Pension plan a wedge issue in race to replace State Sen. Duffy
A proposal to reduce the state's pension load by letting new retirees take their retirement in one lump sum is favored by one of the three Republican candidates vying to replace state Sen. Dan Duffy in Springfield this fall.
Dan McConchie, a Hawthorn Woods resident and one of three Republicans running for the GOP nomination in state Senate District 26, supports the proposal, which gives retirees the option to immediately receive 75 percent of what the state expects they'd earn through their pension over the rest of their lives.
He compares it to a lottery winner's choice of taking the jackpot in payouts over many years, or taking a reduced lump sum payout all at once.
During his budget address this week, Gov. Bruce Rauner said the state is paying the equivalent of an 8 percent interest rate on the pension liability, an amount that McConchie says could be cut in half if new retirees select a lump sum, since new state bonds could have an interest rate as low as 4 percent.
"We already owe the money," McConchie said. "Why wouldn't we want to take a 25 percent discount off our long-term pension obligations and reduce the interest rate on that money from 8 percent to 4 percent?"
Martin McLaughlin, the mayor of Barrington Hills, said he opposes House Bill 4427, proposed by state Rep. Mark Batinick of Plainfield, because it would require the state to borrow money to make the lump sum payouts.
Batinick said his bill has received bipartisan support and has been sent to the house's personnel and pensions committee.
"That idea won't fly," McLaughlin said. "Good luck going to the public and tell them once again that we are going to go borrow money to bail out the budget system, because it's worked so well in the past."
McLaughlin, who owns an investment advisory firm and oversees the investment of public and private pension assets, said he doubts Illinois could get an interest rate as low as 4 percent for its bonds. The proposal doesn't address the structural problems of the state's pension system, he added.
McLaughlin said he prefers new workers enroll in a 401(k)-style plan, as does fellow candidate Casey Urlacher.
"This is like the big cloud hanging over us, the pension reform," said Urlacher, the mayor of Mettawa. "I agree with Marty on the 401(k). This is a great first step so I believe we move in that direction."
The 26th state Senate district covers 253 square miles that include large portions of central and southwest Lake County, as well as parts of northwestern Cook County, northeastern Kane County, and southeastern McHenry County. The district includes parts of Libertyville, Lake Zurich, Cary, Algonquin and the Barrington area.
The winner of the primary between McConchie, McLaughlin and Urlacher at this point has no opponent in November's general election. No Democrat filed to run for the seat, which Duffy has held for eight years, and the party has not named a candidate.