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Taking a Page from the Republican Playbook


Illinois state Democrats rumble with the unions over benefits

(Corrects Governor Pat Quinn's party affiliation in the second paragraph.)

The quest to control public worker benefits and wages has been defined this year by high-profile clashes over collective bargaining rights in Republican-dominated Wisconsin and Ohio. Now, in Illinois, it's the Democrats who find themselves playing the heavy when it comes to reducing the state's pension burden. Public sector unions, the party's traditional allies, have returned fire with a million-dollar ad campaign. Meanwhile, Democrats in states such as Connecticut and Massachusetts are pushing for similar concessions.

In Illinois, where pensions have been underfunded for decades, Democratic House Speaker Michael J. Madigan says it's time to consider cutting benefits. Senate President John Cullerton, also a Democrat, is backing a bill to make retirees pay a bigger share of premiums for health care and to force school districts to shoulder more of the teacher-retirement costs. Democratic Governor Pat Quinn has said that he would prefer negotiating with unions to win concessions, but has not threatened to veto legislation to cut benefits. Lawmakers may act before the legislative session ends on May 31. "We paid our share for the pension, and the politicians did not put in their fair share," says Kathy Reno, 55, a certified nurse's aide at the state-run LaSalle Veterans Home, who makes about $38,000 a year. "Why should we be punished for something they didn't do?"

To fight the proposed changes, a coalition of public and private labor groups called We Are One Illinois has launched a $1 million ad campaign. "All I have is the pension I paid for," says one voice in a 30-second spot featuring a firefighter, teacher, and police officer. "But the politicians broke their promise, failed to make payments. And now they want to punish me for their mess?"

The union counteroffensive follows a series of radio spots paid for by a Chicago-based business group called the Illinois Is Broke Campaign. "Right now, 95 percent pay higher taxes so 5 percent—bureaucrats and other public workers—can retire at 55," one ad asserts. "Sweet deal for them. Raw deal for us."

The Illinois pension system is the least financially sound in the country, with a funded ratio of about 51 percent, according to data compiled by Bloomberg. (Oklahoma and Kentucky are next on the list). The state's unfunded pension liability is at least $80 billion. There is also a $40 billion long-term obligation for retired public employees's health care, according to a report from the Pew Center on the States. Illinois spent $473 million annually on retiree health care last year, while the retirees themselves paid about $12 million, according to the Healthcare & Family Services Dept.

The state is projected to close the current fiscal year ending on June 30 with $8 billion in unpaid bills. A 67 percent increase in the state income tax, approved in January, will raise $6 billion annually, Madigan said in a Mar. 29 speech in Springfield. That's "the exact amount of money that the legislature will be required to pay over to the five state pension systems in the next budget," he said.

House Republican Leader Tom Cross is sponsoring a bill that would require a higher employee retirement contribution and let workers enter a self-managed retirement plan. He expects a vote before the end of the month. "People who are currently in the system are not putting in enough to justify or support the benefit they are getting," says Cross. "I don't see it as a reduction at all. I see this as an adjustment to put you on par with the benefits you are going to get."

Illinois's politicians biggest obstacle in their quest to control costs may be the state's constitution, which says benefits "shall not be diminished or impaired." Public workers in Colorado, South Dakota, and Minnesota are suing their states, which are among 18 that want to increase employee contributions, raise the retirement age, or curb cost-of-living increases. "There's a core fairness question here," says Anders Lindall, spokesman for the American Federation of State, County & Municipal Employees in Illinois.

The bottom line: Democratic legislators in Illinois want to tackle the state's $8 billion budget gap even if it means alienating labor unions.

Jones is a reporter for Bloomberg News.

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