By Jamey Dunn
Thousands of Illinoisans could lose long-term federal unemployment benefits at the start of the new year.
Congress is currently trying to work out a budget deal that both parties can live with, and the long-term benefits may be on the chopping block. The benefits kick in after the typical 26 weeks of state benefits run out. Currently, the maximum time frame over which benefits are allowed, including Illinois benefits and the federal benefits combined, is 73 weeks. The extension was signed into law by former President George W. Bush in 2008 at the beginning of the recent recession.
According to the Illinois Department of Employment Security (IDES), if Congress does not vote to continue the benefits, 80,000 people in the state would lose benefits in January. Those benefits total $25.6 million each week. The average weekly benefit to an individual is $320 and the largest possible benefit is $562. The 109,00 Illinoisans currently collecting state benefits would not be affected immediately, but 36,000 of them would qualify for the federal benefits if they do not find jobs in the first quarter of next year.
U.S. Rep. Paul Ryan, a Republican from Wisconsin, and U.S. Sen. Patty Murray, a Democrat from Washington, have been working to reach a deal that would set the spending numbers for a federal budget, and the unemployment benefits are reportedly on the table. The federal government shut down for more than two weeks in October, after lawmakers could not reach a budget agreement. Some Republicans held out on budget votes because they wanted to halt or delay the rollout of the Patient Protection and Affordable Care Act. The shutdown ended after Congress voted to fund the government through January 15.
U.S. Sen. Richard Durbin, a Democrat from Illinois, said he hopes the benefits would be included but said it is not a deal breaker at this point. Durbin told CNN that the benefits might be addressed in a separate bill. "From my understanding, that's more between [House] Speaker [John] Boehner and (President Barack Obama) at this point,” he told CNN. Boehner has said he is open to approving a continuation of the benefits.
An estimated 1.3 million would lose benefits nationwide. Continuing the program would cost projected $25 billion. Supporters say that while the country has technically recovered from the recession, continuing high unemployment rates and the large numbers of long-term unemployed people across the country indicate that the benefits are still needed. “While today’s job growth allows most newly unemployed individuals to find work after a several weeks, the long-term unemployed face additional hurdles,” IDES Director Jay Rowell said in a prepared statement. “Ending this modest program based on a calendar date rather than economic principles and job skills could slow economic growth.”
But those who are opposed to continuing the program argue that the feds must step down the spending that was justified by the country’s economic collapse. “These have been extraordinary extensions, and the Republican position all along has been, we need to get back to normal here at some point,” U.S. Rep. Tom Cole, a Republican from Oklahoma, told ABC News. “I don’t see much appetite from our side for an extension of benefits. I just don’t.”
Tuesday, December 10, 2013
By Jamey Dunn
By Jamey Dunn
The major bond rating agencies are having mixed reactions to changes to Illinois' public employee pension systems that were approved and signed into law last week.
Standard & Poor’s rating services upgraded its outlook on the state’s borrowing from “negative” to “developing.” However, the state retains its A- rating from the agency. According to S&P, the new outlook means that the agency could raise or lower the state’s rating in the next two years. “The change reflects the consensus reached on pension reform, which we believe could contribute to a sustainable path to fiscal stability,” S&P credit analyst Robin Prunty said in a prepared statement. “Although we view the consensus achieved by Illinois on this difficult issue as positive from a credit standpoint, the developing outlook reflects the implementation risk — legal and budgetary — associated with various provisions of the pension reform, as well as the overall structural budget challenges facing the state.” The new outlook comes as Illinois is planning to sell $350 million in general obligation bonds later this week.
Gov. Pat Quinn highlighted the change as a positive byproduct of the pension cuts that lawmakers approved and he signed into law. “I am pleased the ratings agencies are recognizing that Illinois is moving in the right direction,” Gov. Quinn said in a prepared statement. “As I’ve always made clear, one of the many reasons to resolve Illinois’ pension crisis was the negative impact it had on our bond rating, which cost taxpayers more money to finance critical repairs and improvements to roads, bridges and schools. This improved outlook will be the first of many positive developments towards a revitalized and stronger Illinois.”
