With the May 31 deadline quickly approaching, there appears to be little progress in Springfield on a comprehensive plan to close the state's $12 billion deficit.  If lawmakers fail to come up with the necessary revenue, state programs will be face draconian cuts. Quinn illustrated this scenario in the "slash and burn" budget he released yesterday. But so far the tactic doesn't has made little impact.  (Worse yet, Quinn's rhetoric has provoked comparisons to former governor Rod Blagojevich.)

Meanwhile, a separate cost-cutting measure included in Gov. Quinn's budget plan has been quietly gaining steam in the statehouse. In its current amended form, Senate Bill 1292 would create a "two-tiered" pension system for state workers: Current employees will receive their promised level of benefits when they retire, but new hires will face reduced benefits and, in some cases, a later retirement date. With lawmakers seeking political cover as they consider voting in favor of an income tax increase, this proposal appears to be on the fast track.

Quinn and others have asserted that the plan will save the state $162 billion by 2045.  But as Bethany Jaeger reported, House sponsor Kevin McCarthy (D-Orland Park) brought the measure before the Personnel and Pension Committee last Tuesday without "concrete savings estimates" to support the claim. In the week since, we've tried to track down year-by-year savings projections, but neither McCarthy nor the governor's office could produce such a document.  

Nonetheless, lawmakers rushed to move the plan out of committee.  And if they succeed in passing the bill this month, they will undoubtedly tout it as a major step towards fiscal responsibility.  But let's be clear: the pension plans available to state workers are not what got us into this mess and slashing benefits for new employees is not going to get us out of it.  As the Center for Tax and Budget Accountability (CTBA) has repeatedly noted, the real culprit is our state government's decades-long habit of skimming from the pension fund to cover the rising cost of public services -- an accounting trick that Quinn himself employs in his current budget.

Here's a choice excerpt from CTBA's recent analysis (PDF) of the governor's budget proposal:

[T]he main reason Illinois has such a large retirement system unfunded liability does not stem from generous benefits, the benefits are about average, or high basic costs (the weighted average normal cost across all five systems is 9.3%, which is 26% less than the national average). Instead, the main reason Illinois has run up a large unfunded liability is simple—the state's revenue system has historically underperformed over time, creating the structural deficit described previously in this report. As state decision makers continually found themselves short of the revenue needed to cover both maintaining essential services from one year to the next, and making the full, actuarially determined employer contribution required to fund the pension systems, they consistently opted to skip full funding of the retirement systems to maintain spending on services. [...]

The deadly combination of years of systemic state underfunding of its employer contribution to the pension systems, followed by the cataclysmic decline in asset values caused by the national meltdown in financial markets over the last year, have led to an all-time high in the state's unfunded pension liability.

Unfortunately, the Quinn budget once again proposes shorting the pension system, as Greg Hinz noted back in March:

On the theory that the new pension system will save the state tens of billions of dollars in the future, Mr. Quinn wants to withhold $2.9 billion in payments the state otherwise would have to make to its pension plans this year and next. But the savings won't actually accrue that quickly, because the state's not doing much hiring right now.

CTBA director Ralph Martire echoes this point, calling it "highly speculative" that cutting state contributions to pension funds by two percent, as proposed, will do much to fill in the hole that lawmakers have dug. "It's a distraction, not a solution," he tells us. "Voters will think something important has happened but it hasn't. This is about politics, not true reform."

Sen. Don Harmon (D-Oak Park) told us last week that the issue has "taken on a degree of currency that it's never taken before." He warned, however, that there are some "complicating factors" to consider, like whether it makes sense to require prison guards, police officers, and teachers to stay on the job until they're 67. 

Also, the Illinois Federation of Teachers (IFT) estimates that it would cost an extra $1.4 billion in annual salaries to keep teachers employed until the later retirement age. School districts learned long ago that younger workers are cheaper and they have routinely offered retirement incentives to lower their payroll costs.

"If there's a need to overhaul the system, let's do it in a methodical way," IFT policy director Steven Preckwinkle said last Friday. "This plan is pension voodoo economics."

McCarthy's bill currently has a Friday deadline to move out of the House.  We'll keep you updated on any further developments.