SPRINGFIELD – Illinois House Speaker Michael Madigan sought Tuesday to tackle the pension crisis through a single piece of legislation that would require government employees and teachers to contribute more toward their retirement but receive fewer benefits in return.
The proposal changes some provisions for benefits that have received House approval – both more generous and more restrictive. And it leaves out a contentious plan for shifting some pension costs to local school boards, which the Chicago Democrat has referred to as a “free lunch.”
Years of underfunding five state pension programs has left the state $97 billion short of what it needs to cover promised pensions for all current and retired workers. Lawmakers have wrestled for years with the problem but it’s now costing taxpayers $6 billion a year, crowding out crucial services such as education and public safety.
Madigan’s proposal ties together ideas that previously received individual debate and approval through a late-winter vetting process on the House floor. Now those ideas, supporters say, become a one-stop shop for pension reform, rather than disparate fixes requiring separate legislative approval. The bill is scheduled for a committee vote Wednesday morning.
“It’s a solution that fixes the problem,” said Brooke Anderson, spokeswoman for Gov. Pat Quinn, who said the
Democrat wants to see House passage and Senate consideration as soon as possible.
In moving the pension debate into high gear, Madigan replaced language in legislation sent to the House by Senate President John Cullerton, removing Cullerton’s plan for offering affected state-government employees and teachers a choice of benefits instead of unilaterally reducing them.
Cullerton, another Chicago Democrat, insists pension reform will only pass a court test of constitutionality with choice – in his plan, between reduced cost-of-living increases or subsidized health care in retirement.
The Madigan plan takes on the constitutional question with a unique, nine-page preamble laying out the state’s financial crisis and actions lawmakers have taken to try to fix it.
“We do need to lay out the case for the Supreme Court as to why this amendment is necessary,” said Rep. Elaine Nekritz, a Northbrook Democrat who has been a House leader on pensions. She said she had input on the Madigan plan but “it’s significant that he has brought this forth himself.”
Several Madigan proposals have received House OK – mostly in a plan negotiated by Nekritz and House Republican Leader Tom Cross – but have a new twist. The highest salary on which a pension could be based would be about $110,000, instead of the $113,700 Social Security guideline. That salary would increase by only have of the rate of inflation each year.
But cost-of-living increases on retirement benefits could be more generous. Instead of basing COLAs on the first $25,000 of an annual pension, it would be 3 percent of $1,000 for each year of service. So someone working 30 years would do better than under past proposals.
The Madigan plan would bring the systems to full funding by 2044. Spokeswoman Sara Wojcicki Jimenez said Cross was reviewing the plan Wednesday but that he “welcomes any sort of comprehensive look at pension reform.”
Cullerton continues to “build consensus for a constitutional plan,” spokeswoman Rikeesha Phelon said. She pointed out that the Cross-Nekritz plan, which is similar Madigan’s approach, fell seven votes short of passage in the Senate; she acknowledged that opinions might have changed since that March 20 vote because of “increased urgency.”
Other parts of the Madigan plan remain unchanged from those proposed by Nekritz and Cross.
They include a promise that starting in 2020, the state will contribute an additional $1 billion annually to the pension funds, reflecting the retirement of bonds sold to borrow money for pensions. The final, $952 million payment is due in 2019.
And the bill would guarantee that the state would make the payment it owes each year – determined by actuaries – or the officials that operate the individual pension systems could file a lawsuit.
Madigan has been adamant that the reform answer include an end to the “free lunch” for local school boards, who have their employer portion of teacher pension contributions paid by the state. But the idea has not received universal approval; suburban Republicans fear local property taxes will increase. Nekritz said it’s possible Madigan would introduce separate legislation later to address the question.