House passes comprehensive changes to pension benefits

By Jamey Dunn
with Meredith Colias contributing 

The Illinois House approved changes to the state’s pension systems today that supporters say will likely be the plan that makes it to the governor’s desk.

“Obviously, it does not meet every request. Obviously, it does not make everybody happy. But I think we’re all familiar with the severe fiscal problems of our state. The fiscal problems of the pension systems are a large large part of that broader problem,” said House Speaker Michael Madigan, sponsor of Senate Bill 1. “In my judgment, this is a critical action that must be taken now. It must be taken for future budget making. It must be taken for the fiscal well-being and reputation for the state of Illinois.”

The bill would cap pensionable salary at $109,000, increase retirement ages for employers younger than 36 and increase employee contributions by 2 percent of their salaries over two years. Compounded cost of living adjustments would be capped based on the amount of time worked. For each year on the job, the cap would increase by $1,000. For example, if an employee worked for 30 years but received less than $30,000 of annual pensions benefits, he or she would receive a compounded COLA until the pension benefit caught up with that cap. Then the COLA would be flat amount going forward. Madigan said that it was the House’s affirmative vote a few weeks ago on capping COLA benefits that indicated a comprehensive plan could make it through the chamber. “I think that told the tale, and then we put the bill together,” he said.

Senate Bill 1, which passed 62-51 with two representatives voting “present,” is expected to save almost $2 billion up front and aims to fully fund pension benefits by 2044. The proposal also contains a guarantee that the state makes its annual required payments. When the state pays off bonds that were used to cover previous pension payments, $1 billion of that money will go toward the unfunded liability annually. House Leader Tom Cross, who a co-sponsor of SB 1, warned that lawmakers must become more fiscally prudent if they hope to live up to the funding guarantee in the bill. “I think we all need to keep in mind ... we can put anything we want in the law, and we can talk about the guarantees. But if the General Assembly, either the House or the Senate, doesn’t have the capacity or the willingness or the understanding to not spend more than we have, then it really doesn’t matter what we put in the law.”

House members listening to pension floor debate.

Rep. Thomas Morrison, a Palatine Republican, argued that the proposal would not go far enough. He said public employees should get all their benefits earned to date but should then be moved into 401(k)-like plans. “Other states have gone down this road. ... There are huge, huge problems with defined benefits systems,” he said. “I think there are some good reforms in this bill. I wish it would go significantly farther. I think we owe it even to the members of these pension systems to go significantly farther because I still am not confident that passing this bill is going to fulfill a promise to those workers who are counting on (pensions).”

However, Rep. Elaine Nekritz, a key player in the push for pension changes, and others noted the significance of today’s vote. “Today, we are very much taking an historic step to getting Illinois back in fiscal order,” said Nekritz, a Northbrook Democrat. “It’s historic in two ways. It’s historic because of the dramatic nature of the legislation itself. These are steps none of us relish taking, but we know we should. It’s also historic because we as a body today are sending a very clear message. We are putting necessity ahead of political expediency and doing the right things instead of the easy thing.”

Union leaders have the opposite view of today’s vote. They believe that cutting the benefits of workers who never failed to make their required payments toward their pensions is unconstitutional and just plain wrong. “Senate Bill 1 is unfair to the active and retired teachers, nurses, police and other employees who paid out of every paycheck to fund their pensions, even as the state shorted its share. On top of that, it is blatantly unconstitutional and thus saves nothing. It simply exacerbates Illinois' fiscal problems. In contrast, our coalition had a productive meeting today with [Senate] President John Cullerton, and we hope to be able to continue the dialogue,” said a statement from the We Are One Coalition. Cullerton has said he believes that the House plan is unconstitutional. He is working with union officials to try and craft a plan.

Madigan today dismissed the talks as a stalling tactic from the unions. He pointed to the negotiations of the union’s contract, which took more than a year. “I think this is a continuation of what we experienced a year ago. Henry Bayer [executive director of the American Federation of State County, and Municipal Employees Council 31] and the We Are One Coalition—where day to day they simply want to delay, delay, delay because maybe the problem will go away. Precisely what they did on the collective bargaining. And they only came to the conclusion on the collective bargaining because they knew there would be action in the legislature.” Madigan called Bayer an “expert at delay.”

However, the unions and Cullerton say they are making an earnest effort. Cullerton said Wednesday that the coalition presented him with a “credible constitutional plan.” But Madigan said that even if that is the case, it is unlikely that members of his chamber would go for a different bill that, all other things being equal, Cullerton admits would save less money. “I don’t expect that they’ll be able to come to an agreement such that people will be prepared to back away from this bill. There’s two chambers here, and both chambers have to pass the same bill. The House has passed a bill, and so whatever the Senate does, I don’t think it would achieve the cost savings that the House bill does.”

Senate Minority Leader Christine Radogno said she expects Republicans to support SB 1 if it is called for a vote in the Senate. “I am pleased the House will be sending over a comprehensive pension reform bill. These are substantial reforms that take a huge step forward in stabilizing the state’s finances,” she said in a written statement. She urged Cullerton to move ahead with the legislation. “A significant number of Senate Republicans supported similar legislation earlier this session. I anticipate they will join with me again to try to pass this bill to the governor’s desk. I’m appreciative of the Senate president’s efforts on a different framework, but the momentum may be building on this bill. Illinois desperately needs pension reform—we can’t afford to wait any longer.”

Gov. Pat Quinn congratulated the House on its vote in a written statement. “Today the Illinois House of Representatives took the biggest step to date towards restoring fiscal stability to Illinois. With the passage of this comprehensive pension reform solution, Illinois is closer than ever to addressing a decades-long problem that is plaguing our economy, our bond rating and the future of our children.”

Before the vote, Quinn said he does not want to dismiss the talks going on in the Senate. “I want to make sure that everybody has their say in both houses of the legislature,” Quinn said this morning. “We have to do it. The sooner it’s done, the better. I do think it’s important that both houses of the legislature know that it’s imperative this month that we pass a bill through both houses that comes to me so I can sign it into law. I want to make that point very clear to all the members of the legislature. We cannot delay. We cannot postpone. Our moment in history to get new pension reform is right now.”