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In a tight vote, House OKs Madigan pension-cut package

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ILLINOIS_PENSIONS_38883037.JPGHouse Speaker Michael Madigan (D-Chicago) speaks to lawmakers Thursday while on the House floor where he passed legislation to tackle a Goliath-sized public-employee pension deficit. (AP Photo/Seth Perlman)

With reporting by Zach Buchheit

SPRINGFIELD-The Illinois House Thursday narrowly backed a bi-partisan pension-reform package pushed by House Speaker Michael Madigan in a move Gov. Pat Quinn called "the biggest step to date" in solving the state's nearly $100 billion pension crisis.

After a sober, hour-long succession of speeches mostly favoring Madigan's plan, the House signed off on his push 62-51, with six members voting present. Sixty votes were needed for the speaker's measure to clear the House. It now moves to the Senate.

"This bill has been worked assiduously by many, many people. Obviously, it does not meet every request. Obviously, it does not make everybody happy," Madigan said as the bustling House chamber quieted during his pitch.

"I think we're all familiar with the severe fiscal problems of our state, and the fiscal problems of the pension systems are a large, large part of that problem. In my judgment, this is a critical action that must be taken now. It must be taken for future budget making. It must be taken for the fiscal wellbeing and reputation of the state of Illinois," Madigan said.

Twenty-two House Republicans sided with Madigan's push, with Democrats accounting for the rest of the "yes" votes. Among the Republicans backing the plan was House Minority Leader Tom Cross (R-Oswego), who signed on to Madigan's legislation as a co-sponsor.

Cross said current and retired state workers, university employees and downstate and suburban teachers had every right to be "mad as hell" that the state's pension systems are in fiscal ruin and bore no blame for the worst-in-the-nation mess.

While acknowledging the hurt being inflicted on them, Cross went on to describe Madigan's approach as the only way to restore financial stability to the state and ensure the state's pension systems exist into the future.

"It provides certainty to employees. It provides certainty to annuitants," Cross said. "You may not like it. But it provides certainty you will have a pension."

No sooner than the roll call was locked in, Quinn heaped praise on the House's action.

"Today the Illinois House of Representatives took the biggest step to date towards restoring fiscal stability to Illinois," the governor said in a prepared statement.

"With the passage of this comprehensive pension reform solution, Illinois is closer than ever to addressing a decades-long problem that is plaguing our economy, our bond rating and the future of our children," Quinn said.

Now, the focus shifts to the state Senate, where a similar approach fell seven votes shy last month and Senate President John Cullerton (D-Chicago) has raised questions about the constitutionality of Madigan's plan. Cullerton met Thursday with public-sector labor unions in hopes of crafting an alternative that could be voted on in coming weeks in the Senate.

"The Senate president intends to take the Madigan plan and the union proposal to a caucus meeting early next week. At that point, we'll able to see where the appetite for action is," Cullerton spokeswoman Rikeesha Phelon said.

Madigan gutted a Senate-passed pension plan written by Cullerton that applied to only one of the state's five retirement systems. Cullerton's plan also adhered to a legal theory he championed that would have retirees decide for themselves whether to give up a compounding, annual 3-percent pension boost or forego state-subsidized health insurance - an approach Cullerton insisted was the only way to reel in pension costs and still be constitutional.

Madigan abandoned both concepts in his plan.

The speaker's measure would wipe out as much as $30 billion of the nearly $100 billion unfunded pension liability the state faces and fully fund the pension systems by 2045.

Madigan's plan takes aim at one the single biggest drivers of the state's pension crisis: the compounding 3-percent annual increases state retirees get. Now, it's an automatic based on whatever annuity a retiree gets and has exceeded the rate of inflation 13 times in the past 20 years.

Madigan has recalculated that cost-of-living increase in a far less generous manner, using a template offered by Senate Minority Leader Christine Radogno (R-Lemont). A retiree would get 3 percent of an amount equal to the number of years they worked for state government, a university or downstate and suburban school district, multiplied by $1,000.

For a retiree who worked 20 years for one of those employers and has a $35,000 annuity, for example, the current formula would give him or her $1,050. Under Madigan's revision, the cost-of-living boost would drop to $600.

"These are steps none of us relish taking, but we know we should. It's also historic because we as a body are sending a very clear message. We're putting necessity above political expediency and doing the right thing over the easy thing," said Rep. Elaine Nekritz (D-Northbrook), Madigan's point person on pensions.

The plan also includes a funding guarantee that would give the state's pension systems new authority to petition the Illinois Supreme Court if the state shorts the pension systems or skip payments, a recurrent practice that also has driven the state's pension systems deeper into the hole.

But not everyone in the chamber was sold on the strength of that pension-funding safeguard, noting that future Legislatures could weaken or suspend it.

