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posted: 3/26/2014 5:00 AM

Editorial: Scrap extra municipal pension payment

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Should a controversial program that gives municipal retirees an additional yearly payment that cost taxpayers $41 million last year continue?

At least one suburban legislator says no, and we are pleased that a House committee has approved her bill.

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That didn't come without compromise, however. State Rep. Deborah Conroy, a Villa Park Democrat, agreed to amend her bill so that current retirees will not be affected and future retirees earning less than $40,000 a year also will be unaffected.

Given that initially there was little discussion about compromise in order to fix what's been known as the 13th payment, it's a good sign for Conroy's bill.

"I think there were some who are unaware of it," she told the Daily Herald's Jake Griffin about how she drafted the legislation after reading his initial report last month. "The reality of it is we can't continue to sustain our system this way."

And that's really the bottom line. Changes need to be made, despite potential challenges. This is another example of a system that provides more than it should or was designed to do. And, as Conroy pointed out, it's also an example of a cost that many of the people who are charged with cleaning up the state's financial mess were unaware of.

The 13th payment is a stipend paid to beneficiaries each year with money collected from participating tax-supported agencies. It's paid every July in addition to the monthly checks from the Illinois Municipal Retirement Fund and is based on the amount of a beneficiary's June pension and its relation to the total amount of pensions paid that month.

While the average amount paid is not a lot -- $343 -- some received as much as $7,659. The program was started in the 1990s as a compromise between labor groups and employers after other pension programs started compounding annual cost-of-living increases. But the IMRF still would have an annual 3 percent cost-of-living increase even if the 13th payment is eliminated.

IMRF Executive Director Louis Kosiba said the payment was "a form of deferred compensation intended to help offset inflation." He was particularly upset with the notion the payment was a bonus.

It may not be a "bonus," but it is an unnecessary burden on local governments. Suburban counties paid between $376,000 and $971,000 for the 13th payment last year, for example.

"There are municipalities that are struggling greatly," Conroy said. "This would allow them funds for things that they don't have money for."

Kosiba's argument that it would be unconstitutional to change retirement payments may have been mollified by the compromise approved Tuesday. If not, let the courts decide if something is unconstitutional.

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