Quinn hedges on police/fire pension deal in fall

Wednesday, October 20, 2010

Gov. Pat Quinn is pouring a bit of cold water on the prospect of pension cuts for police and firefighters being approved in the Legislature's post-election veto session.

In an appearance before Crain's editorial board late Monday, Mr. Quinn strongly suggested that revisions in pension levels mandated by the state should be enacted only if agreed to by both management and labor in negotiations.

"I'm very reluctant to impose my view of pension reform on municipalities and the law enforcement personnel who work for them," Mr. Quinn said. Unless, of course, what's up for a vote is an "agreed bill" to which both sides consent, he added.

Legislative leaders have been trying to reach a deal on a November pension bill that would raise the retirement age and cut other benefits for newly hired police and firefighters -- much like a plan passed in the spring that applied to teachers and other non-safety government workers.

To my knowledge, a deal has not yet been struck, with at least one union involved in talks demanding that, in exchange for pension cuts, municipalities agree to post their state aid as a guarantee that they'll actually make their full annual pension contributions.

Sworn personnel "have particularly dangerous jobs," Mr. Quinn said. He went on to suggest that a negotiated deal makes sense for cities and villages, since that would limit any legal challenges to the new law.

In a related matter, the incumbent Democrat termed "baloney" any suggestion that the state's pension funds face insolvency in a decade or two -- even though the amount of unfunded benefits now tops $70 billion.

The new state law will save tens billions of dollars in decades to come, and other reforms would help, too, Mr. Quinn said. But cutting the accrual rate for benefits now being earned by current workers is a non-starter, Mr. Quinn said.

The Illinois constitution is "crystal clear" that the rate of accrual cannot be changed once someone goes on the payroll -- unless changes are collectively bargained -- Mr. Quinn said. That puts him in dispute with some lawyers who say a reduction in benefits earned from now on would be legal.

So far this year, the state has not made its annual $3-billion-plus pension payment. Mr. Quinn wants to borrow the money and predicted that the borrowing "of course" will pass in the veto session. But Springfield Republicans have balked, and at least some GOP votes will be needed to approve the borrowing.

One other pension matter: Mr. Quinn said he opposes switching from the state's current defined-benefit pension program into a 401 (k)-like defined contribution system, as GOP gubernatorial nominee Bill Brady wants. Mr. Brady would borrow up to $50 billion needed for transition costs to the new system.

"The current system is the most affordable, and is the best for the state and its employees," declared Mr. Quinn, saying that borrowing as much as Mr. Brady wants would require $4.5 billion in annual debt-service payments.

Mr. Quinn's campaign is getting major financial support from labor unions. Mr. Brady has strong backing from business groups.

One other item of particular interest from the Crain's interview with the governor: More confusion about what exactly would happen with proceeds from Mr. Quinn's proposal to hike the individual state income tax from 3% to 4%.

At one point, Mr. Quinn had argued that an increase was needed to help fill a cumulative $13 billion shortfall in the state budget. Then he said the hike would go for education.

Monday, Mr. Quinn suggested that part of the proceeds would go to cut local property taxes for schools, but much of the $3 billion left after that would be used to replace existing state aid to education -- thereby providing indirect budget relief.

"A great deal of it" would be used as an offset for existing state aid, Mr. Quinn said at one point. But at another, he said things like, "We want to invest in education and low property taxes."

Despite several attempts by several of us, Mr. Quinn just wouldn't get more specific on how much would be new help for schools, and how much would just replace existing state aid.