Friday, January 04, 2013

Democrats set aside potential roadblock to pension reform

By Jamey Dunn 

Democratic leaders in Illinois have agreed to table a controversial component of pension reform proposals, potentially opening the door for a renewed push when the House returns for its lame-duck session.

Gov. Pat Quinn announced today that he and House Speaker Michael Madigan are willing to back off the so-called cost shift,which has been a sticking point in negotiations. “He indicated that he was willing to defer any discussion on the cost shift regarding pension reform until a later date,” Quinn said of a recent conversation with Madigan. He said Democrats are not abandoning the idea; they are simply acknowledging that it was holding up progress on pension reform.

There are several versions of the cost shift. but they all would produce the same result: public schools outside of Chicago, universities and community colleges would eventually pick up the tab for their employees’ pensions. Chicago Public Schools currently pays for most of the employer costs of its workers’ retirement, and legislators from the city argued that it is unfair that the rest of the state does not. Also, they said school districts need to have some skin in the game because they now set the benefits that state government ends up paying. Under the proposal that was up for consideration, the state would be responsible for the state’s estimated $96 billion unfunded liability and schools would take over the future costs gradually over several years. But Republicans and some downstate Democrats say the shift would increase local property taxes because schools would not be able to afford the cost. The also say they are concerned that if the pension investment funds do not perform as expected, schools could be on the hook for future unfunded liability.

 Quinn called the willingness to set aside the shift a “major step forward” in negotiations. “I think we’re on the eve of collaboration where people of good faith of both parties — Democrat and Republican, House and Senate — come together and do what has to be done for the common good,” Quinn told reporters in Wheaton today. He encouraged members of the General Assembly to look to the hard-fought compromise that was recently struck in Congress over the fiscal cliff. “I think we saw in Washington [D.C.] with the debate over the fiscal cliff that people, in order to solve a problem, oftentimes have to make reasonable compromises, make changes in their original position in order to get an outcome that benefits the public. It was bipartisan in Washington the other night, and it’s going to have to be bipartisan in Illinois in the next few days.”

Quinn shared few details about the reform plan that is currently being negotiated with legislative leadership from both parties. “We’ve been working on this really pretty feverishly over the last several weeks,” he said. “There were some breakthroughs concessions and compromises, and that’s sort of how it is in life, you know. You’ve got to sometimes concede this or that for the time being at least and move forward.” However, he did say that workers could expect to see their contributions increase and their Cost of Living Adjustments decrease under the proposal. He also said he is confident that it will survive a constitutional challenge. “It’s a very carefully balanced plan.”

Northbrook Democratic Rep. Elaine Nekritz said that the plan would likely be inserted into Senate Bill 1673, which is scheduled for a hearing on Monday morning. Negotiations are continuing over the weekend, and Nekritz is optimistic. “I think the momentum is continuing to build,” she said. Nekritz added that she thinks it is possible to get a plan approved before the new legislative session begins next week. While Nekritz is encouraged by the new development on pension reform, she said that she thinks a compromise on the cost shift is not out of reach. “I still think that the cost shift is the right policy goal. I feel that very strongly,” she said. “I still think we could have found a middle ground on the cost shift.” Setting that issue aside, she said, “was not my decision.”

Republicans are also speaking positively about the newest plan for tackling pension reform. “Not everyone agrees with all the nuances. We don’t know the numbers yet for the bills, but my gut is telling me this is moving in a really significant direction in regards to getting this thing shored up once and for all,” said Rep. Darlene Senger, a Naperville Republican. She said she hopes that both chambers can approve it. “We’ve got a new set of legislators coming in, and it’s a complicated process. And to start this over again is really not necessary. We know what we need to do.”

Republican House Leader Tom Cross said that leaders will continue to talk through the weekend, and a measure that House leadership from both parties agree on could emerge by Sunday or Monday. The House is scheduled to return for its lame-duck session on Sunday. Cross cautioned, “I don’t bet on pension reform anymore because I have lost that bet in the past.” But he said he is “cautiously optimistic.” Cross said that if the legislature can pass a bill that substantially reduces employee benefits, and therefore reduces the cost of their retirement that would be passed on to schools, Republicans might be open to revisiting talks about a cost shift. “A strong benefits package reform bill diminishes in a lot of ways the potential damage that a cost shift presents.”

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