CHICAGO – Illinois Senate leaders said they will work to pass by Feb. 1 their so-called "grand bargain" plan aimed at breaking the year-and-a-half old budget logjam that's driven the state's unpaid bill backlog to $11 billion and dragged its ratings down to the lowest among states.
Bills were filed in a lame-duck session Monday morning but after caucus discussions, the leaders cancelled plans for a floor debate and possible votes, saying the legislation would be refiled when the new legislature convenes Wednesday.
The sweeping, bipartisan package of 10 bills that were filed as Senate Bill amendments would put in place a budget for the remainder of the fiscal year, authorize an income tax increase and $7 billion in borrowing to pay down the state's growing list of overdue bills.
The deal also offers pension reforms, a minimum wage hike, an expansion of legal gambling, and local government consolidation. It would also provide the distressed Chicago Public Schools with aid promised last year if state pension reforms were approved. Additional legislation is expected to be part of the overall package.
The bills were filed on the first day of the General Assembly's two-day lame-duck session.
The leaders opted to hold off on voting over concerns of rushing through complicated proposals without sufficient time for vetting and concerns among some in the rank-and-file Republicans about voting on major legislation that includes a tax increase during a lame-duck session.
The package was portrayed by Senate leaders as a framework and potential roadmap to work from in an attempt to break the budget logjam. Even if voted on Monday, there would have been insufficient time for a vote in the House before the end of the lame-duck session Tuesday.
Without action on the budget, rating agencies have threatened further downgrades in the state's already weak rating in the BBB category.
The compromise package came together in recent days as Senate President John Cullerton, D-Chicago, and Senate Minority Leader Christine Radogno, R-Lemont, quietly hashed out agreements that sought to tackle disagreements behind the state's 19-month-old budget gridlock.
At a news conference late Monday, Cullerton said committee hearings would be held the week of Jan. 23 and Radogno said the goal is get a budget deal passed by Feb. 1.
"We are two years into this and we don't have a budget," Cullerton said. "It's an embarrassment to the state."
"I think we need to act expeditiously," Radogno said.
The two portrayed the filed legislation as a significant step forward but acknowledged that some pieces had not yet been finalized. Cullerton said the two sides were "not quite there" on a final agreement. "I'm very optimistic," he added.
The two leaders enjoy a more congenial relationship than House Speaker Michael Madigan, D-Chicago has with House Republicans. Madigan has also borne much of the brunt of Gov. Bruce Rauner's attacks over the state's budget impasse. Democrats want a mix of tax hikes and cuts to deal with a $5 billion deficit while the first-term Republican governor has tied his support for tax increases to his policy and governance items in his so-called turnaround agenda.
Asked about the deal that was in the works earlier Monday, Rauner said he remained "heartened" by the bipartisan efforts coming from the Senate and said no one issue was on or off the table as a deal killer. He previously had named specific turnaround agenda items that must be included in any deal.
"My hope is that we come up with some bipartisan productive compromise to change the system because it's broken," he said. "Let's get truly balanced budgets, truly balanced budgets for the long term stability of the state and let's grow our economy."
Legislative aides cautioned that information on the filed bill amendments was preliminary and could be amended following caucus meetings.
Under Senate Bill 523, income tax rates would go up to 4.95% from 3.75%. That's near the 5% rate residents paid until last January when a 2011 increase partially expired. The higher rate would generate an additional $4 billion annually in revenue. The state would also impose a penny-per-ounce tax on sugary drinks.
Senate Bill 2053 authorizes spending to finish out fiscal 2017, providing funding for higher education, social service providers, seniors' programs, various health screening programs, and other services that lost further funding when the six-month stopgap budget approved in June expired at the end of 2016.
It would provide $740 million for human services and $10 million for youth employment programs and $1.1 billion for higher education, putting their funding for the fiscal year on par with fiscal 2015.
Lawmakers had previously approved a full-year budget for K-12 public education that bolstered funding levels by $300 million and much of state government spending has continued based on continuing appropriations and court orders including debt service and pension payments.
The bill would cover spending through the fiscal year leaving future spending to be proposed in the fiscal 2018 budget that will be unveiled by Rauner on Feb. 15.
