By Karen Pierog
CHICAGO, June 10 (Reuters) - The Illinois public pension system, the worst funded among U.S. states, will be tackled with a two-prong approach that addresses both cost-savings and constitutional concerns during a special legislative session next week, state officials said on Monday.
But the measure, which will start in the Senate, may not even be voted upon in the House, where Speaker Michael Madigan said a bill his chamber passed in May to make unilateral changes to retirement benefits was the right approach to address the state's nearly $100 billion unfunded pension liability.
"We're going to try to pass it in the Senate, but we don't have a commitment from the speaker he's going to call it," Senate President John Cullerton told reporters following a meeting he attended with Madigan and Governor Pat Quinn.
Under the plan, a bill similar to one passed by the House would be combined with a public labor union-backed bill passed by the Senate that gives workers and retirees choices between benefit cuts and continued access to state-sponsored healthcare in retirement. Cullerton said if state courts determine the unilateral cuts, which would save Illinois more money, are unconstitutional, the second part of the bill would take effect.
"The backup makes it easier to get people to vote for it," Cullerton said. The Senate soundly defeated Madigan's measure on May 30, while the House never got a chance to vote on Cullerton's bill during the spring legislative session that ended May 31. Both chambers are controlled by Democrats.
Cullerton said he and the governor will try to persuade state senators to sign onto the combined bill ahead of the special session Quinn set for June 19. If the measure manages to pass both chambers, it won't take effect for a year, he added.
Madigan said the question of constitutionality should be left to the Illinois Supreme Court. Unions and Cullerton have contended unilateral changes in benefits violate strong protections for retirement benefits in the state constitution.
Inaction on pensions for state workers, teachers, legislators and others during the regular session led two credit rating agencies last week to cut Illinois' bond ratings, a move that could cost the lowest-rated state more money to sell about $1.25 billion of general obligation bonds.
John Sinsheimer, the state's capital markets director, said that state officials will be meeting with potential investors on both coasts and in Chicago ahead of the June 26 bond sale and in the wake of the rating downgrades to A3 by Moody's Investors Service and A-minus by Fitch Ratings -- both with negative outlooks. The state is also considering bond insurance for the deal, he added.