CHICAGO, June 17 (Reuters) - Illinois increased the size of its upcoming general obligation bond sale by $50 million to $1.3 billion and plans to sell the bonds next week even if state lawmakers meeting in special session this week fail to deliver on public pension reform, a state official said on Monday.
Prospects for a pension reform compromise to be passed during the special legislative session on Wednesday were dim.
“I like to be optimistic but it doesn’t appear to me that any of the dynamics that existed at the end of session have changed in any significant way to allow a bill to move ahead,” said State Representative Elaine Nekritz, the House Democrats’ point-person on pensions.
Despite the stalemate in the state’s pension politics, Illinois enlarged the size of its pending bond issue to accommodate additional key infrastructure projects the state is funding with bond proceeds, said Abdon Pallasch, a spokesman for the governor’s office of management and budget.
The bond sale, slated for June 26, follows action by Moody’s Investors Service and Fitch Ratings, which cut Illinois’ bond ratings, meaning the lowest-rated state likely will need to offer investors a higher interest rate to sell its bonds. The downgrades came after the Democrat-controlled Legislature ended its spring session on May 31 without passing comprehensive legislation to address a nearly $100 billion unfunded pension liability.
House Speaker Michael Madigan and Senate President John Cullerton are at odds over an approach to pension reform, with Madigan favoring unilateral cuts to retirement benefits to reap the greatest savings. Cullerton favors a plan, backed by the public employee labor unions, that gives workers and retirees choices between reduced benefits and continued access to state-sponsored healthcare in retirement.
State Senator Daniel Biss, who along with Nekritz spoke at a Midwest Public Funds Summit sponsored by Information Management Network on Monday, said that an alternative to the two leading bills will receive a hearing before a Senate committee on Tuesday. The alternative measure bill could serve as a template for compromise, Biss said.
The new measure, which in its current form would only affect state universities and community colleges, includes higher worker pension contributions. It also ties pension payment increases to inflation and gradually shifts pension payments currently made by the state onto the universities and colleges.
Glenn Poshard, president of Southern Illinois University, who is pushing the new bill along with other university presidents, said it has the potential to save as much as Madigan’s approach, while standing a better chance of withstanding a constitutional challenge in court. Unions have vowed to fight Madigan’s bill if enacted into law on the basis of strong protections in the Illinois Constitution for retirement benefits.
The state’s pension crisis continues to dominate Illinois’ politics. Bill Daley, the former chief of staff to President Barack Obama who has formed an exploratory committee for a gubernatorial campaign, said at a press conference that the pension impasse could be overcome if the state’s governor would make a case that the Madigan-backed measure is constitutional, declare an intent to veto the Cullerton measure, and promise that a substantial share of any savings would help fund education in Illinois.
The Illinois GO bonds, to be priced through Wells Fargo Securities, Siebert Brandford Shank & Co, and Stifel, will carry serial maturities from 2014 through 2038, as well as a term bond, according to a preliminary official statement.