Rauner: Pension, health overhaul needed to balance budget

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SPRINGFIELD, Ill. (AP) - Republican Gov. Bruce Rauner said Wednesday he could balance the Illinois budget and cut taxes by $1 billion provided the Democratic-controlled General Assembly agrees to make massive changes to the pension system and health insurance benefits for state workers.

Besides again advocating for a constitutionally questionable overhaul of employee pensions, Rauner told lawmakers during a budget address that he wants to shift retirement costs to local school districts and dictate health insurance benefits for state workers.

The first-term governor, who is facing a tough re-election bid, said pension and health expenses consume 25 cents of every dollar the state doles out.

"The simple truth is this: We have to change the way we manage pension costs and group health expenses," Rauner said. "If we don't, our finances will continue to deteriorate, our economy will remain sluggish and our tax burdens will stay high and keep rising."

The overall pension revamp would save $1 billion a year, Rauner said. Although he wouldn't count on that money in the 2019 budget that begins July 1, it ultimately would allow him to drop the income tax rate from 4.95 percent to 4.7 percent, he contended. It's likely to face a court challenge as past proposals have because the Constitution prohibits promised pensions from being "diminished or impaired."

Of more immediate concern to Democrats was the pension cost-shift plan. They called it a massive property tax increase - something Rauner has railed against for years - because school districts will have no other choice for taking on the huge cost.

Reassigning responsibility for the employer portion of teacher pensions to school districts would reverse a yearslong practice of the state picking up the tab for all districts outside Chicago and was even extended to that city as a matter of fairness in last summer's education-funding package. A sponsor of that plan, Sen. Andy Manar, said the shift would reverse the entire reason for the funding-formula changes - more equity in how the state pays for education.

"The governor's proposal appears to spend hundreds of millions of dollars but doesn't result in greater equity because of that cost-shift provision that he's proposing," the Bunker Hills Democrat said. "That would shift those pension obligations onto local property taxpayers."

One of Rauner's toughest budget critics, Chicago Democratic Sen. Heather Steans, said the plan would severely hurt human-services, although she acknowledged it would balance a budget.

"This is the closest the Rauner administration has ever come to a real, balanced budget, which I appreciate," she said.

Rauner proposed his $37.96 billion blueprint which he claims would leave a surplus to be put toward billions of dollars in overdue bills. However, all require approval from Democratic legislators with whom he's feuded for years. A two-year stalemate without a budget - which created the huge bill backlog - finally broke last year when Republican lawmakers crossed over to override Rauner's budget veto and implement an income tax hike from 3.75 percent to 4.95 percent.

The group health insurance changes would mean union employees would no longer be able to bargain for health care, which Democratic lawmakers are almost certain to oppose.

Rauner defended the ideas, saying giving local schools the responsibility for paying teacher pensions gives local taxpayers "plenty of incentive to lower costs."

House budget expert Rep. Greg Harris, a Chicago Democrat, said the budget plan requires lawmakers to "turn their backs on the middle class" by cutting services and implementing a "pension scheme" that would take $1 billion away from classrooms.

"Throughout Gov. Rauner's time in office, progress has been made only when legislators agreed to work together without him," Harris said. "If the governor is finally sincere in his desire to be a part of this process, he'll find willing partners in House Democrats."