PI Original Ashlee Rezin Wednesday March 6th, 2013, 6:39pm

Quinn's Budget Address Pits Pensions Against Education, Social Services

Gov. Pat Quinn turned up the rhetoric on pension reform during today’s state budget address, largely putting the blame on lawmakers for their failure to act.

Gov. Pat Quinn turned up the rhetoric on pension reform during today’s state budget address, largely putting the blame on lawmakers for their failure to act.

Promptly at noon, Quinn began his speech to a joint session of the legislature by saying, “This is the most difficult budget I have ever submitted to you.”

“Inaction on comprehensive pension reform has left our state with less revenue for our most important priorities,” he said.

Spending levels for the budget in 2014 fiscal year, which starts July 1, are the lowest since 2008, according to the governor.

“If I could issue an Executive Order to resolve the pension crisis, I would,” Quinn said during the address. “And I would have done it a long time ago ... It’s time for you to legislate. So take the vote. Send me a comprehensive pension reform bill.”

With $96.8 billion in its underfunded pension system and a $7.2 billion backlog of bills that threaten to consume funding for education and other public services, Illinois has been slapped with the worst credit rating in the nation.

"So, members of the General Assembly, what are you waiting for," Quinn asked the legislature.

There are several pension reform bills pending in the General Assembly, but so far lawmakers’ attempts to overhaul the crisis have been unsuccessful.

During the address Quinn called for pension reform legislation to include a firm guarantee that the state will pay its full pension amount every year, a mandate that state employees raise their pension contributions, and an adjustment to pension benefits that includes changes to some pensioners' cost of living adjustments (COLA). As a cost-cutting initiative, he proposed COLAs be temporarily suspended for individuals with large pensions.

“Pension and debt service costs are growing much faster than the state’s revenues, so without some change to the pension funding system, it’s unavoidable that Illinois will experience cuts,” said Nancy Hudspeth, resource and policy analyst for the Fiscal Futures Project at the Institute of Government and Public Affairs at the University of Illinois at Chicago.

“This is an unfortunate reality for Illinois,” she said. “We don’t see any good answers for the state."

During the address, Quinn made little mention of the budget proposal’s call for a 3 percent cut, or approxmiately $400 million, to education funding. Instead he focused his attention on the preservation of investments in early childhood education and MAP scholarships for higher education.

“It is unfair for Governor Quinn to present this false choice between pensions or pencils,” said Dan Montgomery, president of the Illinois Federation of Teachers, in a statement. “To call that debt an education expense is not only a gimmick, but an insult to teachers everywhere. We are not to blame, and our students shouldn't suffer.”

He talked about his willingness to consider a gambling expansion package, though, saying gaming revenues should be directed toward education.

“Gaming expansion has to be done right,” he said. “It must have tough ethical standards, a campaign contribution ban on casino operators, and no loopholes for mobsters.”

With Quinn planning to run as an incumbent in the 2014 gubernatorial primary election, despite a dire fiscal situation, his address had no shortage of positivity. He touted an additional $25 million for mental health initiatives and a tentative contract agreement between the state and the American Federation of State, County and Municipal Employees (AFSCME), Illinois’ largest employee union, which could save Illinois $900 million in healthcare costs.

He also boasted of Illinois ranking fifth in the nation for manufacturing job creation, and that if hydraulic fracturing comes to Illinois, it will have the “strongest environmental regulations in the nation.”

Referring to the “the few priorities we’ve been able to protect despite hard fiscal reality”, Quinn also boasted of an anti-violence strategy that includes early childhood education, after-school programs, intervention initiatives, mentorship, mental health care, jobs, and support for law enforcement.

“But there’s much more work to do,” he said.

Quinn suggested lawmakers cut their office budgets by 5 percent, which he said he plans to do this year.

The governor also called for the establishment of a Bill Payment Trust Fund, proposing to close a few corporate tax loopholes and dedicate the revenue to Illinois’ $7.2 billion backlog of bills. He mentioned three tax loopholes that, if closed, could bring in approximately $445 million per year.

Saying “I guess every little bit counts”, Hudspeth called that solution a “drop in the bucket.”

Encouraging the closing of corporate tax loopholes, the Illinois labor coalition We Are One issued a statement after the address, saying the organization has identified $2 billion in loopholes, adding that more could be done to prevent “harmful cuts to education and essential public services.”

