As Democratic leaders prepared to ram a $54-plus billion budget through the Illinois legislature on May 31 — thus avoiding another overtime session — Gov. Rod Blagojevich was ebullient. "I feel real good about the session," he told reporters following cameo appearances in the Senate and the House. "My only regret is that it has to end now."
The governor's professed disappointment could hardly have been shared by Senate President Emil Jones or House Speaker Michael Madigan, whose zeal to beat the clock is likely to cost future Illinois taxpayers tens of billions of dollars, the unavoidable result of Democrats' decision to increase current state spending with dollars that should have gone to shore up the state's pension systems.
Certainly, one can understand the governor's exuberance. The two Democratic leaders produced a spending plan that includes more money for local schools, expanded health care access for the working poor and cash to help stave off CTA fare hikes and service cuts. They also sent him legislation stiffening high school graduation requirements, capping medical malpractice awards and banning sales of violent and sexually explicit video games to youngsters, all good bill-signing photo-ops.
And they did it without raising income or sales taxes, perhaps the only 2004 campaign pledge on which the governor has not yet wavered. All in all, a wealth of campaign fodder for a guy whose approval ratings appeared headed south just a few weeks earlier.
Indeed, Blagojevich's sorry showing in springtime polling may have been a key factor in Madigan's willingness to boost spending for education and health care with dollars earmarked for the state's retirement systems, a practice the speaker and the governor had decried in the past.
Blowing the May 31 deadline would have meant three-fifths majorities would be needed to pass a budget, giving the Republican minority a meaningful role. More important, legislative overtime would have reinforced last year's image of a feckless governor and a Democratic Party not up to the task of managing state affairs. That could be a possible recipe for disaster in next year's elections, given the governor's sagging poll numbers, especially downstate.
So the about-face on pension funding — roundly and rightly condemned by Republicans — was the only option left, Democrats said, given the governor's opposition to income or sales tax hikes and Republicans' unwillingness to support gaming expansion.
No doubt the pension "holiday," as Democrats euphemistically termed it, is politically expedient. But shirking the statutory obligation to fund the retirement systems is wretched public policy, essentially taking future dollars away from education and health care to underwrite more spending today.
Blagojevich initially proposed slashing pension funding next year by about $820 million, roughly one-third of the $2.6 billion required under a 1995 law intended to put the retirement systems on sound footing by 2045. Administration officials said the cut represented "proportionate" savings from a package of pension reforms they estimated would reduce costs by $55 billion over 40 years. But the actual savings next year would have been only about $81 million, according to actuaries for the systems.
The legislation Democrats finally approved cut more deeply and "reformed" less dramatically. Under its terms, the state contribution for the fiscal year starting July 1 is $938 million, roughly $1.2 billion less than the 1995 law required. The measure, which Blagojevich signed June 1, also pegged the FY 2007 contribution at $1.4 billion, a cut of $1.1 billion from what would have been required otherwise.
At the same time, the proposal included only a handful of the reforms Blagojevich originally wanted, although Democrats contended the watered-down package still would save roughly $30 billion by 2045.
No doubt the pension "holiday," as Democrats euphemistically termed it, is politically expedient.
Republicans disputed that estimate, contending that the enacted reforms would provide only about a quarter of the long-term savings of the governor's original package. Moreover, GOP lawmakers noted, by diverting even more money from the pension systems than Blagojevich proposed, Democrats were digging even deeper the current $35 billion hole — the difference between the systems' assets and the value of the benefits the state Constitution guarantees those covered, including schoolteachers outside Chicago, state workers, university employees, judges and legislators.
A precise reckoning awaits calculations the five systems' actuaries are making, but one doesn't have to be a financial genius to realize that — thanks to compound interest — a dollar not invested today will have cost the pension funds a whole lot more in lost earnings over a 40-year period.
Try explaining that in a 30-second TV spot, though, and it's easy to see why Democratic leaders chose to solve their short-term budget problem by shortchanging pensions.
But the spending plan embodies other elements more congenial to campaign rhetoric. For example, the administration is counting on siphoning into the state's general checking account some $160 million from hundreds of special funds earmarked for other uses, including several that a trial judge already has declared off-limits. Were Democrats who approved the "fund sweeps" in contempt of court?
Perhaps more trenchant in downstate legislative contests, the Democrats' plan — enacted without GOP votes — continues to use roughly $150 million in road funds to pay for state police and secretary of state operations that otherwise would have been covered by general funds, some $54 million of which will go instead to the CTA. Moreover, the budget earmarks another $17 million in road funds to help pay the costs of the tailpipe testing programs in the Chicago and Metro East areas. Did downstate Democrats — consciously or unwittingly — send off to the city dollars needed to patch local highways?
Such assertions might gain political traction now, but next year Democrats will have another $1 billion diverted from the pension systems to spend for election-year goodies to placate restive constituents. Meanwhile, many of those who'll be on the hook for the Democrats' profligate ways won't be old enough yet to vote.
Charles N. Wheeler III is director of the Public Affairs Reporting program at the University of Illinois at Springfield.
Illinois Issues, June 2005