But a change in outlook does not constitute much positive forward motion for the state, especially given how much of a beating Illinois’ credit has taken in recent years. The two other major rating agencies, Moody’s and Fitch Ratings, both issued positive statements about the new law. But neither has opted to adjust the state’s rating or outlook. Both said they would analyze the law to determine the extent of its fiscal impact. Supporters say it will save $160 billion and fully fund the pension systems by 2043.
Public employee unions are expected to bring a lawsuit against the state because they say the pension cuts violate the state’s Constitution, which contains an explicit protection for retirement benefits. “[Senate Bill 1] won’t save a penny. The bill is unconstitutional, so it’s savings are an illusion. It’s only going to cost the state time and money and kick the can down the road all over again,” said a statement from the We Are One Union coalition. Moody’s said in a brief analysis issued after the bill passed last week, that it would be able to factor the changes in the new law into the state’s credit rating if and when they are upheld by the courts.
All three rating agencies acknowledge that the state is facing other budget issues besides pension reform, including the loss of billions of dollars of revenue when the temporary income tax increase sunsets. The tax rate begins stepping down in 2015. Fitch’s said that the state must address some of its budget challenges to hang on to its current rating, which is the lowest in the country. “In addition to action on pensions, maintenance of the rating will require timely action on a more permanent budget solution to the structural mismatch between spending and revenues in advance of the expiration of temporary tax increases.”
Monday, December 09, 2013
Sunday, December 08, 2013
Saturday, December 07, 2013
Seventy-two years ago today was a date which has lived in infamy. The video below shows the only color film of the attack on Pearl Harbor.
Thursday, December 05, 2013
By Jamey Dunn
Gov. Pat Quinn today signed sweeping public pension changes passed by lawmakers earlier this week.
Hard-fought bipartisan compromises of this nature are usually signed with fanfare and speeches from lawmakers who helped make it happen. That was not the case today with Senate Bill 1. Quinn signed the legislation during a private ceremony in Chicago this afternoon.
SB 1 will reduce annual cost-of-living adjustments for retirees and base them on a formula that is tied to inflation. It will also require workers younger than 46 to work longer for full benefits. Some annual COLAs would be deferred for current employees upon retirement. The number of years an employee must skip the COLA is contingent on years of service. The plan caps pensionable salary at $109,971, but that number would increase annually based on inflation. The provision would not apply to employees who already earn more than the cap. Workers will contribute one percentage point less of their salaries toward retirement benefits. The law also allows pension systems to sue if lawmakers opt to skip out on the annual payment. (For a more detailed rundown on what the law does, see this post.) The proposal is projected to save $160 billion and fully fund the systems by 2043.
Quinn, who once said he was put on Earth to address the woefully underfunded pensions systems, issued a short statement thanking the legislative leaders, all the members of the pension conference committee and other legislative supporters of the bill. “Illinois is moving forward,” Quinn said in a written statement. “This is a serious solution to address the most dire fiscal challenge of our time.”
While there were no public speeches, some legislative leaders took their victory laps in their statements, which were included in the governor’s news release. “The bill would not have passed without me. I was convinced that standing fast for substantial savings, clear intent and an end to unaffordable annual raises would result in a sound plan that will meet all constitutional challenges," House Speaker Michael Madigan said. “With today’s bill signing we have staved off a greater crisis,” Minority Leader Jim Durkin said. “I am proud many of the significant components are Republican ideas generated by the conference committee, and my predecessor through Senate Bill 1.” Former House Minority Leader Tom Cross had been a key player in pension negotiations over the years. However, he voted against SB 1. Cross left his leadership role in the legislature to run for state treasurer.
Senate Minority Leader Christine Radogno applauded the bipartisan efforts that produced the final compromise. “This is a major step forward in putting Illinois on the path to financial recovery,” Radogno said. “It is the result of bipartisan, bicameral negotiations, after a great deal of debate and discussions. It will demonstrate to the credit rating agencies and job creators that we are serious about turning Illinois around.
Senate President John Cullerton gave some credit to Quinn. “I applaud the governor for prioritizing this issue,” he said. “I look forward to working with him and all legislative leaders to ensure that we continue on this path of fiscal leadership and bipartisan cooperation.”
The measure will go into effect in June of 2014, but the next stop for the law will likely be the state’s court system. Pension benefits are protected by Illinois’ Constitution, and union leaders say the law violates that protection.