The group also pushed back against the assertion that cuts to education and public services fall on the shoulders of pensioners and the lack of pension reform.

“It is misguided to blame the modest pensions earned by teachers, police, caregivers and other public employees for harmful cuts to education and essential public services,” We Are One’s statement reads. “As the budget process begins, we urge lawmakers to prevent cuts to public services and keep promises to retirees by closing wasteful loopholes instead."

But if Illinois doesn’t restructure its debt, it won’t really solve any problems, according to Ralph Martire, executive director of the Center for Tax and Budget Accountability.

He said legislators’ focus should be on Illinois reamortizing its debt into a payment structure it can actually afford and reforming its revenue base.

“There’s a gubernatorial election approaching next year, and Illinois just experienced the temporary state tax increase, so it would be difficult for Quinn to talk about,” he said. “But the truth is, unless we have substantial revenue reform in Illinois and modernize our tax code to tax people more thoroughly, tax in a manner that’s more responsive to a modern economy, and tax in a manner that generates stable revenue even during poor economic cycles, we’re never going to fix our fiscal problems.

“The state created its unfunded liabilities for the pensions by borrowing against them to cover up the structural deficit created by our flawed tax policies,” he added.

Referring to it as a “runaway pension train”, State Sen. Kwame Raoul (D-Chicago) said in a statement that it’s time for legislators to have a “serious conversation, followed by meaningful action.”

Raoul chairs the newly-organized Special Committee on Public Pensions and State Investments, which focuses on pensions and promoting state investment in minority and female-owned businesses.

“While realizing that past governmental irresponsibility, not hard-working state employees, caused this fiscal nightmare, we nevertheless must stop the bleeding now,” Raoul said.

“Government’s failure to enact fair, but sweeping pension reform is hampering our ability to invest in our future and deliver needed services to the people of this great state. "

The 2011 state income tax increase, which raised Illinois’ individual income tax rate from 3 percent to 5 percent, is due to expire January 1, 2015. Having brought in $15 million for the cash-strapped state, one state legislator has suggested making the income tax increase permanent as one potential solution to Illinois’ fiscal problems.

If income tax rates decline, state revenues in fiscal year 2015 will drop by more than $2 billion, and the revenue loss in fiscal year 2016 will be $4.7 billion.

“Our elected officials must finally enact a credible plan to address the pension funding crisis and not allow current income tax rates to expire at the end of next year,” said Gaylord Gieseke, president of Voices for Illinois Children, in a statement.

“Without doing both, our state will not be able to dig out of its deep budget hole, give all kids the opportunities they deserve, and create a brighter future for all Illinoisans.”

Image: AP Photo/Seth Perlman

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The state legislatures have been handing out excessive retirement benefits for years, in order to get support from the public workers unions, so that they could get re-elected over and over again.

They made no arrangements to pay for these entitlement programs.

The gravy train has come to an end. The Democratic Party will be know as the "Tax and Spend (what we've already spent)" Party.

You can't take back what the public workers have already earned but you can seriously reduce what new hires will earn, and this will make angry the public workers unions - what put the state into this mess in the first place by seeking these generous demands.

The public workers unions answer: "We have to raise taxes to maintain our entitlements."

Who will stand up against the powerful public workers union?

Franklin D. Roosevelt, who wrote in an Aug. 16, 1937 a letter to Luther Steward, the president of the National Federation of Public Employees"

“All Government employees should realize that the process of collective bargaining, as usually understood, cannot be transplanted into the public service. It has its distinct and insurmountable limitations when applied to public personnel management. The very nature and purposes of Government make it impossible for administrative officials to represent fully or to bind the employer in mutual discussions with Government employee organizations. The employer is the whole people, who speak by means of laws enacted by their representatives in Congress.”

“Since their own services have to do with the functioning of the Government, a strike of public employees manifests nothing less than an intent on their part to prevent or obstruct the operations of Government until their demands are satisfied. Such action, looking toward the paralysis of Government by those who have sworn to support it, is unthinkable and intolerable.”

Read the press conference here:
http://www.fdrlibrary.marist.edu/aboutfdr/pdfs/union_pressconf.pdf

Bob Kastigar
IBEW Local 1220, Chicago
A private-sector union.