RPT-UPDATE 2-Illinois House passes sweeping pension fix in close vote

Fri May 3, 2013 12:28pm EDT

By JoAnne von Alroth

SPRINGFIELD, Ill., May 2, (Reuters) - The Illinois House of Representatives in a 62 to 51 vote on Thursday passed a comprehensive bill aimed at addressing the nation's most under funded state pension plan, a major step after weeks of legislative maneuvering had made pensions the dominant political issue in the financially strapped state.

The bill, introduced only two days ago by the powerful Democratic House Speaker Michael Madigan, now goes to the state Senate. That chamber's president is preparing a competing plan that is viewed as more favorable to the state's public-employee labor unions.

The Madigan bill, which is designed to eliminate a $96.8 billion funding shortfall over 30 years, relies on changes to retirement benefits that unions say are a violation of the state constitution. Union leaders have said they will challenge the measure in court if it becomes law, and Madigan acknowledged during floor debate Thursday that implementation likely would not move forward until courts rule on the constitutional issue.

"In my judgment, this is a critical action that must be taken now. Must be taken for future budget making. Must be taken for the fiscal well-being and reputation of the state of Illinois," Madigan said during a floor debate prior to the bill's passage. Madigan won the votes of two-thirds of the Democrats, with 40 of them voting for it and 28 against, while Republicans split nearly evenly, 22 for and 23 against.

No actuarial analysis of Madigan's measure has yet emerged, but the speaker said it would fully fund the pension system by 2044 and reduce the state's pension payment by $1.5 billion in fiscal 2015.

Several law makers acknowledged struggling with how to cast their vote. "This state is in crisis," said Republican State Representative Dwight Kay. "What we're doing today is not an easy move."

The measure now moves to the state's upper chamber, where Senate President John Cullerton, a Democrat, is circulating a union-backed plan. Cullerton has not yet released details of the new plan, which he described as being "credible and constitutional" after emerging from a closed-door meeting with union leaders on Wednesday.

A spokeswoman for Cullerton said the Senate President plans to discuss both measures with his Democratic caucus on Tuesday. Still, Madigan was optimistic his plan would pass the Senate.

"We've taken that first step in the House. My expectation is that the Senate will approve this bill," Madigan told reporters after the vote.

The state's constitution prohibits any diminishment of benefits to current and retired workers, and Cullerton has stated he believes the union plan will meet any constitutional test. Cullerton previously said he does not believe Madigan's plan can survive a constitutional challenge.

The Senate's Republican Leader Christine Radogno said "a significant number" of lawmakers from her caucus were expected to support Madigan's bill.

Madigan's measure affects four of the state's five pension funds. The speaker said the bill exempts the judges' pension fund to eliminate conflicts of interest for judges who would hear likely legal challenges to the bill should it become law.

The Madigan measure sets a cap on salaries used to determine pensions, limits cost-of living adjustments on pensions for future retirees, increases retirement ages and hikes worker pension contributions. It introduces changes to calculating the state's annual pension contributions that are designed to come closer to the actual future cost, and also exempts pension changes from collective bargaining.

After the vote, a coalition of public labor unions blasted the bill as being unfair to workers who have paid into their pension funds while the state has skipped or skimped on its payments.

"On top of that, it is blatantly unconstitutional and thus saves nothing. It simply exacerbates Illinois' fiscal problems," said a statement from We Are One Illinois. The group added that it was continuing talks with Cullerton.

Illinois lawmakers, who are in the final weeks of their spring legislative session, are under pressure to deal with the worst-funded state pension system. Pension payments are squeezing out funding for core services, while the state's backlog of overdue bills has topped $9 billion.

Credit rating agencies, meanwhile have downgraded Illinois' debt rating to the lowest level among states, and a government watchdog group has reported that pension payments along with debt service on outstanding pension bonds will amount to almost 25 percent of the state's upcoming general fund budget.

Madigan's bill contains elements similar to those in another comprehensive bill that failed to pass out of the Senate in March.

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Scottish Coal liquidators say in talks over parts of business

LONDON | Fri May 3, 2013 12:33pm EDT

LONDON May 3 (Reuters) - Liquidators for Scottish Coal, KPMG, said on Friday they were in talks regarding the possible sale of parts of the business.

The company ran out of cash last month, putting 600 jobs at risk and closing mines that are major suppliers to Britain's power stations.

