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Illinois Senate defeats sweeping pension reform bill

SPRINGFIELD, Illinois (Reuters) - The Illinois Senate on Thursday overwhelmingly defeated a sweeping reform of the state's sinking public pension system, leaving scant time for maneuvering with the Democrat-controlled legislature set to adjourn late on Friday.

Senators voted 16-42 against the measure, which was approved by the House of Representatives this month. The bill was championed by House Speaker Michael Madigan as the best way to curb Illinois' nearly $100 billion unfunded pension liability.

Immediately after the vote, legislative supporters of the bill huddled in the state House chamber. One of them, State Senator Daniel Biss, said the push for pension reform was not yet ended, even after the Senate failed to concur with the House version of the bill.

"Basically, we have three options," he said. "We can try again for concurrence, and we could try 56 times and see it fail and then it could pass the 57th. We could come up with something completely new. Or we could go home empty handed, which obviously we do not want to do."

A majority of Senate Republicans voted for the bill, which leader Christine Radogno, said is "the only bill that will save the pension systems."

Actuarial analyses of the measure done for three of the four affected pension funds indicated it would cut Illinois' unfunded liability by $21 billion and its fiscal 2015 pension payment by nearly $2 billion.

Illinois Governor Patrick Quinn, who has spoken on behalf of the measure but has not been seen lobbying for it in the state Capitol, said the Senate vote was a setback. "The people of Illinois were let down tonight," Quinn said in a statement. "Failure to send me a comprehensive pension reform bill hurts our economy and costs Illinois taxpayers $17 million a day."

The measure calls for unilateral changes to retirement benefits for current and retired state employees, legislators, public school teachers outside of Chicago Public Schools, and state university and community college workers to reap maximum cost savings.

UNIONS LAUD VOTE

Public labor unions have condemned the measure as violating a provision in the state constitution that prohibits diminishing pension benefits. Backers of the bill have countered that the legislature's duty to protect the state's financial health trumps any specific prohibition in the constitution.

A coalition of public-sector unions calling itself We Are One Illinois issued a statement lauding the vote. "Today's 'no' vote was especially forceful and bipartisan. We thank state senators who stood firmly against SB 1," the statement said.

The Senate has previously passed a union-supported bill with more modest cost savings. The measure, backed by Senate President John Cullerton, generally allows workers to retain access to state-sponsored healthcare in retirement if they opt for pension concessions.

Cullerton, who has contended the bill passed by his chamber is the only constitutional method of pension reform, still voted in favor of the Madigan-backed bill. During the Senate debate, Cullerton described the bill in detail without directly criticizing it, but pointedly noted it "unilaterally scales back cost of living increases." He said the measure would require workers to chip in more of their own paychecks and limited the size of the salary that would count toward a pension.

Cullerton's spokeswoman said Senate Democrats will continue to discuss pension measures, adding that three smaller pension bills approved by the House in March still were pending in the Senate.

The House earlier on Thursday passed a bill that would shift the cost of pensions paid by the state for higher education workers onto public universities and community colleges. The measure, which now heads to the Senate after the 60-55 vote, raised concerns among Republican lawmakers that it could lead to tuition or property tax hikes.

Republicans also questioned whether the cost-shift bill would end up being the only pension reform measure to be passed during the session.

(Reporting by Joanne von Alroth and Karen Pierog; editing by Christopher Wilson)

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