Observations and comments about state government by State Representative Robert W. Pritchard.
Governor Quinn met his self-imposed deadline for announcing Medicaid and pension reforms last week without bothering to wait for the recommendations of his advisory task forces. While his proposals include some of the ideas that were discussed by the task forces, I believe he short-circuited the discussions of the various affected parties and may have damaged negotiations.
The Governor met his $2.7 billion goal for reducing Medicaid spending through program changes, reducing payments to providers, adding a $1 per pack cigarette tax and capturing federal matching dollars.
About $1.35 billion of the spending reduction will come from service cuts and efficiencies in 56 separate areas. Provider rates, already heavily discounted, will be lowered further and thus reduce spending by $675 million. About $675 million of spending will be offset by higher revenue–$337 million from an increased tax on cigarettes which will be matched by the federal government with another $337 million.
About 215,000 people of the 2.7 million Medicaid clients would lose benefits entirely including adult dental, chiropractic, group psychotherapy, prescription drug assistance for low-income elderly, medical equipment and people living outside the state. Adult participants would also only receive one pair of eyeglasses every two years, while adult podiatry services would be limited to diabetics, and adult prescriptions would be limited to five per month.
Keep in mind, the Governor unveiled his plan while a bi-partisan Medicaid group continues to hammer out reforms. I think the legislature should wait to see what reductions the negotiations produce before accepting on the Governor’s cuts and tax increase.
Here again the Governor proposes some of the reform ideas being discussed in the legislature while omitting others that are important to long-term stabilization of the pension system.
The Governor moved forward with his ideas without much input from employees. It’s understandable that labor representatives do not want to lower employee benefits but we must not lose sight of the fact that the pension system will collapse if the cost of the program is not lowered. This is time for serious negotiations when modest changes can stabilize the pension system.
Among the pension changes proposed by the Governor are increasing employee contributions by three percent; transferring responsibility for annual employer costs from the state to schools, colleges and universities over several years; and requiring the state to make its pension payments each year.
The Governor did not include any ways to force the state to make pension payments which is the main cause for the pension unfunded liability. Transferring the responsibility to make the annual pension payment to the actual employer does make good policy sense but it should be phased in as the economy improves and schools have the funding.
Other proposed changes include lowering the cost of living adjustment (COLA), delaying the COLA until age 67 or five years after retirement, and not compounding the COLA payment. The retirement age would be raised to age 67, pension payments would be calculated using actuarially required payments, and public pensions would only include public employees.
Pension Sweeteners Would Require Supermajority
While underfunding the pension system has been the main contributor to the current pension crisis, enhanced employee benefits over the past decade or two without payment for those benefits has added to the pension financial problems. The House took action to limit such sweeteners in the future by passing a constitutional amendment that would require a supermajority vote on pension enhancements.
House Joint Resolution – Constitutional Amendment 49 (HJRCA 49) now moves to the Senate and if passed there in the next two weeks will be placed on the ballot for voters to ratify this fall.
The three-fifths vote will be required of the legislature as well as any unit of local government before enhancing pension benefits, or reducing or eliminating eligibility requirements of an employee. It is the duty of the voting unit to deem what is a pension benefit. Such enhancements would include compensated time off, bonuses, incentives and other compensation but not an increase in salary.
Since the vote, I have heard from employee advocates who believe the amendment would require a three-fifths vote on annual budgets and create pension systems with different benefits across the state. While constitutional amendments are usually worded in general terms, there seems to be a lot of questions now forming that weren’t brought up before the House action.
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