"Over the last few days we have been in discussion with a variety of parties who have expressed an interest in the business or more precisely certain parts of it," accountancy firm KPMG said.

No names were disclosed.

Last month Hargreaves Services, Britain's second biggest producer of coal, raised 42 million pounds ($65.39 million) to buy rival operations and develop new mines.

Venture capitalist John Moulton's company Better Capital has been reported to be in talks to buy coal miner ATH Resources, which went into administration late last year.

Britain's coal industry is struggling to survive in the face of competition from imports and rising costs.

Its largest producer, UK Coal, said this week it was in talks with creditors to save 2,000 jobs and keep mines open that supply large utilities such as Drax, Scottish and Southern Energy and subsidiaries of E.ON and RWE.

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Mine workers union warns of strike at Patriot Coal if contract voided

By tim bross

ST. LOUIS | Fri May 3, 2013 5:51pm EDT

ST. LOUIS May 3 (Reuters) - A lawyer for the United Mine Workers of America on Friday told a bankruptcy judge it would be forced to strike if Patriot Coal Corp succeeds in voiding its contract with the union, as five days of contentious court hearings came to an end.

Attorney Fred Perillo said the union would do everything in its power to reach a consensual agreement with Patriot, which is seeking to impose $150 million a year in labor cuts.

But if Judge Kathy Surratt-States approves the proposal, which would end pension contributions, alter healthcare and lower pay rates, Perillo said a strike will follow.

"No contract, no work," Perillo said during closing arguments to cap off the hearing in U.S. Bankruptcy Court in St. Louis.

Ben Hatfield, Patriot's chief executive, said later that Perillo's remarks were ill-conceived.

"It's a poor time to be throwing out threats," Hatfield told Reuters in an interview outside the courtroom. "I think reasoned judgment will prevail when it comes to workers retaining their jobs in this environment."

Hatfield said a UMWA strike would be a replay of what happened in the bankruptcy of Hostess Brands Inc, which last year liquidated after a union strike caused it to hemorrhage money.

Judge Surratt-States has until May 29 to rule in the Patriot case.

St. Louis-based Patriot declared bankruptcy in July amid weak coal markets and heavy pension and healthcare costs, saying it needed major concessions from unions to stay in business.

Patriot has proposed ceasing pension contributions and transferring healthcare to a voluntary employees' beneficiary association, or VEBA, stocking it with $15 million in up-front cash and another $300 million in profit-sharing contributions.

It would give the union a 35 percent equity stake in reorganized Patriot, which could be sold to help fund the VEBA.

Without the cuts, the company has said it would be forced to liquidate. The union, which represents about 1,700 current Patriot workers and another 13,000 retirees and their families, has called the proposal "nowhere near" fair, and staged heated rallies in St. Louis, New York and elsewhere.

Bankruptcy laws allow companies to impose unilateral cuts to labor contracts, but only if they can show the cuts are critical to survival and that a good faith effort was made to achieve them consensually.

Before the start of closing arguments on Friday, Patriot's unsecured creditors' committee said it had withdrawn its initial objection to the 35 percent stake.

Patriot lawyer Ben Kaminetzky in his closing argument criticized the UMWA for casting the issue as a "Wall Street against Main Street" class struggle, saying Patriot did not begrudge the benefits and wages collected by union workers, but simply "cannot afford them."

Kaminetzy balked at the union's position that it has been asked to bear a disproportionate share of Patriot's cuts, saying nonunion employees have sacrificed for years while union workers have received "multiple raises."

Patriot reached consensual concessions from its non-union workers last month.

One key topic on which the union and Patriot agree is the liability of Peabody Energy, the former parent that spun Patriot off in 2007. Patriot and the UMWA have filed lawsuits seeking to keep Peabody on the hook if Patriot cannot afford to pay benefits.

The union has alleged that Peabody saddled Patriot with unsustainable legacy costs, knowing it would eventually fail.

But Kaminetzky said the union "sounds like it wants to reward Peabody with Patriot's liquidation" by resisting cutbacks that are necessary for survival.

A Peabody spokesman on Friday declined to comment, but in the past has said that the spinoff was above board.

"Patriot was highly successful following its launch more than five years ago with significant assets, low debt and a market value that more than quadrupled in less than a year," the spokesman Vic Svec said in a statement earlier this week.

