Making his first post-election appearance at the Capitol on Thursday, Gov.-elect Bruce Rauner said he hopes the Illinois Supreme Court eventually will provide guidance on what changes are acceptable when it comes to fixing the state’s more than $100 billion debt in the government worker pension system.
The incoming governor may get some clues as early as Friday, when a lower court judge is expected to weigh in on the legality of a sweeping overhaul lawmakers approved nearly a year ago. The ruling by Sangamon County Circuit Judge John Belz could provide an early indication of whether the pension law violates a provision in the state constitution that prevents public employee pensions from being diminished or impaired, as unions have argued.
Rauner has said he believed the law, which curbs annual cost-of-living increases for current retirees and delays the retirement age for many current public workers, will end up being found unconstitutional by the state’s highest court. He also has said the law did not go far enough to reduce the state’s pension debt and indicated he favors moving most public workers into a 401(k)-style defined contribution plan. Rauner, however, has yet to fully detail his concepts to deal with the pension system and didn’t provide any more specifics Thursday.
“My preference is probably to wait until the Supreme Court rules so we have some ground rules for what probably works and won’t work. I think that’s the smarter way to do it,” Rauner said.
That could happen sooner rather than later, depending on how Belz rules. The judge could move to hold hearings in the case, or he could declare the measure unconstitutional, which likely would send the matter directly to the state Supreme Court.
Even then, it could take several more months before the justices make a final decision, meaning Rauner may not get the clarity he’s seeking in time to drive cost-saving pension changes during the spring legislative session.
At the heart of the pension issue is a clause in the Illinois Constitution that says membership in any state pension system is an “enforceable contractual relationship, the benefits of which shall not be diminished or impaired.” Employee unions argued that the pension law that Democratic Gov. Pat Quinn signed in December clearly violated those protections.
Illinois Attorney General Lisa Madigan’s office has defended the law, arguing the contract between the state and its workers could be modified in times of emergency, such as the dire financial situation facing Illinois clouded by the pension system’s debt.
In July, the high court ruled unconstitutional a law that sought to rein in state subsidized health care benefits for public employee retirees, citing the prohibition against diminishing or impairing benefits. Belz has said that decision will factor into his ruling on the larger pension case — a signal that unions and retirees have interpreted as favorable to them.
Rauner said Thursday that if the pension law is struck down, he would meet with lawmakers on the pension issue “immediately,” declaring it a “top priority” of his administration. He dismissed the suggestion that efforts to reduce retirement benefits could make it more difficult to hire new employees for his administration.
“Public servants serve as a way to give back in our community and make a difference,” Rauner said.
The next governor stopped in Springfield as lawmakers were wrapping up the first week of the fall session and met with Republican legislative leaders and Democratic Senate President John Cullerton. Democratic House Speaker Michael Madigan was not at the Capitol Thursday, a spokesman said.
Rauner also toured the executive mansion and said he’ll use private funds to renovate the historic home he plans to move into, which has suffered from major water damage following years of neglect. It’s unclear if that means the equity investor will spend some of his personal fortune to fix up the governor’s residence — an option Rauner can’t rely on when it comes to repairing what he called the state’s “horrible” finances.
Rauner will take office just days after a major portion of a 2011 income tax increase is scheduled to roll back, leaving a $4 billion-a-year hole in the state budget that could wreak havoc on government services. So far, Rauner has not detailed how he’ll tackle the problem beyond offering generalities, such as calling for an overhaul of the state’s entire tax system, which he repeated Thursday.
Rauner said Quinn’s office has provided access to budget information and the closer glance has made it clearer how “stunningly bad” the state’s financial problems are. Though he gave no scope of the problem as he saw it, Rauner’s pronouncement could serve to manage expectations and potentially provide some wiggle room in seeking more money from taxpayers as he begins to craft his first spending plan, which he’s set to unveil in February.
“We look forward to getting more access and more information,” Rauner said. “We want to understand every penny of the current financial condition and where the spending has been, where it’s likely needed to go. We are doing detailed financial analysis right as we speak. It’s critically important. We want to be ready in February with our budget plan.”
“Our financial condition is dire. We need to take strong action to fix it,” he added.
Rauner would not say what that action would be. He campaigned on letting the income tax rate drop from 5 percent to 3 percent over his full four-year term. The personal rate falls to 3.75 percent on Jan. 1, but Rauner has left open the possibility it may need to be boosted again temporarily.
That could be a hard sell in the Democratic-controlled legislature, where many rank-and-file members acknowledge the need for the extra revenue but have no intention of making Rauner’s job any easier following months of attacks accusing lawmakers of participating in a broken system.
It’s also a bit of a pickle for Republican lawmakers, who have long refused to go along with Democratic spending plans but will be asked to put up votes to back the new GOP governor’s agenda.
Rauner, who has proposed spending more money on education, public works and natural resources while cutting taxes, did not provide any additional insight Thursday.
“Again, our plan’s for recommending a comprehensive overhaul of the tax code,” Rauner said. “We’ve recommended that from day one of the campaign. We will be pursing that. We’ll discuss that at the right time.”
While Rauner does not yet have the power of office, he has tried flexing some political muscle by asking lawmakers to put off any substantive action until he’s sworn into office Jan. 12 and new lawmakers are seated two days later.
Lawmakers are scheduled to return again in December and could convene for last-minute action in January — giving Democrats plenty of time to push through any number of measures before they have to contend with a Republican chief executive.
Meanwhile, Rauner also called on Quinn to freeze hiring and appointments in an effort to guard against Democrats from loading the state payroll with allies. Rauner said he had “no reason” to believe Quinn is “doing anything inappropriate” regarding hiring, but argued the outgoing governor should not be making employment decisions as Rauner works to build his administration.
“We think it’s good practice, it’s good management practice, not at the tail end of an administration to put in people, friends, affiliates, into positions that are permanent or hard to change when we have a new administration,” Rauner said.
Quinn’s office signaled the administration had no intention of honoring Rauner’s request.
“The governor has already directed all Cabinet members to manage their agencies in a responsible manner to ensure that the basic operations of the state continue,” spokeswoman Katie Hickey said.
Tribune reporter Rick Pearson contributed from Chicago.
