Illinois Dems narrow pension reform to state lawmakers

SPRINGFIELD, Illinois Fri Aug 17, 2012 4:09pm EDT

Patrick Joseph Quinn, Governor of Illinois, delivers a speech at the opening ceremony of an exhibition celebrating the city of Chicago at NATO Headquarters in Brussels March 22, 2012. REUTERS/Sebastien Pirlet

Patrick Joseph Quinn, Governor of Illinois, delivers a speech at the opening ceremony of an exhibition celebrating the city of Chicago at NATO Headquarters in Brussels March 22, 2012.

Credit: Reuters/Sebastien Pirlet

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SPRINGFIELD, Illinois (Reuters) - Ignoring calls for comprehensive reforms to fix Illinois' woefully underfunded public retirement system, the Democrat-controlled legislature was poised on Friday to take up a narrow bill dealing only with legislators' own pension plan.

While Governor Pat Quinn envisioned broader reforms to the five state pension systems when he called lawmakers into Friday's special legislative session, Democrats and Republicans have failed to agree on broad-based legislation.

Steve Brown, spokesman for powerful House Speaker Michael Madigan, said the House will consider a bill ending pensions for new legislators as of June 1, 2013. Current legislators would have to choose between lower cost-of-living increases and state subsidized healthcare in retirement, he added.

"It appears to be the only bill that can muster 60 votes," Brown said, adding he did not know how much the limited reforms would reduce the state's huge $83 billion unfunded pension liability.

Brown also said Madigan remains committed to greater reforms, although the timing of when those reforms would be voted was uncertain.

Republicans earlier in the day said Democrats were ducking substantive pension changes. Critics have said Madigan, who is also chairman of the state's Democratic Party, wants to avoid any changes to pensions that would anger thousands of public union workers -- long-time political backers of the Democrats -- ahead of the November 6 general election.

"The only thing that's clear is that Democrats do not want to do comprehensive reform," said Senate Republican Leader Christine Radogno.

The Democratic governor has been pushing lawmakers from both parties to reform the ailing state retirement system, which is the most underfunded state system in the country.

The predicament of Illinois is the latest example of a nationwide problem of ballooning costs on pensions for government workers, such as teachers, as the population ages.

Illinois' financial condition is among the worst in the United States, on a par with California where three large cities have filed for bankruptcy protection, citing out-of-control pension costs. California and Illinois, the nation's most populous state and the fifth most populous, respectively, have some of the lowest credit ratings among the states.

Democrats, who hold the governorship and legislative majorities in both states, are between a rock and a hard place.

On Wednesday, Quinn got a taste of the emotion surrounding this issue when he was heckled at a state fair by several thousand unionized state workers -- a group that helped narrowly elect him in 2010.

Unlike California, where Governor Jerry Brown is seeking tax increases to help plug a budget hole, Illinois already has played this card, sharply raising both business and personal income taxes in 2011. That did little to improve the state's structural budget deficit and huge backlog of unpaid bills.

In April, Quinn proposed a pension fix that he said would save taxpayers up to $85 billion over 30 years and result in a fully funded system by 2042. The plan called for higher employee contributions, lower cost-of-living adjustments and a phased-in retirement age of 67 in exchange for access at retirement to state-subsidized healthcare.

Quinn also wants obligations for teacher pensions outside of the Chicago Public Schools, which account for the bulk of the state's unfunded retirement liabilities, shifted to local districts from the state.

Republicans fear a voter backlash if teacher pension costs are shifted to school districts, which could prompt higher property taxes in their stronghold of the Chicago suburbs.

Labor unions are by far the biggest campaign finance backers of Illinois Democrats, more than doubling the second-largest group, lawyers, according to data compiled by Follow the Money.

(Additional reporting by Karen Pierog, editing by Peter Bohan and M.D. Golan)

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