The bankruptcy is In Re Patriot Coal Corp, U.S. Bankruptcy Court, Eastern District of Missouri, No. 12-51502.

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RPT-UPDATE 2-Illinois House passes sweeping pension fix in close vote

Fri May 3, 2013 12:28pm EDT

By JoAnne von Alroth

SPRINGFIELD, Ill., May 2, (Reuters) - The Illinois House of Representatives in a 62 to 51 vote on Thursday passed a comprehensive bill aimed at addressing the nation's most under funded state pension plan, a major step after weeks of legislative maneuvering had made pensions the dominant political issue in the financially strapped state.

The bill, introduced only two days ago by the powerful Democratic House Speaker Michael Madigan, now goes to the state Senate. That chamber's president is preparing a competing plan that is viewed as more favorable to the state's public-employee labor unions.

The Madigan bill, which is designed to eliminate a $96.8 billion funding shortfall over 30 years, relies on changes to retirement benefits that unions say are a violation of the state constitution. Union leaders have said they will challenge the measure in court if it becomes law, and Madigan acknowledged during floor debate Thursday that implementation likely would not move forward until courts rule on the constitutional issue.

"In my judgment, this is a critical action that must be taken now. Must be taken for future budget making. Must be taken for the fiscal well-being and reputation of the state of Illinois," Madigan said during a floor debate prior to the bill's passage. Madigan won the votes of two-thirds of the Democrats, with 40 of them voting for it and 28 against, while Republicans split nearly evenly, 22 for and 23 against.

No actuarial analysis of Madigan's measure has yet emerged, but the speaker said it would fully fund the pension system by 2044 and reduce the state's pension payment by $1.5 billion in fiscal 2015.

Several law makers acknowledged struggling with how to cast their vote. "This state is in crisis," said Republican State Representative Dwight Kay. "What we're doing today is not an easy move."

The measure now moves to the state's upper chamber, where Senate President John Cullerton, a Democrat, is circulating a union-backed plan. Cullerton has not yet released details of the new plan, which he described as being "credible and constitutional" after emerging from a closed-door meeting with union leaders on Wednesday.

A spokeswoman for Cullerton said the Senate President plans to discuss both measures with his Democratic caucus on Tuesday. Still, Madigan was optimistic his plan would pass the Senate.

"We've taken that first step in the House. My expectation is that the Senate will approve this bill," Madigan told reporters after the vote.

The state's constitution prohibits any diminishment of benefits to current and retired workers, and Cullerton has stated he believes the union plan will meet any constitutional test. Cullerton previously said he does not believe Madigan's plan can survive a constitutional challenge.

The Senate's Republican Leader Christine Radogno said "a significant number" of lawmakers from her caucus were expected to support Madigan's bill.

Madigan's measure affects four of the state's five pension funds. The speaker said the bill exempts the judges' pension fund to eliminate conflicts of interest for judges who would hear likely legal challenges to the bill should it become law.

The Madigan measure sets a cap on salaries used to determine pensions, limits cost-of living adjustments on pensions for future retirees, increases retirement ages and hikes worker pension contributions. It introduces changes to calculating the state's annual pension contributions that are designed to come closer to the actual future cost, and also exempts pension changes from collective bargaining.

After the vote, a coalition of public labor unions blasted the bill as being unfair to workers who have paid into their pension funds while the state has skipped or skimped on its payments.

"On top of that, it is blatantly unconstitutional and thus saves nothing. It simply exacerbates Illinois' fiscal problems," said a statement from We Are One Illinois. The group added that it was continuing talks with Cullerton.

Illinois lawmakers, who are in the final weeks of their spring legislative session, are under pressure to deal with the worst-funded state pension system. Pension payments are squeezing out funding for core services, while the state's backlog of overdue bills has topped $9 billion.

Credit rating agencies, meanwhile have downgraded Illinois' debt rating to the lowest level among states, and a government watchdog group has reported that pension payments along with debt service on outstanding pension bonds will amount to almost 25 percent of the state's upcoming general fund budget.

Madigan's bill contains elements similar to those in another comprehensive bill that failed to pass out of the Senate in March.

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Scottish Coal liquidators say in talks over parts of business

LONDON | Fri May 3, 2013 12:33pm EDT

LONDON May 3 (Reuters) - Liquidators for Scottish Coal, KPMG, said on Friday they were in talks regarding the possible sale of parts of the business.

