Unions pitch their own pension reform plan

By Jamey Dunn

Union officials laid out the broad strokes of their own pension reform plan today. 

Cinda Klickna, president of the Illinois Education Association, described the plan backed by We Are One Illinois—a coalition of public employee unions, which includes the Illinois AFL-CIO, the American Federation of State, Country and Municipal Employees, Service Employees International Union and unions representing teachers, police, firefighters and transportation workers. Klickna said that group seeks a guarantee that the state will make the required pension contribution. Under the proposal, the priority of the pension payment would only be second to the state’s creditors. Union officials argue that legislation that is currently up for consideration does not do enough to ensure that lawmakers make the annual pension payments. They point to skipped pension payments as the primary cause of the state’s more then $80 billion unfunded pension liability. “The pension crisis was caused by past governors and legislators that failed that people of the state,” Klickna said.

The group also is proposing that lawmakers reevaluate corporate tax breaks, such as the package of tax cuts recently passed to benefit Sears and the CME group. The collation is focusing on a group of tax breaks, the elimination of which they say could save the $80.7 billion over the next 34 years. On the list are tax exemptions for paper and ink given to news outlets, a tax exemption for foreign dividends and a tax break given to retailers for collecting the state’s sales tax. “We cannot longer afford to let these big corporations off the hook will vital services continue to be slashed,” said Henry Bayer, executive director of AFSCME Council 31. “We need to reform our tax system. It’s long, long overdue. ... We need to focus on where the money is -- what we can afford and what’s fair.”

All of the tax breaks have the backing of relatively powerful lobbying groups and could be a tough sell to legislators who are concerned about giving the appearance of being pro jobs and business friendly in the wake of the economic downturn.

The union coalition is also asking that any changes would not affect current retirees. In exchange for those three considerations, the group says that current workers would pay more toward the cost of retirement. Klickna said that such an increase would need to be negotiated, but she said the amount would likely vary across the different pension systems. “The employees didn’t cause the crisis, but we’re going on record today to say our members are willing to help fix it if the state will guarantee that the politicians will never again divert our pension money to other expenses,” Michael Carrigan, president of the Illinois AFL-CIO, said in a prepared statement.

The move comes as lawmakers are scheduled to return to Springfield this Friday to take up the pensions issue during a special session called by Gov. Pat Quinn. However, Quinn’s camp does not seem responsive to the plan. “This is nothing new, and all has been discussed before,” Brooke Anderson, a spokeswoman for Quinn, said in an emailed response to Illinois Issues. “This proposal would not solve the state's pension challenges, nor is it feasible.”

 House Speaker Michael Madigan reportedly plans to call House Bill 1447, which the Senate approved on the last day of the spring legislative session. The measure would require employees and retirees to choose between keeping either a cost-of-living increase based on compounded interest or state-subsidized health care benefits. Current employees who chose to keep the compounded cost-of-living adjustment would also not be able to factor any future raises into calculating their pension benefits.

Unions maintain that the pension reform plan is unconstitutional and presents workers and retirees with a false choice between two bad outcomes. “If I had to chose between my [COLA] and my insurance, it would be like asking me to cut off my right hand or my left hand,” said Barbara Gilhaus, a retired teacher. Gilhaus said she gets about $28,000 annually from her pension.

Supporters of the plan to offer employees a choice between health care and compounded COLAs say it passes constitutional muster because it allows employees to decide what benefits that may want to trade off to keep others. Quinn also recently signed Senate Bill 1313, which will result in retirees paying more for their health care coverage. While the state still plans to kick in to cover some of the health care costs for retirees, some retirees will have to start being premiums under the plan.

HB 1477 only applies to state workers and members of the General Assembly. Democrats and Republicans cannot agree on whether universities, community colleges and downstate and suburban schools should have to pick up the cost of their employees' retirement. There are multiple bills on the table that would sift the costs to schools over several years. But so far, Republicans have staunchly opposed them, and Democrats have been unwilling to back off the issue. Leaving the retirement benefits of teachers and university employees out of any pension vote that may happen on Friday would allow lawmakers to revisit the issue of the cost shift after the general election.