Gov. Bruce Rauner’s proposed four-year pension cost shift to local schools and universities – a key part of his budget proposal for the coming fiscal year – has garnered mixed reactions from lawmakers across the aisle, but the controversial plan is likely dead already.
Rauner’s, House Speaker Mike Madigan, backed a similar plan in 2012 that ultimately failed. Rauner’s plan calls for moving the cost of pension payments from the state to universities and local school districts over four years. However, the proposed pension shift is a non-starter for some in the governor’s own party. State Rep. David McSweeney, R-Barrington Hills, joined with the Illinois Education Association to gather widespread support for a resolution opposing any shift.
State Sen. Andy Manar, D-Bunker Hill, said he’s confident lawmakers will come to terms on various aspects of the governor’s proposed budget before the May 31 deadline. He said Rauner’s budget is on better footing than previous proposals.
State Sen. Kyle McCarter, R-Lebanon, said that’s because of the massive income tax increase lawmakers imposed over the governor’s veto.
But, Manar said the cost shift is a large sticking point.
“It’s a large moving part of his proposal,” Manar said. “It involves several hundred million dollars and is, of course, very controversial.”
During his budget address, Rauner said the four-year cost shift will save the state’s taxpayers hundreds of millions of dollars a year.
“Our budget proposal shifts costs closer to home,” Rauner said, “so people can question expenses and deal with them more directly. Now, they have no incentive to manage costs because the state picks them up no matter what they are. When they are responsible for paying the bill, there will be plenty of incentive to lower costs.”
McCarter supports the overall cost-shift concept because the local school districts that set pensions need to contain their employment costs locally rather than have taxpayers statewide cover big salaries and expensive benefits.
“In my business, if I was to hire somebody and give them a salary and send them to an unrelated party that’s to determine benefits, I’d be one of the dumbest business people in the world. I determine the salaries, I determine the benefits, because I have to contain my costs,” he said.
McCarter said local governments should have to do the same.
However, Rauner’s proposal goes too far, too fast, McCarter said.
“Do it over an eight-year period,” McCarter said. “Gradually build that in, let them react to the new challenge.”
The shifts of pension and healthcare costs to the employer will save the state $696 million this year, Rauner has said. His plan would be phased in over four years.
“The cost shift is the biggest hurdle right now for the governor’s [budget] proposal,” Manar said.
McCarter said opponents are scared the cost shift will increase taxes locally, something he said no one wants.
A group of bipartisan lawmakers in the House have joined House Resolution 27 that opposes a pension cost shift. That measure spearheaded by McSweeney says it’s “the opinion … that the proposed educational pension cost shift … is financially wrong.”
That resolution has been referred to the House Rule Committee despite having nearly 70 state Representatives as cosponsors.
