Lawmakers look to borrow $16 billion for pensions

SPRINGFIELD -- Illinois Senate Democrats approved borrowing $16 billion to cover pension debt Thursday over minority Republicans howls of being politically steam-rolled on a deal that will saddle generations to come.

The deal, approved along party lines, would empower Gov. Rod Blagojevich to borrow $16 billion to pay down the more than $40 billion pension debt in the retirement funds owed to teachers, state and university employees. It faces a doubtful future in the Illinois House as lawmakers on both chambers race to make a May 31 midnight deadline for a budget deal or risk another summer of expensive overtime sessions.

While the Senate was voting on pension borrowing, the House voted on technical language needed to approve pieces of a budget it approved last week that critics say is unbalanced. Supporters said it'd be up to the governor to manage the budget and make adjustments to keep it in balance. The House version does not include the pension borrowing.

Blagojevich, who supports the pension deal, told the Daily Herald he's confident lawmakers will "do the right thing and send me a budget that's balanced."

The Senate-approved pension deal takes money the state owes itself -- complete with 8.5 percent interest - and converts it to a hard debt owed to outside investors. It essentially becomes impossible to skip those payments without severe repercussions.

Over the years, the state's run up crippling debt by not making its share of the pension payments even as teachers and other employees had their share taken out of paychecks.

The idea is to borrow $16 billion at a rate far lower rate than 8.5 percent, invest that money and get a profitable return. A similar, smaller deal was used in 2003.

The sudden influx of borrowed money would allow lawmakers to restructure the pension payoff schedule and save $500 million out of the next budget, which makes it far easier to balance.

But with the governor's former political fundraiser awaiting a federal jury verdict on whether he illegally steered pension investment business to campaign donors, critics said it would be irresponsible to approve a new, bigger deal.

"I think we have to ask ourselves, 'Do we trust the governor with $16 billion of this state's dollars that are borrowed?'" asked state Sen. Matt Murphy, a Palatine Republican. "I don't."