The company ran out of cash last month, putting 600 jobs at risk and closing mines that are major suppliers to Britain's power stations.

"Over the last few days we have been in discussion with a variety of parties who have expressed an interest in the business or more precisely certain parts of it," accountancy firm KPMG said.

No names were disclosed.

Last month Hargreaves Services, Britain's second biggest producer of coal, raised 42 million pounds ($65.39 million) to buy rival operations and develop new mines.

Venture capitalist John Moulton's company Better Capital has been reported to be in talks to buy coal miner ATH Resources, which went into administration late last year.

Britain's coal industry is struggling to survive in the face of competition from imports and rising costs.

Its largest producer, UK Coal, said this week it was in talks with creditors to save 2,000 jobs and keep mines open that supply large utilities such as Drax, Scottish and Southern Energy and subsidiaries of E.ON and RWE.

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Mine workers union warns of strike at Patriot Coal if contract voided

By tim bross

ST. LOUIS | Fri May 3, 2013 5:51pm EDT

ST. LOUIS May 3 (Reuters) - A lawyer for the United Mine Workers of America on Friday told a bankruptcy judge it would be forced to strike if Patriot Coal Corp succeeds in voiding its contract with the union, as five days of contentious court hearings came to an end.

Attorney Fred Perillo said the union would do everything in its power to reach a consensual agreement with Patriot, which is seeking to impose $150 million a year in labor cuts.

But if Judge Kathy Surratt-States approves the proposal, which would end pension contributions, alter healthcare and lower pay rates, Perillo said a strike will follow.

"No contract, no work," Perillo said during closing arguments to cap off the hearing in U.S. Bankruptcy Court in St. Louis.

Ben Hatfield, Patriot's chief executive, said later that Perillo's remarks were ill-conceived.

"It's a poor time to be throwing out threats," Hatfield told Reuters in an interview outside the courtroom. "I think reasoned judgment will prevail when it comes to workers retaining their jobs in this environment."

Hatfield said a UMWA strike would be a replay of what happened in the bankruptcy of Hostess Brands Inc, which last year liquidated after a union strike caused it to hemorrhage money.

Judge Surratt-States has until May 29 to rule in the Patriot case.

St. Louis-based Patriot declared bankruptcy in July amid weak coal markets and heavy pension and healthcare costs, saying it needed major concessions from unions to stay in business.

Patriot has proposed ceasing pension contributions and transferring healthcare to a voluntary employees' beneficiary association, or VEBA, stocking it with $15 million in up-front cash and another $300 million in profit-sharing contributions.

It would give the union a 35 percent equity stake in reorganized Patriot, which could be sold to help fund the VEBA.

Without the cuts, the company has said it would be forced to liquidate. The union, which represents about 1,700 current Patriot workers and another 13,000 retirees and their families, has called the proposal "nowhere near" fair, and staged heated rallies in St. Louis, New York and elsewhere.

Bankruptcy laws allow companies to impose unilateral cuts to labor contracts, but only if they can show the cuts are critical to survival and that a good faith effort was made to achieve them consensually.

Before the start of closing arguments on Friday, Patriot's unsecured creditors' committee said it had withdrawn its initial objection to the 35 percent stake.

Patriot lawyer Ben Kaminetzky in his closing argument criticized the UMWA for casting the issue as a "Wall Street against Main Street" class struggle, saying Patriot did not begrudge the benefits and wages collected by union workers, but simply "cannot afford them."

Kaminetzy balked at the union's position that it has been asked to bear a disproportionate share of Patriot's cuts, saying nonunion employees have sacrificed for years while union workers have received "multiple raises."

Patriot reached consensual concessions from its non-union workers last month.

One key topic on which the union and Patriot agree is the liability of Peabody Energy, the former parent that spun Patriot off in 2007. Patriot and the UMWA have filed lawsuits seeking to keep Peabody on the hook if Patriot cannot afford to pay benefits.

The union has alleged that Peabody saddled Patriot with unsustainable legacy costs, knowing it would eventually fail.

But Kaminetzky said the union "sounds like it wants to reward Peabody with Patriot's liquidation" by resisting cutbacks that are necessary for survival.

A Peabody spokesman on Friday declined to comment, but in the past has said that the spinoff was above board.

