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Study: Illinois Senate pension plan saves $26B

SPRINGFIELD – A coalition of state employee unions tried to swing support behind a labor-endorsed pension reform plan Thursday on the eve of the Legislature's scheduled adjournment, touting a new study that finds the plan would save the state far more money than originally thought.

The study by the We Are One Illinois coalition estimates that if half of employees and retirees forgo post-career health insurance as part of Senate President John Cullerton's legislation, the state's $52 billion debt in two health insurance programs would be cut in half.

Cullerton's plan essentially offers each beneficiary a choice: give up annual compounded cost-of-living increases to their retirement pay or access to state-subsidized health care. Unions believe it's fairer and Cullerton argues it has a better chance of survival than a more-restrictive one in the House that offers no such choice.

Advocates hoped the study would be a game-changer, arguing that by answering the cost question it eliminates the biggest apparent pitfall to Cullerton's plan. But with just a day left before adjournment, the House sponsor wasn't conceding anything in a fierce debate over how to solve the worst-in-the-nation pension crisis.

Northbrook Democratic Rep. Elaine Nekritz acknowledged the new savings discovery but said long-term cost reductions of her plan, favored by House Speaker Michael Madigan, far outpaced the Cullerton measure and that it "provides certainty, predictability and a sufficient solution."

The report came on a day when both chambers inched forward on the issue's edges. The House prepared legislation to impose Madigan's so-called "cost shift" of partial employer pension payments to community colleges and universities. The state pays them now.

And the Senate was discussing the possibility of advancing smaller House-approved pension measures including one that limits retirement cost-of-living increases. They're the biggest cost-driver of pension programs, which are billions in the red because of decades of state underfunding or skipped payments.

Based on an analysis commissioned by the Senate, Nekritz and her colleagues estimated last week that the $97 billion pension liability would drop by $30 billion under the House plan, and less than $6 billion under Cullerton's proposal.

Earlier this week, new numbers showed the Madigan savings at $21 billion. The Cullerton camp now says their measure saves more because they are adding $6 billion to a $26 billion cost reduction in health care

That's based on the assumptions that Nekritz made of the Senate proposal: That half of state government workers and retirees would choose to give up health coverage.

Steve Kreisberg, health policy director for the American Federation of State, County and Municipal Employees in Washington, D.C., conducted the We Are One coalition's analysis. He acknowledged that health care coverage, according to an Illinois court ruling that's been appealed to the state Supreme Court, doesn't enjoy the same protected status as pensions.

"There's also a moral obligation as well," Kreisberg said. "If people work their careers under a certain set of understandings and circumstances, they're going to make a claim that this is deferred compensation and you owe it to me."

We Are One also pointed out Thursday a warning flag by the Teachers Retirement System about the House legislation. It noted that benefits would be cut so much that public schoolteachers would qualify for Social Security in 2020 – and, with their employers, owe federal taxes associated with it, costing school districts and possibly universities billions of dollars.

Nekritz spent Thursday preparing a separate piece of the pension puzzle – ending what Madigan calls the "free lunch," but so far, only for community colleges and universities, not elementary and secondary school districts.

The House was debating the plan Thursday evening to require higher educational institutions, which have agreed to a phased-in program, to pay half of 1 percent of payroll costs toward pensions annually beginning next year until all costs are shifted from the state. Republicans fear it will result in higher local property taxes.

Cullerton and his Democratic caucus were huddled behind closed doors, deciding whether to go through with a committee vote on Madigan's plan. But members were also discussing taking votes on smaller pension bills, pieces that came from the House in early spring when Madigan was testing support for his comprehensive approach. Cullerton said he didn't know if the three bills would generate enough savings to stand alone as reform.

The Senate approved parts of a new state budget and sent them to Gov. Pat Quinn Thursday. The $35.4 billion general-revenue spending plan avoids spending cuts to education for the first time in at least four years.

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The bills are SB2404 and SB1.

Online: http://www.ilga.gov

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Contact AP Political Writer John O'Connor at https://www.twitter.com/apoconnor

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Associated Press writers Sophia Tareen and Sara Burnett contributed to this report.

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