SPRINGFIELD, ILL. – Gov. Rod R. Blagojevich applauded the Illinois House’s approval today of a pension financing plan that is a cornerstone of the governor’s strategy to resolve the worst budget deficit in the state’s history.
“Today was an important day in Springfield because we came together,” Blagojevich said at a press conference after the House approved the measure (H.B. 2660). “Members from both parties worked as one to pass an extremely important piece of legislation, because they recognized its importance to our state and its future.”
“Simply put, what this proposal means to our state is whether or not we have a balanced budget, whether or not lawmakers are going to be talking about raising taxes and whether or not we, in this state, embrace a new – and a better – way of doing business,” the governor said. “By their action today, the House is emphatically saying it wants a better, bipartisan way of doing business.”
“I very much appreciate the Democratic and Republican members support for this innovative, commonsense approach that I believe can help get us out of the current budget mess. I urge the Senate to quickly follow suit so we can get this package into the bond market and take advantage of unprecedented low interest rates. If we don’t act expeditiously, we could throw away an opportunity for the state to save nearly $2 billion. Time is of the essence,” Blagojevich said.
Joining Blagojevich at the press conference were House Speaker Michael Madigan, D-Chicago; Senate President Emil Jones, D-Chicago; state Rep. Jay Hoffman, D-Collinsville; state Rep. Gary Hannig, D-Litchfield; state Rep. Robert Molaro, D-Chicago; state Rep. Edward Acevedo, D-Chicago; state Rep. Calvin Giles, D-Chicago; state Rep. Kurt Grandberg, D-Clinton; state Rep. Marlow Colvin, D-Chicago; state Sen. Carol Ronen, D-Chicago; state Sen. James DeLeo, D-Chicago; and state Sen. James Meeks, D-Chicago.
The bill authorizes an increase in the state’s General Obligation bond authority and grants
permission to use those proceeds to make pension payments to five state retirement
systems that cover 435,000 current employees and 155,000 retirees, including state and university employees, judges and downstate teachers. The governor has estimated that by selling bonds for up to $10 billion of the state’s $35 billion in unfunded pension liability the state can save approximately $300 million during the remainder of fiscal year 2003 and another $1.6 billion in fiscal year 2004, which begins July 1.
“Legislators and the public have anxiously waited for an explanation of how this administration will erase nearly $5 billion in red ink,” Blagojevich said. “This is one of the innovative solutions my budget team has come up with that will not only help us meet the state’s spending pressures without an increase in the income or sales taxes, but guarantee the solvency of these pension funds. The plan will result in a real savings in the long run and it will provide significant savings to address our immediate fiscal crisis.”
Under the plan, pension fund contributions for the remainder of the current fiscal year and all of the next fiscal year would be covered by newly-offered bonds rather than being paid primarily out of the state’s general tax revenues and free up $1.9 billion to offset a portion of the estimated $5 billion budget deficit.
The governor said the concept should sound familiar to many homeowners who take advantage of low interest rates to refinance their mortgages. It is expected that the new bonds can be sold at a rate of about 6 percent, while the state pays roughly 8 percent on the current bonds.
If no changes are made in the state’s pension payment system, the annual pension burden is expected to rise by as much as $1 billion a year over the next four years.
H.B. 2660 was sponsored by Speaker Madigan and Rep. Hannig.
In addition to the support of the House, Blagojevich’s plan has been endorsed by business groups from throughout the state, including the Illinois Federation of Teachers, Illinois State Chamber of Commerce, Chicagoland Chamber of Commerce, Illinois Hispanic Chamber of Commerce, Illinois Manufacturers’ Association, The Chicago Civic Federation, Illinois Retail Merchants Association, Taxpayers Federation of Illinois, AFSCME, Service Employees International Union, State Employees International Union, Illinois Petroleum Marketers’ Association, Illinois Association of Convenience Stores, and the National Federation of Independent Businesses.