“Gov. Pat Quinn has given hundreds of thousands of working and retired teachers, nurses, police, caregivers, first responders and others no alternative but to seek justice for retirement security through the judicial system. Contrary to his belief, every Illinois citizen loses today,” said a statement from the We Are One union coalition. “Senate Bill 1 is attempted pension theft, and it’s illegal. Once overturned, its purported savings will evaporate, and the state’s finances and pension systems will be left in worse shape. Our coalition has been consistently in contact with our attorneys, and today we directed them to prepare to file suit. We will challenge SB 1 as violating the Constitution and ask for a stay of the legislation's implementation pending a ruling on its constitutionality.”
Tuesday, December 03, 2013
By Jamey Dunn
After years of debate and several failed attempts, the Illinois General Assembly passed changes today to the state’s pension systems for public employees.
After holding simultaneous floor debates, the Illinois House and Senate voted within minutes of each other to approve a new version of Senate Bill 1. The plan is the product of a special conference committee on pensions and negotiations among legislative leaders. Gov. Pat Quinn said he plans to sign the bill, which he called a “bipartisan victory for the people of Illinois.” Quinn, who voluntarily stopped taking pay until the bill was passed, said that after he signs it, he will look into picking up his back checks. “Today, this day, will always go down in history as the day that the people of Illinois through their elected representatives and senators took action for the future. The people have won. We have all won.”
The proposal is projected to save $160 billion over 30 years and fully fund the pension systems, which are currently underfunded by an estimated $100 billion, by 2043. It would reduce annual cost of living adjustments (COLAs) for current and future retirees. The bill would apply differently to employees and retirees, depending on how long they worked and which retirement system they belong to. The current COLAs are 3 percent compounding interest. Under the new SB1, the COLA would be determined by 3 percent of pension benefits or 3 percent of the product of years served multiplied by $800 for state employees or $1,000 for teachers and university employees. The COLA would be based on whichever number result is smaller. The numbers used in the formula, $800 and $1,000, would increase along with the Consumer Price Index. Some annual COLAs would be deferred for current employees upon retirement. The number of years an employee must skip the COLA is contingent of years of service.
Employees younger than 46 also would have to retire later. For each year an employee is younger than 46, an additional four months would be tacked onto the time he or she would have to work to receive full benefits. The proposal would also cap pensionable salary at $109,971, but that number would increase annually based on inflation.
The bill would reduce the employee contribution toward retirement benefits by one percentage point and allow the systems to sue the state if it does not make its required payment. However, lawmakers could vote to change the payment schedule and reduce the annual payment. The state would contribute 10 percent of the savings from the plan toward the unfunded liability starting in 2015. The state would also contribute an additional $1 billion after borrowing that was used to make pension payments in the past is paid off.
House Speaker Michael Madigan made his goals for pension changes clear during floor debate today. “We’re here today discussing the issue because of the cost, and what we want to do is get cost savings as a result of this bill.” Madigan said he did not call a union-backed proposal, Senate Bill 2404, for a floor vote in the House because it would not have produced enough savings. He said that the House had set the “high bar of achievement” when it passed an earlier version of SB 1 last spring. That proposal would have saved an estimated $163 billion. The plan failed to gain the needed votes to pass in the Senate. Madigan said that he was “severely criticized” for not allowing the SB 2404 to to be called in the House after it passed in the Senate. But he said today that he did not call it because he wanted to “shape the issue” and give people time to understand the difference in cost savings between the bills. He also wanted lawmakers “to understand that our goal is to achieve the most cost savings feasible as a result of the legislation.”
Madigan said that pensions had become “too rich” to be sustained, and that he and Republican leaders hoped to keep the savings from any new proposal near to those that would have been achieved by the previous SB 1. Madigan also said today that he believes COLAs, the biggest cost driver among the pension benefits, are not protected by the state’s Constitution. The speaker said that a smaller portion of the savings in the new version of SB 1 would be derived from benefit cuts. Under the old bill, almost two thirds of the savings were reductions, but under the new plan, the unfunded liability reduction would be split about half and half between cuts and additional funding.
