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Analysis: Illinois pension fix faces political, legal hurdles
CHICAGO (Reuters) - Illinois lawmakers begin a two-month push on Monday to enact major pension reform, under pressure from taxpayers, workers, business groups and bond investors to fix the worst-funded state pension system in the United States.
The key objective: To put together a package of reform measures that are capable of addressing a nearly $100 billion unfunded pension liability, while still standing up to anticipated court challenges.
The state's constitution prohibits reduction in pension benefits to active and retired workers, and reform efforts have been inhibited by warnings made by union groups and others that they intend to file lawsuits to block implementation of many reforms.
The president of the Illinois Senate, John Cullerton, a Democrat, said he is preparing a two-pronged attack. He first will seek to pass a bill similar to the measure the House approved late last month that would impose restrictions on cost-of-living increases to pension payments to retirees.
As a back up, in case those reforms hit a constitutional roadblock, Cullerton said he will seek to offer workers a choice. They will either receive the benefits already promised, but have to forego state-funded healthcare care in retirement, or they will accept limits on cost-of-living increases in their pensions and still have access to state-funded healthcare.
"I'm trying to come up with a winning combination to pass a bill," Cullerton said.
Pensions are devouring an ever-increasing share of state revenue. That is a worry for the state's bondholders, as well as vendors, school districts and others doing business with a state that is running as much as a year behind on $9 billion in unpaid bills.
Illinois Income Tax Increase: Legislature Approves 66% Tax Hike
SPRINGFIELD, Ill. Illinois Gov. Pat Quinn defended a massive increase in state income taxes passed by lawmakers Wednesday and promised to quickly sign the measure to help heal the state's ailing finances.
Lawmakers worked overnight to pass the increase to raise the personal income tax rate from 3 percent to 5 percent for four years a 66 percent increase. Corporate income taxes also will rise, but Quinn rejected the notion that it would decimate businesses.
The rate increase might be the biggest any state has adopted in percentage terms while grappling with recent economic woes. Nevertheless, Illinois' tax rate would remain lower than in several other states in the region.
"It's important for their state government not to be a fiscal basket case," Quinn told reporters outside his Capitol office.
CHICAGO (Reuters) - Illinois lawmakers begin a two-month push on Monday to enact major pension reform, under pressure from taxpayers, workers, business groups and bond investors to fix the worst-funded state pension system in the United States.
The key objective: To put together a package of reform measures that are capable of addressing a nearly $100 billion unfunded pension liability, while still standing up to anticipated court challenges.
The state's constitution prohibits reduction in pension benefits to active and retired workers, and reform efforts have been inhibited by warnings made by union groups and others that they intend to file lawsuits to block implementation of many reforms.
The president of the Illinois Senate, John Cullerton, a Democrat, said he is preparing a two-pronged attack. He first will seek to pass a bill similar to the measure the House approved late last month that would impose restrictions on cost-of-living increases to pension payments to retirees.
As a back up, in case those reforms hit a constitutional roadblock, Cullerton said he will seek to offer workers a choice. They will either receive the benefits already promised, but have to forego state-funded healthcare care in retirement, or they will accept limits on cost-of-living increases in their pensions and still have access to state-funded healthcare.
"I'm trying to come up with a winning combination to pass a bill," Cullerton said.
Pensions are devouring an ever-increasing share of state revenue. That is a worry for the state's bondholders, as well as vendors, school districts and others doing business with a state that is running as much as a year behind on $9 billion in unpaid bills.
Illinois Income Tax Increase: Legislature Approves 66% Tax Hike
SPRINGFIELD, Ill. Illinois Gov. Pat Quinn defended a massive increase in state income taxes passed by lawmakers Wednesday and promised to quickly sign the measure to help heal the state's ailing finances.
Lawmakers worked overnight to pass the increase to raise the personal income tax rate from 3 percent to 5 percent for four years a 66 percent increase. Corporate income taxes also will rise, but Quinn rejected the notion that it would decimate businesses.
The rate increase might be the biggest any state has adopted in percentage terms while grappling with recent economic woes. Nevertheless, Illinois' tax rate would remain lower than in several other states in the region.
"It's important for their state government not to be a fiscal basket case," Quinn told reporters outside his Capitol office.
