UPDATED 04/20/12 1:04 p.m.

SPRINGFIELD, Ill. (CBS) — Gov. Pat Quinn announced a pension plan Friday that he says will fix the state’s overtaxed and underfunded public pension system.

Quinn says the proposal will secure public workers’ retirement, while fixing years of fiscal mismanagement of the system. He says it will save the state $65 billion to $85 billion.

“Unsustainable pension costs are squeezing core programs in education, public safety and human services, in addition to limiting our ability to pay our bills,” Quinn said in a news release.

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“This plan rescues our pension system and allows public employees who have faithfully contributed to the system to continue to receive pension benefits. I urge the General Assembly to move forward with this plan, which will bring a new era of fiscal responsibility and stability to Illinois.”

Under the new plan, employee contributions will rise 3 percent, cost-of-living adjustments will be modestly reduced, and increase the retirement age to 67 in a new rule to be phased in over the next several years. The plan will also limit public pensions to those who actually work in the public sector.

The program will also establish a 30-year “closed” actuarially-required contribution schedule to create a stricter system for funding.

Currently, the state pension systems are underfunded by $83 billion.

Quinn said rolled out his plan on the heels of another major budget-relief announcement on Medicaid health programs. He wouldn’t comment Thursday on what the pension announcement includes.

Quinn moved forward on his pension fix plan after a bipartisan group of lawmakers failed to agree on a complete plan.

Lawmakers have noted that some proposed changes must pass a test that pension benefits not be unconstitutionally diminished. A coalition of union groups that represent pension-covered employees declined comment Thursday but stressed in a statement last week that solutions must be constitutional and fair to public employees.

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