SPRINGFIELD — Republicans in the General Assembly are balking at a proposal to shift responsibility for teachers’ and college employees’ pensions to their schools, instead of the state.
By Andrew Thomason
SPRINGFIELD — Republicans in the General Assembly are balking at a proposal to shift responsibility for teachers’ and college employees’ pensions to their schools, instead of the state.
The GOP’s reticence threatens a broader attempt at state pension reform. They say the pension shift would result in either property tax spikes around the state, cuts to classroom spending, or some combination of both.
“Property tax payers are looking at a potentially enormous increase. Policywise, it may or may not make sense, but … there are a lot of questions out, a lot of uncertainty,” Illinois Senate Republican Leader Christine Radogno, R-Lemont, said during the Senate Executive Committee on Wednesday. “We will lose votes, there’s no question we lose votes with the cost shift.”
Radogno and Republicans said they worry about a part of the proposal that would make school districts and colleges responsible for any increase in the pensions’ unfunded liability — how much is owed to current and future retirees versus how much a pension system has on hand, starting July 1, 2013.
Radogno has filed legislation to strip the cost shift from the larger pension-reform proposal. Illinois House Republican Leader Tom Cross, R-Oswego, filed similar legislation in the House on Tuesday.
Proponents counter that because the shift to schools is delayed until July 1, 2013, and because it would be phased in over the course of at least six years, the effect wouldn’t be as nearly as dramatic as Republicans portend.
Illinois Senate President John Cullerton, D-Chicago, is carrying the Senate’s version of pension reform, and he even found an ally in the Illinois Policy Institute, a right-leaning think tank.
Cullerton and Collin Hitt, senior director of governmental affairs for the institute, agree the proposal wouldn’t necessarily guarantee a property tax increase for school districts.
“School districts can take on this cost, and they can eliminate other expenditures in order to offset this cost,” Hitt said.
The proposal in the Senate — and a similar piece of legislation in the House — claims to eliminate the state’s $83 billion unfunded liability in 30 years, without the cost-shift measure.
Jerry Stermer, Gov. Pat Quinn’s budget director, said forcing school districts and colleges to pay employees’ retirement benefits is the “responsible” thing to do. School boards negotiate teachers’ pay, which in turn determines the size of teachers’ pensions. If schools are responsible for the cost of pensions, they might be more apt to curb salary increases that lead to higher pension benefits.
“This proposal says everybody who makes decisions has to bear the responsibility,” Stermer said.
Radogno asked Stermer if Quinn would support a proposal removing the cost shift but leaving other provisions, the core of which offers employees and retirees a choice between lower cost-of-living adjustments coupled with guaranteed access to the state health care plan, or higher cost-of-living adjustments without access to the state health care plan.
Stermer hedged, saying the governor is considering anything that could fix the $83 billion unfunded pension liability facing the state.
The General Assembly is scheduled to adjourn by midnight Thursday, putting even more pressure on legislators to get something done.
Reporter Andrew Thomason can be reached at andrew.thomason@franklincenterhq.org.
Republicans are right on this one
The Republicans are right on this issue. Pension reform does not mean dumping the unfunded liabilities on someone else's lap.
Real reform means ending DB pensions for all state and municipal employees and switching to DC plans as well as raising retirement ages and adjusting payout formulas sharply downward for existing participants. The state may also need to consider capping the maximum payouts to participants in these plans to some reasonable figure ($80K annually or so to pick an amount) including payments to existing retirees. Illinois should also consider ending collective bargaining rights for public sector employees as Scott Walker has partially done. Some of these changes are radical and may require state constitutional amendments in order to bypass judicial review.
These are painful and politically unpopular decisions that need to be made to restore our state and our municipalities to solvency. Illinois and its municipalities, unlike the federal government, do not have a printing press and therefore these mounting liabilities can and will push us to insolvency if they are not addressed. Offloading the liabilities to the municipalities does nothing to solve the problem or address the structural issues which created and perpetuate this crisis.