SPRINGFIELD – A recent contract agreement with the state’s largest union will save Illinois nearly $900 million in health care costs, an administration official said Tuesday, forecasting one piece of good news in what was expected to be a largely dire budget address from Gov. Pat Quinn.
Quinn’s administration and the American Federation of State, County and Municipal Employees Council 31 reached a tentative agreement last week for a three-year contract after negotiating for 15 months. The proposal requires state workers to pay more toward healthcare and requires retirees to pay health insurance premiums for the first time.
That will add up to a projected $900 million savings over the three years of the agreement, according to an administration official familiar with Quinn’s speech. The official, who spoke on condition of anonymity, wasn’t authorized to discuss the proposal before today’s address.
The tentative agreement still requires a union vote. Neither Quinn’s administration nor the union has released many details publicly, but a memo to AFSCME members this week outlined a schedule of insurance premiums to be paid by retirees. Last year, Quinn signed into law legislation that would require longtime retirees to pay healthcare premiums for the first time; previously those who had spent 20 years working for the state didn’t have to pay health insurance premiums in retirement. However, lawsuits challenging the law still are pending into court.
AFSCME officials declined to discuss savings estimates Tuesday, saying the contract still needs to be ratified.
Quinn previewed the nugget of good news a day earlier.
“The union agreement was a good step forward, and we will talk about that,” Quinn told reporters Monday. He called it a contract that “serves the taxpayers well and recognizes the employees.”
The agreement calls for a wage freeze in the first year and 2 percent increases in each of the following two years, along with increases in health care contributions. Quinn will outline his budget priorities for the fiscal year that begins July 1 in a noon speech today. The Democratic governor has said the first thing he and legislators must take on is the $96.7 billion deficit in the state’s five pension systems.
Trying to catch up with that hole will cost Illinois nearly $7 billion – 17 percent of the state’s general revenue fund – according to legislative analysts.
The governor’s office already has projected a cut of approximately $400 million to education and additional reductions in public safety and economic development.
Illinois lawmakers expect Quinn to focus on the pension crisis Wednesday when laying out his state spending proposal for the coming year.
But Rep. Frank Mautino of Spring Valley, who is the House Democrats’ budget negotiator, says revenues should increase by $1.3 billion because of healthier tax receipts. While that is hardly a windfall in a state that also is holding onto $9 billion in overdue bills, the state has been able to absorb increases in pension obligations and Medicaid payments while paying down bills in recent years.
“With the economy and the predictions of the revenues going up, it will be difficult, but I don’t know that it will be a doomsday scenario,” Mautino said.
Republicans recognize the difficulty the pension problem poses and are looking for a bold statement on how to fix the pension mess – the state’s paramount financial problem.
Senate GOP budget negotiator Matt Murphy of Palatine says he’s seeking “gubernatorial leadership” and a “concrete plan.” Quinn has said the “best vehicle” for pension reform is dual-approach legislation introduced by Sen. President John Cullerton, D-Chicago, but Murphy said the governor needs to do more.
“There are a lot of different plans out there ... and we need to zero in on what the bill is going to be and you need some leadership from the second floor to get there,” Murphy said, referring to the location of the governor’s office in the Capitol.
Murphy wants to know what the cost of that agreement will be, particularly because it includes a promise by Quinn to pay wage increases promised in 2011 on which he later reneged.