Gov. Quinn Delivers Budget Address Amid Pension Crisis

There were few surprises Wednesday in Gov. Pat Quinn's budget address in the Illinois General Assembly. He called it a "difficult" proposal with steep cuts in spending on education.

Education

In his address, Gov. Quinn talked about trimming education funding by about $400 million dollars, which would include K-12 and higher education.

Despite the deep cuts, Quinn pledged to protect early childhood education and some college scholarship programs, like the Illinois Monetary Award Program

"I agree with him that we should make sure that youngsters are getting that early, early education," said  State Rep. Naomi Jakobsson (D-Urbana). "But if we’re going to put all of our efforts there, what’s going to happen to them when they do go onto kindergarten and first grade. I think we need to look at a whole balance.”

Sen. Mike Frerichs (D-Champaign) said he was surprised the governor is proposing new spending despite the need for budget cuts.

"First of all, I think he's proposing to spend more money than the General Assembly thinks will be coming in or thinks that's prudent," Frerichs said. "But I think there's also a difference of priorities on funding for things on education. I know I talked to several of my colleagues who feel like that's one of the most important investments we can be making as a state, and that's not the place to be cutting the deepest."

The governor maintains the education cuts are needed because lawmakers have failed to resolve the state’s $97 billion pension crisis.

"We all know that we must reform the Illinois public pension system," Quinn said.  "So, members of the General Assembly, what are you waiting for? I know this issue requires a hard vote. But you know that every day you wait to vote on this matter – the problem gets worse."

State Sen. Andy Manar (D-Bunker Hill) said regardless of how these budgetary reductions play out, schools across the state can’t afford to face the same level of cuts.

“We have school districts that spend incredible amounts of money, and we have school districts that just have enough money to keep the doors open," Manar said. "And that inequity among school districts in the state should be our number one focus right now.”

State Sen. Jason Barickman (R-Bloomington) said the proposed cuts to education are nothing but a scare tactic.

“What we need to do is have a serious discussion about how we enact budgetary reform across the board, and we don’t just swing at a constituency that can’t withstand a cut like that,” Barickman said.

"For him to shirk his responsibilities and failures on the backs of classroom spending, property taxes and tuition, I think is dead on arrival," said Sen.  Bill Brady (R-Bloomington), who lost to Quinn in the 2010 gubernatorial race.

Meanwhile, a leading teachers' union said Gov. Quinn's budget address before lawmakers presented a "false choice'' when it comes to schools and a pension overhaul.

In a statement, Illinois Federation of Teachers President Dan Montgomery said that teachers did not create the pension funding problem and shouldn't be blamed. He said students should not suffer.

Gambling

Quinn also said if the legislature approves an expansion of gambling -- like a proposal for new casinos in Chicagoland, Rockford, and Danville -- that money should be dedicated for education, which could include teachers' pensions.

Quinn previously vetoed two gambling expansions that lawmakers have sent him, but he maintains that any new gambling legislation must have ethical protections.

"Of course, gaming expansion has to be done right.  It must have tough ethical standards, a campaign contribution ban on casino operators, and no loopholes for mobsters," Quinn said.

Late on Wednesday, an Illinois Senate committee approved a measure calling for five new casinos (Chicago, Rockford, Danville, Chicago's south suburbs and Lake County) and thousands of slots at Chicago's airports.

The profits generated in this latest proposal would be used to fund education - something Gov. Quinn said he would like to see happen.

"Any enhancement that we enact to gaming revenues this year should be dedicated to education, which could include teachers’ pensions," Quinn said.

State Rep. Chad Hays (R-Catlin) said re-directing gaming revenue for education is a great idea.

“Certainly I would absolutely welcome that discussion, both on the front end and the positive implications for Danville and the Vermilion County area that the gaming license would bring," Hays said. "Certainly if there’s talk about earmarking some of those additional revenues on a statewide level for education, I would be very enthusiastic about that discussion as well.”

The gaming measure would also create thousands of slot machines at Chicago's airports. Internet profits would be split with some going toward the state's public pension systems.

The Senate Executive Committee voted 10-4 Wednesday to move the bill to the full Senate. It is unclear if Gov. Quinn support this particular legislation.

Corporate Tax Loopholes

Also in his budget address Wednesday, Quinn called on lawmakers to end corporate tax loopholes to help pay down the state's massive backlog of unpaid bills.

He said he wants legislation to do that in the next 12 weeks. He mentioned three specifics, including suspending the foreign dividend corporate loophole.  He estimates they all together cost the state about $445 million each year.

Sen. Chapin Rose (R-Mahomet) said he is skeptical about Quinn’s plans to close corporate loopholes to pay a backlog of bills. He said a 2011 state income tax hike didn’t have the impact it should have.

“Today,  there’s 20 percent more unpaid bills today than there was two years ago, when the largest tax increase in state history went into effect," Rose said. "So to come in and suggest we’re going to do corporate loopholes to pay off the bills – whether or not they should be closed or not – I don’t think there’s a whole lot of trust that they money’s actually going to be used for what it’s going to be used for.”

