State Government

Frustrated Illinois lawmakers pitch pension fix

SPRINGFIELD – Rank-and-file lawmakers frustrated by slow progress and finger-pointing offered their own solution Wednesday to Illinois' multibillion-dollar pension crisis, saying legislators must take a new approach to the problem before the state is sent into "financial oblivion."

Rep. Elaine Nekritz, chairwoman of the House pension committee, was joined by more than 20 colleagues – including a handful of Republicans – in introducing the legislation on the final day of the fall veto session.

The Northbrook Democrat said the proposal included things each of them don't like, but that it has more support and momentum than any pension effort she has seen.

"We must continue to push this issue forward and not let excuses get in the way of progress," Nekritz said.

The proposal would reduce cost-of-living increases for retirees and require workers to contribute more to their retirement. Younger employees would have to work longer, and some costs for teacher pensions would gradually shift to school districts. That cost shift has stalled previous negotiations, with Republicans and some Democrats saying it would force districts to make severe cuts or raise taxes.

The plan also includes a guarantee that Illinois will meet its funding obligations, and allows for court action or intercepting of other state funds if the obligations aren't met.

The state's pensions are currently $95 billion underfunded – the worst shortfall of any state in the nation. Yet lawmakers have been unable to resolve the crisis despite years of negotiations and a failed special session called by Gov. Pat Quinn. Meanwhile, the cost of meeting the state's obligation has continued to grow, putting pressure on the rest of the budget.

Quinn has listed pension reform as his top priority, and he and legislative leaders in both chambers have said they hope to have an agreement before Jan. 9. That would allow dozens of lawmakers who weren't re-elected in November to vote on a bill before a new crop of legislators is sworn-in.

But there has been little visible progress on any plan proposed by Quinn or leadership.

David Harris, R-Arlington Heights, encouraged legislative leaders Wednesday to get behind the new proposal, saying officials from both sides of the aisle agree a solution is needed, even if they disagree on how the problem got so bad.

"I think there is a genuine frustration on the part of many members of the legislature that there has not been meaningful negotiation, meaningful progress on this most serious issue until now," Harris said.

A spokeswoman for Quinn called the proposal a "welcome contribution" and said the administration is looking more closely at the numbers. But Senate President John Cullerton said he's concerned the measure may be unconstitutional because it imposes unilateral reductions of pension benefits. He said his office will take a closer look at it.

Nekritz said there's no way to tell how the Supreme Court would rule on the issue. She also said guaranteeing pension obligations will be met — and eliminating the risk of future insolvency — may sway justices.

For employees hired before 2011, the proposal would apply cost-of-living adjustments to only the first $25,000 of an employee's pension, or only $20,000 for employees eligible for Social Security. It also would delay the increases until the employee turns 67 or until five years after retirement, whichever comes first.

The retirement age would be increased by one to five years for everyone 45 years old or younger, while workers age 46 and older would see no change in the age requirement. Employees also would have to contribute 1 percent more to their retirement in the first year the law is in effect, and 2 percent more each following year. And the amount of salary that counts toward determining the amount of a pension would be limited.

Teachers and university employees hired since 2011 would be put into a cash balance plan, which would guarantee a minimum defined benefit while allowing local districts to negotiate the cost of the benefit with their employees.

The plan also limits lawmakers' pension increases.

On one of the more controversial issues — shifting costs for teacher pensions to local districts — the plan calls for a slower phase-in than in previous proposals. Under the plan, colleges and universities would assume costs at a rate of 0.5 percent of payroll per year.

Rep. Daniel Biss, D-Evanston, a former math professor who co-authored the plan, said he's confident it will have "extremely significant savings," though the state's actuaries haven't crunched the numbers yet.

Nekritz said lawmakers introduced the plan Wednesday so that analysis can occur over the next few weeks, and the plan can be refined into legislation that has a chance of success. She said she has spoken with House Speaker Michael Madigan, D-Chicago, to inform him of the proposal, and that if the actuarial analysis works out and enough lawmakers are on board, she "can't imagine that it wouldn't be called" for a vote in the House.

The plan being negotiated last spring from Quinn and Democratic legislative leaders had called for reducing the state's annual pension costs by cutting pension benefits, despite union opposition. It also limited the 3 percent cost-of-living increase for retirees, compounded annually, to 3 percent or half the rate of inflation, whichever is lower, and the increases would not be compounded.

But supporters of the new plan called that and other previous proposals "one-size-fits-all" approaches that don't take workers into consideration.

The bill is HB6258

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