House Passes Speaker Madigan’s Pension Reform Plan
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SPRINGFIELD, Ill. (AP) – The Illinois House approved a plan Thursday that would tackle the $97 billion shortfall in the state’s retirement system by increasing employee contributions and decreasing benefits, the first victory for across-the-board pension reform in four years of debate.
Shepherded by House Speaker Michael Madigan, the House voted 62-51 on a plan he says would reduce the liability by $30 billion and fully fund by 2044 the systems for state employees, university workers, and primary-school teachers.
“This obviously does not meet every request. This obviously does not make everyone happy,” the Chicago Democrat said during more than an hour of floor debate. “We’re all familiar with the severe fiscal problem of the state and the fiscal problems of the pension systems are a large part of that problem.”
The plan largely resembles a blueprint negotiated by Democratic Rep. Elaine Nekritz and House Republican Leader Tom Cross. But Madigan put some zing into the debate by introducing his language, pushing it through a committee vote over labor leaders’ objections and ushering it off the House floor, all in about 48 hours.
Years of underfunding by past governors and General Assemblies — including Madigan, a House member since 1971 and a leader for three decades — led to a pileup of debt in five public-employee pension accounts, which now are nearly $100 billion short of what they need to cover all current and retired workers.
At its base, the plan requires employees to pay 2 percent more of their salaries toward pensions and reins in cost-of-living increases, tying COLAs not to the pension they earn each year, but to a cap $1,000 for each year of service. Pensions may be paid on a total salary of $110,000, a limit that increases by half the rate of inflation each year and retirement is delayed for people aged 45 or younger.
No one argued it was an easy vote, but it was historic, Nekritz said, both in terms of its breadth and its message.
“We are putting necessity ahead of political expediency and doing the right thing over the easy thing,” the Northbrook Democrat said.
Employee unions’ main complaint about “reform” has been that pension contributions have continued to come out of individual worker paychecks without fail, even while the state skimped.
“If I’m a state worker, if I’m a teacher, a university worker, I have every right to be mad as hell. I’ve done everything you’ve asked me to, dutifully … with every expectation that what I was promised when I started was going to be there … ,” said Cross, who’s from Oswego. “We have no choice. We have to move forward today.”
If enacted immediately, the plan would reduce the amount the state owes its pension programs by about $1.8 billion next year. But no one is counting on that savings yet because officials expect a lawsuit over the plan’s constitutionality. So Gov. Pat Quinn must still build in an expected $6 billion pension payment, an amount that has grown tremendously in recent years as the state attempts to catch up with past underfunding.
Quinn and others have capitalized on the monstrous pension debt and the way it “crowds out” available money for education, health care and public safety.
“Illinois is closer than ever to addressing a decades-long problem that is plaguing our economy, our bond rating and the future of our children” Quinn said in a statement after the vote.
Madigan’s legislation omits two key elements. First, it leaves out what he has called the “free lunch” for school boards that have had their portion of teacher pensions paid by the state. Madigan says he’ll bring that in later legislation but feared including it in the big package would cost the votes of suburban Republicans who fear resulting local property-tax increases.
And the bill only addresses four of the five pension systems: state employees, university professionals, teachers and legislators, excluding the separate pension account for judges. Madigan has not explained why, but supporters have hesitated to include the judiciary because it will be judges who decide the program’s legality.
The 1970 state Constitution prohibits pension benefits, which it considers a contract, from being impaired or diminished. Nekritz said one means of convincing the state Supreme Court that the legislation abides by that dictum is a nine-page preamble to the bill. It describes the state’s desperate financial condition and the steps lawmakers have taken to address it, from raising the income tax in 2011 by 67 percent to setting up a reduced-pension program for new employees beginning in 2010.
Opponents were unconvinced.
“Rather than work within the mandate of the Constitution legislators have sworn to uphold, today’s General Assembly is dangerously close to violating the very law that governs Illinois’ legal stability,” Illinois Retired Teachers Association executive director Jim Bachman said in a statement.
Other worker representatives, such as labor unions, apparently are focusing on the Senate, where President John Cullerton, a Chicago Democrat, has insisted that only a constitutionally sound pension plan leave the Capitol. He believes that is achieved by offering pensioners a choice between, for example, choosing subsidizing health insurance in retirement or continued, compounded cost-of-living increases.
That outline has gotten Senate approval twice in as many years, but not from the House. Madigan used the latest version as his vehicle for Thursday’s bill. Cullerton signaled Wednesday that he had heard a “credible, constitutional” answer from labor leaders, but no one has yet detailed the plan.
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