"Patriot was highly successful following its launch more than five years ago with significant assets, low debt and a market value that more than quadrupled in less than a year," the spokesman Vic Svec said in a statement earlier this week.

The bankruptcy is In Re Patriot Coal Corp, U.S. Bankruptcy Court, Eastern District of Missouri, No. 12-51502.

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RPT-UPDATE 2-Illinois House passes sweeping pension fix in close vote

Fri May 3, 2013 12:28pm EDT

By JoAnne von Alroth

SPRINGFIELD, Ill., May 2, (Reuters) - The Illinois House of Representatives in a 62 to 51 vote on Thursday passed a comprehensive bill aimed at addressing the nation's most under funded state pension plan, a major step after weeks of legislative maneuvering had made pensions the dominant political issue in the financially strapped state.

The bill, introduced only two days ago by the powerful Democratic House Speaker Michael Madigan, now goes to the state Senate. That chamber's president is preparing a competing plan that is viewed as more favorable to the state's public-employee labor unions.

The Madigan bill, which is designed to eliminate a $96.8 billion funding shortfall over 30 years, relies on changes to retirement benefits that unions say are a violation of the state constitution. Union leaders have said they will challenge the measure in court if it becomes law, and Madigan acknowledged during floor debate Thursday that implementation likely would not move forward until courts rule on the constitutional issue.

"In my judgment, this is a critical action that must be taken now. Must be taken for future budget making. Must be taken for the fiscal well-being and reputation of the state of Illinois," Madigan said during a floor debate prior to the bill's passage. Madigan won the votes of two-thirds of the Democrats, with 40 of them voting for it and 28 against, while Republicans split nearly evenly, 22 for and 23 against.

No actuarial analysis of Madigan's measure has yet emerged, but the speaker said it would fully fund the pension system by 2044 and reduce the state's pension payment by $1.5 billion in fiscal 2015.

Several law makers acknowledged struggling with how to cast their vote. "This state is in crisis," said Republican State Representative Dwight Kay. "What we're doing today is not an easy move."

The measure now moves to the state's upper chamber, where Senate President John Cullerton, a Democrat, is circulating a union-backed plan. Cullerton has not yet released details of the new plan, which he described as being "credible and constitutional" after emerging from a closed-door meeting with union leaders on Wednesday.

A spokeswoman for Cullerton said the Senate President plans to discuss both measures with his Democratic caucus on Tuesday. Still, Madigan was optimistic his plan would pass the Senate.

"We've taken that first step in the House. My expectation is that the Senate will approve this bill," Madigan told reporters after the vote.

The state's constitution prohibits any diminishment of benefits to current and retired workers, and Cullerton has stated he believes the union plan will meet any constitutional test. Cullerton previously said he does not believe Madigan's plan can survive a constitutional challenge.

The Senate's Republican Leader Christine Radogno said "a significant number" of lawmakers from her caucus were expected to support Madigan's bill.

Madigan's measure affects four of the state's five pension funds. The speaker said the bill exempts the judges' pension fund to eliminate conflicts of interest for judges who would hear likely legal challenges to the bill should it become law.

The Madigan measure sets a cap on salaries used to determine pensions, limits cost-of living adjustments on pensions for future retirees, increases retirement ages and hikes worker pension contributions. It introduces changes to calculating the state's annual pension contributions that are designed to come closer to the actual future cost, and also exempts pension changes from collective bargaining.

After the vote, a coalition of public labor unions blasted the bill as being unfair to workers who have paid into their pension funds while the state has skipped or skimped on its payments.

"On top of that, it is blatantly unconstitutional and thus saves nothing. It simply exacerbates Illinois' fiscal problems," said a statement from We Are One Illinois. The group added that it was continuing talks with Cullerton.

Illinois lawmakers, who are in the final weeks of their spring legislative session, are under pressure to deal with the worst-funded state pension system. Pension payments are squeezing out funding for core services, while the state's backlog of overdue bills has topped $9 billion.

Credit rating agencies, meanwhile have downgraded Illinois' debt rating to the lowest level among states, and a government watchdog group has reported that pension payments along with debt service on outstanding pension bonds will amount to almost 25 percent of the state's upcoming general fund budget.

Madigan's bill contains elements similar to those in another comprehensive bill that failed to pass out of the Senate in March.

