February 4, 2015 / 6:43 PM / 5 years ago

Illinois governor lays out controversial agenda

(Reuters) - Illinois Governor Bruce Rauner laid out on Wednesday an ambitious and controversial agenda that includes constitutional fixes for the state’s public pension system and budget.

Republican Bruce Rauner gives a thumbs-up after winning the midterm elections in Chicago, Illinois, November 4, 2014. REUTERS/Jim Young

In his inaugural state of the state address, the Republican, who holds political office for the first time, also took aim at public labor unions.

“It’s make-or-break time for the Land of Lincoln,” Rauner told state lawmakers.

Illinois has a chronic structural budget deficit, as well as the lowest credit ratings and the worst-funded pension system among the 50 states. The fiscal crisis is the worst the state has seen for decades, according to budget experts.

State pension payments are squeezing spending on essential state services and a 2013 law aimed at easing a $105 billion unfunded liability is being challenged in court by unions and others.

Rauner’s policy agenda calls for “permanent pension relief” by amending the Illinois Constitution, which prohibits the impairment or diminishment of public worker retirement benefits.

The governor also wants to change the constitution to prohibit the carryover of unpaid bills between fiscal years, a practice that has fed Illinois’ structural deficit.

Rauner called for banning political donations by unions representing government workers. He repeated a campaign pledge to create local “empowerment zones” in which workers would have a right to work, even if their employer has a collective bargaining agreement with workers. And he proposed that Illinois give employees of local governments the right to work even in communities where government workers are represented by unions.

“Local communities, local voters, deserve this option so that they can compete with other states and other nations for new businesses and new investment,” he said in his speech.

FACING A BATTLE

Rauner’s proposals will face a battle in the Democrat-controlled General Assembly. House Speaker Michael Madigan told reporters after the speech that some of Rauner’s proposals will get a favorable reception in the legislature, while some will not.

“I wouldn’t characterize anything as a nonstarter,” Madigan said, adding that the top priority should be addressing a $1.5 billion deficit in the current budget with a mix of cuts and revenue.

Senate President John Cullerton, who is a Chicago Democrat like Madigan, said in a statement the new governor “has a lot to learn if he is to build on our successes in Medicaid reform, workers compensation, pension reform, cutting the bill backlog and meeting our obligations.”

“The people of this state elected a divided government, but the governor will soon learn that it doesn’t mean that he needs to be divisive.” Cullerton said.

Roberta Lynch, executive director of American Federation of State, County and Municipal Employees Council 31, the biggest public labor union for state workers, criticized many of Rauner’s proposals, including a ban on political contributions by unions.

“But while seeking to shut working people out of the halls of power, he leaves free access to the scores of corporations that have secured for themselves tax breaks costing Illinois taxpayers some $2 billion annually,” Lynch said in a statement.

Despite the fact Illinois is facing big budget shortfalls in its current and upcoming budgets, Rauner called for higher funding for public school districts, particularly in disadvantaged areas of the state, while also expanding public charter schools to give parents choices.

The governor, who took office on Jan. 12 and is due to release his fiscal 2016 budget plan on Feb. 18, did not disclose where that money would come from.

Laurence Msall, president of Chicago-based government finance watchdog The Civic Federation, lauded the governor’s plan to curtail the state’s pile of unpaid bills, which is expected to total $6.4 billion when fiscal 2015 ends on June 30.

Rauner reiterated campaign initiatives that called for extending the Illinois sales tax to some services and freezing local property taxes for two years. On the pension front, he also repeated a call to protect state workers’ accrued retirement benefits, while moving them into a less generous pension program or a 401k-type plan for future work.

His policy agenda also included seeking a state law providing bankruptcy protections to municipalities and launching an effort to reduce the number of governmental units in Illinois, which has nearly 7,000, the most among states.

Reporting By Karen Pierog; Editing by David Greising, Bernard Orr

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