"We do not have a real guarantee," said Rep. Michael Fortner (R-West Chicago), who voted against Madigan's legislation. "The fact we can change it through our budget implementation process gives me concern a future Legislature will do very much the same things we've seen happen all too many times during the past decades under a variety of different administrations."

Madigan's plan did not include the pension system that covers the state's judges, including those who sit on the Illinois Supreme Court, which figures to be the ultimate arbiter of any pension plan that gets through the Legislature and signed by Quinn. Judges have the highest average annual annuity of anyone covered by a state pension: $117,564.

The speaker, who Wednesday predicted Supreme Court sign-off on his plan, justified his move to exempt judges from the pension pain during floor debate Thursday.

"Judges were excluded as a practical decision," Madigan explained. "We anticipate this matter will be before the Illinois court system and Illinois Supreme Court, and the absence of the judicial pension system in the bill will relieve them of the burden of dealing with a conflict of interest."

The coalition of public-sector labor unions fighting Madigan's pension package lashed out at the House action.

"Senate Bill 1 is unfair to the active and retired teachers, nurses, police, and other employees who paid out of every paycheck to fund their pensions, even as the state shorted its share. On top of that, it is blatantly unconstitutional and thus saves nothing," said a statement from the We Are One Illinois coalition. "It simply exacerbates Illinois' fiscal problems."

The group is trying to craft an alternative to the Madigan plan with Cullerton, though neither the unions nor Cullerton offered details of what their proposal was. It described a Thursday meeting with Cullerton as "productive."

Despite such criticism of Madigan's plan, a government watchdog that has long pushed for sweeping pension reform in Illinois lauded the components of Madigan's legislation.

"The Civic Federation considers the passage of Senate Bill 1 as amended a monumental step forward by the Illinois General Assembly in beginning to address the state's worst-in-the-nation pension crisis," said Laurence Msall, president of the Civic Federation.

"This legislation has the potential to put the state of Illinois on the path toward financial stability," Msall said.

After the House vote, Madigan predicted the Senate, in the remaining 29 days before the Legislature's scheduled spring adjournment, would vote to send his legislation to Quinn.

"I'm committed to the bill. I'm committed to solving the issue. I've spoken to this publicly that the state's fiscal problems are so bad that they require radical surgery, and this is the first step. We've taken that first step in the House. My expectation is that the Senate will approve this bill," Madigan said.

Asked how he was so confident of that, the longest-serving House speaker in state history and a delegate to the state's 1970 constitutional convention quipped, "Maybe it's that 43 years around this building."

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13 Comments

This is a very tough decision.However, it is needed.These pensions should have been funded the last thirty years.In the absence of that it is crucial for the state that this plan goes through quickly.The unemployment rate in Illinois is the second highest in the country ,because of the uncertainty that the pension fiasco has caused.

As a pensioner, I'm supposed to take the word of the most corrupt state government in America that Illinois' money problems are caused by the savings of teachers, police and firemen and not by the reckless spending and mismanagement of politicians. By the way, this is good Kool-Aid.

That is all well and good that the teachers, and other public emplyees, will not get what was guaranteed to them becuase of incompetent politicians from both of our corrupt political parties. Now my question, what are the legislators giving up, or the judges? They both are public sector workers. Are our legisators going to take on judge's pension reform and their own pension reform? I will give you 10 to 1 odds on a $100 bill that they won't even want to discuss either one of those reforms? Sad. Really, really sad group that is running this State. I wonder how they sleep at night.

It is a sad day for the rule of law; the idea a contract matters. If the legislature can ignore the plain language of the Illinois Constitution to remedy the underfunding of pensions they, especially Madigan, caused; then no contract is safe. Maybe the contracts of bondholders and vendors will be honored, or not, as their service to the public will be needed in the future. The contracts of retired workers have no value by this reasoning because their work is finished. A shame. If they can cheat pensioners, they can cheat anyone.

If the House and their evil speaker cannot honor the Illinois Constitution and Federal contract law, how can anyone in this state realistically expect them to honor anything? You can't pick and choose which amendments of the Constitution you will adhere to. You have to be all in.

Speaker Madigan is evil and the exact reason Illinois needs term limits.

I am embarrassed by the actions of the legislators. It will be easier for Illinois to recover from this financial nightmare that Madigan has created than it will be to recover from the loss of public trust.

