Our Opinion: Make pension payment top budget priority
Tuesday, May 25, 2010
Members of the Illinois House are set to return to Springfield Monday to consider a state budget, but it remains unclear what it will look like.
David Vaught, Gov. Pat Quinn’s budget director, described it as a “no-win situation” because the General Assembly is not inclined to pass an income tax increase or the type of deep spending cuts that would be needed to start to extract the state from a $13 billion hole.
“We still need to get through the fiscal year in some kind of non-chaotic way,” Vaught told us Friday.
The first priority must be making the state’s full $3.6 billion pension payment on time. Delaying the payment will cost the state $37 billion in lost compounding interest over the next 35 years. Borrowing the money would cost the principal amount — $3.6 billion — plus hundreds of millions in interest. While more borrowing is less than ideal, it’s clear that it’s more fiscally responsible than delaying or skipping the payment to a pension system that already is the nation’s worst funded.
But House Republicans and 11 House Democrats refused earlier this month to vote for any borrowing. House Republicans want the full pension payment made without borrowing any money. At least one House Republican vote is needed to authorize borrowing because the Democrats only have 70 votes in the chamber and 71 are necessary.
Republicans are cynically playing politics with this issue, attempting to add another arrow to the quiver full of issues they hope to shoot at the Democrats in an election year.
“We have not heard any good reasons for them not to support pension borrowing,” Vaught said.
Neither have we.
If Republicans believe there is $3.6 billion to cut, they should file an amendment making those cuts to the proposed budget, as House Speaker Michael Madigan has offered to allow any House member to do. If not, they should come to the table and be ready to make a compromise that includes borrowing.
A group of House Democrats have been meeting since the legislature adjourned to come up with more cuts. They are set to unveil their ideas Monday. House Republicans could propose using some of the money saved from cuts to make part of the pension payment out of the state’s general revenue fund instead of borrowing the entire $3.6 billion.
If the House Republican leadership decides to continue down a path of lockstep obstruction, Democrats ought to try negotiating with individual GOP lawmakers. No lawmaker’s constituents would benefit more from a less chaotic state budget than those of Rep. Raymond Poe, R-Springfield, and Rep. Rich Brauer, R-Petersburg.
Thousands of Poe and Brauer constituents either are current or future state retirees. It is their constituents’ pensions that will be at risk if the state does not make the full payment. It is their constituents’ pocketbooks — whether they get their checks directly from the state or from their customers who get their checks from the state — that are impacted each year of Illinois’ budget debacle.
For the last two years, we’ve watched Poe and Brauer sit on the Republican backbenches rather than step up and negotiate for their votes. Quinn and Vaught ought to be on the phone every day, courting the two of them. If members of the House Republican leadership will not be statesmen, Poe and Brauer should.
Meanwhile, Quinn and Vaught need to redouble their efforts to find efficiencies and savings. Vaught outlined several examples of how the administration is trying to save or eliminate inefficiencies:
- To save money on travel, the state is considering reducing the mileage it pays employees when they travel in their personal cars from 50 cents to 39 cents. Using a car from the state vehicle pool costs 39 cents per mile. It will save $7 million.
- The state is trying to save $14 million by renegotiating leased office space.
- The state is trying to renegotiate large contracts, such as a $20 million one it has with IBM.
These types of cuts should have been explored long before now. But it also must be acknowledged that those three cuts, if implemented, add up to $41 million. The state would need to find 317 groups of similar cuts to erase $13 billion in red ink.
Closing that gap completely is not possible without a tax increase or hacking into education, public safety and health care. Unfortunately, that’s a choice this legislature will pass off yet again to the next governor and legislature. The budget that will go into effect July 1 will be little more than a stopgap measure.