Four legislative leaders strike deal on pension reform

After years of lurches and stops, House and Senate leaders finally struck a landmark pension-reform accord Wednesday that ultimately could shave $160 billion from the state’s future pension liabilities and lift Illinois from its status as the least creditworthy state in the country.

But the deal expected to be voted on next week in Springfield sets up a hostile legislative confrontation with public-employee unions that claim the agreement is unconstitutional.

It also runs headlong into the crosswinds of the 2014 gubernatorial campaign, in which Gov. Pat Quinn is poised to grab a huge legislative prize, and one of his top GOP rivals — private equity investor Bruce Rauner — is said to be trying to tube the plan through back-channels.

A series of secret, closed-door meetings involving the legislative leaders that date back to October culminated Wednesday with a deal to reel in annual, cost-of-living increases current and future state retirees get, lower pension contributions from existing employees and hike retirement ages.

“We have a deal,” House Minority Leader Jim Durkin, R-Western Springs, told reporters at about 11:45 a.m. at the Michael Bilandic Building after the latest round in what had been intensifying, daily discussions ended in an agreement.

As late as Tuesday night, some close to the talks expressed pessimism that a deal could be reached before the Thanksgiving holiday.

Labor officials excluded from the talks found out about the eventual Wednesday breakthrough from reporters.

“Unions representing hundreds of thousands of public employees and retirees were not included in the leaders’ talks,” read a statement issued by the We Are One Illinois coalition of public-sector unions. “If their new plan is in line with what’s been reported from earlier discussions, then it’s an unfair, unconstitutional scheme that undermines retirement security.”

If lawmakers wind up somehow passing a bill next week, they will grant Quinn his No. 1 legislative priority going into what promises to be a bare-knuckles re-election campaign — a contest he’s entering in which barely three out of every 10 Illinoisans are satisfied with his job performance.

After Wednesday’s announcement, Quinn was quick to place his seal of approval on the deal, which incorporated key elements from summer-long deliberations by a bipartisan legislative conference committee the governor sought.

“When I proposed the creation of a conference committee in June,” Quinn said in a prepared statement, “I asked members to draft a plan that eliminated the unfunded pension debt and fully stabilized the systems, and this plan meets that standard.

“We have more work to do,” the governor continued. “I look forward to working with the leaders and members of the General Assembly over the coming days to get this job done for the people of Illinois.”

Madigan touted the role he, as speaker, played in bringing about the deal and predicted next week’s votes would be tight.

“What I can tell you today is that all four leaders have agreed,” said House Speaker Michael Madigan, D-Chicago, after emerging from the talks at the Bilandic Building. “It’s going to be a very difficult roll call. The unions will be against the bill.

“But we’re going to go to Springfield and, speaking for myself, I’m going to start working today to persuade House Democratic members to vote for the bill on Tuesday,” the powerful Southwest Side Democrat told reporters.

At the heart of the deal, which was first reported publicly by the Chicago Sun-Times, are changes to the annual, 3-percent compounding cost-of-living increase retirees now automatically get.

Those increases would be replaced by a new, less generous formula in which only a portion of a retiree’s annuity would be subject to compounding, 3-percent increases, while the balance would be non-compounding and tied to the rate of inflation. Whatever a retiree’s base annuity is, before cost-of-living increases are added, won’t change.

“What we’re doing will benefit long-term, low-income workers,” Madigan said.

The leaders also wove into the deal what is being called a “COLA pause,” meaning that current workers 50 and over would have to go one year in retirement without getting any increase in their annuities. Those under that age could face a cost-of-living increase freeze of up to five years.

In exchange for concessions such as that, existing workers would have one-percentage-point less withheld from their paychecks for pensions.

There also are guarantees that 10 percent of any savings generated by the changes would automatically be diverted to the state’s five retirement systems on top of regular statutory pension contributions. If lawmakers ever shorted the systems of what they are owed, the retirement systems would be newly empowered to sue the state to collect those proceeds.

Madigan said that Rauner opposes the deal because of that funding guarantee. A Rauner campaign spokesman said the Republican has serious concerns with what he has seen of the plan.

“Unfortunately, the Springfield insiders have kept Illinoisans in the dark about the details of this bill,” said Rauner spokesman Mike Schrimpf. “We’ve seen politicians do this before, and it is rarely a good sign for taxpayers. Any deal that would rank pension payouts to government union bosses ahead of priorities like education and public safety should cause grave concern and will lead to higher taxes.”

Politically, if Rauner is the GOP’s nominee for governor, a successfully enacted pension law would deprive him of being able to paint Quinn as ineffective in his dealings with the Democratic-led Legislature. Almost from taking office, the governor has imposed deadline after deadline for pension reform only to be rebuffed by Madigan and Senate President John Cullerton.

If the bill passes, it is sure to face an immediate legal challenge from public-sector unions such as AFSCME Council 31, the Illinois Education Association and others seeking an ironclad judicial interpretation of the state Constitution’s edict that public pensions won’t be “diminished or impaired.”

But the speaker said he believes this concept will withstand constitutional scrutiny.

“We’ve expected there would be a court challenge from the very beginning,” Madigan said. “Built into this bill are several items of consideration, where we would say to the court, ‘Yes, there would be a change in the benefit level, but other things are being done for the system, such as a guarantee of funding and the ability of the systems to file a lawsuit if the money is not sent over to the systems; a reduction in the employee contributions, which is a consideration for the worker.’”

Three of the four legislative leaders — Durkin, Madigan and Senate Minority Leader Christine Radogno, R-Lemont — spoke with reporters after Wednesday’s talks broke up.

Asked why the deal came together now, Radogno said, “It’s just the urgency and the sense we really need to get this done …. Every leader had concerns, and we’ve all accommodated each other.”

“Having the leaders, all four agree, is a huge step in the right direction,” Radogno said.

Only Cullerton chose to avoid talking about the deal, with an aide explaining that the North Side Democrat had Thanksgiving “shopping” to do.

“The Senate president is going to work members over the next couple of days, over the weekend, to garner support for the package,” spokesman Ron Holmes said.

The sales pitch Cullerton must make to his caucus to secure an expected 18 votes will be a challenge, given how the 40-member Senate Democratic bloc put only four votes on a failed, Madigan-crafted pension bill that was similar in scope last May.

“I think it’s going to be difficult,” said Sen. Linda Holmes, D-Aurora, a member of the pension conference committee and supporter of labor’s arguments in pension talks. “I’m uncomfortable they didn’t have a seat at the table when they’re the people who’ll be impacted by this.”

In conceding that a vote in the House will also be tight, the speaker sounded the part of a football coach.

“We’ve gotten this far,” the speaker said. “We’re inside the one, and we’re trying to get across the goal line.”

But, in a note of optimism, Madigan added, “We might have a better record than the Bears in the red zone.”

With Stefano Esposito and Kate Grossman