Veterans' Services

Gov. Quinn said his proposed budget includes more money for veterans' services, which he said is an area the state cannot afford to cut.

Quinn said the budget includes increased funding for Illinois Veterans' Homes, which are essentially nursing homes for veterans. The state has four including in LaSalle, Quincy and Manteno. There are plans to build another one in the Chicago area. The homes serve more than 900 veterans.

Quinn said the increase covers higher staffing requirements outlined in the Illinois Nursing Home Care Act.

Fracking

The governor also talked about a proposal that would establish regulations for high-volume gas and oil drilling, calling it a "jobs bill.''

Fracking uses high-pressure mixtures of water, sand or gravel and chemicals to crack open rock formations and release oil and gas. The industry is looking at southern Illinois' New Albany shale. But opponents say Quinn should support a moratorium on high-volume hydraulic fracturing because more studies are needed on pollution and health risks.

The fracking legislation was crafted with the help of the industry and some environmental groups.

Reduce State Boards

Gov. Quinn said he is going to issue an executive order later this week to eliminate or consolidate 75 state boards and commissions that are redundant.

He said the elimination will increase efficiency.

Quinn did not detail which the boards and commissions would be eliminated. His spokeswoman later said the list of the 75 would come when Quinn issues the order.
 

Pension Reform

A common theme during Gov. Quinn's address was his criticism of the General Assembly for not passing pension reform.

"If I could issue an executive order to resolve the pension crisis, I would, and I would have done it a long time ago," Quinn said. "But democracy requires action by the executive branch and the legislative branch. It's time for you to legislate."

Surprisingly, House Republican Leader Tom Cross seemed to welcome the governor's hectoring tone.

"And I'm not being critical of it, because I think we needed to hear that from somebody," Cross said. "And so I  don't think it's all bad. But I just think that tone was different than what we're used to from someone standing up there giving that speech."

Sen. Barickman said he wasn't happy with the governor’s “tough talk” to the legislature, and that it's Quinn who needs to step up.

"I don't think he's living within the reality of the limited amount of revenue that's coming into the state," Barickman said.  "And he's certainly not living within the reality that we've got to control spending and live within our means."

Sen. Rose said Gov. Quinn gave a great speech, doing a terrific job of framing the debate for pension reform. But Rose said Quinn was wrong to target downstate Illinois for the bulk of his cuts. For example, he said cuts to school transportation funding will have its greatest impact on longer bus routes in Central and Southern Illinois.

Republicans have repeatedly criticized Quinn generally for not doing enough on pensions, and in particular for not laying out exactly what he wants to see in legislation.

On Wednesday, Quinn actually laid out some specifics, like a three-percent cost-of-living increase retirees get every year.

"That's unsustainable for taxpayers," Quinn said. "For those with higher pensions, the cost-of-living adjustment should be suspended until the entire pension system achieves better balance."

Illinois Treasurer Dan Rutherford said there is no question that lawmakers have to agree on a plan to address the roughly $100 billion pension problem. But he said the devil is in the details.

Rutherford says he wants to hear more details on Quinn's proposal to close corporate tax loopholes.

There are still a lot of open questions about what else Quinn wants to see in a pension proposal, but Rutherford said that is OK, at least in a major speech.

"I can understand maybe laying the specifics out in the public arena is not the best way to get some production done," Rutherford said.

But Rutherford noted that it is a different matter when Gov. Quinn is in private meetings with legislative leaders.

"I would hope that at least when you've got that closed door, you're laying out here, 'This is absolutely what I'm for, and this is absolutely what I'm against, and let's put together a comprehensive package,'" Rutherford added.

Senate President John Cullerton (D-Chicago) said the General Assembly knows it needs to act on pension reform, but doing so is "hard" and complicated.

Cullerton said he hopes to call his pension bill for a committee hearing next week.

The bill would include a plan proposed by House Republican Leader Rep. Tom Cross (R-Oswego) and Rep. Elaine Nekritz (D-Buffalo Grove). It calls for cuts to benefits and creating a 401K-style retirement plan for some public employees.

Cullerton said the issue is complicated by a constitutional amendment that says the state cannot reduce benefits for public employees.

After the budget speech, House Speaker Michael Madigan (D-Chicago) spoke to the media, which he rarely does. He appeared on a public TV program called "Illinois Lawmakers."

This was the first time Madigan publicly addressed the latest mainstream pension legislation to put teachers and university workers hired after 2014 into a new hybrid, public-private retirement program.

Madigan was critical, saying that plan doesn't end the practice of the state paying the employer's share of pension costs for teachers and university workers.

"They ought be paid for by the local employer, the people that issue the paycheck," Madigan said. "It's a free lunch, and it ought to end, and we ought to respond to the governor's challenge and do something significant, not insignificant."

The governor's budget proposal would spend at least $500 million more than a spending cap already approved by the Illinois House and Senate.

Though many lawmakers stopped short of saying Quinn's proposal is dead on arrival, they suggested it could face a tough road.