Opponents argued that the issue is about more than the bottom line. “If this were only about picking the bill that saves the most money, we’d all pick the bill that saves the most money,” said Sen. Toi Hutchinson, an Olympia Fields Democrat. “It’s about taking people’s retirement benefits right when they need them the most, after they’ve worked hard and earned those benefits.”
Aurora Democratic Sen. Linda Holmes, the only member of the conference committee who did not support the bill, said that the plan was akin to theft. “I don’t know how there’s one person here with any understanding of business, with any understanding of contracts, who can sit there and say what we’re doing is right. This is wrong.” Homes and Hutchinson both said that the bill violates the state’s constitutional protection of pension benefits. That provision says: “Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”
Hutchinson said of the constitutionality of SB 1: “I’m not a constitutional lawyer. I’m really not. But I can read, and it’s in the Constitution.”
Supporters of the bill say that the reduction in employee contributions and the funding guarantee offer a consideration in exchange for the benefits that would be reduced. The idea behind their argument is that under contract law, a benefit could be reduced if something else of value is offered as a consideration for the reduction. However many argue — including Senate President John Cullerton at one time — that employees would have to agree to the swap for it to pass muster. Cullerton’s SB 2404 would have offered employees choices between COLA reductions or state-subsidized health care in retirement.
Not all who voted in favor of the law today say they are certain that the bill is constitutional. However, they say that the crisis is too big to ignore. “The legislative process involves compromise. When it comes to pension reform, a compromise was found at the intersection of policy and political feasibility. The General Assembly stumbled at this intersection for years. Now, it’s time to move forward and allow the courts to rule on the constitutionality of our approach,” Cullerton said in a prepared statement.
Chicago Democratic Sen. Kwame Raoul, who was chair of the conference committee, said that if the Illinois Supreme Court did strike down the bill, the justices would likely give some indication in their opinion of what steps they think lawmakers could take on pension changes. “We have the worst unfunded liability in the United States of America, and we can’t continue to be cemented into a stalemate,” he said. “We cannot continue to be the embarrassment of the nation. We must act to steer our ship in the right direction.”
Madigan said he thinks the courts will uphold the bill. “Something’s got to be done. Something’s got to be done. We can’t go on dedicating so much of our resources to this one sector of pensions,” he said. The changes will apply to four of the five state pension systems: teachers, university employees, legislators and state government employees. Judges' pensions will not be affected under SB 1.
Union officials say SB 1 goes too far and is unconstitutional. They maintain that SB 2404 was the best choice. “There’s no victory in a bill that will get tied up in court, no victory in harming the lives of teachers and firefighters and nurses to a far greater degree than is just and necessary,” said Dan Montgomery, president of the Illinois Federation of Teachers. “We feel it's blatantly unconstitutional, and so claiming it saves $160 billion is a disturbing illusion. It will save no money at all.” There is some debate about whether opponents will have to wait until the law goes into effect in June before they can file suit. But at least one union leader indicated today that a suit could come sooner than June. “We would have to wait until the governor signs it, and then we can file a suit at any time. And then we’ll do it when we’re ready and when it’s most appropriate,” Montgomery said.
Other opponents said that the state should completely scrap its defined benefits system and move employees to a 401(k)-type plan for future benefits. Advocates for such plans argue that only employee benefits earned to date are protected by the Constitution. Rep. Thomas Morrison, a Palatine Republican, said that because the state has the worst-funded pension system in the nation, lawmakers have go to “go big” on reforms to solve the problem.
Senate Minority Leader Christine Radogno said she is aware of the human toll that cutting pensions would take. “We very cognizant of the fact that this is not just a numbers issue but it’s a people issue as well.” During negotiations, she pushed for a provision that would allow low-income retirees to keep their current COLAs until their pensions reached $30,000. But she said that that the changes must be made to address the state’s fiscal problems. She said that if the pension issue is addressed, other concerns such as the state’s overdue bills, will be easier to tackle. She also said that making the systems solvent should provide employees and retirees some piece of mind, even if they are upset that their pensions will be reduced. “They will be able to count on the benefits once we pass this bill,” she said on the Senate floor.
Several opponents on the Republican side argued only that lawmakers should slow down the process. They said there was not enough time for them to fully understand the more-than-300-page bill or for the public to grasp what was at stake. Republican gubernatorial candidate Sen. Kirk Dillard of Hinsdale was among them.
