Little urgency, a lot of politicking in Illinois over deepening pension crisis

Democratic Party infighting and pre-election positioning in Illinois are stalling efforts to realistically solve the state's looming $100 billion pension shortfall, deepening a fiscal crisis and forcing the state to pay more to borrow money in the future.

Moreover, there's no indication a resolution will be forthcoming any time soon, even though Gov. Pat Quinn (D) has ordered legislators back to Springfield, the state capital, for a special session on pension reform and even though Democrats control both legislative chambers.

Competing pension reform plans by the House and Senate both died in May, and, critics say, Governor Quinn has not put forward a plan of his own to remedy the state's unfunded pension obligation toward its public employees. 

“People are puzzled why the governor has called a special session when no one has a plan to resolve the crisis. The governor is not really providing any leadership to make it happen, either," says J. Fred Giertz, an economist with the Institute of Government and Public Affairs at the University of Illinois in Champaign-Urbana. "It may sound good now to have a special session to deal with the crisis, but having a special session and failing again isn’t going to be much of a help for the state.”

The pension crisis deepened this week after two downgrades of Illinois' credit ratings. First, Fitch Ratings lowered to A-minus the grade it assigns to Illinois debt. Then, Moody’s Investors Services cut the state's rating on its $27 billion of outstanding general obligation bonds, from A3 to A2, and also downgraded its rating of Illinois' $5 billion in related debt.

Moody’s cited “political paralysis” in making the ratings downgrade, saying it “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.” The firm said it assumes that Illinois leaders “will not take action to reduce the state’s pension liabilities any time soon.” Illinois is dead last among the states in terms of unfunded pension liabilities, after years of not socking away enough money to cover what it owes its retirees. 

Some state legislators are also skeptical that real action will happen June 19, the date the governor says he wants the General Assembly back in session.

“He tried that last year, and it didn’t work. I’d suggest he seriously, seriously consider the drawing board before he invites us back to Springfield. It’s a risky play for him unless he’s pretty sure he’s got a solid agreement and therefore some solid votes,” House majority leader Barbara Flynn Currie (D) told the Chicago Sun-Times Friday.

The paralysis reflects “the unwillingness” of state leaders to seriously confront reform, especially because that would mean disappointing or angering public-sector unions, says Lawrence Msall, president of the Civic Federation, an advocacy and research organization in Chicago. 

The legislature has not been able to reach a compromise on how to confront the pension crisis since it voted down two different plans offered by each of its majority leaders – House Speaker Michael Madigan (D) and Senate President John Cullerton (D).

Speaker Madigan’s plan would have raised the retirement age for public employees, required state workers to contribute more toward their retirement, and reduced cost-of-living adjustments for current retirees. Opposition to that plan was particularly strong from Teamsters union representatives working for the Metropolitan Water Reclamation District of Greater Chicago, which represents about 2,000 workers and carries $1 billion in unfunded liability. 

The Senate bill “is more agreeable to unions,” Giertz says, because it offers workers the choice between the current system and Madigan’s proposal for a higher worker contribution rate. However, if workers choose the current system, any pay raise they receive won't be applied to their pensions.

The two Democratic leaders' inability to hammer out a compromise – even in the face of higher borrowing costs borne by state taxpayers – reflects the gnawing realization that the gridlock is political.

“The Democrats control everything in Illinois, but they are not unified. They are beneficiaries of labor support, and labor is not very happy because of the pensions proposals,” Giertz says. “I don’t see any end in sight to the problem. I see them muddling through. Both bills don’t solve the problem, or reduce it drastically, because really, they’re not a whole lot different.”

Complicating the process is next year's gubernatorial race. Quinn, who plans to run for reelection, will likely face a primary challenge from Illinois Attorney General Lisa Madigan, Speaker Madigan’s daughter. The speaker, therefore, is not all that invested in resolving a problem that makes the sitting governor look bad in voters' eyes, some suggest. Indeed, the speaker is not returning Quinn’s phone calls about the issue, the Sun-Times reported Friday, and an aide likened the governor to his predecessor, disgraced ex-governor Rod Blagojevich, who called three special sessions during his tenure, all of which proved to be futile.

“Blagojevich proved the value of dragging people back to Springfield when there’s no agreement. The governor tries to avoid comparisons to Blagojevich, I thought,” spokesman Steve Brown told the Sun-Times.

Also getting into the debate is former White House Chief of Staff William Daley, who lambasted Quinn for failing to get both houses in order to pass pension reform.

“Where’s the leadership? … They [Madigan and Cullerton] both had different ideas on this bill. So who's the one who's supposed to forge a compromise? The governor,” Mr. Daley, the brother of former Chicago Mayor Richard M. Daley, told the Chicago Tribune earlier this week.

The Sun-Times reports that Daley is expected to announce next week that he will run for governor.