Illinois at "critical juncture" because of pension crisis -Quinn

SPRINGFIELD, Ill. Wed Feb 6, 2013 1:37pm EST

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SPRINGFIELD, Ill. Feb 6 (Reuters) - The state of Illinois is at a "critical juncture," Democratic Governor Pat Quinn said on Wednesday and he beseeched state lawmakers to rescue the nation's most underfunded state pension system that threatens the health of the state economy.

Illinois state pensions are in the red by a staggering amount of nearly $97 billion, more than $20,000 for every household in the state. The pension systems are only 39 percent funded, according to a state report, when 80 percent is considered healthy.

"This is a choice about whether we will make the tough decisions necessary to balance our budget by reforming our public pension systems or whether we will let our jobs, our safety and our schools be squeezed out by skyrocketing pension costs," Quinn said in his "state of the state" speech to the legislature.

In addition to the pension crisis, the state also has institutionalized late bill payments as a budget balancing tool, ending fiscal 2012 on June 30 owing more than $9 billion to vendors, healthcare and social service providers.

Credit rating agencies, which have collectively downgraded Illinois a dozen times since 2008, have warned the state's ratings could fall further if it fails to get its pensions and structural budget deficit under control.

The legislature is considering proposals to increase the contributions of government workers to pay for pensions, increase retirement ages, delay cost of living increases in benefits and gradually shift some of the cost of pensions to local communities from the state.

But the proposals have met stiff resistance from labor unions - major political and financial supporters of the Democratic party, which has a stranglehold on power in Illinois.

A provision of the Illinois Constitution guarantees that pension benefits to retired workers cannot be reduced. Unions have threatened to challenge any pension reforms in court, which could substantially delay putting cuts in place.

In his state-of-the-state address, the Democratic governor also called for a boost in the state's minimum wage, currently $8.25 per hour. His plan would lift the hourly wage over four years to at least $10 dollars. The highest minimum pay currently is in Washington State at $9.19, according to data from the National Conference of State Legislatures.

Quinn is the most unpopular governor in the nation, according to Democratic polling firm Public Policy Polling. Only 25 percent of Illinois voters surveyed in November had a favorable opinion of him.

His attempts to get lawmakers focused on pension reform, which included promoting a cartoon snake called "Squeezy" to illustrate how pension costs are squeezing out other social spending, have been widely criticized as ineffectual.

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