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Quinn Sees Last Chance to Fix Illinois Pension Mess

Illinois Governor Pat Quinn called on lawmakers to quickly resolve a growing pension crisis that has saddled the state with the nation’s worst credit rating and threatens to erode funding for education and other services.

While the Democratic governor’s proposals for 2013 included raising the minimum wage to $10 an hour from $8.25 and authorizing online voter registration, a solution for the $97 billion unfunded pension liability dominated his remarks.

“Let there be no mistake: Our state is at a critical juncture,” Quinn, 64, said in a speech to a joint session of the legislature in Springfield, the state capital.

Quinn singled out the pension bill approved last year by the state Senate as “the best vehicle to get the job done.” A revised measure combines proposals for higher payments by employees, lower benefits and giving workers a choice of bigger contributions or guaranteed health benefits upon retirement. The measure is designed to ensure savings if the Illinois Supreme Court were to strike down changes to worker payments.

Illinois postponed a $500 million offer of general- obligation bonds planned for Jan. 30, citing unfavorable market conditions after Standard & Poor’s lowered its credit rating. The move added to the sense of crisis in the fifth-most-populous state, which also has a backlog of $9 billion in unpaid bills.

Mixed Reviews

“This fiscal calamity hovers like a storm cloud over the state of Illinois,” Republican Comptroller Judy Baar Topinka said after Quinn’s speech, adding that “time is of the essence.”

Doug Whitley, president of the Illinois Chamber of Commerce, condemned the proposed increase in the minimum wage as “untimely, ill-advised and outrageous.” At the same time, he also applauded the governor’s push for a legislative solution to the pension issue.

S&P cited lawmakers’ “poor track record” on addressing retirement-system funding as well as the unpaid bills when it reduced the state’s rating Jan. 25 to A-, six levels below AAA. After S&P raised California’s credit score Jan. 31, that left Illinois with the lowest state grade in the nation.

“The pension squeeze is draining our ability to educate our students,” Quinn said. “Each and every one of you has a choice to make,” he said, adding that failure to act will “let our jobs, our safety and our schools be squeezed out.”

Re-election Fight

Quinn, elected in 2010 after succeeding the now-imprisoned Democratic Governor Rod Blagojevich in 2009, faces a potential primary challenge in 2014 from Illinois Attorney General Lisa Madigan, daughter of House Speaker Michael Madigan, and William Daley, a former White House chief of staff and brother of ex- Chicago Mayor Richard M. Daley.

Recalling the unsolved killing last month of 15-year-old Hadiya Pendleton, a Chicago girl shot a mile from President Barack Obama’s South Side home, Quinn urged a ban on the sale of assault weapons and high-capacity ammunition magazines.

The governor also endorsed a bill to legalize same-sex marriage, saying “equality is coming to Illinois.” A state Senate committee sent the measure to the floor yesterday, and a vote is scheduled for Feb. 14, Valentine’s Day.

While Quinn presented his priorities, he kept returning to the pension, “the toughest of all issues.” Invoking the recent accidental death of an Illinois Marine who survived wounds in Iraq to become an advocate for veterans, Quinn added: “Surely we can summon political courage in the days to come.”

Political Gridlock

Illinois is paying for years of financial mismanagement and political gridlock, resulting in the worst-funded state pension system in U.S., with 39 percent of assets needed to cover projected obligations for five major groups of employees, according to the Civic Federation, a Chicago-based nonprofit research group that tracks government finances.

Lawmakers failed to pass a restructuring in the past legislative session, marking the third time since August that they’ve been unable to reach consensus. The retirement-fund deficit widens by $17 million a day.

Democrats hold veto-proof majorities in both the House of Representatives and the Senate, though Madigan has repeatedly said any deal must be endorsed by both parties. Public-employee unions have attacked proposals that reduce payments and require workers to make larger contributions.

“It is time that we put aside partisanship and entrenched opinions in pursuit of bigger and broader goals,” Senate President John Cullerton said in a statement from his office.

We Are One Illinois, a coalition of labor unions, issued a statement today that criticized Quinn for presenting a “false choice between funding pensions or funding vital services.”

“It would be irresponsible for the state to walk away from the pension debt owed for past services performed by employees,” the group said.

To contact the reporter on this story: Tim Jones in Chicago at tjones58@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net

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