Ill. pension cost shift accord proposed
SPRINGFIELD – The top Illinois House Republican and the Democrats’ pension point person proposed another solution Wednesday to the state’s public retirement system debacle, one that signals the GOP’s first concession toward shifting teachers’ pension costs to local school districts.
Minority Leader Tom Cross of Oswego and Rep. Elaine Nekritz, a Northbrook Democrat, suggested moving the state out of funding retirement for schoolteachers and university employees, maintaining defined-benefit accounts supplemented by a 401(k)-style, defined-contribution system.
If signed into law, the idea would reduce the state’s annual contribution to five employee pension accounts by $2 billion, reduce the $96 billion funding shortfall by 30 percent, and reduce the deficit within three decades, according to Cross and Nekritz, who were joined by about a dozen other representatives and senators at a news conference outside the House chamber.
The pitch was made on the eve of a House session scheduled by House Speaker Michael Madigan, D-Chicago, to allow open floor debate on four pension ideas. They include elimination of pension cost-of-living increases, an apparently extreme measure that Madigan put forth as a serious potential remedy because “there’s a huge problem,” spokesman Steve Brown said.
“Everything’s serious,” said Brown, “and it’s just, keep working on the issue until we can find a majority of the Legislature willing to pass a bill and send it to the governor.”
As for the Cross-Nekritz offer, Brown said Madigan was encouraged by the first indication by Cross that he would support the so-called “cost shift,” transferring from state taxpayers to local boards of education the employer portion of pensions for schoolteachers – who Madigan notes are “nonstate employees.”
Senate President John Cullerton embraced the Cross-Nekritz idea but will also continue pursuing a proposal that he believes is constitutional because it offers annuitants a choice of post-career benefits, a spokeswoman for the Chicago Democrat said. That concerns Nekritz, who doesn’t believe that Cullerton’s ideas save enough money.
A coalition of public-employee unions called “We are One Illinois” rejected the new twist put on Nekritz’s idea as a proposal that “defies the Constitution and diminishes benefits unilaterally.”
Cross and Nekritz trumpeted their solution and pointed to its bipartisan, bicameral support – Senate Republican Sue Rezin of Morris attended the announcement, along with Sen. Daniel Biss, an Evanston Democrat who as a House member last fall worked with Nekritz on the initial idea.
“Thirty years from now, if you’re retired, and live to 90, you will have a pension check coming in the mail, and this thing will be solved in 30 years, solid, 100 percent,” said Rep. Darlene Senger, a Naperville Republican.
The new bill recycles Nekritz’s and Biss’ propositions from fall. It requires state employees to contribute an additional 2 percent of their salaries toward pensions by July 2014, generally delays cost-of-living increases until age 67, and applies COLAs only to the first $25,000 of an annual pension.
The new part involves teachers and university employees hired beginning next year. They would begin in a system in which they contributed 4 percent toward a traditional, defined-benefit plan and 5 percent to a defined-contribution plan, which the public pension systems would invest in the market. School boards and universities would take over the employer portion by paying at least 3 percent toward the system.
School districts, backed by Cross and other Republicans, have been reluctant to embrace the cost shift because they contend the state already underfunds schools and additional pension costs would require increased local property taxes.
Ben Schwarm of the Illinois School Management Alliance, representing public school administrators and school boards, said he didn’t know the new plan’s details but said if the employer portion was based solely on what education boards negotiate with teachers, legislative plans were moving in the right direction.
The House discussion scheduled Thursday will focus on four amendments to two “shell” bills – devoid of language – that Madigan introduced.
The amendments aim to solve the pension crisis in a variety of ways, including: eliminating cost-of-living increases; prohibiting COLA payouts in years when the pensions are not funded at 80 percent or more of the total they owe; requiring employees hired after January 2011 to pay an additional 5 percent toward their pensions on top of other contributions; and penalizing retirement before age 67 with reduced benefits.