The proposal has the support of all four legislative leaders and Gov. Pat Quinn. Nonetheless. speculation that it might not pass was still floating around earlier today. (Those assessments may have been caution from supporters and wishful thinking from opponents.) Two other Republican candidates for governor, Illinois Treasurer Dan Rutherford and venture capitalist Bruce Rauner, both opposed the measure in the lead-up to the vote. Republican U.S. Sen. Mark Kirk also panned the bill, dismissing it as gimmicks that would not solve the problem.
Republican legislative leaders acknowledged that the political hubbub made their attempts to get votes for SB 1 more difficult. Radogno said she was glad that 10 members of her 18-member caucus voted in favor of the bill. “That’s more than half. I’m very pleased with it. It was a contentious vote,” Radogno said. “The caucus was a microcosm of the opposition that we heard outside. You had the folks that were very much from the union districts and were not going to be for the pension reform no matter what. And then you had people that were very ideological, saying that this isn’t good enough; we ought to just not do anything and let chaos reign and then we can come in and do something better.” New House Minority Leader Jim Durkin said that his vote count changed throughout the day. He said that the influence from people such as Rauner, as well as lobbying from union members, probably played a role. But he said that getting the vote done now was likely key to its passage. “I quite frankly believed that if we did not pass a bill today, that we would not see one next year because then it would get caught up in the governor’s election and all the drama that goes into it every four years.”
Madigan, who is known for delivering votes at crunch time, said it wasn’t easy. “Well, this was difficult because of the strength of the opposition and the intensity of the calls and contacts generated by organized labor among the Democrats. On the Republican side, their problem apparently was some of the gubernatorial candidates thinking about the campaign rather than the seriousness of the issue.”
Northbrook Democratic Rep. Elaine Nekritz, who has been working on the pension issue for more than two years, said that today’s vote might be the first in a series of bills to address underfunded pension systems. “I think that this will free up a lot of energy and capacity in the General Assembly to start focusing on the needs of the city [of Chicago] and they are significant and in may ways more immediate than the state’s need in terms of addressing the shortfalls in their pensions systems.”
Chicago Mayor Rahm Emanuel came to Springfield in 2012 and appealed to lawmakers for changes to the city’s pension systems. Many other municipalities are also struggling with underfunded pension systems. “There are police and fire pension systems around this state that are funded in the 10 [percent] to 20[percent] to 25 percent range that are very much at risk of being insolvent. Our work on pensions is by no means done. But this [vote] will let a lot of air back in the room to start addressing the other systems,” Nekritz said. Cullerton agreed. “Pension reform isn’t done. I am committed to building on our momentum and providing relief for our local communities facing similar problems. Specifically, it is critical that we turn our focus to the financial crisis facing the Chicago Public Schools’ pension system. I look forward to working with all leaders on this critical issue.”
By Jamey Dunn
Supporters and opponents of proposed changes to the state’s public pension systems are expecting close votes on legislation today.
A special conference committee, aided by some final negotiations among legislative leaders, produced a pension bill that has bipartisan support. However, those counting noses today say that the margin to get the bill passed is tight, especially in the Senate. Senate President John Cullerton did not attend a Senate hearing on the bill this morning. According to conference committee chair Chicago Democratic Sen. Kwame Raoul, Cullerton was working to round up votes for the new version of Senate Bill 1. Raoul said he would be doing the same after the committee adjourned. “It’s very close. It’s very close,” he said. Raoul said that lawmakers should ignore the opposition coming from high profile candidates and politicians such as Republican gubernatorial candidate Bruce Rauner and Republican U.S. Sen. Mark Kirk. “I think there’s a time when the politics of self preservation need to be set aside, and I think this is one of those times,” he said. “So I think some people need to visit the wizard and get some courage and vote the best interest of the state of Illinois.”
The proposal is projected to save $160 billion over 30 years and fully fund the pension system by 2043. It would reduce annual cost of living adjustments (COLAs) for current and future retirees. While previous plans have cut COLAs in a more straightforward way, this bill would apply differently to employees and retirees, depending on how long they worked and which retirement system they belong to. The current COLAs are 3 percent compounding interest. Under the new SB1, the COLA would be determined by 3 percent of salary or 3 percent of the product of years served multiplied by $800 for state employees or $1,000 for teachers and university employees. The COLA would be based on whichever number is smaller. The number for teachers and university employees is larger because workers in both systems generally do not get Social Security benefits. Some annual COLAs would be deferred for current employees upon retirement. The number is contingent of years of service. Employees younger than 46 would also have to retire later. For each year an employee is younger than 46, an additional four months would be tacked onto the time he or she would have to work to receive full benefits.
