Illinois governor calls special session on pension reform

CHICAGO, July 30 Tue Jul 31, 2012 2:06am IST

CHICAGO, July 30 (Reuters) - Illinois Governor Pat Quinn said on Monday he is calling a special legislative session in August for lawmakers to deal with "comprehensive" reforms to ease the state's huge unfunded pension liability.

Quinn said that since their regular session ended on May 31, legislative leaders have had enough time to study ways the state can enact constitutional changes to pensions for state workers, teachers and others.

"We can't afford to wait another moment," Quinn said in a speech to the City Club of Chicago, adding that Illinois' $83 billion unfunded pension liability was growing by millions of dollars each day and gobbling up revenue the state needs for education, health care, public safety and other essential services.

Revenue from a big increase in income tax rates last year largely went to fund pension payments for Illinois. But with those payments accounting for about 15 percent of its $33.7 billion general funds budget, the state has kept accumulating billions of dollars in unpaid bills and other obligations.

The structural budget imbalance and pension liability have led credit rating agencies to lower Illinois' ratings. Standard & Poor's Ratings Services has warned of a multi-notch downgrade if progress is not made.

The Aug. 17 special session called by Quinn for both the Democrat-controlled House and Senate will coincide with an already scheduled House session called by Speaker Michael Madigan to potentially expel a state representative who was indicted for bribery in March and still won the primary election for his seat.

A 12-YEAR COST-SHIFT PLAN FOR SCHOOLS

But it was not clear if lawmakers from either political party were ready to tackle pensions after reform legislation fizzled in the House on May 31. A big stumbling block is the Teachers' Retirement System, which covers all public school teachers with the exception of those in the Chicago Public Schools, who have their own pension system.

Quinn on Monday called for a plan to allow school districts to assume pension costs now paid by the state over a 12-year period. He said school districts would be better off financially under the phased-in plan than having state pension payments continuing to squeeze out education funding, which was cut by more than $200 million in the current budget.

Some Republican lawmakers have objected to the pension cost-shift onto schools, saying it would result in big local property tax increases.

Republican House Leader Tom Cross and Senate Leader Christine Radogno issued a joint statement saying they were encouraged by Quinn's action to call a special session.

"As many people know, we have been and continue to be supportive of comprehensive pension reform that solves the major crisis facing us today," the statement said. "The time to act has been upon us."

Reaction from Democratic legislative leaders was not immediately available.

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