A joint Senate-House Conference Committee set to work trying to accomplish a task that has eluded the Governor and his legislative allies for years – finding a solution to the state’s growing pension debt. The Committee is seeking a solution that will both attract enough votes to pass the legislature and pass constitutional muster.
The first hearing of the committee, held in Chicago June 27, focused primarily on the background and financial challenges facing the state’s pension systems. Much of the day was also taken up with testimony from various advocacy groups and employee representatives with little new ground covered.
The Committee will meet again July 3, at 9 a.m. in Chicago, although committee members were urged to exchange ideas and continue discussions amongst one another in the meantime. Technically, the Conference Committee was formed to resolve differences between the Senate and House of Representatives on amendments to Senate Bill 1; but as a practical matter, the Committee has the authority to completely rewrite the legislation, submitting what could be an entirely new proposal.
Senate Bill 1 originally contained a pension reform plan promoted by the Senate President, but was amended in the House to reflect a competing plan supported by the House Speaker. Although both chambers are controlled by Democrats, the two Democrat leaders, along with the Governor, have been unable to agree on a solution. As a result, during a Special Session held June 19, the special Conference Committee was formed to try to hash out a solution.
Much of the debate has focused on the price of annual 3% cost-of-living adjustments (COLAs) currently promised to retired teachers and other public employees. Such guaranteed COLAs are recognized both as one of the primary drivers of rising pension costs and as an important hedge against rising costs for retired persons. Other items that have been a focus of past legislative proposals include increasing the amount employees pay toward their pension benefits, ending or modifying access to state subsidized health insurance, capping benefits for highly compensated public employees, and offering an alternative “defined contribution” retirement plan.
On June 17, I joined the Illinois Policy Institute at a press conference to present a pension reform plan that is constitutional, would immediately cut Illinois' $100 billion unfunded pension liability by nearly half, and would protect the benefits earned to date by current government workers.
To prevent Illinois from going down the path that has led many companies to file for bankruptcy, Illinois must end its dependence on the defined benefit pension system and follow the lead of the private sector, by converting its retirement system to 401(k)-style plans. This is the only way Illinois will be able to end its pension crisis and begin to make way for the economic growth our state needs.
Also during the week, the Senate and House Republican Caucuses announced they were united against recent efforts to push a graduated income tax increase on the residents and businesses in Illinois. The announcement came as Illinois begins its new fiscal year in July.
The Illinois Constitution requires a flat rate tax, which assures that all residents pay an equal rate on their income taxes. However, Democrat leaders and lawmakers have introduced legislation calling for a graduated income tax. Illinois already offers generous earned income tax credits for low-income workers, but a graduated tax might mean that middle income earners would see their tax rates go from the existing temporary five percent rate to a even higher permanent rate.
The so-called temporary income tax increase was passed on a purely partisan vote during the 2011 lame duck session, with all Republicans in opposition. Individual income tax rates increased from 3 percent to 5 percent; corporate income taxes increased from 4.80 percent to 7 percent.
Two leaders in the effort to reform the state’s Medicaid system are drawing attention to a recent state arbitrator’s ruling that has the potential to cut short millions in savings. Senator Dale Righter of Mattoon and Representative Patti Bellock (R-Westmont) sent a joint letter to the Governor expressing concerns over a recent arbitrator’s ruling challenging the state’s right to hire a private contractor to assist in scrubbing the state’s Medicaid rolls of ineligible participants.
They pointed out that the state consulting contract, jeopardized by the ruling, “is proving to be highly successful in helping the state discover and remove as many as 80,000 ineligible individuals from the rolls to date because they live outside of Illinois, make too much money or otherwise are not eligible. By the end of the year, as many as 300,000 individuals could be removed from the program that costs Illinois taxpayers more than $10 billion a year.”
The Chicago Tribune is calling on the Governor to appeal the ruling and saying that, if necessary, the Legislature should change to law to assure that the work can continue.
During the week, Governor Pat Quinn signed Senate Bill 1738, which clarifies aspects of the state’s Video Gaming Act. One change allows the vendor that operates the central communications system to also manufacture and distribute gaming terminals.
Video gaming continues to gain momentum in Illinois and is bringing revenue into the state and local municipalities. While video gambling was approved in Illinois by lawmakers in 2009, regulators did not start to approve the sites and machines until last year. Since then, the number of video gambling machines has risen sharply, with hundreds of new video game sites and machines being approved each month. As of June 20, there are 1,799 live video gaming sites across Illinois and 7,536 live video gaming machines. The reports, which can be found at www.igb.illinois.gov, detail information for the past nine months.
The Governor also signed legislation (HB 3049) moving jurisdiction of the Illinois Latino Family Commission from the Department of Public Aid to the Department of Health Care and Family Services; and signed three state budget bills, including measures that comprise the bulk of the state’s education budget for elementary and secondary schools, as well as universities and community colleges.