By Karen Pierog and Dave McKinney
CHICAGO (Reuters) - Illinois Governor Bruce Rauner and Republican legislative leaders said on Thursday they will endorse what they called a Senate Democratic approach to curbing the state's $111 billion unfunded pension liability.
But Senate President John Cullerton, a Chicago Democrat, said the plan promoted by the Republican governor goes beyond what he supports because of curbs on collective bargaining.
Rauner said the initiative would give workers a choice between having future salary increases count toward their pensions or continuing to receive 3 percent compounded annual cost-of-living increases upon retirement.
"This does not go as far as we need to ... But it's a step in the right direction," Rauner told reporters at a news conference. He added it would save the state $1 billion annually and affect four of the state's five pension funds.
Illinois has the worst-funded pensions and lowest credit ratings among the 50 states. An impasse between Rauner and Democrats who control the legislature has left the fifth-largest state without a budget seven months into fiscal 2016.
Rauner said the so-called consideration approach will be constitutional as long as salary increases are removed from collective bargaining with labor unions.
“We apparently still have a fundamental disagreement over the role of collective bargaining in this process, in the sense that I think collective bargaining should continue to exist and the governor does not," Cullerton said in a statement.
An aide to House Speaker Michael Madigan characterized the governor’s track record on pensions as anti-working family.
“What he wants to do is destroy middle-class families whether it’s over pensions or wages or injuries on the job site,” said Steve Brown, a spokesman for Madigan.
Easing pension costs was made harder after the Illinois Supreme Court last May tossed out a 2013 state law that would have saved as much as $145 billion over 30 years, ruling that public sector workers have iron-clad protection in the state constitution against cuts to retirement benefits. The high court could rule as soon as Friday on a union challenge to a 2014 state law to shore up two of Chicago's financially struggling pension funds.
The city used a consideration argument to defend the law, claiming that pension benefit cuts and higher pension contributions will save the funds from insolvency.
Union coalition We Are One Illinois contended the governor's plan was unconstitutional. "A forced choice between two diminished options is no choice at all and forbidden by the court," it said.
(Editing by Matthew Lewis)