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Lawmakers poised to not make pension payment
By Timothy Magaw | Daily Herald Staff
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Published: 5/6/2010 9:40 PM | Updated: 5/6/2010 10:41 PM

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SPRINGFIELD - Lawmakers advanced a plan Thursday evening that would allow the state to skip nearly $4 billion in pension payments until January as part of a fiscal Band-Aid intended to keep the state afloat.

However, the rest of the budget plan remained unclear as lawmakers head into the final day of their scheduled session. The House adjourned late Thursday without taking final action on its version of a proposed budget, one that would skip the pension payment and give the governor the ability to borrow billions from special state bank accounts but also cut the operating budget by 5 percent.

Skipping the pension payment was seen as perhaps the only course of action after tax increases were voted down last year and efforts to borrow to make the payments lacked support.

"Our choice is no cash or borrowed cash. We don't have cash from another source," said David Vaught, Gov. Pat Quinn's budget director. He said Quinn still prefers to borrow rather than skip the payment.

For decades lawmakers have shorted the pension systems, leading to a $78 billion debt that's likely to grow if current payments aren't made.

House Republican leader Tom Cross of Oswego said Republicans weren't willing to put votes on a pension borrowing plan because the ruling Democrats haven't reformed spending.

"They've yet to address a variety of issues on reform and spending and cuts and jobs. We're having some of the same conversations we had a year ago. After a while you just feel like you're beating your head against the wall because they don't listen to the need to change this place. It's very frustrating," Cross told the Daily Herald.

But Democrats claim it's Republicans who are playing politics with the budget in hopes of improving their election chances and those of GOP governor nominee Bill Brady of Bloomington.

"I understand that they involved themselves with Senator Brady, who's their candidate for governor, and they apparently made a political party decision to resist further borrowing. So it is what it is," said House Speaker Michael Madigan, a Chicago Democrat.

Meanwhile, the Senate appeared to be working on its own version of a budget plan late Thursday.

Key moneymaking components up for consideration in both chambers appear to be borrowing from existing state accounts, selling off the rights to collect the payments from a massive legal settlement with cigarette makers, delaying payments to those who do business with Illinois, urging tax cheats to pay up without penalty and a cigarette tax.

The cigarette tax could bring in nearly $200 million in the initial year, and when combined with federal health care matching dollars could reach $320 million.

There's an estimated $6 billion in the state accounts earmarked for specific groups and programs. Quinn could access that money under the budget deal but would have to pay it back within 18 months with 1 percent interest.

Selling off future tobacco payments for cash upfront could get Illinois nearly $1.2 billion. And the tax amnesty might yield another $250 million.

Lawmakers are scheduled to adjourn today, but the budget proposals shaping up don't appear to entirely address the state's $13 billion deficit. Meanwhile, Vaught said the governor is still open to other suggestions to help eradicate the state's fiscal woes and warned layoffs are likely under some budget versions.

"Let's get real here," Vaught said. "We're out of money."