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IL pension reform in limbo as lawmakers mull cost shifting

By   /   May 30, 2012  /   No Comments

BREAKING: Sponsorship of the pension reform bill is being transferred to House Minority Leader Tom Cross, Speaker Michael Madigan announced at the end of Wednesday night's House budget debate. Madigan said Gov. Pat Quinn agrees with Republicans that pension costs should not be shifted to local school districts. The matter will be debated in committee Thursday morning.

By Andrew Thomason | Illinois Statehouse News

SPRINGFIELD — Republicans in the Illinois General Assembly are balking at a proposal to shift responsibility for teachers' and college employees' pensions to their schools, instead of the state.

The GOP's reticence threatens a broader attempt at state pension reform. They say the pension shift would result in either property tax spikes statewide, cuts to classroom spending or some combination of both.

“Property tax payers are looking at a potentially enormous increase. Policy-wise, it may or may not make sense, but … there are a lot of questions out, a lot of uncertainty,” Illinois Senate Republican Leader Christine Radogno, R-Lemont, said during the Senate Executive Committee on Wednesday. “We will lose votes, there’s no question we lose votes with the cost shift.”
Radogno and Republicans said they worry about a part of the proposal that would make school districts and colleges responsible for any increase in the pensions' unfunded liability — how much is owed to current and future retirees versus how much a pension system has on hand — starting July 1, 2013.
Radogno has filed legislation to strip the cost shift from the larger pension-reform proposal. Illinois House Republican Leader Tom Cross, R-Oswego, filed similar legislation in the House on Tuesday.
Proponents counter that because the shift to schools is delayed until July 1, 2013, and because it would be phased in over at least six years, the effect wouldn’t be nearly as dramatic as Republicans portend.
Illinois Senate President John Cullerton, D-Chicago, is carrying the Senate’s version of pension reform, and he even found an ally in the Illinois Policy Institute, a right-leaning think tank.
Cullerton and Collin Hitt, senior director of governmental affairs for the institute, agree the proposal wouldn’t necessarily guarantee a property tax increase for school districts.
“School districts can take on this cost, and they can eliminate other expenditures in order to offset this cost,” Hitt said.
The proposal in the Senate — and a similar one in the House — claims to eliminate the state’s $83 billion unfunded liability in 30 years, without the cost-shift measure.
Jerry Stermer, Gov. Pat Quinn’s budget director, said forcing school districts and colleges to pay employees' retirement benefits is the “responsible” thing to do. School boards negotiate teachers’ pay, which in turn determines the size of teachers’ pensions. If schools are responsible for the cost of pensions, they might be more apt to curb salary increases that lead to higher pension benefits.
“This proposal says everybody who makes decisions has to bear the responsibility,” Stermer said.
Radogno asked Stermer if Quinn would support a proposal removing the cost shift but leaving other provisions, the core of which offers employees and retirees a choice between lower cost-of-living adjustments coupled with guaranteed access to the state health-care plan, or higher cost-of-living adjustments without access to the state health-care plan.
Stermer hedged, saying the governor is considering anything that could fix the $83 billion unfunded pension liability facing the state.
The General Assembly is scheduled to adjourn by midnight Thursday.