Illinois Watchdog Group Blasts Pension Funding Proposal

May 3, 2004 ( - Illinois Governor Rod Blagojevich's track record in funding the state's pension obligations has drawn the ire of a Chicago tax policy group.

Civic Federation of Chicago (CFC), a group that had once praised the state chief executive, waded into the fray between Blagojevich and his legislative critics with word that it “strongly opposes” Blagojevich’s current pension stance.

The CFC  argued that the governor has a $527-million underfunding of pension obligations in Blagojevich’s proposed fiscal 2005 state budget. “This appropriation reduction, while reducing the operating budget deficit in the short-term, does not deal with the State’s longer-term problem of the historic underfunding of the State’s pension funds,” the group argued. “Instead, it repeats the pattern that created the State pension crisis.”

The CFC report comes after Illinois House Speaker Michael Madigan, a Chicago Democrat, and GOP leaders have stepped up their fire against the governor. Madigan has suggested that the state impose a temporary income or sales tax hike to shore up its finances.

Blagojevich has resisted, and the Civic Federation report praised that stance, and congratulated him for proposing a 3.6% reduction in the number of state employees.

However, the civic group is harshly critical on other counts.   “The solution to the remaining budget deficit cannot be to defer pension payments or to enact what could be substantial changes to business tax laws without public discussion,” said federation Chairman Kevork Derderian, president of Des Plaines-based real estate developer Continental Offices Ltd., in a statement.

The watchdog group backed Blagojevich’s major fiscal move last year, an unprecedented $10-billion bond issue whose proceeds were used to replenish reserves for the retirement of state employees ( See  Illinois Legislature Okays $10 Billion Pension Bond Issue ). But instead of leaving the proceeds with employee pension funds, Blagojevich now wants to use some to offset normal state pension contributions, the report says, and wants the funds to bear the costs of the early retirement of 10,000 state workers.

A state spokeswoman said state pension plans are in better shape than they were a year ago and that the state needs better alternatives than cutting spending across the board, as the federation proposes.