By Joanne von Alroth Karen Pierog
SPRINGFIELD, Ill., May 31 (Reuters) - The Illinois legislature ended its spring session without final action on two major proposals to reform its deeply underfunded pension system - leaving the state’s weak credit rating at risk of sinking lower.
The state capitol’s two most powerful politicians - House Speaker Michael Madigan and Senate President John Cullerton, both Democrats - were unable to find a compromise to address the state’s $100 billion unfunded pension liability.
With Illinois’ credit rating the lowest among U.S. states, lawmakers vowed to continue working toward some resolution. But no path toward compromise and no timetable emerged as first the House and then the Senate gaveled their spring sessions to close.
Moody’s Investors Service midday Friday reiterated a warning that Illinois’ A2 credit rating could be cut if pension reform stays elusive. And Robert Amodeo, portfolio manager at Western Asset, a firm with $460 billion in assets under management, said bond holders will be watching closely for next steps.
“If talks break off, the market place will penalize them,” Amodeo said.
House Speaker Madigan, in remarks before adjourning his chamber at around 7:30 p.m. Friday - well ahead of the midnight deadline for the spring session - held out hope for compromise.
“I don’t think we should take our lack of success today as a reason to give up,” Madigan said in his end-of-session address to the House. He referred to “huge problems” that remain without mentioning pensions by name.
But Tom Cross, the House minority leader, reminded members that the inconclusive adjournment was reminiscent of past failures on pension reform. “I feel like I‘m hearing the same speeches I heard a year ago,” Cross said.
“How are we going to sell bonds? What is it going to cost us?” Cross asked.
And Cullerton, during a brief press conference following adjournment, offered no ready answer on how to end the standoff. “I don’t know,” he said. “I’ve tried everything.”
Pension reform was not the only casualty of the stalled legislature.
Bill after bill fell by the wayside: A vote on gay marriage was put off until the fall, and a revamped effort to expand casino gambling fizzled.
Even a relatively minor plan that would have required the state’s community colleges and universities to carry the cost of funding their employees’ pensions died in the Senate on Friday.
Late Friday, the legislature did manage to complete passage of a $35.4 billion general fund budget for the fiscal year that begins on July 1. The budget passed over the objections of Republican lawmakers who contended the plan locked in increased spending that would force the state to stop the scheduled partial roll back of a big income tax rate increases in 2015.
But on the big issue of the legislative session - pensions -the state’s two most powerful legislative leaders showed no apparent effort at compromise on positions they had held for weeks. The bill Madigan sponsored opts for unilateral cuts in retirement benefits for current and retired state workers, teachers, legislators, and college and university employees to reap the maximum cost savings.
Madigan’s bill, which the unions have vowed to challenge in court on constitutional grounds, would immediately reduce the state’s unfunded liability by $21 billion, according to actuarial analyses by the state’s pension funds.
Cullerton, meanwhile, was pushing a bill passed by his chamber that would generally allow workers to retain access to state-sponsored healthcare in retirement if they opt for pension concessions.
Cullerton’s plan, which has the backing of public labor unions, would shave the state’s nearly $100 billion unfunded pension liability by only $9.13 billion.
Governor Pat Quinn, a Democrat, has kept a low profile throughout the legislative session. He issued a statement decrying the failure to pass a major pension bill.
“This is wrong,” Quinn said. “I will call the legislative leaders together in the coming week to forge a comprehensive pension reform agreement.”