Another state drowning in pension debt...Will the politicians in Illinois finally stand up to the unions?
CHICAGO (Reuters) - Illinois Governor Pat Quinn, already the most unpopular governor in the nation, has his work cut out for him at his annual "state of the state" speech on Wednesday - and this time he probably won't be relying on a python named "Squeezy."
The fiscal crisis caused by pension underfunding in Illinois is so bad that some hospitals wait a year to be paid by the state for insurance claims.
At the same time, teachers in Chicago's wealthy suburbs are retiring with six-figure salaries set by school districts on which pensions are calculated, and the state pays the bill. The benefits cannot be reduced, according to the state constitution.
Illinois' pension systems are in the worst financial shape of any state at 39 percent funded when no less than 80 percent is considered healthy. State pensions are in the hole by the staggering amount of nearly $97 billion, or $20,000 per Illinois household and nearly four times the annual state revenue.
It is this increasingly nightmarish financial mess that the Democratic governor has to address in his speech to the legislature in Springfield on Wednesday.
Quinn was widely lampooned in November when he held a press conference to unveil a cartoon python called "Squeezy" in an attempt to illustrate how pension costs are squeezing funding for education and other core services.
Despite the mockery, everybody agrees the problem is serious.
"This is a horribly embarrassing situation for the citizens of Illinois that their legislature said stabilizing pensions is a top priority yet nothing comprehensive has been done in over a year," said Laurence Msall, president of the Civic Federation, a non-partisan research group backed by Chicago business.
There might be some movement afoot. Majority Democrats, who have relied for decades on labor unions for political and financial support, are showing signs of a willingness to confront organized labor.
"To date, we have received no cooperation from the labor unions representing state employees on addressing these challenges," powerful state House Speaker Michael Madigan wrote in a January 30 letter to the head of a labor coalition.
The legislature will discuss this week proposed laws to boost worker contributions to pensions, raise retirement ages, eliminate the cost-of-living adjustment for retirees for several years, and end some abuses.
Michael Carrigan, president of the Illinois AFL-CIO, said in a statement that unions are willing to make a higher contribution toward the costs of their pensions to help solve the problem. "The public employees and retirees who serve the people need and depend on the modest pensions they earn and pay into from every check."
The financial pressures to act are growing. The pension funding gap has pushed the state's credit rating to the lowest of any state rated by major agencies. That raises the state's borrowing costs to such an extent that last week it had to postpone a bond sale to fund construction in the spring.
In Illinois, a balanced state budget is an illusion, only possible through a strategy of delaying payment of bills. The backlog was $9.3 billion at the end of fiscal 2012 and some 40 percent of this is for basic health care services such as payments to hospitals for care of poor people.