CHICAGO — The Illinois General Assembly wrapped up a special, one-day veto session this week after approving budget changes that will allow seven state facilities to remain open while shooting down a $200 million to $250 million tax relief package that included breaks for companies threatening to leave the state.
Lawmakers also again left on the table a pension reform package aimed at reining in the state's mammoth pension obligations, which rating agencies have called a significant drag on the state's credit profile.
The General Assembly and Gov. Pat Quinn agreed to funding shifts in the fiscal 2012 budget that will cover operations at seven facilities and stave off 1,900 layoffs.
"After working closely with the General Assembly this veto session, we have reached a bipartisan budget agreement that achieves the goal of keeping the seven state facilities slated for closure open throughout this fiscal year using existing state resources," Quinn said.
The Senate passed a version of the tax break package aimed at keeping Sears Holdings Corp., CME Group, and CBOE Holdings Corp. in Illinois, but the House shot down a differing version forcing supporters back to the drawing board amid pressure from the companies. The package also included relief for low-income families. The companies are being courted by neighboring states and have warned they would consider relocating without action.
While lawmakers could return to vote on a new tax break package in a special session before convening their regular spring session early next year, Comptroller Judy Baar Topinka warned lawmakers against passing any spending items without also saying how they plan to make up for the loss.
"Today our state has unpaid bills totaling more than $8 billion in my office and at the state agencies, dating back to July 8 here and even earlier in the case of some health care bills," she said in a statement. "Clearly, this is not the time for increased spending. If lawmakers determine that a new tax package is necessary, they must also identify a way to address these growing costs."
Lawmakers also approved measures to curb loopholes in pension rules that allow for employee "double-dipping" abuses, but they did not vote on a pension system reform package. The reforms would protect the accrued benefits already earned by current employees, but going forward, Illinois would offer a three-tiered system with employees paying more to maintain their current benefits.
Illinois holds the distinction among states of having a retirement plan with the lowest-funded ratio, 45.4%, with $75.7 billion of unfunded liabilities. It's considered a negative for the state's credit profile. The state's general obligation bonds are rated A1 by Moody's Investors Service, A-plus by Standard & Poor's, and A by Fitch Ratings.
The state recently learned that its fiscal 2013 payment will rise by about $1 billion to $5.3 billion, $440 million more than previously anticipated.
In a special commentary issued late last month, Moody's labeled the revised calculation "a credit negative that underscores the state's to date inadequate efforts to address pension funding challenges."
The revised state contribution would account for about 14% of projected general fund spending and could force state budget cuts, revenue increases, payment delays or other offsetting fiscal measures, Moody's wrote.
The concerns extend beyond state government. "Growing pension funding needs may also lead to efforts to require significant local-government contributions to the Illinois Teachers' Retirement System, which could cause financial and rating pressure for school districts," Moody's analysts added.