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updated: 8/23/2013 6:41 PM

Possible pension fix could save $145 billion

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Associated Press

A bipartisan panel tasked with solving Illinois' multibillion-dollar pension crisis is considering a framework that could save the state about $145 billion over 30 years, largely by ending automatic 3 percent cost-of-living increases for retirees.

The Associated Press on Friday obtained an outline of ideas being considered by the 10-person committee, whose members have said they are making progress on an issue that has vexed the legislature for years.

Sen. Kwame Raoul, a Chicago Democrat and the committee's chairman, acknowledged the outline but said the document is preliminary and the panel is not ready to issue a final recommendation.

"The committee has not come to a consensus," Raoul said. "Our work is not done."

But the outline is the most detailed information disclosed to date of what the committee is considering or how much savings any proposal on the table could achieve.

It calls for setting retirees' annual cost-of-living increases at half the rate of inflation, though it would set both floors and caps -- which were not included in the outline -- for what the rate could be. That formula would likely equate to smaller adjustments than the current 3 percent increases, compounded annually.

Unlike previous proposals that would have required employees to contribute more to their own retirement, the outline calls for workers to pay in 1 percent less. It also does not increase the retirement age, as has been previously proposed.

Those elements are an apparent attempt to improve the odds any proposal could survive a legal challenge. They also could make a plan more palatable to public-employee unions and legislators who have said earlier attempts at pension reform went too far.

But the document does suggest retirees' annual pension benefits could be based on their salary over their career, rather than on the higher amount they're making right before they retire. It also calls for the state to put extra money into the retirement funds starting in 2019, when it has paid off its pension bonds.

It would reduce the state's nearly $100 billion unfunded pension liability by about $18.1 billion and fully fund the retirement systems within 30 years, the document states.

Illinois has the nation's worst-funded public employee pensions, mainly because for years lawmakers voted to skip or short the state's contributions. This year the state's payment to the funds is about $6 billion, or nearly one-fifth of the general fund budget -- an amount that has led to cuts in funding for areas such as education and public safety and increased the pressure on legislators to come up with a deal.

Lawmakers voted in June to create the conference committee after reaching an impasse over two rival pension plans -- one advanced by House Speaker Michael Madigan and the other by Senate President John Cullerton, both Chicago Democrats. Madigan's plan would have saved Illinois about $187 billion over 30 years, while the savings in Cullerton's plan -- which was backed by the state's public-employee unions -- were estimated at $47 billion over the same time frame.

The unions have said Madigan's plan and others like it that impose across-the-board cuts violate a provision of the Illinois Constitution that states pension benefits can't be reduced. They've also said they will file a lawsuit to stop any proposal they believe violates the constitution.

A spokesman for We Are One Illinois, a coalition of public-employee unions, did not immediately respond to a request for comment Friday.

If or when the committee recommends a plan, it would have to be approved by the legislature and Gov. Pat Quinn.

Rep. Elaine Nekritz, a Northbrook Democrat and the pension panel's vice chairwoman, said the committee is still looking at options. "No one has signed off yet on the details," she said.

Last month Quinn halted lawmakers' pay because they hadn't come up with a solution. Madigan and Cullerton sued, saying Quinn's line-item veto of the state budget was unconstitutional.

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