August 27, 2013
By: Ray Long
SPRINGFIELD – The group of lawmakers working on pension reform is focused on a new outline of ideas aimed at bringing the state’s $100 billion pension monster to heel, but what’s not in the plan may prove as interesting as what is in it.
Under the outline, the state would cut back the cost-of-living increases that are driving much of the retirement system shortfall but require workers to actually pay less toward their pensions.
Missing from the outline was a long-debated requirement offering retirees a choice between keeping health insurance or taking a smaller pension increase each year. There also would be no increase in the retirement age. And there would be no limits on how much of an employee’s salary could be counted toward a pension.
Negotiators were quick to note that these are simply ideas under discussion after weeks of closed-door meetings and that there’s no firm timetable for a proposal or a vote.
“We don’t know where we’ll land,” said Sen. Kwame Raoul, a Chicago Democrat who chairs the pension committee.
The two biggest voices will be Senate President John Cullerton and House Speaker Michael Madigan, the Chicago Democrats whose failure to compromise on a pension fix left the Statehouse at loggerheads since the end of spring session in May.
The estimated savings from the sparse details that emerged over the weekend is about $145.6 billion — less than the long-stated estimate that Madigan’s proposal would save $187 billion but more than the projected $57.6 billion savings of Cullerton’s plan.
A development Monday illustrated why guessing how changes in the pension formulas will play out can be so challenging. The Teachers’ Retirement System, which covers 700,000 working and retired teachers outside Chicago, downgraded its estimated savings from the Madigan plan by about $24.5 billion. That cuts the estimated overall savings for the Madigan plan to $163.2 billion.
Also Monday, a coalition of worker unions fighting pension changes came out strongly against the new elements in the outline the panel of lawmakers is mulling. The We Are One group took aim at the cost-of-living cutbacks as unconstitutional attacks on retirement security.
Should a pension bill ever pass, the courts likely will be the ultimate decider on whether a deal with benefit cuts is legal. For decades, state workers believed their benefits, once in place, could never be reduced because of wording in the Illinois Constitution.
State workers are likely to applaud one provision in the latest outline: a 1 percentage point decrease in how much money they would deduct from their paychecks toward retirement. Some of the plans, including Madigan’s, call for asking workers to pay more toward their pensions, not less.
Retirees can cheer the idea of removing Cullerton’s choice option in which they could keep either their state-supported health care or 3 percent automatic annual cost-of-living increases, but not both.
But retirees probably won’t like the change in the way cost-of-living bumps would be calculated under the latest outline. Instead of the automatic compounded 3 percent jump every year, the increase would be based on half of the size of the consumer price index. If inflation remained around 3 percent, the yearly increases would be closer to 1.5 percent.
Raising the retirement age has long been pushed as one more way to cut costs by phasing in a higher age for younger employees, but that currently has fallen by the wayside. The same goes for an idea that would have limited the size of pension payouts to retirees by adopting a federal formula used by Social Security.
Still in play, though, is a fairly popular idea that would force lawmakers to increase how much the state pays into the pension system each year. The state is currently paying back pension loans taken out in the past. When those loans are paid off, the state would take that money and put it directly into the pension system — an effort akin to making advance payments on a mortgage to reduce the overall cost.
Democratic Rep. Elaine Nekritz of Northbrook, Madigan’s pension leader, also cautioned that the elements that have surfaced don’t represent a deal.
“No one said ‘yes,’ but no one said ‘no’ either,” Nekritz said about the overall “package or on individual components.”
Raoul once suggested a vote could take place before Oct. 22 but is no longer making such a prediction.
“We entered into this acknowledging we were at a stalemate and that the state of Illinois could not be stuck at a stalemate on pensions,” Raoul said. “Given that, the effort from the outset was to (reach) a framework different than that embraced in the two bills that had us stuck at stalemate.”
Madigan has cautioned that simply putting forth a new pension plan isn’t enough to get a bill on Gov. Pat Quinn’s desk. It makes little sense to go to Springfield to consider a pension bill “if we don’t have the required number of votes to pass it,” Madigan said.
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