The proposal would also cap pensionable salary at $109,971, but that number would increase annually based on inflation. The plan would reduce the employee contribution toward retirement benefits by one percentage point and allow the systems to sue the state if it does not make its required payment. However, lawmakers could vote to change the payment schedule and reduce the annual payment.
Raoul said that this new version of SB 1 is similar to a previous version, which passed in the House but twice failed to gain the votes needed in the Senate. “This is very close to the same level of savings of Senate Bill 1, it’s just put together in a different way.” Raoul did not support that legislation when it came up for a vote in the Senate, but he said his work on the conference committee has made him realize that he cannot get his way on every aspect of the issue. “We were in a stalemate, and we had to compromise. And this is where we are. This is our best chance to get this thing done to get it moving forward,” Raoul said. He added: “This is a tough vote, I will not deny that. ... We will have probably a very spirited discussion in our caucus.”
Union officials say that the new version of the proposal’s resemblance to the old SB 1 is part of the problem. “I am having flashbacks to the House’s SB 1. After months of conference committee meetings, the so called compromise bill that you consider today is nearly identical to where you started — a bill twice rejected by the Senate,” said Dan Montgomery, president of the Illinois Federation of Teachers. “There is only one way to describe that kind of blatant taking of ones life savings. We call it theft.” They called upon lawmakers to instead approve a union-backed plan that passed in the Senate last spring but was never called for a House vote. “We believe very firmly that there are problems that need to be solved and it in all of our interests as a state to solve them,” Montgomery said. Lawyers representing labor say that the bill is unconstitutional because it does not offer workers something of value in exchange for their benefits “There is no consideration. There is no offer and acceptance. There is no indication that anyone affected by this agrees to these changes. Therefore we’re left with the matter of unconstitutional changes [to benefits],” said John Stevens, a lawyer for the We Are One unions' coalition
Supporters of SB 1 say that the bill does offer workers and retirees consideration in the form of a funding guarantee and a reduction by 1 percentage point of employees' contributions to their benefits. Raoul said that no matter what was in the proposal, it would likely face a constitutional challenge. But he said hat the issue has reached the point where lawmakers must take action and see what the courts decide. “I think this bill will be challenged, and I think that there will be strong arguments that can be made on both sides of it, but we’ve got to get to that point. Let’s say that this bill was found unconstitutional. I think it’s very likely that the court would give us guidance as to what we can do. And if it’s found constitutional, then we’ve taken a major step towards securing our state. But we’ve got to get to that point. We can’t continue to just play this ping pong game and say that we can’t vote on anything because of a constitutional debate.”
Montgomery said that if the bill is approved and signed into law, his organization plans to file a lawsuit “a soon as we can.” But in the meantime, those on both sides of the issue are lobbying lawmakers hard. “I think they’re really faced with a choice. ... So they’re really coming to the brink of the abyss here, and some lawmakers have some real tough choices,” Montgomery said. “It’s very close. ... Very close in the Senate. I think there’s trouble finding the requisite votes on both sides of the aisle, but we will see.”
Monday, December 02, 2013
By Jamey Dunn
The political fallout has begun over a deal reached by legislative leaders to make changes to the state’s public employee pension systems.
The proposal, which is yet another version of Senate Bill 1, is projected to save $160 billion over 30 years and fully fund the pension system by 2043.
The legislation would reduce annual cost of living adjustments (COLAs) for current and future retirees. While previous plans have cut COLAs in a more straightforward way, this bill would apply differently to employees and retirees, depending on how long they worked and which retirement system they are a member. The current COLAs are 3 percent compounding interest. Under the new SB1, the COLA would be determined by 3 percent of salary or 3 percent of the product of years served multiplied by $800 for state employees or $1,000 for teachers and university employees. The COLA would be based on whichever number is smaller. The number for teachers and university employees is larger because workers in both systems generally do not get Social Security benefits. Some annual COLAs would be deferred for current employees upon retirement. The number is contingent of years of service.
