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SPRINGFIELD — State employees currently on the job would either pay more or see reduced pension benefits under a plan in the Illinois Legislature.

By Andrew Thomason

SPRINGFIELD — State employees currently on the job would either pay more or see reduced pension benefits under a plan in the Illinois Legislature.

“I don’t think anybody in this room — whether you’re for this bill or against this bill — would disagree with the fact that our (pension) systems are in very, very, poor shape,” state House Minority Leader Tom Cross said Thursday during a House Personnel and Pensions Committee hearing.

Pensions stand to become the biggest consumer of state tax dollars if the system is not changed to provide upward of $80 billion in benefits it currently cannot pay, according to proponents of the plan.

“Every time a dollar leaves the Legislature and goes over to the pension systems, that’s a dollar not available for education, for social-service programs, for whatever else the Legislature chooses to appropriate the spending of money,” Illinois House Speaker Michael Madigan, D-Chicago, said.

The plan, Senate Bill 512, would stop the unfunded liability from continuing to grow, allowing the state to get to 85 percent to 90 percent funded liability by 2045, Cross said. He is co-sponsoring the plan with Madigan and said the state would take responsibility for the current $80 billion unfunded liability through a long-term plan of increased pension payments by the state.

A few organizations, however, peg the unfunded liability for the state’s five pension systems much higher than $80 billion. The American Enterprise Institute, a free market think-tank, put the number at $190 billion.

The proposed plan would swap the burden of making up the growing costs of Illinois’ pensions from state taxpayers to state employees. State taxpayers would contribute 6 percent toward an employee’s pension annually, with the employee contribution being recalculated every three years to reflect any increased costs of providing pension benefits.

The measure creates a menu of three options: employees hired before Jan. 1 could keep their current benefits but would be asked to contribute the more annually; all employees could move to the benefits package created for people hired after Jan. 2, which means working longer to get a pension, the second most expensive option; and lastly any employee could move to a 401(k) style, defined contribution package, the cheapest option.

A tiered system would go into effect for most employees beginning July 1, 2012. Cross said that because it would allow employees to pick their own plan, he could not give an estimate on annual savings.

If no action is taken on the pension systems, 61 percent of the state’s tax income revenue would go to pay for benefits, said Tom Johnson, president of the Taxpayer Federation of Illinois, a proponent of containing government spending.

“If our tax dollars have to be used … to pay for prior debts, and those dollars are not available to buy current services, whether they be human services or health care or education, both K through 12 and so forth, other states will be more competitive because they’re tax structures will be able to buy those services,” Johnson said.

Unions representing state workers, teachers and college professors have come out hard against the proposal.

“The problem isn’t the modest $32,000 a year the average public sector worker earned on their retirement. These workers have made their contributions, they have paid in and they deserve an adequate retirement,” said Michael Carrigan, president of the Illinois’ chapter of the AFL-CIO, a conglomeration of more than 55 unions.

He and other union leaders blamed the state, which skipped payments or recently borrowed to make payments to the pension funds. This year marked the first time in two years the state made its scheduled payments from cash on hand.

Language in the current proposal makes sure the state puts up at 100 percent its prior year’s contribution.

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1 Comment

  1. Not addressing our pensions

    Note that this pension reform does nothing to help Evanston or other cities with the State mandated pension requirements.  The State is only addressing its' own needs, and not addressing the other government entities that are bound by State mandates.  And this is on top of the threats to withhold State funds, such as the distribution of income tax money.  If thousands of people can be rallied to petition to stop kilts, you'd think that there would be even more writing and calling their legislators about these issues.  I hope that's the case, because it seems awfully quiet considering the fact that millions of Evanston dollars are at stake.

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