Quinn calls pension session after credit downgrade
SPRINGFIELD — Whammed by Illinois’ second credit-rating downgrade this week because of the pension debacle, Gov. Pat Quinn moved swiftly Thursday to call lawmakers into a special session “to finish their job” after adjourning the spring session last week without a resolution.
The Democrat’s announcement came just minutes after Moody’s Investors Service downgraded the state’s credit worthiness to A3 from A2 — seven levels from the best grade and four stages above “junk” status.
It was the second time in less than a week that a major assessor of Illinois’ $27 billion in outstanding bond indebtedness knocked the state’s rating down a level because of inaction on closing a $97 billion shortfall in five public-employee pension programs. Such downgrades cost the state millions of dollars in interest on bonds.
“Time and time again over the past two years, I have proposed, asked and pushed members of the General Assembly to send me a comprehensive pension reform bill,” Quinn said in a prepared statement. “Time and time again, failure to act by deadlines has resulted in the bond rating agencies lowering our credit rating, which hurts our economy, wastes taxpayer money and shortchanges the education of our children.”
Quinn said he had contacted House Speaker Michael Madigan and Senate President John Cullerton about calling lawmakers back on June 19 for a special session. Quinn spokeswoman Brooke Anderson confirmed there is no deal, but said there’s time to seal one before lawmakers ride back into town.
Madigan and Cullerton — both Chicago Democrats, like Quinn — adopted differing plans to catch up over 30 years on the debt after decades of state underfunding of employee retirement programs, but neither proposal got approval in the opposite chamber.
“Moody’s provides more damning evidence that we can’t afford a continual stalemate on pensions,” Cullerton spokeswoman Rikeesha Phelon said. “It’s time to identify a reasonable compromise.”
Moody’s tagged its downgrade to legislative indecision.
“Our rating now assumes the government will not take action to reduce the state’s pension liabilities any time soon,” the Moody’s statement said. “The legislature’s political paralysis to date shows not only the magnitude of Illinois’ unfunded benefit liabilities, but also the legal and political hurdles to legislation that would make pensions more manageable.”
It was a similar story on Monday, the first business day after the General Assembly’s curtain, when Fitch Ratings dropped its score from “A” to “A-”.
And a third major credit-rating agency, Standard & Poor’s, said Thursday that it would keep its mark at “A-” for now, based on what it called a correct prediction when it issued a downgrade in January that “action could occur during the regular legislative session but was unlikely given the poor record of the past two years and the lack of consensus on a plan.”
Downgrades cost Illinois millions of dollars extra in interest costs when officials sell government bonds to raise money, primarily for long-term construction projects. Such bonds, backed by general tax revenue, are still highly stable investments, but such high debt makes markets jittery.
Cullerton and Madigan differ on the approach to the pension crisis. Cullerton is concerned about complying with the Constitution’s restrictions on diluting pension benefits once promised, so his idea would save money by reducing perks but would give workers a choice on which to forgo. It has the backing of public-employee labor unions.
Madigan believes his plan would meet a court challenge because it would save the pension framework and that his proposal saves sufficient money, while Cullerton’s would not.
“Clearly there is a rift (among) Democrat leaders,” Senate Republican Leader Christine Radogno of Lemont said in a statement. “Despite their supermajority status, they missed a prime opportunity to enact comprehensive pension reform.”
Radogno questioned whether the “dynamics” had adequately changed to make a special session worth the time and money, particularly because passing any legislation between June 1 and Dec. 31 requires a three-fifths vote of both chambers. That was the case last August when Quinn called a special session that produced nothing.
House GOP Leader Tom Cross of Oswego echoed Quinn’s oft-repeated number of $17 million as the added daily cost to the pension systems and said, “The sooner the Illinois General Assembly returns to Springfield to get the job done on pension reform, the better.”