SPRINGFIELD --- Over strong union protests, the Illinois House’s top two party leaders won preliminary approval today of far-reaching pension changes that would reduce the benefits for many public workers throughout the state, including Cook County and Chicago.
Government workers would get to choose from three different options: Keep the same level of benefits and pay more, pay nothing more and get less in benefits, or enroll in a 401k-styled retirement plan.
House Speaker Michael Madigan, D-Chicago, joined Minority Leader Tom Cross, R-Oswego, in testifying that Illinois must address the “severely underfunded” pension systems that are owed $80 billion, a debt so deep that it competes with spending on essential government services.
“Every time a dollar leaves the legislature and goes over to the state pension systems, that’s a dollar not available for education, for social service programs and for whatever else the legislature chooses to appropriate the spending of money,” Madigan said.
The speaker said he was “fully supportive” of the legislation that moved to the House floor, hailing it as “forward looking.”
But Madigan conceded at one point that supporting the politically volatile legislation “will not be for the faint of heart.”
Cross, the measure's main architect, acknowledged his proposed three-tier pension plan is a “very scary topic” because it impacts the lives of teachers, university workers, rank-and-file state employees, state lawmakers and most city of Chicago and Cook County employees.
Chicago and downstate fire and police were exempted. So were county and city workers outside of Chicago who are members of the separate Illinois Municipal Retirement Fund, which has about 90 percent of its debt covered, officials said.
The five retirement systems covering state government have less than 40 percent of their debt covered, a problem that ranks Illinois as one of the worst of the worst funded of any state.
“We can’t run from it,” Cross said.
The state’s pension systems put a strain on overall state funding when annual payments are made at the current level of $4.5 billion a year, Cross said. He warned that payments could grow to $20 billion a year by 2045. That’s when the state hopes to have the pension systems at the 90 percent funding mark. He estimated his three-tier plan could reduce that $20 billion expected payment by half.
Ken Swanson, outgoing president of the Illinois Education Association, challenged the proposal, saying the problems exist because “our pension systems have been used as a credit card” by politicians who have shirked their responsibilities to make adequate payments into retirement payments for decades.
One provision that “troubled” Rep. Karen May, D-Highland Park, was that the out-of-pocket payments eventually could go up if workers opt to pay more now in order to maintain their current level of pension benefits when they retire.
In particular, she questioned why the worker payments would be based on a percentage of an employee’s salaries for the first three years and then recalculated every three years. She called the three-year review a “last-minute wrinkle” and voted against the bill in the House Personnel and Pensions Committee.
No one would lose any of the benefits they earned up to the point when the legislation would become law, but future benefits would drop.
The bill advanced to the House floor on a 6-2 vote, with one lawmaker, Rep. Dan Biss, D-Evanston, voting present.
Rep. Elaine Nekritz, D-Northbrook, supported the legislation, saying the state needs to use “every arrow in its quiver” to reduce the pension debt.
Former Illinois Attorney General Ty Fahner, a Republican who serves as president of the Civic Committee of the Commercial Club, supported the legislation, saying 95 percent of Illinois citizens are paying for the costly state pensions. But he said those growing expenses for people who get state pensions “simply crowd out” state support for the needs of many more. He dismissed as “nonsense” the arguments of opponents who contended the move was an assault on worker rights.
Disagreeing was Henry Bayer, who heads AFSCME Council 31, the union that represents the largest portion of state workers. He charged the captains of industry who belong to the Commercial Club get astronomical salaries and pensions. And he maintained it would take 1,000 years for a state worker making typical $23,000 a year pension to make as much as the annual retirement benefits of industry big shots.
“Those are the people who are telling us our pensions are too high,” Bayer said.
Bayer dismissed charges that he is creating “class envy,” and he maintained the legislation is unconstitutional because it breaks a guarantee in the Illinois charter that says pensions cannot be diminished.
Lobbyist John McCabe testified against the legislation on behalf of the pension funds Cook County government and the Forest Preserve District. He said the changes could hurt employees because they may face skyrocketing payments every three years, calling the bill’s provisions an “almost a reckless attempt to fix this.”
Six Cook and Chicago public employee plans would be covered, including the one for Chicago schoolteachers.
The changes in the state pension systems would begin July 1, 2012. The city of Chicago and Cook County funds falling under the changes would begin Jan. 1, 2013. Judges would fall under the new provisions following their next election, pending approval of an amendment attaching the judicial system.