Employees younger than 46 would also have to retire later. For each year an employee is younger than 46, an additional four months would be tacked onto the time he or she would have to work to receive full benefits. The proposal would also cap pensionable salary at $109,971, but that number would increase annually based on inflation. The plan would reduce the employee contribution toward retirement benefits by one percentage point and allow the systems to sue the state if it does not make its required payment. However, lawmakers could vote to change the payment schedule and reduce the annual payment. Since the details of the plan were released last week, candidates running in the 2014 elections have been weighing in.
Only one Republican gubernatorial candidate, Bloomington Sen. Bill Brady, came out strongly in favor of the proposal. “I will be voting in support of this legislation, which has been crafted through months of discussion, exhaustive analysis and legislative debate. It will not be an easy vote by any means; in fact it will be one of the most difficult votes I have ever cast,” Brady said in a written statement. Brady served on the conference committee that helped to craft the legislation. “It’s not fair to ask state employees and teachers who have paid every dime they owed to the system to make a sacrifice. It’s necessary, however, because governors and legislators who voted for budgets over the last decade did nothing more than delay the resolution we now have before us.”
Illinois Treasurer Dan Rutherford, who is running for the Republican nomination for governor, said the plan goes too far by not offering employees legitimate consideration for the benefits they would lose. “I have taken due consideration over the long Thanksgiving weekend to evaluate the proposal for State Public Pension Reform. Having examined the information available, I do not support the current legislation. I do not believe it will withstand judicial review should it pass the Illinois General Assembly,” Rutherford said in a written statement. “Strong beliefs are held in this debate, but fundamental to our rule of law is our Constitution. Our government’s obligation can be changed through a process involving adequate consideration to the employees. In my opinion, the legislation before us fails to address this relationship and offer adequate consideration in exchange for altering the pension benefits.”
Union leaders agree with Rutherford that the plan is unconstitutional. “It’s an unfair, unconstitutional scheme that undermines retirement security,” said a statement issued by the We are One Coalition last week.
University of Illinois leaders also oppose the bill. Previous versions of pension reform were based on proposals from the U of I’s Institute of Government and Public Affairs. “The University of Illinois called for a pension system that would be reasonable, responsible, sustainable and competitive with those offered by our peer institutions,” said an email to employees from U of I President Robert Easter; Phyllis Wise, chancellor of the U of I at Urbana-Champaign; Paula Allen-Meares, chancellor of U of I at Chicago; and Susan Koch, chancellor of the U of I at Springfield. “In our view, the legislation under consideration fails to meet those basic principles. The likely changes arguably lessen the retirement commitments made to employees and retirees, and their net effect also will harm the public higher education sector in Illinois.”
Hinsdale Republican Sen. Kirk Dillard, who also is running for governor, has yet to take a stance on the bill. He has instead called for multiple hearings and time before a vote to ensure that lawmakers understand the legislation. “Addressing pension reform is an essential first step in working our way out of a deep fiscal hole,” Dillard said. “But we must know what's in the bill and not rush a vote merely because we've been assured by the leaders and Gov. [Pat] Quinn that this is the best deal for the people of Illinois.” Dillard is not alone. Other Republican lawmakers have complained that they are being pushed to vote too quickly on the more-than-300-page bill.
Supporters of the plan say the changes in the bill are nothing new to lawmakers who have been debating the issue for years. “We’ve been working on this issue for two years. There’s [been] plenty of time to take a look at every single aspect. It’s been debated, discussed, looked over, analyzed scrutinized — you name it,” Quinn said in Chicago today. “The time for review is fast eclipsing. It’s time now to vote. That’s what the people want. They want their legislators to take this bill that’s been discussed in many different ways and vote on it, and I think a vote ‘yes’ is the best way for our state to go.” Quinn said that the vote would be the “most important” fiscal vote taken by lawmakers during their legislative careers. But he said that anytime there is an important vote, opponents look for ways to block it. “There’s always going to be a do-nothing caucus, and they will say anything in order to continue to do nothing.” The governor added: “I think everyone who is interested in the future of Illinois, the common good, what’s good for taxpayers, should join us in urging a ‘yes’ vote tomorrow for the pension reform.”
