Local schools the sticking point in pension debate
SPRINGFIELD -- After months of discussion and speculation, a written plan emerged Tuesday to transfer millions of dollars in retirement costs to suburban schools and cut pension benefits of working and retired teachers, but Republican opposition left its future in question.
Now, lawmakers have two days before their budget deadline to keep trying to pass the bill, craft a different one or put pension reform off until sometime in the future.
The move to saddle local schools with more expenses proved to be the sticking point. The bill, written by Democrats, would have suburban and downstate schools take over the state's share of teacher pension funding, phasing in the shift beginning in 2013-2014.
Suburban Republicans, including House Republican Leader Tom Cross of Oswego, led the charge against that portion of the bill and accused Democratic House Speaker Michael Madigan of being willing to scuttle all pension reform over their disagreement on this one element.
An Illinois House committee approved the sweeping pension reform plan by a 6-3 vote Tuesday, but in the end it was not called for a vote by the full House.
Pension costs have increased sharply in recent years, cutting into how much money the state has for other things and raising questions about whether the troubled state retirement systems could stay solvent long-term.
"At some point soon, we face true calamity," said state Rep. Elaine Nekritz, a Northbrook Democrat who sponsored and voted for the plan.
The Democrats' plan would:
• Make local schools pay for the cost of teachers pensions going forward, starting with schools paying an additional 1 percent of teacher payroll costs in each of six years beginning in 2013-2014. Local school districts would also assume future liability created by investment losses.
• Guarantee the state pay its share of pension costs every year. Delinquency in doing this over decades has largely caused the state's pension mess.
• Cut a yearly cost-of-living pension increase for current and future retirees, targeting the single biggest factor in rising pension costs.
Two suburban lawmakers on the committee, state Reps. Darlene Senger of Naperville and Tom Morrison of Palatine, voted against the plan. Both said that while they want to reform the state's pension system, they don't back the proposal to move costs to suburban schools.
Republicans largely agree with the benefit reductions but won't go along with the cost shift to local schools, stalling the plan in the House so far. They have offered a compromise, eliminating the cost shift to local schools but requiring school districts to pick up some pension costs associated with end-of-career raises.
Now, districts have to pay for pension boosts resulting from any end-of-career raises of more than 6 percent a year. Pension amounts are tied to an employee's final years of salary.
House Republicans would lower that to zero, meaning school districts would be on the hook for any pension boosts resulting from raises in a teacher's final years of work.
It's unclear if House Democrats would eventually compromise with that plan or continue to push forward their own, but they rejected a chance to debate it Tuesday.
Meanwhile, an Illinois Senate committee is scheduled to hear a proposal this morning that would break the proposal into three parts -- dealing with public schools, universities and community colleges, and state employees.
But splitting the systems up could create a scenario where lawmakers could cut benefits for state and college workers and put off public schoolteacher reforms until later. While public schools have balked, college and university officials have reluctantly signed on to the plan to take over pension costs for their employees from the state.
Cross lashed out at Madigan Tuesday, arguing Madigan's insistence on making local schools pay more is holding up the benefit cuts that could save the state money.
Cross blamed the longtime House speaker for being at the helm of Illinois government as the state's financial problems have grown.
"Maybe you need to take responsibility, Mr. Speaker, for your actions," Cross said.
"For the last 40 years, you have had your fingerprints on the mess we have," Cross said.
Madigan, of Chicago, responded calmly.
"I don't plan to respond in kind," he said.
"Let's not get swept up in the emotion of the minute," he added later.
Changes debated Tuesday would affect teachers, state workers, university employees and state lawmakers. It excludes judges, the people who likely would eventually rule on whether the whole package is legal.
Nekritz backs having local schools pay more, saying that schools shouldn't be able to give teachers raises without having to be responsible for the resulting pension costs.
"That misalignment in our public policy has created a lot of trouble," she said.
State Rep. Karen May, a Highland Park Democrat, said she would have liked to have some time to talk to suburban school districts about what this will mean to them. Lawmakers are racing toward their deadline for adjournment on Thursday.
"How do I call a town-hall meeting when I'm here 24/7 for a couple days?" May said.
It's not clear how much more the suburban schools would have to pay under the current proposal once it fully matures. Estimates over many months have ranged from 4 to 10 percent added to payroll costs. Some supporters say that number would fall over time as pension benefits become less costly as a result of changes made in 2010.