Thursday, March 21, 2013

House passes bill to cut COLAs
on public-employee pensions

By Jamey Dunn

Supporters of efforts to cut spending on public-employee pensions say they reached a turning point today, as the House approved reductions to cost-of-living increases for current and future retirees.

“The meat and potatoes of pension reform happened today,” House Minority Leader Tom Cross said after today’s vote. “And I think this was the toughest vote people are going to face.” Lawmakers approved House Bill 1165 on a vote of 66 to 50. The measure would cap the amount of salary on which retirees could earn the compounded 3 percent cost of living adjustment [COLA] at $25,000. Anyone earning more pension income would receive a flat COLA of $750 annually. Under the bill, retirees would not be eligible for a COLA until they have been retired for five years or they reach age 67, whichever comes first. The bill also would apply to current retirees who are now receiving COLAs.

“I know that this is a very difficult thing to do to retirees ... but unfortunately, we have let the problem get so big that that has to be the nature of the solution that we’re looking to,” said sponsor Rep. Elaine Nekritz, a Northbrook Democrat. The current COLAs are by far the costliest component of the pension plans. Nekrtiz and Cross said that they must be targeted to make a real dent in the $96 billion unfunded liability.

House Speaker Michael Madigan said today’s vote signals that the House is very close to a vote on a final comprehensive pension reform bill. “I think we’re in a position to finalize the preparation of the bill and then move a bill from the House to the Senate that treats all aspects of the problem.”

Opponents to HB 1165 say it is an unconstitutional reduction in employee benefits and unfair to retirees who planned their finances around the benefits they were promised when they left their jobs. “What’s not fair to do is to go to them and say, 'You have to make up the entire liability,' when over half the liability is because the state of Illinois never made its payments,” said Rep. David Reis, a Willow Hill Republican. He said lawmakers should instead accept a union coalition offer for employees to pay a larger percentage of their wages toward their pensions. “There are other avenues out there that have been negotiated with the various unions that may prevent a lawsuit, that I think would help us accomplish what we’re trying to do.”

Earlier this month, the House approved House Bill 1154, which would cap pensionable salary at the Social Security wage base, which is $113,700 in 2013, or the employee's current salary, whichever is greater. The same day, the chamber voted in favor of HB 1166, which would increase the retirement age for employees younger than 46. Employees from 40 to 45 would see a one-year increase, employees 35 to 39 would see a three-year increase and employees 34 and younger would see a five-year increase. All three bills are key pieces of HB 3411, the “comprehensive plan” pushed by Cross and Nekrtiz, and are now in the Senate. “We all recognize the enormity of this problem. The significance of the problem is not the issue. The issue is, how do we react to the problem? How do we move legislation that will solve the problem and do it in such a way that we have a reasonable chance of approval from the Illinois court system?” Madigan said on the House floor today. “We’ve taken three significant steps in a process to solve the problem.”

Cross and Nekritz both agree that a final package could contain tweaks and additional provisions. Their bill has a provision meant to ensure that the state would make its annual required payment and calls for money now going to pay off pension bonds to be used to pay down the unfunded liability after the bonds have matured. It would also require employees to pay 2 percent more of their salaries toward their retirement benefits. Both lawmakers agree that any of those proposals may end up in a final bill. “We’ve now passed the most challenging parts of the bill, in many ways, so putting together a comprehensive package from here, when you are talking about the funding guarantee and additional money going into the pension systems, those are things that are hardly controversial.” Cross said he is still not thrilled with the approach that the House took, voting on each part separately. And he said he does not know how he stands on any potential final bill until he sees what is in it. He said he would like it to be as close to complete as possible. “I’m not happy with the process. I’d like to see something in a more comprehensive package.”

While leaders of both parties in the House say the chamber made significant progress today, the Senate rejected a comprehensive proposal on Wednesday. Senate Bill 34, which is similar to HB 3411, fell seven votes shy of the majority needed to pass. The chamber instead approved a much narrower bill that would only apply to teachers. Senate President John Cullerton said that the measure was just part of an overall reform package he plans to present in the Senate. “The work of building a coalition of 30 votes is going to require more heavy lifting. I'm committed to this goal and look forward to passing a full reform plan this session,” he said in a prepared statement.

 Cross said the House vote today may shake things up in the other chamber. “I think any time that one chamber passes something of this significance, it changes the dynamic,” he said. “I would like to think that the Senate would take another shot. They can certainly do just this bill.”

 Gov. Pat Quinn said he plans to work with both chambers to try to get a bill to his desk. “I’m encouraged by the positive steps recently taken by the Illinois General Assembly toward comprehensive pension reform. In the past few weeks, the Illinois House has passed three pension reform bills, culminating with today’s major cost-saving measure, which reforms the cost-of-living-adjustment factor,” Quinn said in a prepared statement. “In addition, yesterday’s votes in the Illinois Senate indicate that there is support for pension reform. There's much more work to do, but I’m pleased to see progress being made. I will continue working with the leaders and members of both houses and both parties to get comprehensive pension reform legislation on my desk so that I can sign it into law.”

Union leaders said they would continue to fight against the changes, which they say violate the state's Constitution.“We remain opposed to measures passed by the House and Senate this week. We will continue to advocate for coalition-supported solutions that have been negotiated with the unions who represent those affected by pension changes," said a statement from the We Are One Coalition.  


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