Quinn’s own Lt. Gov. Sheila Simon issued a statement today opposing the plan. She says it should do more to protect low-income employees and retirees. “While I congratulate the legislative leaders who came together in a bipartisan way to produce a pension compromise, the proposed legislation puts too much of the burden on lower income workers and retirees,” she said. Simon is also in candidate mode. She is challenging Comptroller Judy Baar Topinka, and the statement was issued by her campaign staff.
Meanwhile, Republican venture capitalist and gubernatorial hopeful Bruce Rauner slammed the proposal, saying it would “guarantee a future of higher taxes.” He said the cuts to benefits do not go far enough and proposes moving workers into a 401(k)-style plan. Rauner and others argue that employee benefits earned to date are protected by the Constitution, but future benefits are not. “Government workers and retirees deserve to be treated fairly. But let’s not forget who pays for this — it’s the hard working taxpayers of our state, who themselves are struggling to make ends meet in an economy that is weighed down by the fiscal blunders in Springfield,” he said in a prepared statement. “We can have a pension system that is fair to both sides of this transaction, the government workers and the taxpayers who pay for it. True reform would cap the current system and fully put in place a 401(k)-style program that is similar to the retirement plans of most Illinoisans. That’s fair to workers and taxpayers, and it ensures we will never face a pension crisis again.”
While Rauner dismissed SB 1, many other business leaders in the state have voiced their support. “The pension crisis is by far the most pressing economic issue facing the state of Illinois today. Despite rapidly escalating pension contributions that are consuming the state’s budget and crowding out funding for critical state services, the fiscal health of the pension funds themselves continues to deteriorate. The bill is a good bill and deserves your support. It incorporates a number of benefit reforms that have been widely discussed and that we have supported in the past,” said a letter sent to lawmakers and signed by several prominent representatives of Illinois business. Those signed on include Tyrone Fahner, president of the Civic Committee of the Commercial Club of Chicago, a group that led the charge for pension reform in the state; Gregory Baise, president of the Illinois Manufacturers' Association; David Vite, president of the Illinois Retail Merchants Association; and Doug Whitley, president of the Illinois Chamber of Commerce. “While not a solution to all of the state’s fiscal problems, this bill is a significant step forward. It will stabilize the pension systems and help put Illinois on the path to fiscal stability.”
Northbrook Democratic Rep. Elaine Nekritz, who served on the pension conference committee, said of the letter: “I think that that will be very significant in giving people the security that they need that the business interests in the state line up in support.” Nekritz said that while others might have different ideas about how to tackle the problem, they don’t have the votes needed to pass their plans. “We’ve always been trying to achieve a balance with this legislation, and I think that this is a balanced approach, a moderate approach, a compromise approach that actually can pass. It’s one thing to talk about all the things that you’d like to see, but if you can’t put votes on it, then it isn’t any good.”
Those who would rather not see the bill pass tomorrow say that the opposition coming at the issue from two different sides — some arguing that it does not cut benefits enough and others that it cuts too much — could manage to kill the bill through their combined lobbying efforts. “What happens tomorrow, I don’t know?” said Rep. Raymond Poe, a Springfield Republican. Poe represents many state workers and says he does not support the bill. “If both of those forces get together, we may be back to start over again. So who knows where we’re at for sure. ... It’s going to be funny tomorrow to see how that all shakes out.”
Evanston Democratic Sen. Daniel Biss, who also served on the conference committee, said that the opposition on both sides of the spectrum is to be expected. “It’s a compromise. There are those on the right who oppose compromise, who are hard-line dead-enders and don’t want to see us accomplish something. And so we have those opposing it. And of course there are those in [organized] labor who are very concerned that it gives too much, and I understand where they are coming from. But the bottom line is, this is a reasonable sound compromise that saves a lot of money, shelters the people in greatest need and puts us on a path to sustainability.”
Both the House and Senate plan to hold session tomorrow. A hearing on SB 1 is scheduled for 8:30 a.m. It's difficult to deny the politics of the issue when they may have even had a hand in the timing of a potential vote. The deadline for candidates — including potential challengers to legislators — to file paperwork to appear on the spring primary election ballot passed at 5 p.m. on Monday.