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State and Federal Legislative Issues
Spotlight Issue - State Pensions January 2013
New legislature still faces elusive pension solutions (From the January 9th Edition of the State Journal Registrar)
Legislative leaders and Gov. Pat Quinn all stressed the importance of tackling pensions as the 98th General Assembly was sworn into office Wednesday.
Now all they have to do is find a solution that has eluded them for at least the past two years.
Pension change proposals were introduced in both the House and Senate that incorporate ideas that were floated last year but failed to gain enough traction to pass.
Rep. Elaine Nekritz, D-Northbrook, and others introduced House Bill 98, which mirrors a plan she developed in December. It would change retirement benefits, raise employee pension contributions and require the state to make its full contribution to the pension systems each year.
Senate President John Cullerton, D-Chicago, introduced Senate Bill 1, which is a hybrid of a plan floated this month in the House and a bill that was passed by the Senate, but never approved by the House. Cullerton’s bill requires members of most pension systems to choose between higher cost-of-living adjustments in their retirement benefits or continuing to receive state-subsidized health insurance in retirement.
Cullerton’s bill stipulates that if the House reform plan is found unconstitutional, the Senate plan would become law. Cullerton believes the Senate idea is the only one that can be found constitutional because it would give employees a choice.
“The finances of our pension system have to be addressed in a fair and constitutional manner,” Cullerton said in remarks to the newly sworn-in members after he was re-elected Senate president. “We are on the verge of our state budget turning into a financial plan that funds pensions and benefits rather than essential services.”
House Speaker Michael Madigan, D-Chicago, called the pension issue “the most serious problem facing Illinois today.”
“It’s an extremely difficult issue because, in order to achieve some improvement, part of the solution would be to tell people there will be a change in their promised benefit,” Madigan told the House.
Madigan said participants in state-funded pension plans get notices about what their pension benefits would be if they retire immediately.
“We propose to change that number and take it down,” Madigan said. “That’s difficult.”
Madigan also renewed his call to shift downstate teacher pension costs to local school districts, ending what he called the “free lunch that is enjoyed by certain employers in the state of Illinois.”
The cost shift idea was a major stumbling block in pension reform talks. Two weeks ago, Madigan said he would postpone action on the cost shift idea if that meant a reform plan could be passed by lawmakers during the just-concluded lame duck session. However, the House still could not muster the votes to act.
Quinn called the lack of action during the lame duck session “disappointing, but we just have to keep running until we get to the finish line.”
“Ultimately, there will have to be some compromises in the House,” Quinn said.
Credit rating unchanged
On Tuesday, Nekritz said Quinn had warned lawmakers that a downgrade in the state’s credit rating would come Wednesday if a reform plan wasn’t passed.
“I said the fear is it is imminent,” Quinn said when no downgrade occurred. “We’ve been warned. Moody’s indicated we are on thin ice with our credit rating.”
Quinn also said some soon-to-be-released early budget projections might spur action.
“The facts are, because we have to pay more and more every year in pension payments, we have less for (other programs),” Quinn said. “The numbers will be pretty clear.”
State pension costs are scheduled to go up by nearly another $1 billion in the next budget.
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