If a private employer skipped Social Security payments for their employees even once, the Federal Government would charge those responsible with a felony. Not so with politicians who were able to boast about keeping Illinois taxes low by not fully funding the States' pension obligations for the last 50 years. That is why the Constitutional Amendment was put into place in an effort to get the State to fully fund the pensions. Didn't work so now forget that it is there and make sure you don't cut the judges pensions or they may do the right thing. Madigan has the guts to brag that he has been involved in those decisions for 43 years. He should step down in shame and be glad he can't be prosecuted. Funny how they include all what has been owed for all these years in the pension deficit like they intend on paying it all this year. Madigans plan won't fully fund the pensions until 2045 which is 32 years from now. So if the pensioners take this 50 percent or more cut, this plan will only save 30 billion over 32 years which equates to an annual savings of less than a billion a year of this much talked about 100 billion dollar deficit. The Civic Federation is another "Think Tank" made up of unelected, unaccountable people of the same ilk as those who pushed the United States into trillion dollar wars who are now proposing to cut Social Security and Veterans benefits now because they could run out of funds in the next 30 or so years. It tickles me to think that these people couldn't predict a downturn of the housing or Stock Market two years in advance, but can no predict the economic health of the country 30 years into the future. Beware all you current and future Social Security pensioners, we don't have the money to better things in America because we need to spend that money overseas. President Eisenhower tried to warn us about these groups outside of government making the policy for the American People. Good luck Mr. Quinn on your promise to clean up Illinois politics. Imagine trying to tell your bank that since you only made 50 percent payments for the last 30 years that you will make things right by paying less in the future. But you really honestly promise to make those future payments.

You are foolish if you believe this solution for Madiganistan is meaningful. As the article notes it tackles only 30 PERCENT of the debt and TAKES 30 YEARS to do it! The whole issue boils down to 5th grade math - it's not algebra or calculus or differential equations! Its simple, grade school math. Current Illinois residents are going to be paying ever higher property, sales and income taxes. Current Illinois pensioners are going to be receiving fewer and fewer pension dollars over time. Current Illinois employees at all levels are going to be contributing more and more to possibly receive less and less in their retirement. Illinois politicians of both parties, but primarily democrats have destroyed the entire state defined benefit system. Its dead, it can not be saved. The only question is will the smarter people figure out how to "get theirs" and "get out" soon enough. Speaking as recent ex-Illinois taxpayers who have moved on to better-run a better run state, those remaining behind can look forward to decreasing property values, increasing taxes, and the net exit of quality jobs from the state. All Illinois big employers from healthcare firms like Abbott, Abbvie, Baxter, Hospira, etc., along with heavy industry like Boeing, Illinois Tool, Cat, as well as big players in the financial world started down-sizing their Illinois based operations more than 5 YEARS AGO. They all saw the writing on the wall. The future of Illinois is Michigan. Get out while you can.

The Illinois Constitution says that public pensions are contractual relationships whose benefits cannot be diminished or impaired.

The U.S. Constitution's contract protection clause says that no state shall pass a law that impairs the obligation of contracts.

Basically, Speaker Madigan is counting on his bill passing Constitutional muster because of financial emergency necessitating police powers that can over-ride the Illinois and U.S. Constitution, as well as other existing Illinois laws.

I am not an attorney. But, according to Westlaw, the most cited case about the U.S. Constitution’s contract protection clause and states powers is the case, U.S. Trust Co. of New York v. New Jersey, 97 S.Ct. 1505. In that case, the U.S. Supreme Court stated:

“Contract Clause of [U.S.] Constitution limits otherwise legitimate exercise of state legislative authority, and existence of important public interest is not always sufficient to overcome that limitation........”.

also:

“If a State could reduce its financial obligations whenever it wanted to spend the money for what it regarded as an important public purpose, the Contract Clause would provide no protection at all.”.

Additionally, the Illinois Supreme Court’s ruling from Jorgensen v. Blagojevich stated, “No principle of law permits us to suspend constitutional requirements for economic reasons, no matter how compelling those reasons may seem.”.

Senator Cross said State employees bear no blame for the pension mess and have every right to be "mad as hell". Really Senator? Then why are you shafting those employees to fix the mess you and your fellow legislators made? Oh, that's right. As Representative Nekritz said, "We're putting necessity above political expediency and doing the right thing over the easy thing" Apparently the "right thing" is to steal employees' contributions to their pensions and then default on the pension promises made to those employees. I mean, what is the alternative? Telling the voters that the services they receive from the State have for years been partially paid for with money stolen from State employees' pensions? That certainly would be more politically expedient.

Daddy just spoiled daughter's gubernatorial aspirations.

So those of us trying to still recover from the furloughs and no raises for 6 years have to suffer yet again with getting more $$ taken out of our paychecks for pension and benefits and our checks have remained the same for 6 years, except when furlough days were taken out, (36 of them). The only reason we are classified as Merit Comp is part of our job duties, NOT big checks and being politically placed.

I feel its sad when our money situation in Illinois was created by our lawmakers who stole from Pension Plans as well as mismanaged them and now want all State workers and Retiree's to pay bot their corruption. Its also upsetting that our lawmakers and judges are not covered under these plans. Maybe the FBI should investigate these folks for very possible corruption charges!

Why is there no mention of the changes to health care in the article?

"Dear Illinois State Pensioners, welcome to ObamaCare! The line for services is way back there, behind all those people on welfare. Thank you for your service and your patience."

The Madigan Family

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