SPRINGFIELD – Gov. Rod Blagojevich's budget director on Wednesday demanded an investigation into how an early retirement program approved in 2002 ended up costing the state four times as much as was originally estimated, but he promised to pay the new price in full, somehow.
John Filan said the administration would "undoubtedly" end up putting more than the $70 million currently proposed in the budget for the year beginning July 1 to cover the early retirement costs, but he refused to commit to the full $382 million owed that year under the current statutory 10-year repayment plan.
The questions of whether that 10-year plan is still appropriate and what other financing options may be available are the subjects of negotiations between the administration and the General Assembly, Filan said.
Top Senate Republican budget negotiator Steve Rauschenberger, R-Elgin, said the state should find a way to cover the full amount due this year as required by law and opposed any attempt to stretch out the payment plan.
"I think the General Assembly that granted this ought to face up to the facts and appropriate the money to pay for it," he said. "We've got to learn that when you grant these kinds of benefits, it is no solution to make our kids pay for it."
The early retirement program was originally calculated to cost the state $622 million over 10 years, but the State Employees Retirement System reported in December that the actual cost would be nearly $2.5 billion. For the upcoming budget year alone, the new estimate means that the state's cost for that program jumped from $70 million to $382 million.
While the administration was told about the higher costs two months before it released its proposed budget, the governor allocated only $70 million for that purpose.
When asked why, Filan said it was "for the simple reason that we didn't know the $380 million was right."
This week, after receiving independent confirmation that the higher figure is likely accurate, Filan ordered the Illinois Economic and Fiscal Commission and state Comptroller Dan Hynes to investigate how such a large discrepancy occurred.
"How could $2.45 billion in costs billed to our taxpayers go unchecked and unnoticed in this process?" Filan asked. "Clearly the members of the General Assembly were misled in this process. They and the people of Illinois are owed a clear explanation of exactly who was involved, how this could have happened and what can we do to make sure this can never happen again."
But Filan has, in fact, already paid two consulting firms to find out what the reason for the difference in estimates was, and they concluded that it was due to "sweeteners" added as amendments to the early retirement bill but not included in the original estimates of the plan's cost.
Since he already knows what happened, some lawmakers are questioning whether the investigation Filan is calling for would be an effective use of state time and resources.
"I think the numbers are staggering and unfortunate, but they've been known for four or five months," Rauschenberger said. "I don't know what value there is in a special investigation. I realize the administration is frustrated, but asking for an investigation of previous governors and previous legislative leaders is, I think, a little out of line."
During a press conference announcing the investigation, Filan said it was needed to prevent such a situation from recurring. He repeatedly said that the members of the General Assembly were "clearly misled," implying that it was a deliberate deception on the part of former Gov. George Ryan's administration.
But Steve Schnorf, who was Ryan's budget director, emphatically denied those accusations and said he welcomed the investigation.
Schnorf said the estimates were developed in concert with the State Employees Retirement System and the legislative leaders from both parties, and that they were as shocked as everyone else when they turned out to be so much lower than the actual costs.
"If we were wrong, we were all wrong," he said. "I find it hard to believe we were wrong by that much ? but I think that director Filan's idea that it would be good to know how the numbers got so far apart is a good one."
Schnorf also said the administration should not overlook the financial benefits the early retirement program brought to the state in the form of decreased payroll.
"The early retirement program isn't a burden on them; it's an asset to them," he said. "Every employee that left the payroll saved the state, the administration, between $50,000 to $55,000 a year on average in decreased salary and benefits. So 11,000 people off the payroll is a $500 million or $600 million benefit to them, regardless of the size of the contributions to the pension systems. So I guess the question would be, would they rather have the 11,000 people back on the payroll and not have the $380 million pension contribution. And my quick math tells me that wouldn't be a good trade."
You can reach Kate Clements at (217) 782-2486 or via e-mail at firstname.lastname@example.org.