Monday, September 16, 2013

Special committee’s pension reform plan about ready by Rich Miller

Several members of the Illinois General Assembly’s special pension reform committee told me last week that they believed a final proposal would emerge within the next week to 10 days. The conference committee has been working since June on a solution to the state’s nearly $100 billion long-term pension funding shortfall, after Gov. Pat Quinn urged members to find a way around the spring legislative session’s gridlock on the issue. 

For the past several weeks, the committee, made up of three Democrats and two Republicans from each chamber, has been working on “tweaks” to ideas that they’ve discussed behind closed doors. 

As I write this, there was no word on what the final proposal would look like, but there was real concern among Democrats I spoke with that the Republicans might decide not to go along. While the Republicans on the committee have strongly indicated they’re committed to finding a solution, three of the four GOP members are running for higher office — Sen. Bill Brady (governor), Rep. Jil Tracy (lieutenant governor) and Rep. Darlene Senger (U.S. House). 

The Democrats fear that any strong objections from traditional Republican allies, particularly in big business, could spook those GOP members into opposition. And, as is usually the case with this sort of stuff, the chaos created by no solution could be more politically beneficial to the Republicans in next year’s election than getting this monster off the table now. 

Despite their super-majority status in both chambers, it’ll be impossible for the Democrats to pass a reform bill without significant Republican assistance. Democratic members are just too closely allied with union interests. Plus, as long as there is no pension reform proposal for Chicago (and none is on the horizon), Mayor Rahm Emanuel has little or no incentive to lobby his Democratic members to pass a bill and billions of dollars in budgetary reasons to quietly oppose it until he gets what he wants. 

In the House, a majority of Republicans sided with the public employee unions last spring when they voted against Speaker Michael Madigan’s pension reform bill. That bill passed with just two votes above the bare majority, so there are few to spare. And while Madigan (D-Chicago) probably has some votes in his back pocket that he can bring out to cushion the roll call a little more (depending on what Emanuel does, of course), it’s doubtful that any of the House Republican “no” votes will flip to “yes” once the compromise is unveiled.

That means that about all of the House Republicans who voted for the business-backed Madigan bill in May will have to vote for the pension reform committee’s report when it gets a vote, likely during the upcoming veto session.

Aside from the politics, there are some legitimate concerns being raised by Republicans about what they know of the proposal so far. They believe the savings assumptions are based on what they view as a too-low projection of the inflation rate. Despite three straight decades of low inflation, there are those who insist that a wave of high inflation could return with a vengeance, blowing those savings projections out of the water.

Another concern is the back-loaded nature of the savings. About $94 billion of the $146 billion the bill is projected to save the state will occur between fiscal years 2045 and 2050. It’ll be tough to allow most of the income tax hike to expire in 2015 if more pension savings can’t be found upfront. The details leaked out of the committee so far add up to a savings of $1.14 billion in fiscal 2015 — not nearly enough to ensure that crucial programs could be spared from the ax if most of the income tax increase goes away. 

And make no mistake, achieving the expiration of the higher income tax is the reason behind much of the public demands by business groups for cutting the pension benefits of state workers, teachers and university employees. About the only recourse the Democrats will have to prevent this from getting out of hand is to threaten to run the Senate-passed, labor-backed reform bill, that’s opposed by business, if Republicans refuse to go along with a compromise.

That possibility is already being floated. Such a vote would get the unions off the Democrats’ backs, and the GOP most certainly knows this. The vote wouldn’t stop the demands for more reform, however, and the New York credit ratings agencies might not love it either. The Democrats clearly know this as well. So we could end up with a high-stakes game of “chicken” next month.

Rich Miller also publishes Capitol Fax, a daily political newsletter, and

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