CHICAGO – Illinois lawmakers returned to the capital Tuesday to start a six-day veto session that includes a possible vote on overhauling two Chicago pension funds and a hearing set for Wednesday on shifting Chicago Public Schools governance to an elected school board.
Whether Gov. Bruce Rauner and his GOP minority can make headway with the Democratic majority on a budget plan looked doubtful Tuesday as leaders met and relations remained tense. Both sides are sticking with positions that have driven a budget stalemate since the spring of 2015.
"This is our opportunity to come together and pass a balanced budget, which is why I have invited the four legislative leaders to meet and immediately begin negotiations on an agreement containing a balanced budget and reforms," Rauner wrote in published op-ed pieces this week. "We must include reforms that the people of Illinois are calling for."
Democrats showed little interest in immediately tackling a big picture budget that would include Rauner's reforms that they argue would hurt the middle class.
"My recommendation is that we follow the framework used on past budgets" and "finish off the fiscal year" that runs through June 30, House Speaker Michael Madigan, D-Chicago, said of his preference Tuesday after meeting with Rauner and other leaders.
Unable to settle differences that have stalled passage of fiscal 2016 and 2017 budgets, lawmakers agreed in June to pass a stopgap funding package to get the state through December. The hope was that lawmakers would resume negotiations after the election and could agree on a budget plan that likely would include a tax hike when they return in January.
The feud between Rauner and Madigan intensified during the legislative races. In the end, Democrats lost several seats in both chambers but retain large majorities in both houses including a supermajority in the Senate.
Madigan said a scheduling conflict prevented him from meeting with Rauner and leaders Monday prompting harsh words from the GOP. Without Madigan in attendance, Senate President John Cullerton, D-Chicago, said the discussion would not be productive and he opted out.
"I can't imagine what conflict is more important than the challenges facing the people of the state of Illinois, especially after last week when people across the state and across the country have sent the indication that they want change," said Senate Minority Leader Christin Radogno, R-Lemont, calling the absences "inexcusable."
A meeting did take place Tuesday but the two sides emerged with conflicting statements. Madigan said he told Rauner he was appointing a new budget negotiating team and wants to focus solely on adopting a spending plan for the remainder of fiscal 2017.
Radogno countered: "We listened to the speaker's comments and we're frankly confused by them. To have another negotiating team come in was not what was agreed to."
The leaders are expected to meet again Wednesday.
Rauner wants any future budget agreement to include items in his turnaround agenda such as worker's compensation and tort reforms, term limits, and caps on local government collective bargaining powers. In exchange, he would support tax hikes.
The state is facing a more than $5 billion budget deficit and its bill backlog stood at $9.8 billion Tuesday due in large part to the partial expiration of a 2011 income tax hike in January 2015.
The state's budget and pension mess has dragged its ratings down to the triple-B category, the lowest among states. All rating agencies have warned of further deterioration without progress toward a balanced budget and pension funding improvement. The state saw spreads to the Municipal Market Data AAA benchmark of 200 basis points on its general obligation bond sale last week.
In other developments, efforts supported by some lawmakers and the Chicago Teachers Union to strip Mayor Rahm Emanuel of his control of Chicago Board of Education appointments and give it to voters will receive a hearing Wednesday before the Senate Education Committee. The House passed the bill last March. It's unclear whether a vote will happen because the Senate president is a close ally of Emanuel.
The junk-rated district is reliant on cash flow borrowing to keep schools open and its efforts to close a $1.1 billion deficit rely on the state coming through on $215 million in help to cover a teachers' pension payment due in June. Rauner has called the district a candidate for bankruptcy if the state were to adopt a general statute permitting Chapter 9.
Legislation was submitted adopting Chicago's proposed overhaul of its municipal and laborers' funding schemes. Approval is needed to finalize the city's proposed fix for its pension crisis.
The city's plans establish a funding schedule that puts the municipal fund and laborers funds on track to reach an actuarially required contribution in 2022. The plan calls for the city to pour more than $1 billion in additional revenue into the funds than it would under the statutorily based funding formula. The city council approved a water/sewer tax to fund higher municipal fund payments and a 9-1-1 surcharge will fund higher payments into the smaller laborers' fund.
Two rating agencies shifted the city's outlook to stable from negative in recognition of the funding plans. Analysts and investors have called the revisions flawed as they take decades to achieve improved funded ratios, but the city has been praised for at least taking action to save the funds.
Current contributions are based on a percentage of what employees contribute. They fall short of an actuarially based amount needed to keep the funds healthy and is the primary driver of the city's pension crisis that has dragged its ratings down to a low of junk. The city's total net pension liabilities are $33.8 billion.
Legislation was also recently submitted that ensures funding for the state's flagship public university in exchange for the University of Illinois caps on tuition hikes. Consideration of the measure is not expected until the new legislative session begins early next year.
University officials support the proposal saying it would avert future funding woes tied to state budget gridlock. All of the state's nine public universities have been strained by delayed aid and uncertainty over funding levels. The legislation would guarantee state aid of $662 million in 2018 for five years with increases tied to inflation while limiting in-state tuition increases to inflation.