House OKs borrowing to cover state pensions
House votes to borrow up to $4 billion after several rejections
Wednesday, May 26, 2010
Pension borrowing — a major (and controversial) component of a state budget plan — finally won approval in the Illinois House on Tuesday after a series of rejections.
The House voted 71-44 to borrow up to $4 billion to cover next year’s payments to the five state-funded pension systems. The bill needed a super-majority of 71 votes to pass, and two Republicans — Bill Black of Danville and Robert Biggins of Elmhurst — provided the needed margin.
“We can borrow money or we can take a hike on our responsibility to pay the pension,” said House Majority Leader Barbara Flynn Currie, D-Chicago. “We have shown we can’t cut $3.7 billion, and we have shown we can’t raise $3.7 billion in revenue. That leaves borrowing.”
As the House approved major portions of a spending plan for the fiscal year that begins July 1, the scene now shifts to the Senate, which returns to Springfield today.
The goal of Democratic lawmakers who control both chambers is to finish the budget before May 31. After that date, it takes a super-majority to pass a spending plan.
Much of Tuesday was given over to House committees that considered a wide range of budget-cutting ideas aimed at saving $1.3 billion. The majority of the ideas failed to get out of committee.
“I think it turns out they were not very carefully thought through,” Currie said. “I don’t think you can change the whole world in a single day.”
Here’s a rundown of Tuesday’s action:
Currie said borrowing, which will cost about $1 billion in interest, is actually the least-expensive alternative for taxpayers. Skipping the pension payments will force the systems to sell assets to pay benefits, something that will cost more than $20 billion in lost investment income.
“If you have any respect for the taxpayers, the only responsible vote is ‘yes’,” Currie said.
The House rejected the borrowing plan before and initially did again Tuesday. However, Rep. David Miller, D-Lynwood, changed his mind, as did Biggins, who said later he thought about the options during a break and convinced himself that borrowing was a better solution.
“This is a much less expensive way to go,” said Biggins, who denied making any deals with the Democratic administration of Gov. Pat Quinn for his vote.
Most Republicans opposed the plan, saying it is irresponsible for the state to continue borrowing.
Senate Bill 3514 goes back to the Senate.
As one of its final acts Tuesday, the House approved a plan to let tax deadbeats pay up without penalty later this year.
The amnesty program is expected to generate about $250 million. From Oct. 1 to Nov. 8, people can make good on taxes owed that were accumulated between June 30, 2002, and July 1, 2009. The bill also allows the state to sell debt to private collection agencies.
Black voted for the bill, but complained Republicans suggested the same idea a year ago and were ridiculed by Democrats.
“The money could have been rolling in (already),” he said.
Senate Bill 377 was approved on a 102-14 vote. It goes back to the Senate for its approval.
Emergency budget act
The House OK’d giving Quinn sweeping powers to decide how best to spend the state’s limited funds. Currie said doing so might be worth about $300 million in savings.
The wide-ranging bill also calls for the state to take out a loan against money it would receive in future years from the national tobacco settlement, a deal worth about $1.2 billion in upfront money. Republicans warned the move is shortsighted because the state uses annual money from the tobacco settlement to fund a variety of programs, including $580 million in prescription drug assistance.
The bill further authorizes Quinn to borrow money from restricted state funds, which previously were “swept” of money to divert to other state expenses and not repaid. This bill requires the money to be repaid with interest, although skeptical lawmakers doubt that will happen. Currie said the administration expects to borrow about $1 billion from the funds.
The bill also requires lawmakers, statewide officials and top agency employees to take 12 furlough days in the next budget year.
Senate Bill 3660 goes back to the Senate.
The House voted 66-50 to adopt House Bill 859, the actual numbers portion of the state budget.
Currie said the bill calls for $26.2 billion in general fund spending, the part of the budget over which the state has the most control. She said that is about $400 million less than the current budget, reflecting a 5 percent across-the-board cut in spending for operations.
Despite this, the whole budget package assumes the state will leave about $6.4 billion in bills unpaid.
“This has a $6.4 billion hole in it,” said Rep. Jack Franks, D-Marengo. “We can’t in good conscience support it.”
“What a joke this budget is,” added Rep. Rosemary Mulligan, R-Des Plaines.
The spending plan now goes to Quinn for his signature.
Retiree health insurance
A House committee shot down the idea of retired state employees paying premiums for their health-care coverage.
Rep. Karen May, D-Highland Park, said the state could save $100 million a year by having retirees pay premiums, noting that 92 percent of them pay nothing now. Also, 25 percent are not old enough to have Medicare cover their health costs, meaning the state pays for them.
May said the premiums would be based on a sliding scale, with retirees making less than $30,000 exempt.
The American Federation of State, County and Municipal Employees opposed the idea, saying it would violate the union’s contract with the state.
Only two Republicans on the committee voted for the bill, Ed Sullivan of Mundelein and Michael Tryon of Crystal Lake.
A House committee approved a $200 million cut in Medicaid spending, one of the suggestions of a group of Democratic lawmakers. Exactly where those cuts will take place is unknown.
“It is painful, but achievable,” said Rep. Sara Feigenholtz, D-Chicago. “As for specific (cuts), it is a work in progress.”
A couple of likely places are imposing some managed-care principals in the Medicaid program and tightening participation in All Kids. A recent audit showed significant All Kids money being spent on children of non-residents.
Currie called the Medicaid cut “the only real savings” lawmakers tackled Tuesday.
Proposals to cut K-12 education funding failed to make it out of committees.
Rejected by a 13-5 vote, one bill would have cut $100 million across-the-board from education grants, including for early childhood, bilingual and adult education programs.
“I’m going to support (the cuts), because I think it’s all we have left if we are going to be honest with the fact that we have a deficit and we have to make real choices,” said Rep. Roger Eddy, R-Hutsonville.
Another proposal that failed would have axed an additional $200 million in categorical funds that reimburse schools for things like transportation and special education.
Also killed was a bill that would have cut $100 million from higher education statewide. Only three committee members voted in favor, while 16 voted against.
Cuts for lawmakers
Legislators were reluctant to embrace cuts affecting their own pocketbooks.
Nine amendments affecting lawmakers and other government officials were considered in committee, and most were rejected.
One cut lawmaker salaries by 25 percent for one year.
“When we are asking everyone else to give something, I think we need to, too,” said Rep. Jack Franks, D-Marengo.
Also targeted for the pay reduction were statewide elected officials, department directors and assistant directors, chairs of boards and commissions, judges in the court of claims and the executive inspector general.
Franks said the state could save $8.6 million.
But Rep. Monique Davis, D-Homewood, argued that lawmakers “should not be blamed for the recession across this country.”
“I think we’ve already tightened our belt,” she said.
Other amendments that got no committee support included cutting agriculture grants to state universities, reducing the budgets of the House speaker and Senate president, and cutting the budget of the Department of Commerce and Economic Opportunity.
Rep. Frank Mautino, D-Spring Valley, said taking money from the state’s economic development agency makes no sense during a recession.
The House Executive Committee did approve a proposal to cut lawmakers’ daily expense money from $139 to $111 next year.
The plan also calls for cutting lawmakers’ mileage reimbursement from 50 cents to 39 cents per mile, the amount the state says it costs to operate state-owned cars.
The committee also adopted a proposal for lawmakers and statewide officials to give up a cost-of-living pay raise next year.