CHICAGO — Illinois Gov. Pat Quinn pressed lawmakers Wednesday to act on a pension reform package that merges House and Senate proposals with the goal of improving the legislation’s chances of withstanding a legal challenge by unions.

“We cannot allow our economic recovery to be held hostage by the pension crisis. We simply must act. Our vision for our Illinois cannot be fully realized without pension reform,” Quinn told lawmakers during a state of the state address. “This problem cannot be delayed, deferred, or delegated to the next session... to the next generation.”

Reforms designed to rein in skryrocketing annual payments and chip away at $95 billion of unfunded liabilities have been stuck in political gridlock over the last year even as the state’s credit rating has tumbled and investors demand greater interest rate penalties. 

Quinn called state Democratic Senate President John Cullerton’s Senate Bill 1 “a comprehensive bill that stabilizes our pension systems and fixes the problem.” Quinn also praised Republican and Democratic House members who have led the push for reforms in that chamber, while noticeably leaving Democratic House Speaker Michael Madigan, D-Chicago, off his list.

“I urge all of you to be part of the solution. And while refinements may come, Senate Bill 1 is the best vehicle to get the job done. Hard is not impossible,” he said.

The legislation’s Plan A embraces measures in a bipartisan House version that caps pensionable salary, temporarily suspends and reduces automatic cost-of-living increases, and requires employees to pay more. It puts the pension system on the path to full funded status by 2043.

The legislation includes a Plan B backup that draws from Cullerton’s previous proposal that asks employees to voluntarily elect to accept the benefit and contribution changes in exchange for maintaining their state-subsidized retiree health care benefits.

Plan B would only take effect if a corresponding portion of Plan A “is determined to be unconstitutional or otherwise invalid and unenforceable,” according to a description of the legislation. Unions have attacked the various proposals as violations of language in the state constitution that protects pension benefits from being impaired or diminished. Lawyers differ over whether the protections extend to future benefits.

Though Quinn addressed the state’s pension crisis in his remarks and warned of how escalating payments are crowding out spending education, health care, and public safety, he surprised some lawmakers by raising the issue only a few times and not spending more time on the crisis.

Quinn also spent little time on the state’s other fiscal woes including billions in unpaid bills. He will unveil his fiscal 2014 budget on March 6.  The Democratic governor who faces re-election next year spent the bulk of the speech recapping accomplishments and outlining legislative and policy goals. He highlighted investments being made in infrastructure through the state’s $31 billion capital program, the tollway authority’s $12 billion capital program, and a $1 billion clean water bond program launched last year. The governor, who was elevated from lieutenant governor in 2010 after the General Assembly removed then Gov. Rod Blagojevich from office through impeachment, also touted ethics reforms. He highlighted advances in education reform and the $2 billion Medicaid reform package adopted last year while also noting other economic development projects and investments.

Quinn called for an increase in the state’s minimum wage, pressed for a ban on assault weapons, and endorsed online voter registration.

Republican lawmakers criticized the speech as one geared toward re-election and not at solving the state’s fiscal troubles.

Comptroller Judy Baar Topinka, a Republican, said in a statement the state needs to focus on its shoring up its fiscal foundation without distraction. The state currently has nearly 162,000 in unpaid bills totaling more than $6.5 billion. “The nation’s bond rating agencies have downgraded Illinois 12 times in the last four years - giving us the worst credit in the nation and costing taxpayers more whenever the state borrows,” Topinka said. “This fiscal calamity hovers like a storm cloud over the state of Illinois. It will not lift until we take long-overdue steps to balance our books in the long run.”

Last month, Standard & Poor’s lowered the state’s general obligation rating to A-minus and assigned a negative outlook. The state is the lowest it rates. Fitch Ratings last month put Illinois’ A rating on negative watch warning that action was needed on pension reform over the next six months. Moody’s Investors Service rates the state A2 with a negative outlook.

The state pulled a planned competitive sale of $500 million of GOs last week when indications suggested it would be forced to pay higher interest rates than it had expected.

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