June 18, 2013
By: Mark Peters and Douglas Belkin

CHICAGO, IL – Desperate to solve the worst state pension crisis in the nation, Illinois Gov. Pat Quinn earlier this month did what politicians have done here for decades—he called Michael Madigan.

State House Speaker Michael Madigan backed a pension-overhaul bill that was opposed by organized labor and failed to pass in the state Senate.

Largely unknown outside Illinois, Mr. Madigan is the nation’s longest-serving state House speaker, with a tenure that began in 1983, and he also is chairman of the state’s Democratic Party. The dual posts make him the most powerful politician in Illinois and the linchpin in trying to fix the $96.8 billion public pension shortfall that is choking the state’s economy and roiling its politics.

Mr. Quinn, also a Democrat, didn’t get Mr. Madigan on the phone for days. The 71-year-old speaker “doesn’t have a cellphone,” the governor said. “I did leave a message with his wife, who called me, and I returned her call.”

The high-level phone tag came days after the legislature failed for the second straight year to reach a pension deal before its session ended, the latest breakdown in a crisis more than a decade in the making. Illinois’s credit rating is the lowest among U.S. states, and without action it could fall to the triple-B category that only three states have reached in the past 50 years, Standard & Poor’s Ratings Services said. The state’s 9.3% unemployment rate, which economists blame partly on the fiscal mess, is second only to Nevada’s.

Elected officials remain deadlocked as Democrats—who control both houses of the legislature and the governor’s office—calibrate how to cut long-promised benefits to public-employee unions. Mr. Quinn has called a special session of the legislature staring Wednesday to try to hash out an accord.

Much hinges on Mr. Madigan, whose legislative machinations are a subject of constant speculation in Illinois political circles. “He’s not like anybody I know,” said David Axelrod, a veteran campaign strategist who served as a senior adviser to President Barack Obama and now heads the Institute of Politics at the University of Chicago. “He’s just inscrutable.”

Mr. Madigan was first elected in 1970 by a working-class southwest Chicago district. The only time he hasn’t been speaker in the past 30 years was in 1995-96, when Republicans briefly controlled the House. While he has been speaker, Illinois has had five governors.

Mr. Madigan expanded the speakership’s power by tweaking House rules to give him authority to pick which legislators sit on which committees and which bills they review, said Kent Redfield, a professor of politics at the University of Illinois Springfield. Becoming head of the Illinois Democratic Party in 1998 gave Mr. Madigan discretion over its campaign coffers.

Illinois’s pension shortfall has nearly tripled in the past decade largely because the state has underfunded its system while approving increases in retiree benefits. “Supplicants would come before the legislature with requests,” Mr. Madigan said on the House floor last month. “All sounded pretty good, but they all cost the state money. That accumulated over several years, and then finally came to roost.”

Republicans have long blamed Mr. Madigan, who declined interview requests, for the pension problem, even though he only leads one chamber of the legislature. His spokesman, Steve Brown, said Mr. Madigan has worked for years on the issue, and that it has taken time to raise awareness and build consensus around an overhaul that doesn’t rely on just raising taxes.

This spring, Mr. Madigan surprised many observers by backing an overhaul that won praise from business groups and opposition from organized labor. The legislation cuts cost-of-living increases for retirees, raises retirement ages and makes teachers and state workers pay more into the system. It would fully fund the pension system over 30 years. The House passed the bill in early May.

But Mr. Madigan’s bill failed to pass in the state Senate, which is headed by John Cullerton, a longtime Madigan friend and protégé and the godfather of the speaker’s only son. Mr. Cullerton pushed hard for a competing plan that achieves a fraction of the savings but has union support, saying it would prevent a legal battle with organized labor.

The standoff prevents Mr. Quinn from delivering on his top priority ahead of his bid for re-election next year, which Republicans see as no accident. Illinois Attorney General Lisa Madigan, the speaker’s daughter, is considering running against Mr. Quinn in the state Democratic primary.

“I think we’re seeing an example of a great tap dance,” House Republican leader Tom Cross said. Ms. Madigan dismissed a link between her possible candidacy and her father’s moves on pension overhaul as “absurd.” Mr. Madigan also dismissed it at a recent news conference.

Mr. Quinn has tried in vain to mobilize public pressure for a pension overhaul. His office made a video depicting “Squeezy the Pension Python,” a widely ridiculed orange cartoon snake that constricts state coffers. The governor’s public approval rating fell to 33% in a recent poll from the Paul Simon Public Policy Institute.

After Mr. Quinn said this month that he wasn’t able to reach Mr. Madigan by phone, local media began hunting for the speaker. One TV news crew staked out Mr. Madigan’s house and followed him to his district office, where staffers refused to answer the door.

When a pension meeting was eventually set in Chicago, Mr. Madigan walked through a scrum of reporters ahead of time and joked about borrowing a cellphone. Nearly two hours later, he walked out and remained firm that it was up to Mr. Quinn to convince state senators to buy into the speaker’s plan.

The governor emerged moments later and put the onus on Messrs. Madigan and Cullerton to reach a deal. “They’re close friends. When they want to put a bill on my desk, they know how to do it,” he said.

Copyright 2013 Dow Jones & Company, Inc.

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