06/13/2013 11:59 am ET Updated Aug 13, 2013

Illinois Pension Fix: Legislative Leaders Move Farther Apart On Pension Funding Bill


CHICAGO, June 12 (Reuters) - Just a week before Illinois' legislature is to meet in special session to address the state's $100 billion unfunded public pension liability, differences between the body's Democratic leaders on solutions to the problem appeared to widen.

House Speaker Michael Madigan on Wednesday introduced an amendment to a pension reform bill passed by the Senate last month that replaces the language of the Senate-passed bill with the bill he backs.

Madigan's bill, which makes unilateral changes to retirement benefits, was defeated by a 16 to 42 vote in the Senate on May 30, fourteen votes short of passage.

That bill, Senate President John Cullerton has said, violates state constitutional protections for public employee pensions.

The Senate bill, which was approved with the backing Cullerton, gives workers and retirees choices between benefit cuts and continued access to state-sponsored healthcare in retirement. Unions representing Illinois' public employees have backed Cullerton's approach.

Actuarial studies have shown that Madigan's approach, which the House approved in another bill, would save the state more money than Cullerton's.

Cullerton and Governor Pat Quinn said on Monday they wanted lawmakers to vote on legislation that combines the Madigan and Cullerton approaches when they meet during the June 19 special session.

Cullerton said a two-pronged approach - a combination of Madigan's approach and the less-drastic measure he proposes -would give the state a backup plan. If state courts determined unilateral cuts are unconstitutional, the second part of the combined legislation would take effect.

Madigan, emerging from the Monday meeting with Cullerton and Quinn, made no commitment that a combined bill would be called for a House vote.

Rikeesha Phelon, Cullerton's spokeswoman, said Cullerton plans to move ahead with combined legislation, she said.

"Cullerton made sure that senators had an opportunity to vote on the bill the House passed," she said. "He believes that members of the House should have the opportunity to vote on the plan that passed the Senate with overwhelming support."

Madigan spokesman Steve Brown said the speaker continues to prefer his approach, coupled with another bill that would phase out state payments for state university and community college pensions.

Illinois' pension system, the worst-funded among U.S. states, is taking away funding for essential state services like education and public safety. And a political solution to problem has been elusive.

Inaction on pensions for state workers, teachers, legislators and others during the spring legislative session, ended May 31, led two credit rating agencies last week to cut Illinois' bond ratings, a downgrade that could cost the lowest-rated state more money to sell about $1.25 billion of general obligation bonds on June 26.

Public labor unions have warned they would use strong protections for retirement benefits in the Illinois constitution to challenge Madigan's bill should it be enacted.