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Illinois governor's 'turnaround budget' targets pensions, universities

Illinois governor's proposed budget targets pensions for public workers, state universities, healthcare

Illinois Gov. Bruce Rauner dubbed his first spending plan a “turnaround budget” for a financially shaky state, targeting for cuts government worker pensions, healthcare for the poor, state universities, mass transit and cities.

“This is our last, best chance to get our house in order,” the Republican governor told lawmakers during a speech that drew tepid applause. “Let’s get it done, together.”

Rauner went after some of state government’s political sacred cows: Medicaid, money for Chicago Mayor Rahm Emanuel’s beleaguered city budget, public transit, public employee health insurance and retirement benefits, and the University of Illinois.

All of those interests sounded dire warnings and geared up their powerful lobbying operations to fight the proposed budget. Some Democratic leaders reacted angrily to the rookie governor’s address, harking back to his days as a partner in a private equity investment firm.

“One of the things Gov. Rauner has to learn is the Illinois Constitution refers to the General Assembly and the governor as partners,” said Rep. Lou Lang, a Democrat. “He wants to run the government like it's a business: We're middle management, and he's the CEO, and we must take orders. That's not going to work.”

Senate Republican leader Christine Radogno countered that Rauner’s call to cut spending should not have come as a surprise.

“I think people understand that Illinois is in dire circumstances, and we absolutely need to change the way we do things,” Radogno said. “This is the starting gun, not the checkered flag.”

The biggest and perhaps most controversial item on Rauner’s budget agenda was his call to shift current public employees on July 1 into a lower-tier pension classification for new hires that provides vastly reduced retirement benefits. The plan would not affect those already retired, and current employees would keep the pension benefits they’ve earned, Rauner said.

Illinois has the nation’s most-underfunded public employee pension liability, which stands at nearly $105 billion. Required payments into the retirement funds are estimated at $6.6 billion plus interest in the new budget. Pension payments, along with paying off earlier loans used to cover some pension costs, now total about one-quarter of spending from the state’s checkbook.

Lawmakers previously addressed the pension shortfall in a December 2013 law that curbed cost-of-living increases, raised retirement ages and limited how much of a salary could count toward a pension. Rauner campaigned against that law, contending that it did not go far enough to reduce costs, and he had suggested shifting all public workers into a 401(k)-style defined contribution plan. That was made an option for newer employees in Wednesday’s outline.

But unions sued, a Springfield judge put that pension law on hold, and the Illinois Supreme Court is being asked to determine whether the changes run counter to a state constitutional prohibition against diminishing or impairing public employee retirement benefits.

In addition to pension changes, Rauner said he would negotiate changes to state employee and university employee healthcare, including higher employee payments and reduced benefits, to save $655 million. Rauner also proposed stopping state subsidies for healthcare for retired suburban and down-state teachers and community college staff to save $125 million.

Rauner’s budget sets up a political landscape in which the Republican governor is arguing that the state should significantly scale back government spending and putting the onus on Democrats to push for tax hikes to avoid the cuts. Rauner aides said new revenues were never considered when crafting the budget proposal.

Even as Rauner detailed his spending priorities and cuts for the budget year that begins July 1, he had little to say about how to fill a $1.5-billion hole for the current budget year as child care providers and social service agencies face payment delays. Rauner said he and top Democratic lawmakers were “days” away from a fix, a point acknowledged by Democratic House Speaker Michael Madigan.

All told, Rauner said the costs of overcoming “fiscal neglect” by past governors and lawmakers amounted to nearly $7 billion in the new blueprint he proposed.

“This budget is honest with the people of Illinois, and it presents an honest path forward,” Rauner said. “Now is the time to start on a responsible path after years of financial recklessness.

“Instilling discipline is not easy; saying no is not popular. But it is now or never for Illinois. It is make or break time,” he said.

The governor also dangled the prospect that he could get behind calls for some increased state revenues. But he said his support would only come after lawmakers approved changes in workers' compensation, unemployment insurance benefits, limits on civil damage awards and altering public employee pensions — all issues likely to meet resistance from Democratic legislators.

“The governor has said that he feels that he can eliminate the deficits just by cutting state services. I disagree,” Madigan said. “I think that the elimination of the deficits will require a blend. Service cuts, plus new revenue.”

Another large target in Rauner’s budget is Medicaid. He wants to trim $1.5 billion from the agency that oversees the health program for the indigent, which is funded jointly by the state and federal governments. The agency will scrub eligibility rolls to kick off those deemed unqualified, reduce how much it pays hospitals and nursing homes, shift people to the Affordable Care Act, and reduce or end optional services for adults such as dental care and podiatry.

Chicago Mayor Emanuel called the governor’s budget shortsighted.

“The idea that you would be looking at basic services and cuts to the municipalities when you have a tax code that has giveaways to corporations, in my view is the wrong priorities,” said the mayor, who is seeking reelection Tuesday.

Tribune reporters Kim Geiger, Jessie Hellmann, Garcia and Long reported from Springfield, Ill. Bill Ruthhart, Jodi S. Cohen and Pearson contributed from Chicago.

 

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