Illinois pension reform debate begins in House

As lawmakers prepared to vote on Illinois' pension reform plan Tuesday, a busload of Chicago teachers headed to Springfield to make their voices heard.
December 3, 2013 2:38:56 PM PST
The Illinois House has started debating a major overhaul aimed at addressing Illinois' $100 billion pension crisis.

The measure is estimated to save roughly $160 billion over three decades. House Speaker Michael Madigan opened floor debate Tuesday afternoon.

Illinois has the nation's worst-funded state pension systems.

Legislative leaders announced the agreement last week. The bill would cut benefits for workers and retirees and raise the retirement age. It's opposed by labor unions, who say it's unfair and unconstitutional.

Union members have protested the measure saying it's unfair to retirees.

As state lawmakers prepared to take a vote on the Illinois pension reform plan Tuesday, a busload of workers from Chicago headed to Springfield to make their voices heard.

The changes proposed in the legislation would affect thousands of people. Gov. Pat Quinn said he supports the plan, but opposition has been mounting. About 50 Chicago Public Schools teachers who are against the plan left from Chicago's West Side at approximately 6:20 a.m. They said they believed the plan was unfair, and they want lawmakers to hear their concerns.

The proposed bill would save Illinois taxpayers $160 billion over 30 years by trimming retirement benefits of state employees and raising the retirement ages.

It purportedly reduces retiree cost-of-living adjustments and allows current workers voluntary 401ks. Although Chicago teachers technically would not be affected by the current bill, because their pensions are funded differently, they are afraid that their retirement accounts are next on the chopping block.

"We want to support other unions whose pensions are placed under attack. I'm here because I realize that if this is allowed to happen to them, the Chicago teachers will be next, and we are already feeling that the mayor has already asked that we be included in this pension bill, and we are absolutely opposed to that," bus passenger and Chicago teacher Patricia Boughton said.

Opposition to the bill comes from both sides of the aisle. Some Republicans say the bill does not do enough, and some Democrats say they don't want to mess with the pensions of state employees.

"This plan is a bunch of smoke and mirrors. It sounds good but when you get into it you see that the changes we so desperately need just aren't there," said Christina Rasmussen, Illinois Policy Institute.

State Rep. Mike Tryon says the state constitution explicitly does not allow pensions to be diminished or impaired.

"You can't just prepare a solution on public policy regarding pension and throw the constitution out," said Tryon.

However, there is some support.

"I feel like members feel like this is a reasonable compromise," said State Rep. Elaine Nekritz, D-Buffalo Grove.

Nekritz said she was cautiously optimistic. Meanwhile, Republican Ron Sandack - a longtime believer in pension reform - is encouraged that Democrats finally get it.

"We can't change financial future and prospects without pension reform," said State Rep. Ron Sandack, R-Downers Grove.

On Monday, Illinois lawmakers, most of whom had not yet read the bill, did not appear concerned they'd be asked to vote on it within 24 hours.

"Uh, we're pretty quick readers around here!" said State Rep. Dan Burke, D-Chicago.

"Every item in this bill is either something we've talked about previously or a distant cousin of something we've talked about previously," said State Rep. Lou Lang, D-Skokie.

"It's packaged a little bit differently but none of the component parts are new or novel," said Nekritz.

The House-Senate Conference Committee that wrote most of the bill met Tuesday morning. They will conduct a brief hearing then send the bill to both the House and the Senate at the same time.

Madigan: Pensions overhaul is 'balanced' bill

Madigan says a major pension overhaul is a well thoughtout and balanced bill that deserves the support of the chamber.

The Chicago Democrat opened debate Tuesday on legislation aimed at solving Illinois' nearly $100 billion pension crisis.

The bill is estimated to save $160 billion over thirty years. It calls for pushing back the retirement age on a sliding scale and would cut benefits for workers and retirees.

Several unions have opposed the bill calling it unfair and unconstitutional.

However, Madigan says it's not a one-sided bill and the changes are needed.

He says state resources that could be used for other things have been going toward pensions.

