Gov. Rauner’s proposed budget would shift pension costs and decrease health benefits

Photo: Gov. Bruce Rauner. (Nancy Stone/Chicago Tribune/TNS via Getty Images)

Illinois Gov. Bruce Rauner today delivered what he claims will be a balanced budget for the year 2019.

At the core of his proposals are the phased shifting of pension costs from the state to local school districts outside Chicago and to the universities, and cutting health benefits for school, university and state employees. The governor’s pitch is that this “structural reform” will free up more money for education, infrastructure, and public safety.

But even if something close to Rauner’s budget gets passed by the legislature, it could face challenges in court since the Illinois Constitution states that pensions cannot be diminished or impaired. And Rauner’s rivals for the governorship on both sides of the aisle blasted his proposal, claiming that the pension shifts would harm workers (per Democrats J.B. Pritzker and Daniel Biss) or increase property taxes (per Republican Jeanne Ives).

Rauner told the General Assembly in Springfield that his plan will allow for an income tax cut of $1 billion, essentially reversing an increase passed by the General Assembly last year. His proposal predicts that the state will take in $38 billion and spend $37.6 billion, leaving a surplus of $351 million. The revenue from a tax hike passed last year is included in the governor’s estimates.

Under current law and practice, school districts outside Chicago receive state money to pay pension costs. Chicago Public Schools, through the Chicago Teachers’ Pension Fund, shoulders most of the pension cost. The CPS last year received $225 million in funding to help cover some of the shortfall in its pension funding.

It is not a new idea to shift pension costs from the state to downstate local school districts, which, under this plan, will be phased in over four years. But since the money will have to come from somewhere, the fear is that property taxes will have to be increased.

Rauner, however, said his budget will give schools and local governments tools “to more than offset the costs.” These include increased education funding, the power to dissolve or consolidate units of local government, and more flexibility in contracting, bidding and sharing service, he said.

Rauner’s proposal to shift pension and health care costs to universities will be offset, he claims, by an additional $205 million in appropriations in 2019.

These changes, along with cuts to health benefits for government employees, will save $1.3 billion, with net savings of $696 million when the additional funding for K-12 education and universities is included, according to Rauner.

Rauner also proposed, again, reform of Illinois’ workers’ compensation, which he claimed costs more than any other midwest state. He also wants a 4 percent cut in Medicaid.

Overall, Illinois will have unpaid bills of $7.5 billion at the end of this fiscal year at the end of June. It paid out over $1 billion in late payment fees in 2017, largely because of a two-year budget impasse.

In this election year, it is unclear how the assembly will react. Rauner did host a meeting with the Democratic leaders, Sen. John Cullerton and House Speaker Michael Madigan, along with minority leaders Sen. Bill Brady and Rep. Ken Durkin, earlier today. It is the first time all five have been in the same room since December 2016.

Both Democratic and Republican gubernatorial candidates hoping to unseat Rauner reacted swiftly to the address.

Democratic front-runner J.B. Pritzker took aim not just at Rauner but also his own party rival, Daniel Biss, who is becoming an increasing threat ahead of the March 20 primary and has been endorsed by Illinois progressives.

“Today, we saw a failed governor propose another unbalanced budget as he doubles down on his all-out assault on workers and the social services they need to build better lives,” Pritzker said in a statement. “Bruce Rauner desperately ripped a page from Daniel Biss’ playbook, attempting to balance the budget on the backs of public servants by slashing their hard-earned benefits in a potentially unconstitutional scheme. ”

Biss said, “This budget isn’t just a bad financial plan, it threatens us to go along with his cost-shifting schemes, or add more than $1 billion to our debt. It attacks our workers and takes away our healthcare.”

Republican gubernatorial candidate Jeanne Ives said, “Governor Rauner outlined a budget that relies on the same income tax hike that he promises to ‘immediately roll back’ on the stump. And his promised property tax freeze – as inadequate as it is – becomes a massive property tax hike once he pushes pensions back on local districts.”