Wednesday, November 27, 2013

Leaders reach tentative deal
on public employee pensions

By Jamey Dunn
and Maureen Foertsch McKinney

The four legislative leaders reached a tentative agreement today on a solution to the state’s pension crisis that reportedly would create a defined contribution plan for public employees, change cost of living adjustments for retirees, raise the retirement age, boost state contributions and save $160 billion over 30 years. Lawmakers are expected to be get details Friday.

“This is the first time the four leaders have come to an agreement. I think that’s very significant and bodes well for getting something done,’’ said Northbrook Democratic Rep. Elaine Nekritz, who has been a key player in the efforts to change the state’s pension systems.

The cost of living adjustment (COLA) for retirees would be based on $1,000 times years of service, according to a Crain’s Chicago Business report. For instance, a retiree who had worked 30 years would receive an annual COLA on $30,000 of his or her pension.

“What we’re doing will benefit long-term low-income workers,’’ House Speaker Michael Madigan said during a news conference after the meeting.

Meanwhile, the Chicago Tribune reported that the youngest workers could see their retirement age pushed back as much as five years.

A December 3 special session, at which a vote could be taken, was scheduled earlier this week. The pension funds for retiree benefits have an estimated unfunded liability of nearly $100 billion.

Gov. Pat Quinn praised the informal pact. “I commend the legislative leaders — Senate President John Cullerton, House Speaker Mike Madigan, Senate Minority Leader Christine Radogno and House Minority Leader Jim Durkin — for their hard work to reach this critical agreement. I also commend members of the conference committee for their work throughout the summer and fall to get us to this point.

Union leaders as a coalition, We Are One, expressed opposition shortly after the leadership meeting concluded. “Unions representing hundreds of thousands of public employees and retirees were not included in the leaders’ talks. If their new plan is in line with what’s been reported from earlier discussions, then it’s an unfair, unconstitutional scheme that undermines retirement security.

"It’s no compromise at all with those who earned and paid for their retirement benefits. In fact, reports suggest the leaders have repackaged Senate Bill 1 and barely bothered to disguise it. On top of this, by expanding 401(k) plans, the leaders will further jeopardize retirement security for the vast majority of public employees and retirees who are not eligible for Social Security.

“If their bill resembles SB 1, we will urge lawmakers to reject it and continue to fight to protect the hard-earned life-savings of Illinois public servants as well as the sanctity of the state’s Constitution.”

Madigan’s plan, SB 1, would not have offered employees a say in their benefit cuts. The proposal would have saved more than Cullerton’s plan by slashing cost-of-living increases, capping pensionable salary, increasing retirement ages for employees younger than 36 and increasing employee contributions to their retirement benefits.

After calls for special legislative sessions didn’t work, Quinn ratcheted up the pressure on lawmakers to approve pension changes when he vetoed the funds for their pay in July. The move did not spur legislative action. Instead, Cullerton and Madigan sued over the pay freeze, and Cook County Circuit Court judge ordered the state to cut the checks. Quinn has appealed the issue to the Illinois Supreme Court, but members of the General Assembly are being paid in the meantime.

If leaders are in agreement, they have come a long way since the end of the spring legislative session, when Madigan and Cullerton each dug in behind two different proposals. Cullerton negotiated a proposal with public employee unions that would have asked them to weigh their pension benefits versus their state-subsidized retiree health care and make decisions that would have reduced their benefits somewhere along that spectrum. Madigan’s legislation passed the House but failed miserably in the Senate. The Senate approved Cullerton’s plan, but Madigan refused to allow a vote on it in the House.

“Obviously, this is a session where we have not enjoyed great success. That’s very obvious,” Madigan said during his annual end-of-session closing floor speech in the spring. Pension reform and other high-profile issues, such as same-sex marriage, had not been resolved. “However, that does not mean that we are going to walk away from our responsibility.”

After the inaction at the end of the spring session, Quinn called for a conference committee made up of members of both parties and both chambers to work together on the compromise. Committee members say they made some substantial progress, but Republicans had concerns about the level of savings that the proposals they were considering might produce. Democrats had reservations about increasing the retirement age and introducing a 401(k)-style option across all the systems. The university retirement system currently has such an option, but some Democrats were concerned that those who support a mandatory move to 401(k) accounts would use a more widespread version of the concept as a way to try to push all retirees in that direction. The negotiations were then kicked up to the legislative leaders.

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