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Scottish Coal liquidators say in talks over parts of business

LONDON | Fri May 3, 2013 12:33pm EDT

LONDON May 3 (Reuters) - Liquidators for Scottish Coal, KPMG, said on Friday they were in talks regarding the possible sale of parts of the business.

The company ran out of cash last month, putting 600 jobs at risk and closing mines that are major suppliers to Britain's power stations.

"Over the last few days we have been in discussion with a variety of parties who have expressed an interest in the business or more precisely certain parts of it," accountancy firm KPMG said.

No names were disclosed.

Last month Hargreaves Services, Britain's second biggest producer of coal, raised 42 million pounds ($65.39 million) to buy rival operations and develop new mines.

Venture capitalist John Moulton's company Better Capital has been reported to be in talks to buy coal miner ATH Resources, which went into administration late last year.

Britain's coal industry is struggling to survive in the face of competition from imports and rising costs.

Its largest producer, UK Coal, said this week it was in talks with creditors to save 2,000 jobs and keep mines open that supply large utilities such as Drax, Scottish and Southern Energy and subsidiaries of E.ON and RWE.

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Mine workers union warns of strike at Patriot Coal if contract voided

By tim bross

ST. LOUIS | Fri May 3, 2013 5:51pm EDT

ST. LOUIS May 3 (Reuters) - A lawyer for the United Mine Workers of America on Friday told a bankruptcy judge it would be forced to strike if Patriot Coal Corp succeeds in voiding its contract with the union, as five days of contentious court hearings came to an end.

Attorney Fred Perillo said the union would do everything in its power to reach a consensual agreement with Patriot, which is seeking to impose $150 million a year in labor cuts.

But if Judge Kathy Surratt-States approves the proposal, which would end pension contributions, alter healthcare and lower pay rates, Perillo said a strike will follow.

"No contract, no work," Perillo said during closing arguments to cap off the hearing in U.S. Bankruptcy Court in St. Louis.

Ben Hatfield, Patriot's chief executive, said later that Perillo's remarks were ill-conceived.

"It's a poor time to be throwing out threats," Hatfield told Reuters in an interview outside the courtroom. "I think reasoned judgment will prevail when it comes to workers retaining their jobs in this environment."

Hatfield said a UMWA strike would be a replay of what happened in the bankruptcy of Hostess Brands Inc, which last year liquidated after a union strike caused it to hemorrhage money.

Judge Surratt-States has until May 29 to rule in the Patriot case.

St. Louis-based Patriot declared bankruptcy in July amid weak coal markets and heavy pension and healthcare costs, saying it needed major concessions from unions to stay in business.

Patriot has proposed ceasing pension contributions and transferring healthcare to a voluntary employees' beneficiary association, or VEBA, stocking it with $15 million in up-front cash and another $300 million in profit-sharing contributions.

It would give the union a 35 percent equity stake in reorganized Patriot, which could be sold to help fund the VEBA.

Without the cuts, the company has said it would be forced to liquidate. The union, which represents about 1,700 current Patriot workers and another 13,000 retirees and their families, has called the proposal "nowhere near" fair, and staged heated rallies in St. Louis, New York and elsewhere.

Bankruptcy laws allow companies to impose unilateral cuts to labor contracts, but only if they can show the cuts are critical to survival and that a good faith effort was made to achieve them consensually.

Before the start of closing arguments on Friday, Patriot's unsecured creditors' committee said it had withdrawn its initial objection to the 35 percent stake.

Patriot lawyer Ben Kaminetzky in his closing argument criticized the UMWA for casting the issue as a "Wall Street against Main Street" class struggle, saying Patriot did not begrudge the benefits and wages collected by union workers, but simply "cannot afford them."

Kaminetzy balked at the union's position that it has been asked to bear a disproportionate share of Patriot's cuts, saying nonunion employees have sacrificed for years while union workers have received "multiple raises."

Patriot reached consensual concessions from its non-union workers last month.

One key topic on which the union and Patriot agree is the liability of Peabody Energy, the former parent that spun Patriot off in 2007. Patriot and the UMWA have filed lawsuits seeking to keep Peabody on the hook if Patriot cannot afford to pay benefits.

The union has alleged that Peabody saddled Patriot with unsustainable legacy costs, knowing it would eventually fail.

But Kaminetzky said the union "sounds like it wants to reward Peabody with Patriot's liquidation" by resisting cutbacks that are necessary for survival.

