Two west suburban politicians differed on the long-overdue but controversial pension reform bill recently signed into law by Gov. Pat Quinn.
State Sen. Don Harmon (39th) called it an “unpleasant necessity” while state Rep. LaShawn Ford (8th) criticized it as an attack on hard-working people’s retirement.
No matter how one slices it, there is no happy medium with the state’s pension overhaul bill that plugs the state’s $100 billion, under-funded pension system. Quinn signed the measure in a closed-door ceremony on Dec. 5, after both houses passed the bill two days earlier. The Senate passed the bill in a 30-24 vote while House voted 62-53.
“It is a very unpleasant necessity but in order to right the ship of state, to put us back on firmer financial footing and to ensure that pension systems are there for folks who need them in retirement, we had to act and we had to act now,” Harmon said.
The bill saves the state $160 billion over 30 years through a combination of changes in benefits calculations along with reduction in employee contributions, COLA increases and a guarantee of state funding to the pension system. The bill allows pension systems to sue the state to compel payments.
Harmon expects a legal challenge about to the law over its constitutionality, something unions representing state employees have vowed to do. The unions contend the law violates a constitutional provision against diminishing pension benefits.
“We just have to see what the (state) Supreme Court says,” he said.
Even after all the political wrangling to overhaul the pension system and pass the bill, its effects on the state’s budget woes may be minimum. The bill offers a long term solution, but Harmon says in the short term, the state will see “modest budget relief.”
Next year, he explained the state may see a reduction of its required pension contribution of about $1.5 billion. But it’s merely a drop in the budget considering the states $50 billion general revenue fund budget.
“It will give us a little bit of headroom to navigate budget challenges before us,” Harmon said. “The bigger issue comes when the temporary income tax expires at the end of next year. We will have a much largest deficit to deal with.”
Ford, however, said he doesn’t think the bill’s “passage will solve the pension problem.” Ford, who voted no, said the state’s pension woes can be traced back to the state’s poor revenue stream. He noted the state lets revenues slip through its fingers via tax loopholes for business while, at the same time, granting subsidies to keep businesses in the state.
Millions of dollars, Ford said, have gone to Sears and Caterpillar in tax breaks – which chips away at state revenue. The Senate – on the same day it passed its pension reform bill – also passed a bill granting millions of dollars in tax breaks to three companies including to Office Depot and Archer Daniels Midland (ADM) Company.
Office Depot sought $53 million in tax breaks to keep 2,000 jobs in the state. The Naperville-based OfficeMax merged with its competitor Office Depot in November. The new office supply company operates under Office Depot moniker. On Dec. 10, however, the company announced it was moving to Florida. AMD sought $24 million to keep its global headquarters in Decatur but the agribusiness announced Dec. 18 it plans to move its headquarters to Chicago. The House adjourned before it could take up the tax break bill.
“The number one problem with the pension system is revenue and that’s why governors for many years rob the pension system to pay our bills,” Ford said.
He questioned how the state could keep giving away these dollars while not paying its pension obligation.
“That’s unfair to small businesses, individual taxpayers and unfair to the pensioners,” he added. “Illinois has a revenue problem and we have to do everything we can to bring more revenue into the states and not find ways to reduce people’s benefits.”
Ford, however, stressed that his no vote was a stand with the “99-percenters,” who do not have high-priced lobbyists advocating on their behalf.
“I sided with the people that are not able to advocate for themselves,” he said. “We need to figure out ways to get the top one percent to pay more and bring more revenues into the state.”