News for May 2005 - Illinois Issues

News June 2005

Governor inks budget, pension plan, payday loan reforms

A budget predicated on $2.3 billion in pension deferrals amounts to a payday loan for state government, Republicans bellowed this spring.

Without fanfare, Gov. Rod Blagojevich signed the pension deferral into law last month, along with the massive spending bill that funds most of the $54 billion state budget.

A few days later, Blagojevich found some face time for the Payday Loan Reform Act. Beginning in December, the new law limits the short-term loans to $1,000 or 25 percent of monthly income. Borrowers are restricted to two loans at a time, and lenders can 't charge more than 15.5 percent interest.

On the pension measure, Democrats scrapped plans to dramatically reduce benefits for new hires when it became clear Republicans wouldn 't toe the line.

Democrats settled for capping end-of-career raises in new downstate and suburban teacher contracts at 6 percent a year. They also reduced retirement payouts for new university hires and cut annual interest increases for current university pensioners.

Advancing even the more modest pension plan took solidarity among Democrats, who hold a majority in both the House and Senate. Solidarity didn 't come cheaply. The Democrats signed more than 70 "memorandums of understanding" that guaranteed more than $20 million in pet initiatives.

Pat Guinane
Illinois Issues June 21, 2005

Pension funds fill state budget gap
Democrats put aside their differences and pushed off $2.3 billion in public pension obligations to send the governor a $54.4 billion state budget for the fiscal year that begins July 1.

Shorting the pension funds closed a $1.2 billion revenue gap this year and provides a $1.1 billion cushion for next year. The tactic also enabled Democrats to avert the drawn-out overtime session lawmakers suffered through last summer.

Republicans called the move a "scam," a "raid," even a "rape" of the systems for retired suburban and downstate teachers, state and university employees, judges and lawmakers. "How can anyone with a conscience at all vote for a budget that does this?" asked Rep. Jim Sacia, a Pecatonica Republican. "This is an abomination. This is an insult to anyone with intelligence above plant life."

After decades of underfunding, the pension systems already were $35 billion in the red. And Republicans argue shorting them by another $2.3 billion now could create a $30 billion liability over the next 40 years.

But Democrats labeled the move a debt restructuring that was inevitable after Republicans refused to support creating a second tier of lower benefits for new hires. Blagojevich had argued that current benefits are overly generous and cutting them would save $55 billion by 2045, allowing him to spend $800 million in potential savings this year.

Ultimately, the governor settled for fewer reforms. Lawmakers capped end-of-career raises in new downstate and suburban teacher contracts at 6 percent a year. School districts must pay for pension spikes that accompany bigger pay bumps. Teacher pension contributions will increase by 4 percent to continue funding the popular early retirement option. New state university hires won't be eligible for the more lucrative money purchase option for calculating retirement benefits and current pensioners could see smaller annual increases.

The governor made late-evening appearances in both chambers to congratulate fellow Democrats. "Well, a great session. I kinda hate to see it end," Blagojevich told reporters upon leaving the House. "I think this is a budget that is very good for the people of Illinois."

The governor focused on the spending side, which includes:

• $10.8 billion in construction dollars, including $7 billion for ongoing projects such as road construction. The $3.8 billion in new capital dollars doesn't include bond money for new road projects or new school construction.

• $314 million more for schools, including a $200 increase in the state's guaranteed per-pupil spending level and $30 million for early childhood education.

• $54 million to bail out the financially strapped Chicago Transit Authority.

• $552 million to maintain Medicaid spending for low-income Illinoisans, including $6 million to provide 56,000 more working parents with health insurance beginning January 1, 2006.

Pat Guinane
Illinois Issues June 21, 2005

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