Jan. 31 (Bloomberg) -- With the exception of Obama, there are no bigger Midwest political names than Daley and Madigan. Their Democratic dynasties have dominated Chicago and Illinois government for much of the past half century.
Those powers may soon clash as Bill Daley and Lisa Madigan explore 2014 primary challenges of Governor Pat Quinn, who leads a state with the nation’s worst bond rating and most underfunded pension. The fiscal mess was left behind, in large part, by Daley’s and Madigan’s own relatives.
Daley, 64, a former executive at JPMorgan Chase & Co., is son and brother of two Chicago mayors. Madigan, 46, is attorney general and daughter of the House of Representatives speaker. Both signaled in recent days that they’re considering entering the gubernatorial race.
“If they decide to run against each other, it has the potential to divide the party and its supporters pretty dramatically,” said U.S. Representative Mike Quigley, a Chicago Democrat.
Both Madigan and Daley are close to President Barack Obama. Daley, brother and son of former Mayors Richard M. Daley and Richard J. Daley, was Obama’s second White House chief of staff and a chairman of his 2012 campaign. Madigan sat next to Obama when they served in the state Senate, and his aides tried in 2009 to recruit her to run for his old U.S. Senate seat.
They’re also part of political families that, in varying degrees, have participated in the Illinois culture of kick-the-can-down-the-road budgeting.
Michael Madigan, House speaker for 28 of the past 30 years, was part of a 2005 deal to avoid funding pensions with the amounts lawmakers set a decade earlier. While the so-called pension holiday avoided cutting programs in an election season, the changes cost $2.3 billion, according to a state report on the system, which now faces a $97 billion shortfall.
The deal “was considered something fiscally responsible to do,” said Steve Brown, the speaker’s spokesman. “From Mike Madigan’s perspective, I think his view is that he’s prepared to solve this as quickly as possible, but it is going to take a bipartisan coalition to get that done.”
During the Chicago administration of Daley’s brother, the unfunded liability of municipal retirement systems soared more than 600 percent to $14.7 billion in 2010 from $2.4 billion in 2000, according to the Civic Federation, a nonprofit that tracks government finances. Mayor Rahm Emanuel is now seeking state approval to restructure city pensions.
“Short-term focused decisions” exact a steep price, said Laurence Msall, president of the city-based federation.
“The markets are already turning against the state of Illinois,” he said. “We are paying an enormous premium compared to other states to operate our government because of our financial recklessness.”
That was on display yesterday as Illinois delayed a $500 million offer of general-obligation bonds on the day it was to go to market. Buyers demand about 0.79 percentage point of extra yield to own the debt of Illinois issuers rather than those in California, which is set for its first surplus in a decade. That’s up about 46 percent in the past month and approaching the highest since at least 1994, data compiled by Bloomberg show.
Those conditions haven’t discouraged Quinn’s potential challengers. If they’re serious, they’ll soon have to make their intentions known, Quigley said.
“They have to start putting this together now,” he said. “This is going to be very expensive.”
The situation reflects the resilience of old-school politics that long provided patronage and promoted candidates, often within families, known in Chicago as the Machine.
“Many people, including most of the media, have been saying for 20 to 25 years the Machine is dead,” said Cook County Clerk David Orr, a former city alderman. “It was never dead here.”
If Daley and Madigan ran, the race could stress Democratic donors who have long supported both families. Hyatt Hotels Corp. heiress and Chicago businesswoman Penny Pritzker, who led Obama’s 2008 campaign fundraising, has a close relationship with the Daleys and hosted fundraisers for Lisa Madigan. Through a spokeswoman, Pritzker declined to comment on the race.
Last week, Quinn, 64, deflected questions about a primary more than a year away.
“I really don’t believe in family feuds,” he told reporters.
Quinn, who replaced Governor Rod Blagojevich after his fellow Democrat was impeached and went to prison for corruption, registered an approval rating of 25 percent in a November survey. Reflecting that, Quinn had just $1 million in his campaign account as of Dec. 31, state records show. That compares with $3.6 million for Lisa Madigan.
In an interview during presidential inaugural festivities in Washington, Madigan told Chicago’s ABC-TV affiliate that she’s “among those people” considering a bid for governor.
Daley told reporters Jan. 15 that he’s contemplating challenging Quinn. He publicly spoke of running in 2002 and 2010 before backing away, in part because of potential resentment of his family’s power.
He alluded to that experience last week, telling the Chicago Sun-Times that Madigan needs a “game plan” for answering questions about conflicts of interest.
Dick Simpson, a former alderman who teaches political science at the University of Illinois at Chicago, said he doubts that both families will field a candidate. If Lisa Madigan declares, he said, her father would be a “problem.”
“If she were to run, Mike Madigan would have to agree to retire for her to be successful,” he said.
Daley, a U.S. commerce secretary for President Bill Clinton, was traveling in China on a trade mission on behalf of World Business Chicago, an economic development board. His brother, Cook County Commissioner John Daley, declined to comment on the race and didn’t respond to a later phone call and e-mail seeking contact information for his brother.
Maura Possley, a Madigan spokeswoman, said in a statement that “the attorney general is focused on her job. She has noted that she continues to consider how best to serve the public in the future, but any specific questions beyond that are premature.”
During Madigan’s 2002 campaign for attorney general, she countered suggestions that she couldn’t be independent, pledging to prosecute Democrats for corruption “even if it involves my father.”
If her 70-year-old father resigned the speakership, he still might keep the powerful role as chairman of the Democratic Party of Illinois. In that post, he controls how campaign cash is allotted.
Potential Republican candidates also are positioning themselves. U.S. Representative Aaron Schock, 31, who represents an area that includes Peoria, is among the most vocal. He told reporters last week that the party’s 2010 gubernatorial candidates have “proven nothing more than they can lose an election.”
Quinn indicated at a news conference last week that he isn’t worrying about challengers from his own party for now.
“My dad told me quite a while ago, ‘Don’t take aspirin until you get a headache,” he said.
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