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Article updated: 2/21/2013 9:01 AM

Proposal: Extend income tax hike to pay for pensions

By Mike Riopell

SPRINGFIELD -- State Rep. Lou Lang Wednesday proposed extending the state's 2011 income tax hike to pay for Illinois' rising yearly payments for teachers' and state workers' pensions.

The Skokie Democrat's controversial plan makes him among the first state lawmakers to publicly call for extending the 2 percentage point tax increase. And his plan to cut the state's rising retirement costs now joins the growing pile of ideas on how to address the problem.

Among other things, Lang's proposal would have teachers and other workers pay 3 percent more of their salaries toward retirement and would raise the retirement age to 67.

It also would slowly shift the cost of teachers' pensions onto suburban and downstate schools, an idea that could cost them millions in the long run but eventually save the state billions of dollars per year.

"The fact remains that the General Assembly should not be responsible for these costs," Lang said.

Lang's proposal would refund to taxpayers any money from the income tax increase that isn't needed to make the state's yearly payment into retirement funds.

Lang argued his plan is less likely to face a credible constitutional lawsuit than other proposals, such as a popular one pushed by state Rep. Elaine Nekritz, a Northbrook Democrat. And as such, his plan would cut judges' pensions, unlike previous efforts.

Nekritz said she appreciated that Lang put a new proposal out for debate for the next several months.

"There's certain things I obviously disagree with," she said.

Nekritz said that the money from the state's tax increase already goes toward pensions. The state's yearly payment into retirement systems is rising toward $7 billion in the next several years, and the income tax hike brings in about that much.

"To limit it to pensions does create some other fiscal challenges," she said.

And Senate President John Cullerton, who has his own competing idea, left the issue once again open for negotiations.

"The negotiating table is large enough to accommodate many of the ideas in Representative Lang's proposal," said Cullerton spokeswoman Rikeesha Phelon. "The Senate President will be reviewing them in concert with ongoing discussions on his legislation."

Gov. Pat Quinn backs Cullerton's plan, which would offer workers and teachers a choice between taking a smaller pension or losing state-subsidized health insurance.

Lang's income tax extension is likely to face near-unanimous opposition from Republicans, some of whom have wanted to roll back the state's tax hike immediately, not extend it.

And many suburban Democrats campaigned on letting the income tax expire in January 2015, too.

In fact, state Rep. Marty Moylan, a Des Plaines Democrat, Wednesday announced legislation to roll the hike back immediately. It's likely a political impossibility to do so, but Moylan's legislation is an indication of the fight over taxes to come.

In the meantime, late last week, state Sen. Linda Holmes, an Aurora Democrat, released a plan that has been publicly backed by the Illinois Federation of Teachers -- perhaps the first time a major proposal has received such union support.

"In large part, this fair, constitutional bill provides a path to paying down the pension debt that, as you know, neither workers nor our modest retirement benefits are responsible for causing," Illinois Federation of Teachers President Dan Montgomery wrote in a letter.

Union leaders haven't yet weighed in on Lang's plan.

Holmes' legislation, which counts Republican state Sen. Pamela Althoff of McHenry as a supporter, would guarantee the state's share of pension payments every year and ask every teacher, state worker and university employee to pay 2 percent more of their salaries into retirement funds.

Holmes said that guarantee is the key.

"We just want to make sure we're absolutely obligated," she said.

In the past, lawmakers have shorted their payments into retirement funds. And that's a key reason why the state faces nearly $100 billion in pension debt now.

A similar guarantee is in other plans, too, including Lang's.

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