next. And the stewards of today’s government need to be responsible for that.”

Class-action status sought on state retiree lawsuit

A group of state employees is seeking class-action status for a lawsuit it filed last week against the state of Illinois, alleging a new law that changes health-care premiums for retirees violates the Illinois Constitution.

The lawsuit was filed Aug. 14 in Randolph County Circuit Court in southern Illinois. The 11 plaintiffs are seeking class-action status that would include all state workers and retirees.

The lawsuit challenges Senate Bill 1313, which had bipartisan support in both houses of the Legislature and was signed into law by Quinn in June. The law requires retired state workers, university workers, lawmakers and judges to pay their own premiums for health insurance, and the director of the state’s Central Management Services is charged with establishing a schedule of premiums for retirees.

Previously, the state picked up the tab for the premiums for state and university employees who retired after 1998 and worked for the state for at least 20 years, as well as premiums for those who retired before 1998 and had eight years of service. The retirees had to foot their own deductibles and co-payments.

The lawsuit says the law violates the state constitution and union contracts that are in place.

A similar lawsuit is pending in Sangamon County, where retired Appellate Judge Gordon Maag has asked that the law be declared unconstitutional, as well. He, too, is asking that the lawsuit be given class-action designation.

State GOP continues call for voters to ‘fire’ Madigan

The Illinois Republican Party’s calls for voters to “fire” powerful House Democrat Michael Madigan are heating up ahead of the November election, but whether the campaign will work remains to be seen, one observer says.

“Mike Madigan is a very durable politician. He’s very smart, and people have come at him before and tried to make him an issue and haven’t succeeded,” said David Yepsen, director of the Paul Simon Public Policy Institute at Southern Illinois University in Carbondale.

The Republican Party, which is the minority party in the Legislature, is trying to capitalize on low approval ratings for Madigan and state lawmakers in general to attract votes in November. The GOP may not succeed in gaining control of the Legislature, but it could gain seats.

The key is linking all Democrats to Madigan, a powerful longtime Democratic Chicago lawmaker who is known to most Illinois voters.

“What this is is Republicans in Illinois saying that a vote for a Democrat in the Illinois House is a vote for Mike Madigan. If the Republicans can take control of the House, Madigan is out as speaker,” Yepsen said.

“This is not a new tactic. What’s new here is the environment and the antipathy toward Springfield and the problems that exist. People in Illinois do know who Mike Madigan is. Maybe this is the year (the tactic) works.”

The state Republican Party repeatedly has painted Madigan as a leprechaun, a reference to his stature and heritage, who “stole Illinois taxpayers’ pot o’ gold.” Now the party’s leaders are asking the federal government to investigate thousands of dollars in donations from a union to a Madigan-controlled campaign fund leading up to Friday’s do-nothing special legislative session on pension reform. It was quid pro quo to kill reform efforts, the GOP charges.

“Mike Madigan might as well hang a ‘for sale’ sign from the dome of the state capitol,” Illinois GOP chairman Pat Brady said in a news release Tuesday. “This clearly does not pass the smell test, and it merits investigation by federal authorities.”

A Madigan spokesman said Republicans have tried to oust the speaker for 25 years unsuccessfully, adding that Republicans killed the pension bill before the House even convened last week.

“They’re not giving anybody a reason to vote for Republicans,” spokesman Steve Brown said. “And that’s the first thing you need to do.”

Contact Jayette Bolinski at jayette.bolinski@franklincenterhq.org. Find Illinois Watchdog on Facebook and follow us on Twitter @ILSthouseNews.

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  • hanmeng

    True, Republicans have blocked passage of the pension bill. But I blame Madigan for the pension crisis. It’s under his leadership that the legislature 1) agreed to generous pensions and health benefits, and 2) failed to properly fund them. Many people castigate the behavior of private corporations, but what about local (and federal) politicians who promise benefits and then fail to fund them? The worst that can happen is that they’re not re-elected. They never seem to have to answer for what should be criminal behavior.

  • Susan

    The State failed to make its employer-payments to the pension plans.
    Now it needs to institute a graduated income tax.
    Illinois is the 5th-wealthiest state.
    It can afford to meet its contracts.

  • BAR

    So
    now there are lawsuits which will attempt to declare any changes to the
    Illinois Constitution un-constitutional. Hmmm, maybe that’s what all the
    current elected officials are hoping for – let the courts decide and then they
    can just blame the courts for making the decision for them.

    The Unions should be
    furious that the lawmakers they put in Springfield are the very ones who
    allowed the funding for their retirements to be diverted. For those supporting
    the Democrats in office, maybe it’s time to re-think your elected officials.
    They appear to have really pulled the rug out from underneath you. Speaking
    about Democrats, lots of folks want to fire Madigan for a number of issues, but
    he is a major leader in the State and his voice is all but unheard. He is an
    elected official, where is his communication, his thoughts, his direction
    toward leading this State from the mess we are in? The lack of communication is
    deafening, credit the Governor for at least trying. Is the lack of
    communication from Madigan the loud sound of back office deals being made? I
    would urge Mr. Madigan to step up and show us a vision of how we clean this up,
    communicate the plan and then use your power to set the plan in place. Open
    communication is fair play, we need more of it.

    $130B in unfunded
    liabilities is a staggering number and mostly meaningless to the average family.
    Illinois has around 13M citizens, seems like that means that not only do we
    need to pay our regular taxes for all the services the State provides but on
    top of that we each owe about a $1000 per person toward this unfunded
    obligation. A family of 4 – $4000, how do those numbers grab you? How are our
    lawmakers going to solve this? There is only one way, the taxpayer will need to
    pay, eventually. Those large unfunded obligations mean the State is a risky bet
    for bond holders for money the State needs to borrow, how much? Somewhere around
    $500M per year, again a huge number not really meaningfull to the average
    family. Simple math, equates to an additional $138 per family of four for years
    to come. So remember the math, letting the unfunded pension obligations get out
    of hand, not making hard decisions along the way, allowing the credit rating of
    the State to dissolve will ultimately cost us all. We need a plan and we need
    communication. We all look forward to the communication, the plan and November!

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