SPRINGFIELD - When state lawmakers return to Springfield on Tuesday, they'll try to hammer out fixes to a statewide construction program and are expected to continue battling over the still-unsigned budget.

But hovering over the zinc-plated Capitol dome will be the ghost of a promised payment that haunts every budget negotiation. That ghost is the very real $4 billion Illinois is supposed pay into its retiree pension systems this year.

Gov. Pat Quinn proposed in his March budget speech that Illinois only make a half payment to its retirement funds next year, effectively promising to pay the rest of the money later on in order to free up immediate cash for current state spending. Quinn's budget was not approved. House Speaker Michael Madigan pushed a full-funding proposal through the House, but that measure never got a vote in the Senate.

If spent over the next year, the $4 billion at stake could minimize spending cuts or reduce the size of a proposed income tax increase. But the long-term consequences of skipping a payment are far worse than any tax increase now, critics claim.

"The impact of skipping those payments is profound. It puts the retirement systems, which are already the nation's worst-funded, onto very dangerous ground. We believe that skipping payments this year would make it nearly impossible for the state to get back on a reasonable payment schedule next year or any year in the future and would endanger the very survival of the pension systems," said Anders Lindall, a spokesman for AFSCME Council 31, a union that represents many state workers.

Illinois has five separate pension systems that provide retirement income and health-care benefits to retirees who were non-Chicago teachers, university employees, state workers, judges and the General Assembly. By skipping payments over the years the funds now owe more than $54 billion than they had on hand June 30, 2008, the most recent date for which data is available. Investment losses over the past year have likely pushed that unfunded liability higher.

"If the state doesn't pay in what it's required this year, as the governor has proposed, as others have proposed, let's skip this payment, the liability will only grow," Lindall said. "You could wipe pensions entirely for all future hires but not reduce what you owe for past benefits by a single penny."

That's because the Illinois Constitution says a state pension is a contractual relationship, "the benefits of which shall not be diminished or impaired." So no matter what happens in the future the state is going to have to pay that money sometime.

Quinn, and others, have proposed establishing a two-tiered pension system where new hires would receive fewer benefits than current workers. The Illinois Policy Institute, a nonpartisan research organization dedicated to supporting free market principles, suggests a "defined-contribution" plan, similar to a 401(k) account, would reduce the state's contribution to employee retirement benefits.

"While tackling public employee pay and benefits is unlikely to prove popular with public employee unions, no serious attempt to rein in Illinois' budget should ignore this critical issue," the policy institute writes in its "2010 Budget Solutions" guide. Reducing state employee pay, requiring state employees to pay more for health care and reducing retirement benefits could all help Illinois balance its budget without a tax increase, the IPI said in the report.

However, an independent analysis of Quinn's two-tiered proposal concluded that while it would produce moderate savings through 2025, it would actually end up costing taxpayers $95 billion more than the current system through 2045.

That doesn't matter to Jim Tobin, head of the National Taxpayers United of Illinois, an anti-tax group based in Chicago. He says "gold-plated" state government pensions are a huge problem and that current employees should help fix it by paying 5 percent more into the pension funds.

"Making them pay five percentage points more out of their salaries for their own pensions would reduce unfunded state liabilities by $20 billion," Tobin said. "That's the primary problem in Illinois and that's the primary reason Quinn wants to increase the income tax."

Quinn has proposed a temporary hike in the state income tax, raising the rate from 3 percent to 4.5 percent for two years. The business income tax would increase from 4.8 percent to 7.2 percent. The Illinois Senate approved a different plan for a permanent hike, setting the state's income tax on individuals and businesses at 5 percent and applying the sales tax to services like oil changes and hair cuts that aren't currently taxed. The House never voted on that plan.

"Basically that's why they put Quinn in the governor's mansion," Tobin said, echoing one of the conspiracy theories put forth by former Gov. Rod Blagojevich. "They want to raise taxes on the middle class to subsidize the wealthy retired state government employees."

Tobin claims 3,194 state government retirees are paid more than $100,000 in pension benefits every year.

However, Lindall counters that his data shows that the average benefit for a state worker is about $20,000 a year, and about $34,000 a year for a retired teacher. In addition, retired teachers do not receive Social Security payments so their state pension is their only government provided income, Lindall said.

"It's disingenuous and it's irresponsible and it's absolutely transparent when right-wing ideologues try to confuse the issue and direct public anger at teachers, at child protection investigators, nurses, social workers, people who have given their working lives to the essential public services that we all depend on," Lindall said. "Anyone who believes that a $20,000 pension for a retired state employee is breaking the bank is misinformed or they have an ulterior motive."

How much state employees pay into pensions

State employee pensions are funded by three sources: employee contributions, state contributions and investment income. In several years the state has skipped or made a partial payment of its contribution. Employee contributions are deducted automatically from paychecks. Here is how much employees pay into each retirement system and their benefits.

Teachers Retirement System

• Contributions: 9.4 percent of annual salary

• Members do not receive Social Security

• Annual retiree pay: 2.2 percent of final average salary for each year worked, up to 75 percent of final average salary

State Employees Retirement System

• Contributions: 4 percent of annual salary for members covered by Social Security; 8 percent of annual salary for members not covered by Social Security

• Annual retiree pay: 1.67 percent of final average salary for each year worked for members covered by Social Security, up to 75 percent of final average salary; 2.2 percent of final average salary for each year worked for members not covered by Social Security, up to 75 percent of final average salary

State University Retirement System

• Contributions: 8 percent of annual salary

• Annual retiree pay: 2.2 percent of final average salary for each year worked, up to 80 percent of final average salary

Judges Retirement System

• Contributions: 11 percent of salary

• Annual retiree pay: 3.5 percent of final salary for first 10 years of service and 5 percent of final salary for each year after 10, up to 85 percent of final salary

General Assembly Retirement System

• Contributions: 11.5 percent of salary

• Annual retiree pay: 3 percent of final salary for each of first four years of service, plus 3.5 percent of final salary for each of the next two years of service, plus 4 percent of final salary for each of the next two years of service, plus 4.5 percent of final salary for each of the next four years of service, plus 5.0 percent of final salary for each year of service in excess of 12 years, up to 85 percent of final salary

Note: All pensioners receive an annual 3% cost of living adjustment.

Source: Commission on Government Forecasting and Accountability