Monday, August 06, 2012

New pension proposals emerge but still no clear solution

By Jamey Dunn

As a special legislative session on pension reforms draws near, one lawmaker has filed new legislation that she hopes will move negotiations forward.

Rep. Elaine Nekrtiz, who serves on a General Assembly pension reform working committee, introduced House Bill 6209 and House Bill 6210.

Gov. Pat Quinn called a special session for August 17. The Illinois House was already scheduled to be in session that day to decide the fate of Chicago Democratic Rep. Derrick Smith, who is accused of taking a bribe. A House disciplinary committee recommended that Smith be kicked out of his seat. Lawmakers plan to take that issue up for a floor vote. But Quinn also wants them to tackle pension reform, and he has called the Senate back on the same day in an effort to push the issue.

Nekritz’s bills are similar to Senate Bill 1673, a proposal she backed at the end of the spring session. Employees would have a choice of either giving up the compounding cost of living adjustments [COLAs] they receive after retirement or sacrificing their state subsidized retiree health care.

Republicans balked at SB 1673 because it would have required school districts, community colleges and universities to pay for their employees’ pension benefits. At present, those entities only pay part a portion of the cost, while the state picks up the bulk of the expense. Republicans said that such a shift would result in layoffs and increased property taxes. They dubbed the provision a “poison pill” that made them unable to support the underlying changes. Democrats say that the cost shift would require school districts to consider pension costs when offering raises. Chicago lawmakers also argue that it is unfair that the city covers the bulk of pension costs for its teachers while the state picks up most of the tab for suburban and downstate districts.

Nekritz’s new plan, House Bill 6209, would shift the cost more gradually than SB 1673. Under the new plan, schools would pay .6 percent of payroll in Fiscal Year 2014, with the cost stepping up by .6 percent each fiscal year through FY 2024. After that time, the cost would step up by .5 percent. The amount schools would have to pay would increase until they had taken over the entire employer cost for retiree benefits. “The concept of the longer phase-in on the cost shift was the results of negotiations, and it never has made its way into bill form,” said Nekritz, a Northbrook Democrat.  

The Senate dodged the cost shift issue by passing HB 1447 on the last day of regular session. The bill only applies to state employees and members of the General Assembly, leaving out teachers and university employees. Nekritz said that HB 6210, which would apply to teachers and university employees, could be a “companion” bill to HB 1447. HB6210 also contains the more gradual cost shift.

But both of Nekritz’s bills would require more than one day of session to pass through both legislative chambers in their current forms, and she is not expecting lawmakers to be in session for multiple days next week. “I think the likelihood of us staying over the weekend is not high.” Both of the bills also have an immediate effective date, which means they would require a three-fifths majority to pass in 2012. It is unlikely that proponents would be able to drum up such support on a controversial issue this close to the November general election.

Nekritz said her intent in presenting the bills was instead to push forward the conversation about pension reform. “The goal is to put this down and say: 'This is the latest thinking. How can we move ahead?'” However, the language in her legislation could be moved into a vehicle bill, which would allow for passage in a single day, and the effective dates also could be changed.

Quinn supports both of Nekrtiz’s bills. “The governor continues to feel that pension reform should be resolved as soon as possible. The governor feels that that there can be no more delay on an issue that is costing taxpayers $12.6 million a day and putting the state at risk of a future downgrade. That’s why he is calling the legislature back for a special session on pension reform, which will give them the opportunity to vote on this critical issue,” Brooke Anderson, a Quinn spokeswoman, said in a prepared statement.

House Minority Leader Tom Cross has reservations about even a gradual cost shift. The Teachers Retirement System may reduce its expected rate of return on investments, which could increase the system’s unfunded liability. A statement from Sara Wojcicki Jimenez said Republicans are concerned that if a change occurred, school districts and colleges would on the hook for a lot more than what is currently being discussed. “The bottom line is that a pension cost shift is exactly that — a cost shift, not reform. We remain in total support of comprehensive pension reform of our pension systems. We have been and are willing to work with the other legislators and the governor to come up with a comprehensive solution as soon as possible,” she said. Jimenez said that the pension working group plans to hold more discussion this week.

However, union officials say they have not been included in negotiations. “We had hoped that the failure of the various unfair bills introduced in the spring would provide an opening for our union coalition to once again sit down with legislative leaders, and particularly the governor, to get serious about solving this problem cooperatively. That hasn’t happened. There have been no such meetings,” said Anders Lindall, spokesman for the American Federation of State County and Municipal Employees, Council 31.

Lindall said these new bills would have negative effects on employees that are similar to the proposal considered at the end of the regular session. “The general concept is to force workers and retirees to choose between losing their health insurance and future pensionable compensation or seeing their COLA gutted. The cost-of-living adjustment is the provision that allows retirees on fixed income to keep pace with rising costs.” He said that unions are “willing to be part of a pension solution that is negotiated collaboratively.” However, Lindall said, “We are strongly opposed to any legislation that’s unfair and unconstitutional in putting practically the entire burden of the pension debt on the backs of employees, and in this case, [current] retirees.”

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