Beyond Pensions, This Session Produced Meaningful Change

Jul 1, 2012

Charles N. Wheeler III
Credit WUIS/Illinois Issues
“All newspaper editorial writers ever do,” the late Pulitzer Prize-winning columnist Murray Kempton once observed, “is come down from the hills after the battle is over and shoot the wounded.”

Whether Illinois legislators are wounded may be a matter of debate, but they certainly were the targets of a heavy barrage of scorn and disdain from the state’s media mavens in the aftermath of the spring session’s turmoil.

From Chicago to Carbondale, editorial writers and columnists lambasted lawmakers and declared the session a failure. Why? Because the legislature had not resolved the state’s pension problems before adjournment.

Now that the heat of the moment has waned, though, perhaps a more nuanced evaluation is in order. So let’s play devil’s advocate.

Almost everyone accepted the notion that major changes in the state’s retirement systems absolutely, positively, had to be enacted by May 31. When that didn’t happen, the hue and cry erupted. But consider the seeming urgency from a different perspective. The legislature did set aside $5.1 billion for the state’s contribution to the retirement systems, the full amount required for Fiscal Year 2013 under a 1995 law intended to bring the systems to 90 percent funding by 2045. Moreover, no retiree will miss a benefit check anytime soon; for example, officials with the largest pension plan, which covers all public school teachers outside of Chicago, warn they could run out of money in 2030 if nothing changes.

But things will change. Indeed, the Senate approved a bipartisan reform plan to dramatically lower future costs for state employee and legislative pensions, saving an estimated $23 billion to $31 billion in coming decades. The measure, awaiting House action, offers a template for reining in cost growth in the other retirement systems, which cover downstate teachers, university employees and judges. Its main feature would offer workers a stark choice: give up an annual 3 percent, compounded, cost-of-living increase in retirement, or lose state health insurance coverage upon retirement. The provisions seem agreeable to a House majority, but members are at odds over whether and to what extent local school districts, community colleges and public universities should help fund their employees’ retirement, as Chicago taxpayers already do for their teachers.

Why not take House Speaker Michael Madigan and Minority Leader Tom Cross at their word when they say they’re committed to negotiating an agreement over the prickly issue?

The real impetus for quick pension action appears to have been fear of the Wall Street bond raters, who’ve threatened to downgrade the state’s credit rating unless state officials do as they want. In one sense, Wall Street’s judgment of Illinois’ creditworthiness is laughable; about the only chance the state will default on its general obligation bonds would be if the Mayans are correct about December 21. Otherwise, bondholders have first claim on everything the state owns, and unlike people and corporations, the state can’t file for bankruptcy and walk away from its obligations. Still, under the rules of the Wall Street game, states face higher interest costs to borrow when the rating agencies look askance.

Meantime, the commentators’ tunnel vision on pensions gives short shrift to the other significant accomplishments of the spring session, including meeting one challenge that truly couldn’t wait — forging a spending plan for the fiscal year starting July 1.

In the session’s final hours, the legislature adopted a $33.7 billion operations budget that again holds spending on current programs below anticipated revenues, even while covering the full pension contribution, assuring bond payments and slicing the state’s ongoing backlog of old bills by some $1.3 billion.

The feat was by no means easy, instead requiring some $700 million in deep and painful cuts in a host of programs valued highly by most Illinoisans, notably including aid to local schools, sliced more than $200 million.

Key to crafting the budget was restructuring Medicaid to shave some $2.7 billion in anticipated Fiscal Year 2013 costs from the roughly $15 billion program that provides health care for the poor, the disabled, and most nursing home residents. As a result, more than 200,000 people are likely to lose benefits, reimbursements to providers will be pared by $240 million and the state’s cigarette tax is going up by $1 a pack. Significantly, the state no longer will be able to push hundreds of millions of dollars of unpaid Medicaid bills into future budget years. 

While passing the budget and Medicaid reform were crucial, majority Democrats and minority Republicans joined forces on a number of important issues that mostly got ignored in the pension frenzy.

Consider this trio: 

  • SB 2621, a revamped early release program intended to help ease chronic overcrowding in state prisons, now housing some 48,000 inmates in facilities designed for 34,000. The bill would allow corrections officials to reduce the sentences of well-behaved, nonviolent inmates who complete education, substance abuse treatment, life skills training or similar programs. Its passage was championed by the John Howard Association, a prison watchdog group that called it a victory for “safe, smart, and cost-effective prison reform.” 
  • SB 3616, legislation that would extend by 25 years the life spans of the state’s 97 existing enterprise zones — some of which are scheduled to expire next year. The proposal also would allow creation of five new zones, designated areas in which business development is encouraged through tax credits, property tax abatements, sales tax exemptions and other incentives. The 30-year-old program has created or kept more than 900,000 jobs in Illinois, supporters say.
  • HB 3810, a measure to abolish the much-abused legislative scholarship program, under which lawmakers can award tuition waivers to state universities. Perhaps a fitting footnote to the controversial program’s scheduled September end: Rep. Derrick Smith, a Democrat from Chicago, facing federal bribery charges and a potential House vote to boot him, handed out $185,000 in waivers shortly before the House voted to ban the practice — and the State Board of Education rejected two of the students because they didn’t live in Smith’s legislative district.

All in all, the legislature’s spring performance was pretty solid, from this reviewer’s vantage point ... maybe not quite Oscar-worthy but certainly better than many media critics seem willing to concede.

Charles N. Wheeler III is director of the Public Affairs Reporting program at the University of Illinois Springfield.

Illinois Issues, July/August 2012