Illinois pension debt getting worse, but at a slower rate

SPRINGFIELD ?

? There's more bad news about Illinois' worst-in-the-nation government worker pension debt, but it's not as awful as it could have been.

The pension shortfall is projected to hit a record $102.7 billion by next summer if cost-saving reforms aren't put in place. The size of the hole, however, is expected to grow at a slightly slower pace in the next year. Aides to Gov. Pat Quinn say that's because the state has been making full pension payments and is seeing the effect of a lower set of benefits for newer employees.

The new calculations also mean that Quinn will have to revise downward his stock line about Illinois losing $17 million for each day the pension problem goes unresolved. The administration now projects the price tag at a little more than $5 million a day, but that's not going to give taxpayers much solace.

"We're just not bleeding quite as fast, but we're still bleeding out. We've got to find a way to stop this," said Hans Zigmund, Quinn's chief budget economist.

Last week, 10 lawmakers ? six Democrats and four Republicans ? from the House and Senate held a new round of hearings on the state's pension problem. They make up a conference committee that Quinn requested House Speaker Michael Madigan and Senate President John Cullerton to form to try to break the stalemate between the two Democratic legislative leaders.

Quinn has called on the committee to "work around the clock" to forge a compromise by July 9, but the panel's chairman, Sen. Kwame Raoul, D-Chicago, has cast doubt on that deadline as unrealistic.

The lawmakers are trying to find a new path between or around two hardened positions: Madigan pushed through the House unilateral cuts that would have raised the retirement age, made workers chip in more from their paychecks and scaled back the cost-of-living increases for retirees. Cullerton's Senate-passed plan centered on giving state workers and retirees a choice, such as giving up on an automatically compounded 3 percent annual cost-of-living increase to keep health coverage or keeping the automatic annual pension boosts in exchange for giving up health care.

Madigan's savings: an estimated $187 billion. Cullerton's savings: an estimated $57.6 billion, depending on the choices people make. Madigan's plan called for 100 percent funding after 30 years. Cullerton's set a target of 90 percent funding during that same timetable.

Jerry Stermer, Quinn's budget chief, said the administration's goals now are to erase the debt, stabilize the pension system so that people will get a pension and "stop the squeeze" on the basic core services of state government.

The near-daily reminder of the costly pension conundrum was underscored further last week.

The state did a routine borrowing of $1.3 billion for public works projects, and Quinn budget officials determined taxpayers will pay an extra $130 million in interest due to lowered credit ratings following inaction on pension reform. Toss in other borrowing this year, and the state is getting charged $180 million extra due to its bottom-feeder status among credit rating agencies, officials said.

State officials had projected that the overall pension debt ? once thought to be about $96.8 billion ? would hit $100.8 billion by Sunday, the last day of the state budget year. It is expected to grow to $102.7 billion a year from now, Quinn's budget office said.

"It's not that we're really getting a lot better," Zigmund said. "It's just that we're getting worse less fast."

The state is paying $6 billion for pensions in the new operating budget ? up from $5.25 billion in the last one ? based on a formula created by a pension payback plan put in place in 1995.

But the real cost of pensions in the new budget year might be more accurately pegged at $7.7 billion. That includes the $1.7 billion in payments on two pension loans taken out under Quinn as well as a major $10 billion pension bond dating to 2003 under his predecessor, Rod Blagojevich.

The $7.7 billion represents about 21.7 percent of the overall state operating budget, or better than one of every five dollars in general funds. Quinn and lawmakers managed to keep school spending for this school year at the same level, but the schools had suffered hundreds of millions of dollars in cuts in recent years because dollars for education, social services and other state operations competed with the rising costs of state pensions.

What Democratic Rep. Elaine Nekritz of Northbrook fears as she sits on the new pension committee is that the state could soon see 30 percent of its general funds going to pensions, an amount that's "just not affordable."

"We need to keep our sense of urgency," she said.

rlong@tribune.com

Twitter @RayLong

Source: http://www.chicagotribune.com/news/local/ct-met-illinois-pension-reform-0630-20130630,0,2433973.story?track=rss

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