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Lawmakers may cap wage increase for state workers

CHICAGO – Warning of unprecedented fiscal woes, Illinois lawmakers put public-sector unions on notice Thursday that they are considering a measure to cap wage increases.

State Rep. John Bradley, a Marion Democrat who is among those sponsoring the House joint resolution, said the state has already made too many financial promises it can’t keep and must fight just to keep vital services and prevent a collapse of the public pension system – underfunded by at least $85 billion.

“There is no magic pot of money that can be found to pay for all the things we want,” Bradley said.

Gov. Pat Quinn’s administration has been unable to reach an agreement to replace an expired contract with the largest state employees’ union, AFSCME. The House resolution could take the issue of pay off the table by prohibiting the Legislature from appropriating money for any wage increase over a yet-to-be-determined percentage.

The House Revenue and Finance Committee heard testimony on the measure Thursday, including from Quinn’s budget director, Jerry Stermer, who cited the state’s more than $8 billion backlog in overdue bills in making the case for broader fiscal constraint.

“The governor is interested in working with the General Assembly on a structured refinancing of this huge amount of unpaid bills payables and we plan to come to the General Assembly with a proposal in the next number of weeks to consider a refinancing of some of that,” Stermer said.

The governor’s office later suggested Stermer overstated the progress and said there was currently no new plan, but that Quinn is interested in working with the lawmakers on the issue.

Union representatives at the hearing acknowledged the state’s difficult financial situation but blasted the proposed House resolution, saying it would restrict their right to negotiate a contract and arguing that state employees shouldn’t bear the burden of budget problems that politicians created.

“This would punish the lowest-wage workers that provide front-line state services, those who take care of people with disabilities, those that take care of disadvantaged children and those that take care of the elderly,” said Jason Keller, legislative director of the Illinois AFL-CIO.

Financial experts also briefed the committee on the state’s severely underfunded public pension systems and the potential impact for Illinois if the nation’s economy worsens.

Natalie Davila, director of research for the Department of Revenue, warned that if Washington fails to avert a potential double whammy of tax increases and spending cuts at the turn of the year, Illinois could see a revenue loss of $800 million in 2014, she said.

“In our opinion, things could really get worse,” Davila said.

Adding to the state’s financial quandary, Quinn’s plan to close several prison facilities has been on hold because of legal battles, costing $7 million a month that wasn’t budgeted, according to the governor’s office.

And Comptroller Judy Baar Topinka, a Republican, issued a quarterly report Thursday that pointed out budgets for state employee health insurance, child protective services, the Department of Human Services and more were underfunded and will run out of money by spring. That would require lawmakers to appropriate additional funding.

Illinois Senate President John Cullerton defended attempts to fix the state’s pension problem Thursday after an influential business group said it couldn’t be done. The Chicago Democrat released an open letter spelling out how proposed legislation to fill a huge funding gap in state employee retirement systems would work.

The letter was addressed to Tyrone Fahner, president of the Civic Committee of the Commercial Club of Chicago, who released a memo Wednesday calling the pension crisis so big that it’s “unfixable.”

Cullerton said the GOP has blocked Democrats’ plan to reduce pension benefits and shift some costs to local schools. He says measures the Civic Committee has supported are unconstitutional.

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Associated Press Writer John O’Connor contributed to this report from Springfield.

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