December 1, 2016 / 8:05 PM / 9 months ago

UPDATE 2-Illinois governor vetoes money for Chicago school pensions

(Adds House decision not to call an override vote)

CHICAGO, Dec 1 (Reuters) - Illinois Governor Bruce Rauner vetoed on Thursday a bill to give the Chicago Public Schools (CPS) a one-time $215 million state payment to help cover the financially ailing district's escalating pension costs.

While the veto was quickly overridden in the Senate, the House adjourned until Jan. 9 without attempting a vote. A spokesman for House Speaker Michael Madigan, a Chicago Democrat, said it was unlikely the 71-vote threshold required for an override would be reached, leaving the veto in place.

Rauner, a Republican, said Democrats reneged on a June deal that tied the bill's enactment to the legislature's passage of comprehensive pension reform, which did not gain any traction in the fall legislative session that ended on Thursday.

CPS, the nation's third-largest public school system, included the money in its $5.46 billion fiscal 2017 operating budget.

CPS is struggling with pension payments that will jump to about $720 million this fiscal year from $676 million in fiscal 2016, as well as drained reserves and debt dependency.

Chicago Mayor Rahm Emanuel, who controls the school district, condemned the governor's move.

"This action is both reckless and irresponsible, and make no mistake, it's our children who will pay the price," Emanuel said in a statement.

Democratic Senate President John Cullerton earlier on Thursday told reporters there was no definitive contingency tied to the bill's enactment. Ahead of the Senate's override vote, he said he was prepared to continue negotiating on pensions.

Illinois is limping through its second straight year without a complete budget. It also lacks a plan to curb a huge $130 billion unfunded pension liability in the wake of an Illinois Supreme Court ruling that found the state constitution prohibits pension benefit cuts for public sector workers.

"Despite my repeated request for daily negotiations and hope to reach a comprehensive agreement by the end of next week, we are no closer to ending the (budget) impasse or enacting pension reform," Rauner said in his veto message.

A temporary budget approved in June expires at the end of this month. There was no legislative action on the budget, but leaders of the House and Senate vowed to keep meeting.

Early on Thursday, Rauner in a Facebook post said he could accept another stopgap budget only if Democrats agree to term limits and a permanent property tax freeze. (Reporting by Karen Pierog; Additional reporting by Renita D. Young; Editing by Andrea Ricci and Leslie Adler)

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