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(Bloomberg) — Illinois Governor Bruce Rauner endorsed parts of a Democrat-proposed plan to fix the nation’s worst- funded state pension system, a move that he says would save $1 billion a year and give workers greater choice.

Flanked by Christine Radogno and Jim Durkin, the state’s top Republicans in the legislature, Rauner backed key provisions of a proposal originally pitched by Democratic Senate President John Cullerton. It would let workers choose between giving up some cost-of-living increases or accepting limits on how salary raises will affect their benefits. The governor stopped short of an outright endorsement, saying it should include curbs on unions’ collective-bargaining power. Cullerton rejected Rauner’s version of his plan.

“This does not go as far as we need to,” Rauner told reporters in Chicago. “It’s a step in the right direction.”
The swift rejection of Rauner’s changes by Democrats who control the legislature suggest it may do little to break the logjam over how to deal with the state’s pensions. Illinois, the worst-rated state, has the least-funded retirement system in the country, with $111 billion less than it needs to cover all the benefits that have been promised. That breaks down to more than $8,000 per resident.

It’s been more than eight months since the Illinois Supreme Court rejected the state’s previous overhaul. Justices threw out a 2013 restructuring that took six attempts over 16 months to pass, despite one-party rule at the time. The measure was projected to save $145 billion over 30 years by limiting cost- of-living adjustments and raising the retirement age.
Bipartisan agreement has been elusive in Illinois’s capitol, where Rauner has been unable to reach a deal with the Democratic legislature over a budget for the year that began in July. The record-long impasse has kept officials from finding a fix for the state’s pension system.

Rauner’s overture was criticized by Democrats for seeking to require that salary negotiations be removed from collective- bargaining.

“The Governor said today that in exchange for negotiating on pension reform, he will continue to demand changes that will drive down the wages and standard of living of middle-class families,” House Speaker Michael Madigan, who controls’ much of the legislative agenda, said in an e-mailed statement. “Neither President Cullerton nor I will agree to make changes proposed by the Governor that will hurt the middle-class families of our state.”

In July, Rauner laid out a plan to create a tiered system to reduce retirement liabilities. At the time, he said it would save taxpayers billions of dollars. The proposed changes were never introduced as a bill in the legislature.

Thursday’s pension announcement comes one day after Rauner and the Republican legislative leaders said Chicago public schools should be taken over by the state and given the authority to file for bankruptcy. Those plans were immediately dismissed by Democrats.

–With assistance from Tim Jones.

To contact the reporter on this story: Elizabeth Campbell in Chicago at ecampbell14@bloomberg.net To contact the editors responsible for this story: Dave Liedtka at dliedtka@bloomberg.net William Selway