The Illinois House and Senate passed the bill Tuesday, a major overhaul aimed at addressing Illinois' $100 billion pension crisis. The measure is estimated to save roughly $160 billion over three decades.
Opponents of the pension reform deal, approved by the Illinois legislature, are considering a legal challenge to the legislation. Many of those who pay into the retirement system, like suburban teachers, face the possibility working longer and receiving less money in their retirement.
"When I put my money into a system I expected to get it back," said Cathy Frederickson, special education teacher.
For 27 years, Frederickson has been teaching, inspiring and changing the lives of students. She's a special education teacher at Homewood-Flossmoor High School. The pension deal this week has thrown her retirement planning upside down, and likely extended her career.
"It kind of beats you down a little bit. You get burnt out. And I always said to myself, I don't want to be that teacher coming into the classroom, just doing my time," said Frederickson.
Frederickson had hoped to retire in 12 years, but it may now be more like 15. She anticipated receiving a pension of $75,000 in her first year of retirement. Now she estimates it'll be more like $70,000.
Sounds like a lot until you remember many teachers contribute 8-10% of their salaries to the teacher's retirement system. Many also won't receive social security. The last hope for state workers lies here in the state supreme court. Their unions will argue the Illinois Constitution guarantees their pension benefits.
"I think it's necessary for the economic good of the people of our state and I think the court will see it that way," said Gov. Pat Quinn.
If the pension changes hold, state workers everywhere will be doing just as Cathy Frederickson, and reworking a retirement plan they "thought" was as good as guaranteed.
"Now I'm going to think about where I need to move because I won't be able to afford taxes in this district, I won't be able to afford my mortgage if I retire in 12 years as planned," said
The Illinois Constitution says state employee pensions are "a benefit which shall not be diminished or impaired."
Backers of pension reform are expected to argue the system is so underfunded it's already impaired and the new law actually makes the pension promise stronger.
It's worth mentioning that Chicago Public Schools teachers have a separate pension fund not affected by this new law.
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.
Joann Washington-Murry monitors the placement of kids in foster care and adoption for the state. It's a job that's given her a lot of joy in the last 20 years. And she thought a good pension as well.
"I was hoping to retire in four years and now I may have to rethink that," said Washington-Murry.
Washington-Murry expected to retire with a $25,000 a year pension. Under the new law, her union estimates she'll lose $1,042 of that per year. Over 20 years, it adds up to more than $81,000 in lost pension benefits.
"That's a part of the mortgage, the food, the lights, the gas, it's everything my pension will help pay in my retirement," said Washington-Murry.
An average retired teacher with 30 years of service received an initial benefit of $67,000 a year. After 20 years retired, the current program gives that teacher just over $121,000 annually. The new system brings it down to a little more than $91,000.
What do state workers gain in all of this? For one: The promise of politicians more fully funding their pensions.
"The pension funds, which are the last safeguards for people who have pensions, now have a right to sue the state if the state doesn't make it's contributions," said Lawrence Msall, Civic Federation of Chicago.
"I do not trust them to do what they say because their history shows they cannot honor agreements they sign," said Washington-Murry.
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
The Associated Press contributed to this report.