How proposed pension deal could affect retirees

Public employees could see significant reductions in long-term retirement income under a proposed bill that Illinois legislative leaders are pushing as a way to solve the worst-in-the-nation pension crisis. One of the biggest cuts would come from a change in annual cost-of-living adjustments. The proposal would change the COLA increase from the current rate of 3 percent compounded annually on the full annuity benefit. Retirees instead would receive increases at that rate only up to a certain amount of annuity benefit.

The Center for Tax and Budget Accountability has developed a formula to calculate estimated changes in retirement income over the years if the bill passes, based on the best information available right now, pension specialist Amanda Kass said.

Here are three scenarios:

Employee 1: Retired teacher, 30 years of service
Initial annual benefit: $67,000
Annual pension benefit after 20 years of retirement: $120,680 a year under the current pension system; $91,000 under the proposed changes
Cumulative 20-year decrease: $282,632

Employee 2: Retired Department of Children and Family Services caseworker, 20 years of service
Initial annual benefit: $50,000
Annual pension benefit after 20 years of retirement: $90,306 under current system; $63,000 under proposed changes
Cumulative 20-year decrease: $261,215

Employee 3: Central Management Services data processor, age 43, planning to retire in 15 years with 30 years of service
Initial annual benefit: $72,000
Annual pension benefit after 20 years of retirement: $130,000 under current system; $85,400 under proposed changes
Cumulative 20-year decrease: $441,700

Public-employee labor unions called the plan unfair and unconstitutional and were continuing their efforts to kill it. Dan Montgomery, president of the Illinois Federation of Teachers, said it would severely cut the retirees' benefits and could only be described as "theft."

"How can you do this to the good people who serve our state?" Montgomery said.

Nine of the 10 members of a bipartisan pension conference committee signed off on the deal late Monday, sending it to the floors of both the House and Senate, where votes were expected later Tuesday. But passage in those Democrat-controlled chambers is not a sure bet. The committee's chairman, Sen. Kwame Raoul, said Senate President John Cullerton was still working to ensure "yes" votes Tuesday morning.

Illinois' unfunded pension liability was caused primarily by lawmakers who failed for decades to make the state's full payments to the funds.

A number of cities and states have dealt with similar pension troubles, but the Illinois' General Assembly has notably lagged behind in finding the political will to deal with its ballooning financial problem. Meanwhile, the major credit rating agencies downgraded Illinois to the lowest credit rating of any state in the country, and annual pension payments grew to about one-fifth of the state's general funds budget, taking money away from schools, roads and other areas.

The pension proposal is estimated to save the state $160 billion over 30 years and fully fund the systems by 2044.

It would push back the retirement age for workers ages 45 and younger, on a sliding scale. The annual 3 percent cost-of-living increases for retirees would be replaced with a system that only provides the increases on a portion of benefits, based on how many years a beneficiary was in his or her job. Some workers would have the option of freezing their pension and starting a 401(k)-style defined contribution plan.

Also included in the plan is language to prevent "pension abuses," as nongovernment employees such as union bosses couldn't participate and new hires wouldn't be able to bank sick or vacation time to boost pensions.

Gov. Pat Quinn and other supporters on Monday stressed the importance of the vote, saying approving the legislation is a crucial step toward improving Illinois' disastrous financial situation. Quinn, a Chicago Democrat, planned to travel to the state Capitol and meet with as many legislators as possible to try to get them to vote yes.

"I think (this is) the most important fiscal vote that will ever be taken by the General Assembly in my lifetime," he said Monday at an unrelated event. "We need to erase the liability and move Illinois forward. That's what I'm committed to and I think everyone who is interested in the future of Illinois, the common good, what's good for taxpayers should join us in urging a yes vote."

Others have said the plan doesn't cut benefits enough, while some critics say legislators and the public haven't had sufficient time to review and analyze the legislation.

Tuesday's vote is scheduled to occur one day after the deadline for candidates to file with the state board of elections to run in the 2014 primary - timing that could give some lawmakers concerned about a primary challenge the freedom to vote in favor of the bill.

It's also a big vote politically for Quinn, who has made fixing the pension problem his top priority and is seeking another term next year. Just one of his three potential Republican challengers, Sen. Bill Brady, has said he supports the bill.

The Associated Press contributed to this report.


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