Wednesday, March 13, 2013

Senate still far from agreement on public employee pensions

By Jamey Dunn 

An Illinois Senate panel today approved two pension reform plans while the House continued to debate gun control issues. The constitutionality of both pension bills was argued from all sides during the hearing, which lasted more than three hours. But as the debate continued, one thing became clear: Supporters of pension changes are still a long way from having a plan that can pass in both chambers.

Sen. Daniel Biss, an Evanston Democrat, presented Senate Bill 35, which is the Senate version of a bill that was introduced with bipartisan support in the House last month. The legislation would:

  •  Increase public employee contributions by 2 percent of their salaries. The increase would phase in over two years.
  • Allow cost of living adjustments (COLAs) on only the first $25,000 of a retiree’s pension, or on only $20,000 for those who receive Social Security benefits. COLAs would not kick in until a retiree turns 67 or five years after retirement, whichever comes first.
  •  Increase the retirement age for employees younger than age 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.
  • Limit the amount of pensionable income to the Social Security wage base, which will be $113,700 in 2013, or the employee's current salary, whichever is greater.
  • Guarantee that the state make required annual payments to the pension systems.
The measure has the backing of the Civic Federation, a nonpartisan think tank in Chicago. “We believe it is a comprehensive and bipartisan pension reform proposal that would help the state of Illinois greatly. By any reasonable assessment, the state of Illinois is in an extraordinary financial crisis. The primary driver of this crisis is the state’s inability to pay for its huge and growing pensions cost,” said Laurence Msall, president of the Civic Federation.

Supporters of the bill say that the dire state of Illinois pensions systems, which are about 40 percent funded, justifies a move the reduce current workers' benefits to stabilize the system. The state Constitution protects the benefits from being “diminished or impaired.” They argued that the alternative to reducing benefits would be insolvency and an inability of the state to pay out future benefits.

Mark Rosen, a professor at Chicago Kent School of Law, said that for the argument to hold up, the state would have to prove that “there is a sufficiently important reason to justify” reducing benefits and that the reductions only go as far as needed to address the problem. “It doesn’t mean all of a sudden, it’s ordinary politics and that pension matters are just subject to ordinary horse trading. There has to be a very careful balancing of the Constitution promise ... against the very substantial problem that is being remedied.”

Senate President John Cullerton disagrees with this argument. He has his own proposal, SB 1, which the committee also approved. Cullerton believes that some consideration must be given to workers for any reduction in their benefits. SB 1 contains similar language to Biss’ bill. But it also has a proposal that passed in the Senate would have asked employees to choose between their compounded-interest cost-of-living adjustments or access to a retiree health care plan. Cullerton calls this second piece a Plan B to be considered by the Supreme Court if it finds the first portion unconstitutional. Cullerton has pitched the idea as a way to avoid having to revisit the issue at a later date. “We’re trying to pass the bill. But with the possibility that Part A would [be] declared unconstitutional, we have the backup already passed and already in front of the court. If we were to just pass Part A, or if Sen. Biss’ bill passes and it’s challenged as it undoubtedly will [be], and a year later the court throws it out, then we have to come back to the legislature, try to fashion another remedy, pass that bill if we could. That would be challenged, and we’d have another year in court.”

But opponents say SB 1 would not create enough savings and that the cost of employee health care is too much of an unknown. Cullerton said the measure would not guarantee that the state would pay future health care costs; the option being offered to workers is merely guaranteed access to the state’s group health insurance plan. Supporters of SB 35 say that SB 1 would muddy the legal argument behind their proposal. “We can’t let politics dictate this. We have to solve a problem but only go as far as necessary to solve the problem, and when you put them both in the same bill and one saves $28 billion off the unfunded liability and the other one saves $11 [billion], I would say under that construct that Plan A can’t survive because on its face, it looks like we’ve gone further than we need to," said Northbrook Democratic Rep. Elaine Nekritz. She is sponsoring the House plan that is the same as Biss' bill. She plans to present the proposal to a House committee tomorrow.

Union officials believe that both plans are unconstitutional. “What we have are questions of funding. The state takes in money. It spends money. What we’re witnessing is a change in fundamental priorities in how the state spends its money, ”said John Stevens, a lawyer advising the We Are One Coalition. He said that the pension clause was added to the 1970 Illinois Constitution to protect benefits at a time when they system was funded at level similar to what it is now. “Under Illinois law, it is not appropriate to diminish benefits” without engaging in bargaining with public employee unions. Stevens said the consideration in Cullerton’s bill is a false choice that does not offer workers something in exchange for a reduction in retirement benefits. “In either case, you’re giving up something on both sides of the equation. You do not get something for something,” he said.

More Republicans on the committee voted in favor of SB 35. Senate Minority Leader Christine Radogno was the only Republican to vote in favor of SB 1. But she cautioned that she did not know whether she would support the bill if it were called for a floor vote. Several senators on both sides of the aisle said that they also did not yet know how they would vote on either bill if faced with the decisions on the floor. “Clearly, there’s a lot of disagreement. I learned a lot today. Some things that I didn’t know,” Radogno said. “It makes sense to me to advance both of these measures so that we can get further input. This is not the final action, but this kind of discussion starts to narrow the field of what we’re talking about.”

 Biss said that there is still work to do. “It’s a hugely difficult, hugely complicated — ethically complicated, legal, complicated, mathematically complicated, economically complicated problem. So there’s different views, and we’re just going to work through it until we can all get to a bill” that can pass in the legislature, be signed by Gov. Pat Quinn and upheld by the courts. He said he is not expecting a floor vote on either proposal when the Senate is back in session Thursday. “It’s unclear at this point. My guess ... is they will not [be called for a floor vote tomorrow.] But a lot of discussion still has to happen."

Meanwhile, the House continued its long slog of taking test votes on gun control proposals. The House rejected a proposal that would have required Firearm Owners Identification (FOID) Card applicants to get a psychiatric evaluation as part of the application process. An amendment that contains a proposal that would require gun owners to report lost or stolen guns was approved. However, no legislation was passed out of the chamber.

The House has been taking these test votes on pension provisions and gun control proposals for the last few weeks under a process dubbed “Weekly Order of Business” . Republicans have refused to vote on several of the amendments, calling the process a game. “Five hundred adults last year killed in the city of Chicago, and we just spent three weeks, every Tuesday of the last three weeks, playing some political game, I guess, with no direction of solving any of the problems associated with that. I don’t know if it’s politics. I don’t know what it is,” House Minority Leader Tom Cross said during today’s debate on the House floor. “But I would argue, and I think most people in this chamber would agree, that 500 people being killed may be one of the biggest issues facing the city of Chicago and the state of Illinois that we have.”

Cross said Democrats refuse to consider Republican ideas. “They’re not all 'get tough on crime.' Some of them are -- some issues dealing with mental health; some legislation dealing with how to deal with conflict; social, emotional learning; funding; some comprehensive well-thought-out approaches.”


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