Governor urges pension reform, $1 billion tax cut
FY19 budget to fund top priorities through expense control, cost shifts

[February 15, 2018] 

SPRINGFIELD

Gov. Bruce Rauner today urged the Illinois General Assembly to make comprehensive pension reforms and use the savings to give the people of Illinois a nearly $1 billion tax break. The prompt came during the governor’s annual budget address to legislators where he laid out his fiscal plan for 2019.

The plan Rauner submitted will produce a surplus provided legislators agree to contain expenses and shift responsibility for paying local pension costs.

“If we can agree on the fiscal framework set out in our FY19 budget,” Rauner said, “we will plug a $2 billion hole in the state’s pocketbook, avoid new taxes, fund top priorities, and start the long process of paying down our bill backlog with cash instead of credit.”

The FY19 surplus budget does not bank on the so-called consideration model for state pensions. But the governor challenged legislators to adopt the model and cut Illinois taxes by nearly $1 billion.

“Let’s make these reforms to grow the economy faster and make the Amazons and Apples of the world take notice,” Rauner said.

“Our FY19 budget sets out to make the structural reforms that will get us moving in the right direction,” he continued. “It reduces government expense but not customer service. It shifts responsibility for the cost of services to the people who buy those services. And it recognizes that we will never have balanced budgets if government grows faster than our economy.”

Schools to pay their own pensions costs

Under the governor’s plan, school districts and universities would begin to pay their own pension costs, resulting in savings of $591 million in FY19. The pension cost realignment would be phased in over the next four years in 25 percent per year increments. The phase-in is designed to help local governments adjust to the new payment plans.

“School districts would be able to offset the costs with increases they receive from the new school funding formula,” Rauner said. “We will also give local government the tools they need to reduce their costs, including the power to consolidate or dissolve units of government and more flexibility in contracting, bidding and sharing services.”

Universities will get $101 million from the state to offset the first-year pension expense.

Rauner said another $470 million would be saved by right-sizing state employee health plans so government workers assume more of the cost of their health care insurance. Today, the state pays for platinum-level health plans for every employee. The premium is just over $18,000 per year per employee, or 35 percent higher than private-sector premiums.

“State government needs to do what every employer in Illinois has done over the last 10 years: Get its health care costs under control,” Rauner said. “Taxpayers shouldn’t have to pay for government employee health insurance policies that are richer than the ones they can afford for themselves.”

The proposed budget includes a provision for the sale of the Thompson Center in Chicago for $300 million, a move that nets $240 million after paying expenses to move employees to new, more productive work locations.

Rauner is again asking the General Assembly to reduce workers’ compensation insurance rates, a move that would save the state $20 million in FY19, spark new business activity and create thousands of jobs.

Plan includes record K-12 education funding

With the savings, Rauner intends to spend a record $8.3 billion on preK-12 education, including $350 million of new money distributed through the more equitable funding formula. Since 2015, Rauner’s first year in office, preK-12 funding has risen a cumulative $3.7 billion. Early childhood education will get $454 million, up 55 percent since 2015.

The governor’s budget brings an end to funding reductions for university and community college systems. It adds $100 million in capital funds to meet deferred maintenance needs. It maintains MAP grants at FY18 levels and lays the foundation for increased MAP funding in the future. It allots money to offset the first year of pension and group health costs that come as a result of the shift of pension cost responsibility.

The FY19 spending plan retains service levels for health and human services. Child care, for example, will continue to be funded at 185 percent of the federal poverty level. Service for the aging will be delivered at the same level but at less cost. The cost savings will include adjustments in managed care and better alignment with actual demand. Medicaid spending will total $14.2 billion to provide care for 3.1 million eligible patients.

Rauner’s FY19 plan promises to increase IDOT funding levels with $2.2 billion in pay-as-you-go appropriations for its annual road program. It adds $511 million for infrastructure improvements. If the FY19 budget is approved, the administration’s new transportation infrastructure spending since 2016 will total nearly $10 billion.

The administration has been actively engaged in conversations over the last year with the White House and the U.S. Department of Transportation about an infrastructure program.

“As the plan announced this week works its way through Congress,” Rauner said, “we will work closely with our Illinois Congressional delegation to maximize the return on Illinois’ investments in its infrastructure.

Public safety spending takes into account efficiencies from reduced prison and juvenile populations plus job and life skills programs adopted by the Department of Corrections. Rauner also has prioritized funding to fight the opioid epidemic and for cadet classes that will add up to 300 new state police troopers.

[OFFICE OF THE GOVERNOR BRUCE RAUNER]