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Time runs out for ‘perfect’ Illinois pension reform plan

By   /   January 7, 2013  /   3 Comments

By Benjamin Yount | Illinois Watchdog

SPRINGFIELD — Not even the authors of Illinois’ latest pension reform proposal are in love with the idea.

State Rep. Elaine Nekritz, D-Northbrook, says the plan to tweak cost-of-living adjustments and increase employee contributions is “not an ideal solution.” State Rep. Dan Biss, D-Evanston, said the reform package is “not perfect,” but he pleaded with lawmakers to find some way to “support this legislation.”

The public employee unions that don’t want Illinois legislators to overhaul the pension system downright hate the plan.

SOLEMN OATH: IFT head Dan Montgomery accused lawmakers of “vioating” their oath of office

Illinois Federation of Teachers’ chief Dan Montgomery accused lawmakers of “plunging ahead with an illegal plan that, from our point of view, violates your oath of office.”

Illinois AFSCME boss Henry Bayer told lawmakers they are trying to take away what has been “earned and is owed” to public employees.

But with time quickly running out in the lame-duck session, the less-than-perfect pension proposal is headed for a Tuesday vote in the Illinois House. Lawmakers have until noon Wednesday, when a new Legislature is sworn-in, to send a pension reform proposal to Gov. Pat Quinn.

The latest plan would freeze COLAs for all workers and retirees for six years. Once reinstated, they would only apply to the first $25,000 of a retirees’ income, and workers would have to wait until age 67 to receive a COLA bump. Public workers would also be required to pay more for their retirement benefits. But the plan does not include a cost shift that would have local schools and governments pick up more of the cost.

Illinois’ largest public employee unions — the Illinois Federation of Teachers, the Illinois Education Association, the American Federation of State, County and Municipal Employees and the Service Employees International Union — are warning lawmakers that any reform to which the unions do not agree would be met with a lawsuit. Illinois’ constitution specifically protects public pensions.

Instead of benefit reductions, the unions want lawmakers to raise taxes on corporations to pay for Illinois’ $93 billion to $130 billion pension gap.

The IEA’s Klickna wants to raise taxes rather than have teachers pay more for their retirements.

“We don’t have a benefit problem,” said Cinda Klickna of the IEA. “We have a revenue problem.”

Illinois’ pension woes go back years and can be partially blamed on lawmakers and governors who did not make the state’s full pension payment.

But House GOP Leader Tom Cross, R-Oswego, said the time for finger-pointing has ended.

“Many of the people … that are going to complain about this solution didn’t mind when the General Assembly didn’t make payments” said Cross. “Because at the same time, more money was going to pay raises or a state contract.”

Bayer of AFSCME accused Cross and other lawmakers of trying to put the pension burden on the “backs of workers.”

But Laurence Msall, president of the Chicago-based Civic Federation, said all taxpayers are bearing the brunt of Illinois’ worst-in-the nation pension crisis.

“Our taxes are going, and will increasingly go, to pay debt and not (for) current services,” said Msall.

The Civic Federation estimates that by 2045, 60 percent of state money will go toward pensions.

CRISIS: Msall, with the Civic Federation, says Illinois pension debt is squeezing out other state spending.

Msall and other business leaders say it will be difficult to persuade businesses to move or expand in the state because of uncertainty over taxes.

The pension-reform proposal now faces a fast-approaching deadline and an uncertain future.

The Illinois House is expected to vote on the plan Tuesday. Leaders in the Senate have said they will call lawmakers back to Springfield as well Tuesday, if there is something to vote on.

The 98th General Assembly will be sworn-in at noon Wednesday.

Contact Benjamin Yount at Ben@IllinoisWatchdog.org

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  • http://www.facebook.com/paul.rainwater2 Paul Rainwater

    I’ve worked for 22yrs and these lame duck members of the General Assembly are going to screw up everything just to rush something through that isn’t well thought out. Had they made the damn payments like they were supposed to instead of giving money to the Cook County crowd, we might not be in this problem now.

  • Mongolia3

    “We don’t have a benefit problem,” said Cinda Klickna of the IEA. “We have a revenue problem.”

    Really?
    The IFT and IEA teacher unions were perfectly happy when Illinois Governors increased teacher pensions from 1971 – 2011. The pension hiking escalated after the pension protection clause was added to the Illinois State Constitution at the 1970 Constitutional Convention.
    Here are some sample Teachers Retirement System of Illinois (TRS) benefit increases signed into state law from 1971 – 2011.
    – Retirement age for full benefits decreased 20%
    (66 to 55).
    – Years worked for full benefits decreased 36% (33
    to 44).
    – Maximum sick day accumulation increased 300% (90
    days to 360 days).
    – Accrual rate increased 46% (1.5% to 2.2%).
    – Cost of Living Allowance (COLA) increased 100%
    (1.5% not compounded to 3% compounded).

    The cost to fund those increases came mainly from the State of Illinois contribution to TRS (thus taxpayers), just a few percent contribution increase from teachers/administrators and a tiny contribution of far less than 1% from school districts.
    Here’s how a TRS teacher and administrator pension is calculated.
    Years of Service x Accrual Rate = Factor.
    Factor x Average Last 4 years Pay = Starting Pension.
    Starting Pension x COLA = Next Year’s Pension.

    Here’s how much the accrual rate and COLA increases affected pensions.

    The accrual rate increase, increased starting pensions by over 40%.
    The COLA increase, increased the amount a $50,000 starting pension would grow to over 25 year period (teacher retires at 55 and lives until 80) from $68,000 to $101,640, a 49% increase.
    Note percentage increase is a different calculation than simply dividing one number into another.
    Note there are many nuances to TRS pensions.
    For instance employees beginning employment in 2011 or after receive reduced benefits in what’s called Tier II.

  • Mongolia3

    I meant to say years worked for full benefits decreased 36% (45 to 33).

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