Senate Bill 284 would authorize up to $7 billion in borrowing to pay down a bill backlog tab that stood at a record $11 billion on Monday. The debt would be repaid over a seven-year term. The state is currently as much as 18 months behind in paying state contractors and service providers forcing some organizations to halt services. With the infusion of funding the cycle would be reduced to 30 days. The state would further chip away at the backlog by earmarking $900 million in expected revenues from an expansion of gambling in a separate bill to pay down the tab.
Senate Bill 305 would authorize six new casinos in Chicago, Lake County, south suburban Chicago, Danville, unincorporated Williamson County, and Rockford, increase gambling at existing facilities and permit slots allowed at race tracks.
All upfront licensing fees would pay down bills with other revenue generated by the expansion going into the state's Education Assistance Fund. Profits from the Chicago casino would go toward increased funding for Chicago's police and firefighter funds.
Another bill would raise the state's minimum wage to $9 from $8.25 beginning in July. It would then rise by 50 cents each January until it reaches $11 in 2021. Small businesses would qualify for a tax credit to help offset the impact. Another bill in the package would smooth the way for local voters to dissolve township districts or approve their merger with nearby townships and city and county board would have more authority to absorb a township. Kane, Lake, and Will Counties could also absorb drainage districts.
Senate Bill 17 offered pension reform changes in the form of a so-called "consideration" plan first promoted by Cullerton. Backers believe it can withstand a state constitutional challenge.
Employees who fall into the state's tier one plan who started before 2011 would be offered a choice. They would be asked to forgo the 3% compounding cost-of-living increase in retirement and accept what tier 2 employees get – the lower of a 3% non-compounding or half the rate of inflation. They would also be asked to postpone COLA increase for five years into their retirement or until they hit 67.
In exchange, tier one employees would receive a constitutional guarantee that future raises would count toward their pensions, a lump sum refund worth 10% of their contributions to the pension systems so far, and a 10% reduction in what they pay toward their pensions going forward.
If they decline the offer, future pay raises won't count toward their pensionable income.
The changes could shave between $700 million to $1 billion annually off the state's annual contribution, which now consumes nearly one-quarter of its general fund.
It would cover three of the state's five funds, the ones that cover state university employees, teachers and lawmakers, and it would also include the Chicago Teachers Fund. The general state employees fund is not included because of pending litigation over their lack of a contract. The judges' fund is also excluded because the courts will decide the legality of the reforms.
Up to 5% of tier one employees could also opt for a 401(k)-style retirement plan and the bill caps end-of-career pension spiking. The plan also eliminates the General Assembly Retirement System for future lawmakers.
The cash-strapped state owes $8.8 billion to the state's five pension funds in fiscal 2018. That's up 12.7% from the $7.8 billion the state is paying in fiscal 2017, which began July 1. The state's unfunded liabilities rose to $126.5 billion in fiscal 2016 from $112.9 billion a year earlier and the funded ratio deteriorated to 39.2% from 40.9%.
Supporters the "consideration" plan believe it can survive the state constitution's pension clause that bans the state from impairing or diminishing promised pension benefits. A prior attempt to cut benefits was shot down by the state Supreme Court in May 2015. High court opinions have left the door open to the "consideration" model because contract laws allow for a change if it's mutually agreed to by the parties and it provides some perk to offset a cut.
Critics contend the proposal is illegal because employee pensions would be impaired whether they accept or reject the proposed change.
The package also provides the Chicago Public Schools with the $215 million lawmakers promised the district to help with its teachers' pension contributions last year if state pension reforms were approved. Rauner vetoed the aid during the fall veto session.
The package also included procurement reforms and Radogno said other pieces of Rauner's turnaround agenda such as some form of a local government property tax freeze and a constitutional amendment on term limits for leaders would be part of the final deal. School funding reform is also expected to be included in the final package.
The uncertainty over the Senate legislation's eventual fate in the House was underscored by that chamber's passage Monday of fresh stopgap funding for social services and higher education. Rauner has been opposed to any further stopgap plans that don't tackle the state's larger budget and pension issues.
