Details emerging on proposed pension deal
New details were released Friday on a proposed pension deal that would prorate the size of teachers’ and state workers’ yearly pension increases based on how long they work.
Also under the proposed legislation, the retirement age would go up for most public employees. It would lower how much workers pay toward their own retirements and leave the state vulnerable to a lawsuit if it doesn’t pay its share.
Illinois’ legislative leaders briefed other lawmakers Friday on details of a breakthrough agreement for solving the state’s $100 billion pension crisis, leaving them four days to study the plan before facing a vote that could be crucial for the state’s financial condition and their own re-elections.
A memo detailing the proposal says the plan, which saves $160 billion over 30 years, would allow the state’s pension systems to be fully funded by 2044.
The plan under consideration would:
Ÿ Replace automatic, annually compounded 3 percent cost-of-living increases for retirees — considered the biggest driver of the state’s pension costs — with a new system than links adjustments to how long someone has worked, resulting in smaller annual adjustments for the highest earners.
Ÿ Increase the retirement age for workers 45 and under on a sliding scale, depending on a worker’s current age.
Ÿ Have workers contribute 1 percent less toward their retirements. Teachers’ current share, for example, is now 9.4 percent.
Ÿ Set a cap on how much salary can count toward calculating a pension. That cap will be $109,971 for 2013.
Ÿ Allow some workers to freeze their pensions and join a 401k-style plan.
Ÿ Mandate the state to contribute its yearly share to the pension systems or risk being sued.
Ÿ Prevent nongovernment employees from participating in the system and keep new hires from banking sick or vacation time to boost pensions.
They’ll soon hear from workers.
Public-employee unions are lobbying against this latest measure, saying they were left out of negotiations and that the cuts are unfair to workers who contributed their share to the retirement funds for years, while the state did not. They also say the plan violates a provision of the state Constitution that says pension benefits may not be reduced.
The Illinois Education Association and Illinois Federation of Teachers will demonstrate outside select lawmakers’ offices in the suburbs to voice their displeasure, “just to make sure everyone understands these hardworking employees are against it,” IEA spokesman Charlie McBarron said.
Because the latest proposal has been agreed to by Republican and Democratic leaders in both the House and Senate, the plan represents the closest lawmakers have been in years to addressing the state’s pension debt.
Gov. Pat Quinn is on board, too, but lawmakers could get pulled in a few different directions before Tuesday’s session in Springfield.
Beyond pressure from organized labor, conservatives say the benefit cuts don’t go far enough and the plan hasn’t been properly vetted.
“No legislation has been released. No financial analyses have been released,” said Illinois Policy Institute CEO John Tillman said. “But of the details that have been shared, it is clear this `deal’ will not solve Illinois’ $100 billion pension crisis. In fact, it will make it worse.”
Lawmakers worry they don’t have enough time to digest the plan.
State Sen. Michael Noland, the Elgin Democrat, said he was hoping for feedback from union members and residents in his moderate suburban district.
“I’m not sure I’ll be able to gather that in the two or three days that we’re given,” Noland said.
“I still frankly don’t know what the bill is I’m going to be looking at,” state Sen. Melinda Bush, a Grayslake Democrat, said Wednesday in the hours before the deal was struck.
State Rep. David McSweeney, a Barrington Hills Republican, said he was “undecided” and will spend the next few days reviewing the proposal.
“I want to support a real pension reform bill, but I need to get all my questions answered,” he said.
Supporters say most of the provisions have been debated in some form over the years, so this new combination shouldn’t be difficult to understand.
Suburban schools won’t have to pay more toward teachers’ retirement, though, a provision that’s long been debated.
The so-called cost-shift didn’t make the final cut despite House Speaker Michael Madigan’s insistence the state stop paying for the retirements of workers it doesn’t employ.
The opposition of suburban and downstate lawmakers to their school districts paying more helped squash the idea over the years, even though Chicago schools already pay for teachers’ pensions.
State Rep. Elaine Nekritz, a Northbrook Democrat, said the idea was quickly abandoned in search of a compromise.
“That was one of the first things that came off the table,” she said.
Madigan spokesman Steve Brown, however, said Madigan believes the idea still “has to be a central part of the equation” and could come up in the future.
If lawmakers approve the new proposal Tuesday, union leaders are likely to sue immediately, putting the next chapter of the debate in the hands of the courts.
Still, taking the issue off their to-do lists could put lawmakers’ focus on Illinois’ many other budget issues. The 2011 income tax increase drops at the end of next year, so the budget they’ll craft in the spring of next year already faces major questions.
Ÿ Daily Herald wire services contributed to this report