Republican Gov. Bruce Rauner sought Thursday to ratchet up pressure on Democratic lawmakers to approve his pro-business, anti-union agenda, vetoing the bulk of the state budget while dangling an offer of pension relief for Chicago and Cook County.
While Rauner argued that the pension help was part of an effort to compromise on his legislative wish list, the idea was quickly rejected by city officials who said it may do more harm than good. At the same time, Rauner refused to back away from some of his more controversial ideas, portending no easy resolution to the budget stalemate that could force government to start shutting down if a spending plan is not in place by July 1.
A day earlier, Rauner approved one bill that would free up money so elementary and high schools can open in the fall, though everything else — from paychecks for prison guards to home care for the elderly — is at risk.
The standoff boils down to this: Rauner has tried to leverage the budget-making process to push through sweeping changes that he argues will save money and boost jobs and the economy. Democrats who control the legislature have repeatedly rejected his ideas as attacks on the working class and instead pushed through a budget that's more than $3 billion short.
Rauner told lawmakers in his veto message that the financial plan sent to him by Democrats was "an unbalanced and therefore unconstitutional budget." But he has not offered an alternative beyond his initial budget proposal in February, which also would spend billions of dollars more than available revenue.
Instead, he doubled down on his demands Thursday, releasing a statement to the Tribune Editorial Board before the veto was made public that said "now is our chance to transform Illinois to make it more competitive and compassionate."
While Rauner billed his statement as a compromise offer to Democrats who have so far refused to grant him his "turnaround agenda," it did not appear that he had significantly altered his key demands.
"It isn't a compromise position," said Rep. Barbara Flynn Currie, D-Chicago. "This is where he's been from the very beginning."
For example, a key area of disagreement between Rauner and Democrats has been his proposal to freeze property taxes in conjunction with removing requirements that local governments bargain with unions over wages and pay prevailing union salaries on construction projects. That proposal was recently brought for a series of votes in the House. Democrats advanced the property tax freeze idea but rejected the provisions to weaken union rights, while Republicans refused to participate and called the process a sham.
"Now, in the spirit of compromise, we are willing to shorten the (tax) freeze portion of our proposal to two years," Rauner wrote.
But a document distributed by the Rauner administration in April contradicts that claim. At the time, Rauner was seeking legislation that "freezes property taxes for two years," according to the document.
Rauner also continued to push for changes to the workers' compensation system and the rules governing civil lawsuits, even though Democrats have staged a number of votes and hearings to display their unwillingness to deliver the exact changes that he wants.
One area where Rauner might have backed down is his push to impose term limits on elected officials and to change the way legislative maps are drawn — efforts that could weaken Democrats' control of the General Assembly. In the past, Rauner has demanded passage of legislation on those items. On Wednesday, he wrote that he would settle for a public commitment from legislative leaders that they'll hold votes on the measures in the next 10 months.
What Rauner would be willing to offer in exchange was not clear. For months, he has held out the possibility that he would agree to tax hikes to help fill the budget hole if Democrats granted him his legislative wish list. But in vetoing the budget and reiterating his demands Thursday, he made no mention of new revenue to fill the shortfall.
Currie, who serves as House Speaker Michael Madigan's top deputy, said Rauner's offers would not sway Democrats.
"He's made these pitches, he's made them before," Currie said. "That he chooses to make them again less than a week away from the close of the budget year I think suggests a tin ear, but that doesn't mean it isn't an ear that can listen and learn."
In a new wrinkle, Rauner said that he would support a proposal for the state to pick up more of the tab for Chicago teacher pensions, an issued pushed by Mayor Rahm Emanuel as Chicago Public Schools faces a massive pension payment due Tuesday.
Emanuel administration officials said that the mayor was blindsided by Rauner's school pension proposal, adding that the Republican governor's solution would hurt CPS.
For much of the last year, Emanuel has railed against what he characterizes as an inequity in how Chicago's teacher pensions are funded compared with the rest of the school districts in Illinois. While Chicago taxpayers help fund the rest of the state's teacher pensions through state income taxes, they also fund Chicago's teacher pensions through city property taxes. Emanuel repeatedly has called for an end of that double payment to fund teacher pensions.
Rauner attempted to address the issue Thursday by offering to have the state pay for the district's so-called normal pension costs — the annual amount CPS owes to the pension fund, not including years' worth of missed payments that were signed off on by state lawmakers. In exchange for paying for those annual pension costs, Rauner said the state would stop funding block grants for the district as part of a new school funding formula he said would be put into effect by the end of 2016.
Emanuel officials, however, argued that the deal would cost CPS $400 million.
Kelley Quinn, a spokeswoman for Emanuel, said CPS currently receives $600 million in state block grants aimed at helping pay for programs that address the district's high percentage of children who have special needs or live in poverty. The district's current "normal" pension costs are $200 million.
"We're pleased that, for the first time, an Illinois governor has committed the state to addressing the pension inequity at Chicago Public Schools," Quinn said in a statement.
"Unfortunately, the Governor's proposal would actually further reduce CPS funding by taking away block grant funding, costing the system hundreds of millions of dollars."
Under Rauner's plan, CPS would be left to rely on a new state commission rewriting the education funding formula to make up the lost revenue.
Another drawback to Rauner's offer for CPS: It doesn't cover the district's annual costs to repay unfunded pension liabilities, which Quinn pegged at $500 million.
"For all the other districts in Illinois, the state doesn't just pay for the normal pension costs, but also the unfunded liability," said a top Emanuel administration source who was not authorized to speak publicly about Rauner's plan. "That's not a very even trade."
Recognizing that a deal is unlikely before lawmakers return to the Capitol next Tuesday, the last day of the current budget year, Madigan had scheduled the chamber to hear from state agencies about their plans to deal with a shutdown.
"It seems the governor missed an opportunity to avoid disrupting the lives of many, many middle-class families for the sake of nonbudget issues," Madigan said in a statement.
Republicans scoffed at the attempt to place the blame for a possible shutdown on Rauner.
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Sen. Matt Murphy, R-Palatine, contended that Democrats were at fault and took particular aim at Madigan, whom Rauner has labeled as an obstructionist in an ongoing television advertising blitz.
"The governor has been trying to do all spring what the voters sent him to do, which was change the direction of the state," Murphy said. "At the end of the day, Speaker Madigan has pushed us into a situation where we can either accept his status quo or we have to have a fight.
"The question I have is, if you are satisfied with the way Illinois was operating, I will lay down and let Mike Madigan have his way," Murphy said. "But if you want to go in a different direction, unfortunately we have to stand up to the guy."
Caught in the middle are those who rely on government services, including social service providers who spent months lobbying lawmakers to preserve funding for programs that pay for services for the poor, elderly and disabled. Rauner had proposed slashing spending on those programs, but the Democrat-passed budget that Rauner vetoed would have largely kept their funding intact.
"When the governor vetoes these budget bills that were crafted from this process, that's basically saying, 'Your concerns are not that important,' " said Amber Smock, director of advocacy for Access Living, a nonprofit that advocates for people with disabilities.
"Everybody worked really hard on that budget, and now it got turned down and we don't' know what's next," Smock said. "That's really scary. We don't know what's going to happen."
Meanwhile, pressure was relieved Thursday in Rauner's simmering stalemate with the largest state employee union, whose contract expires June 30. The administration and the American Federation of State, County and Municipal Employees Council 31 reached a deal to extend talks on a new contract through July, putting off the possibility of a lockout or a strike in the coming weeks.
Chicago Tribune's Rick Pearson, Bill Ruthhart and Hal Dardick contributed.
Kim Geiger reported from Chicago
