Monday, June 18, 2012

No middle ground found in pension talks

By Jamey Dunn

Gov. Pat Quinn signed legislation today that will add a level of oversight to the state’s pension systems, but it seems as if little progress has been made in negotiations over comprehensive pension reform.

Quinn signed Senate Bill 179, which creates the position of a state actuary within the auditor general’s office. The actuary will review estimates that each pension system makes about its returns on investments. “It’s an independent person who has that authority to make sure that the actuarial assumptions of each retirement system are correct. We want that not to be higher than it should be or lower than it should be. We want a second set of eyes to make sure that it’s accurate,” Quinn told reporters in Chicago today.

Supporters said the actuary will give lawmakers another source of information to draw upon when making decisions related to the pension systems or pension benefits. Lawmakers compared it to the budgeting process, where they have access to information from both the Governor’s Office of Management and Budget and the legislative Commission on Government Forecasting and Accountability. “[The actuary is] not going to go back to ground zero and redo the estimates. It really is a second look over the shoulder from the actuaries of the systems from the systems themselves.. … This really is just a second pair of eyes,’ said Chicago Democratic Rep. Barbara Flynn Currie, a sponsor of the bill. “We do the same thing in budget making. You can’t be sure what the next fiscal year is going to bring, so you make some kind of judgment call. And we just want to make sure that the judgment calls that we’re getting from the systems are as close to reality as the human mind can make them.”

At today’s news conference, Quinn leaned hard on Republicans today to accept a cost shift that would ultimately result in school districts paying the retirement costs for their employees. “We need to kind of close that discussion so we can put that final plan into the bill,” Quinn said.

Republicans called the provision a “poison pill” when it was included in a pension reform bill, and it was the issue that caused a stalemate on pension reform in the closing days of the spring legislative session. Republicans say that reform can be achieved without the cost shift. “We are, and obviously have been, committed to pension reform — the cost shift is not a vital component to this package that will save tens of billions of dollars in our unfunded liability,” Sarah Wojcicki Jimenez, a spokeswoman for House Minority leader Tom Cross, said in a written statement.

Republicans say the shift to local districts would result in property tax increases across the state as cash strapped schools try to find the money to cover the costs. But Quinn said the cost shift is needed so that school districts are accountable for the pension benefits their employees earn based on their salaries, which are decided by the districts. He said a shift that is phased in over as many as 15 years would not result in property tax increases. “When you look at the facts, it’s pretty clear that if you phase in a requirement that local school districts have to pay the future retirement costs of those who work for them — for those who they negotiate contracts with over a period of time — if you phase in that requirement of having to pay for their future retirement costs say over 12 years to 15 years, there is, I think, to my mind an imperceptible impact on property taxes. There is no impact on property taxes. And that’s just a fact.”

In the closing days of the session, Quinn backed a bill that did not have the cost shift and said the issue could be revisited later. But the measure did not find enough support in the House to pass. Quinn now seems to have lost patience with the negotiations that have been going on since lawmakers left Springfield at the end of the regular session. “All four leaders believe in the fundamental principle of accountability and responsibility. That’s just public finance 101, and I think everybody agrees with that. It’s implementing this phase in — that seems to be the key point,” Quinn said. “It’s beyond me how you could let this one issue hold up a fundamental overhaul of our public pension system that has been in the waiting for three decades. …We have a reasonable plan that, frankly, a lot of folks have worked so hard on this year, and it’s got one last provision to work on [and to] negotiate.”

Patty Schuh, a spokeswoman for Senate Minority Leader Christine Radogno, said that Republicans are not the holdup when it comes to pension reform passing. “We are and have been committed to pension reform in the state of Illinois. We’ve pushed it. We’ve been for a variety of proposals that are out there.” She said that Quinn has changed his tune about the importance of the cost shift. She noted that it was an “afterthought” in the governor’s own pension reform framework, which mentioned the cost shift but did not provide details on how it would be implemented.

 “The cost shift is not an integral part of this pension reform discussion. We have $60 billion to $80 billion in pension savings, true savings, on the table, and we ought to be capturing those savings and making the reforms that are necessary. Then at the appropriate time, we can have the discussion on school funding, and that’s where the cost shift discussion needs to be,” Schuh said. Both spokeswomen said that legislative leaders plan to meet with Quinn’s staff again on Thursday.

 Quinn today also said he is not pleased with cuts to human services in the budget lawmakers approved last month. He is particularly upset about reductions to the Department of Children and Family Services that he called “just not acceptable.” “I’m not happy with the work of the General Assembly in this area,” he said. “We will have more to say about that when we lay out our decisions on the budget, but we have to make sure that children come first in Illinois all the time.” Quinn said he plans to make his decisions regarding the budget before the new fiscal year begins on July 1. He can sign off on it, veto it outright or make reductions using a line item veto.

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