CHICAGO — Illinois Gov. Pat Quinn on Monday called a special legislative session for mid-August, pressing lawmakers to act on elusive pension reforms needed to help stave off further credit deterioration and to spare schools, health care and public safety spending from further cuts.
Quinn set the special session for Aug. 17, the end of a week during which many lawmakers will be at the capital to attend the state fair and for another special session set earlier in the week to debate whether to expel an indicted House member.
"This is the time for all of us to work together to complete the mission of pension reform," Quinn said during an address at a City Club of Chicago luncheon.
Quinn said the time for analysis was done and that "now is the time for action" to provide rating agencies, the markets, businesses and taxpayers with "the best signal" that Illinois is putting its fiscal house in order.
The state's pension crisis is underscored by unfunded liabilities totaling $82.9 billion, for a 43% funded ratio that is the worst among the states. Pension payments will consume $5 billion of the state's $33.7 billion fiscal 2013 budget, up $1.1 billion from the previous year.
"The state is currently facing an unprecedented pension crisis that, unchecked, compromises the state's credit rating and threatens the continued delivery of vital programs and services, including education, public safety and human services," Quinn's proclamation reads.
In April, Quinn unveiled a pension overhaul that asked workers to voluntarily shift to a new plan with reduced cost-of-living increases in order to preserve their health care perks in retirement. He also proposed a gradual shift in funding for suburban and downstate school teacher pension payments from the state to local districts.
Republican opposition to the school district shift — over fears of the impact of local property taxes — derailed the plan, as Democratic lawmakers refused to drop their support for that piece even after the Democratic governor backed away from it.
The COLA changes alone were estimated to trim up to $88 billion off state payments under a schedule that puts the state at full funding in 30 years. The teacher cost-shift savings were estimated at up to $29 billion.
Quinn on Monday floated a plan to shift the teacher funding burden to districts over a 12-year period to ease the impact. He also sought to portray the shift as more affordable for districts that otherwise would continue to face ongoing general student aid funding cuts, as pension payments eat up more of the state's budget.
With both sides unable to settle their differences after several meetings with the governor, it is unclear what reforms might be voted on during the special session. Quinn did not offer up specifics of what he might push, nor did he say that he would lead efforts to broker an agreement, only that a dialogue would continue.
After the state's spring legislative session ended in May without pension action, Standard & Poor's sent leaders the message that a reckoning looms over the pension strain.
Standard & Poor's rates Illinois' general obligation debt A-plus. It has assigned a negative outlook to the credit since January 2011.
"We expect to resolve the outlook on Illinois this year based on our review of the fiscal 2013 enacted budget and the state's progress, if any, on addressing its significant pension liabilities and associated cost pressures," its report said.
The state did make headway on other fiscal fronts, including passage of a $2.7 billion Medicaid overhaul and adoption of a budget with just a limited spending increase that also makes a $1.3 billion dent in the state's $8 billion to $9 billion unpaid bill backlog.
Moody's Investors Service rates Illinois A2, making it the agency's lowest-rated state, with a stable outlook, and Fitch Ratings assigns an equivalent A and a stable outlook. Investors have demanded a steep interest rate penalty from the state due to its liquidity and budget struggles.
Quinn praised a bill that managed to pass the Senate reducing COLA benefits in exchange for maintaining access to state-subsidized retiree health care for state employees and General Assembly members, but he said Monday he wants a larger package that covers all four pension funds.
Democratic leaders who control the House and Senate did not immediately respond.
Senate Minority Leader Christine Radogno and Minority House Leader Tom Cross, both Republicans, issued a joint statement: "We are encouraged by the governor's call for a special session … and continue to be supportive of comprehensive pension reform that solves the major crisis facing us today."