October 19, 2013
By: Ray Long
SPRINGFIELD - Despite repeated dire warnings about Illinois’ public employee retirement debt, a deal to change pensions remains elusive as the General Assembly reconvenes this week with political considerations taking an upper hand over policy.
House and Senate negotiators from both parties have met for months and report progress on coming to grips with the worst-in-the-nation $100 billion pension liability. But progress and passing a plan are two different things.
“We’re at the one-yard line,” said Rep. Mike Zalewski, a Riverside Democrat who is on the 10-member pension conference committee. “We ran it to the right, and we ran it to the left. We’re third down, and now we need a third play.”
While Democrats control the legislature by wide margins, they want at least some Republicans to vote for pension reform in order to share the blame for a controversial vote. Republicans want additional cost-saving provisions, with newly elected House Republican leader Jim Durkin of Western Springs saying there’s “still work to be done.”
The two-week fall session that starts Tuesday will unfold just weeks ahead of the deadline for candidacy petitions to be filed for next year’s elections. Taking a tough vote on pension reform before then risks drawing a challenger next year. In addition, Democrats are concerned about alienating their traditional allies of government-worker unions by making pension changes.
All the while, the tab for the unfunded pension liability increases at what Democratic Gov. Pat Quinn has pegged at $5 million a day and the increased costs for retirement benefits threaten to eat into more and more tax dollars that could be earmarked for other government services — not to mention a multibillion-dollar backlog in overdue bills.
“Taxpayers come first, and political convenience should go way behind,” said Quinn, who also is up for re-election. “I’ve run for office as governor and I understand how important it is to act for the public in a campaign; no matter how inconvenient it may be for political candidates, you should put the public, the people, the taxpayers first and foremost at all times.”
Unlike their counterparts in Washington, state lawmakers don’t face a debt-ceiling-style hard deadline on pension reform. That’s allowed them to avoid putting together a solution and let the pension crisis drift from year to year as the debt increased exponentially.
With gridlock during the spring session between House Speaker Michael Madigan and Senate President John Cullerton, a panel of lawmakers have spent the summer and early fall coming up with a framework that it estimates could save $138 billion. Interviews with lawmakers and documents reviewed by the Tribune offer a look at the potential changes.
Retirees no longer would get automatic yearly compounded 3 percent increases — a main driver of increased pension costs. Instead, they would get half the rate of inflation. There’d be limits at either end: The minimum increase would be 1 percent and the top increase would be 4 percent, if inflation were really high.
Those cost-of-living increases also would be subject to a freeze of one to five years, with older workers at the lower end of that range. Such freezes would be staggered every other year.
Another cost-saving move would limit how much of a worker’s salary could be used to calculate a pension — an inflation-adjusted Social Security figure now set at $113,700. Current retirees with fat pensions would not be impacted, a nod to the constitutional difficulties of taking back a benefit already in hand.
Sen. Kwame Raoul, the Chicago Democrat chairing the pension panel, said the framework came together by consensus of committee members from both parties and chambers.
“We’ve come a long way,” Raoul said. “There may be some disagreement as to how we define where we are and how we got here. But those disagreements shouldn’t get in the way of finalizing a deal.”
While previous pension proposals have called for employees to contribute an extra 2 percent from paychecks toward their retirement, the latest framework would actually see workers decrease contributions by 1 percent. The idea is that concession would help pension reform withstand a court challenge.
The Illinois Constitution says a pension benefit, once in place, cannot be diminished or impaired. That’s long been viewed as an ironclad shield against benefit cuts. Senate President Cullerton suggests that lawmakers could get around that clause by giving employees what’s called “consideration” — giving something in return for cutting benefits.
Even with that trade-off, the framework is being decried as unconstitutional by a union coalition representing state government workers, university employees and suburban and downstate teachers who would see their pensions cut.
In addition, some Republicans want changes. Workers should be allowed to opt into a 401(k)-style plan, giving them a chance to manage their investments instead of the state. The minimum guaranteed cost-of-living increase should be 0.5 percent instead of 1 percent. And the retirement age should be raised — a non-starter for some Democrats.
GOP lawmakers contend their extra ideas could bring long-term savings while also providing significant short-term relief in the state budget.
“We could have gone with a list of demands that we knew (Democrats) would never agree to and blown the whole thing up,” said Sen. Matt Murphy, a Palatine Republican in on the negotiations. “But we don’t want to do that. We want to solve the problem.”
Should pension reform fail to pass in the fall session, fingers of blame once again will be pointed. Some pre-emptive concerns have surfaced.
Steve Brown, spokesman for Democratic Speaker Madigan, noted Republican differences on the pension panel translate into a lack of bipartisan support and “what seems like shifting” positions.
“The speaker’s hopeful of passing a bill with substantial savings sooner rather than later,” Brown said.
Despite having overwhelming majorities in both chambers, Democrats would have trouble passing a sweeping set of pension reductions on their own. Many Democrats — as well as Republicans with heavy contingents of public workers in their districts — don’t want to rile up union members who can make or break a candidate on Election Day. Each side has said votes from both parties are needed to pass an overhaul.
The intricate negotiations and politics have Rep. Elaine Nekritz, Madigan’s pension point woman, pondering how to reach the minimum vote totals needed to pass both chambers.
“I’m just trying to get to a resolution as quickly as we can,” said Nekritz, a Northbrook Democrat. “As soon as we’re ready with a resolution that we can get 60 votes in the House and 30 in the Senate, we ought to run it.”
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