Thursday, January 12, 2012

Push for pension changes grows, but players are far from agreement

By Jamey Dunn

As lawmakers prepare to return for session in the coming months, Gov. Pat Quinn and the four legislative leaders all count changes to the public employee pension system as a top priority, However, agreement across the aisle and between the two chambers on what needs to be done seems, for now, to be in short supply.

Since taking office Gov. Pat Quinn has been careful when he speaks of pension changes for workers who were hired before changes that went into effect last year. Quinn supported the plan, approved in early 2010, that reduced benefits for employees hired after its passage. But as some lawmakers pushed for further reform, Quinn only said he would not support anything that was unconstitutional, without defining what sort of proposals would fall into that category.

This week, Quinn declared that changes to the pension system are at the top of his agenda for 2012. “We have to reform the public pension system of our state in order to have good finances, proper finances, and definitely enough money for education and health care and public safety — things that count,” Quinn told reporters in Chicago. “We’re going to get this done once and for all.”

Quinn’s budget director, David Vaught, said many ideas to change the system are on the table.

Both Quinn and Vaught have noted that the bulk of pension costs come from the Teacher’s Retirement System. “More than half of the money that we contribute every year is for teachers who are outside of the city of Chicago,” Quinn said. Senate President John Cullerton has pitched the idea of asking local school districts to pay teachers’ pension costs, and Quinn seems to be warming to that concept. Vaught said asking universities to pay retirement costs for those in the State Universities Retirement System could also be a possibility. Quinn’s office estimates that about 2.7 billion in general revenue funds would go to the Teachers’ Retirement System next fiscal year out of the $4.1 billion of general revenue funds that will have to be spent on pensions. Including money from other funds, next fiscal year’s pension payment is estimated at more than $5 billion.

Vaught said that cost-of-living increases given to retirees could be a target. “Some people say the [cost of living adjustment] is not protected constitutionally.”

Vaught said of Quinn, “He’s not coming around to anything that’s unconstitutional, and he’s said that repeatedly.”

But, for now, constitutionality is in the eye of the beholder. House Minority Leader Tom Cross has the most aggressive plan on the table, Senate Bill 512. Under Cross’s proposal, workers would keep all the benefits they have earned to date. Going forward, they could opt to either pay more for the same benefits that have now, take a cut in benefits and retire later or join what is called a defined contribution plan, which is similar to a 401k. Cross has yet to call his bill for a floor vote in the House. “We’ve talked about pension reform in the state until we’re blue in the face. We know what needs to be done.” Cross said that asking school districts and universities to pay would not solve the problem.

However, Cullerton said Cross’ bill is unconstitutional and lacks the support to pass. “It hasn’t even been called, so apparently they don’t have enough votes for it.” He said that pension reform is also a priority of his, but that it should be achieved through negotiations with unions. “Politically, it would be real, for some people, just easy I guess to pass a bill, claim you did something, have it [blocked by the courts], spend millions of dollars in legal fees and then two years later find out it is unconstitutional.”

Cullerton added, “We can affect current employees … with laws that have a contractual basis. If there’s a reduction in benefit, there has to be a corresponding consideration and there has to be acceptance.”

Quinn has called for the creation of a working group to address the pension issue. It will be made up of lawmakers appointed by the legislative leaders and led by longtime Quinn adviser Jerry Stermer. Quinn said he wants to use the same collaborative model for negotiations that produced education reforms and workers’ compensation reform laws. “This working group that we’re convening, it's going to start form zero in the sense of everybody has a chance to some in with their ideas,” he said. “I think it’s very important that no one who comes to the pension reform feeling that there’s some particular bill we’ve already adopted.”

Union officials argue that the pensions systems are facing problems because they have been underfunded by legislators. “The problem is not the cost of the modest benefits earned by teachers, police, caregivers and other public employees. The problem is the failure of politicians over decades to make adequate employer contributions,” Anders Lindall, spokesman for the American Federation of State County and Municipal Employees Council 31, said in a written statement. Lindall said that union representatives should be involved in any conversations about changes to the system. “The only way to solve the pension funding problem is for the unions that represent public employees — whose retirement security is dependent on the health of the pension funds and whose deferred compensation comprises 100 percent of the funds’ assets — to be full partners in discussions that are appropriately structured and focused on the real problem, funding.”

Quinn said his goal is to pass pension legislation by the end of this year. “Our time has come. Our rendezvous with pension reality will come this year.”


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