A Peabody spokesman on Friday declined to comment, but in the past has said that the spinoff was above board.

"Patriot was highly successful following its launch more than five years ago with significant assets, low debt and a market value that more than quadrupled in less than a year," the spokesman Vic Svec said in a statement earlier this week.

The bankruptcy is In Re Patriot Coal Corp, U.S. Bankruptcy Court, Eastern District of Missouri, No. 12-51502.

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UPDATE 2-Illinois House passes sweeping pension fix in close vote

Thu May 2, 2013 7:15pm EDT

By JoAnne von Alroth

SPRINGFIELD, Ill., May 2, (Reuters) - The Illinois House of Representatives in a 62 to 51 vote on Thursday passed a comprehensive bill aimed at addressing the nation's most under funded state pension plan, a major step after weeks of legislative maneuvering had made pensions the dominant political issue in the financially strapped state.

The bill, introduced only two days ago by the powerful Democratic House Speaker Michael Madigan, now goes to the state Senate. That chamber's president is preparing a competing plan that is viewed as more favorable to the state's public-employee labor unions.

The Madigan bill, which is designed to eliminate a $96.8 billion funding shortfall over 30 years, relies on changes to retirement benefits that unions say are a violation of the state constitution. Union leaders have said they will challenge the measure in court if it becomes law, and Madigan acknowledged during floor debate Thursday that implementation likely would not move forward until courts rule on the constitutional issue.

"In my judgment, this is a critical action that must be taken now. Must be taken for future budget making. Must be taken for the fiscal well-being and reputation of the state of Illinois," Madigan said during a floor debate prior to the bill's passage. Madigan won the votes of two-thirds of the Democrats, with 40 of them voting for it and 28 against, while Republicans split nearly evenly, 22 for and 23 against.

No actuarial analysis of Madigan's measure has yet emerged, but the speaker said it would fully fund the pension system by 2044 and reduce the state's pension payment by $1.5 billion in fiscal 2015.

Several law makers acknowledged struggling with how to cast their vote. "This state is in crisis," said Republican State Representative Dwight Kay. "What we're doing today is not an easy move."

The measure now moves to the state's upper chamber, where Senate President John Cullerton, a Democrat, is circulating a union-backed plan. Cullerton has not yet released details of the new plan, which he described as being "credible and constitutional" after emerging from a closed-door meeting with union leaders on Wednesday.

A spokeswoman for Cullerton said the Senate President plans to discuss both measures with his Democratic caucus on Tuesday. Still, Madigan was optimistic his plan would pass the Senate.

"We've taken that first step in the House. My expectation is that the Senate will approve this bill," Madigan told reporters after the vote.

The state's constitution prohibits any diminishment of benefits to current and retired workers, and Cullerton has stated he believes the union plan will meet any constitutional test. Cullerton previously said he does not believe Madigan's plan can survive a constitutional challenge.

The Senate's Republican Leader Christine Radogno said "a significant number" of lawmakers from her caucus were expected to support Madigan's bill.

Madigan's measure affects four of the state's five pension funds. The speaker said the bill exempts the judges' pension fund to eliminate conflicts of interest for judges who would hear likely legal challenges to the bill should it become law.

The Madigan measure sets a cap on salaries used to determine pensions, limits cost-of living adjustments on pensions for future retirees, increases retirement ages and hikes worker pension contributions. It introduces changes to calculating the state's annual pension contributions that are designed to come closer to the actual future cost, and also exempts pension changes from collective bargaining.

After the vote, a coalition of public labor unions blasted the bill as being unfair to workers who have paid into their pension funds while the state has skipped or skimped on its payments.

"On top of that, it is blatantly unconstitutional and thus saves nothing. It simply exacerbates Illinois' fiscal problems," said a statement from We Are One Illinois. The group added that it was continuing talks with Cullerton.

Illinois lawmakers, who are in the final weeks of their spring legislative session, are under pressure to deal with the worst-funded state pension system. Pension payments are squeezing out funding for core services, while the state's backlog of overdue bills has topped $9 billion.

Credit rating agencies, meanwhile have downgraded Illinois' debt rating to the lowest level among states, and a government watchdog group has reported that pension payments along with debt service on outstanding pension bonds will amount to almost 25 percent of the state's upcoming general fund budget.

Madigan's bill contains elements similar to those in another comprehensive bill that failed to pass out of the Senate in March.

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