Unions propose paying more to fix pension crisis

Published: Thursday, Dec. 20, 2012 5:30 a.m.CDT

CHICAGO – Public employees cranked up pressure on lawmakers Wednesday to address Illinois’ worst-in-the-nation pension problem, saying they’d be willing to contribute more money toward their retirements and plan to host a pension summit after the new Legislature is sworn in next month.

A coalition of unions released a study blasting two proposed pension overhauls and making recommendations to address the state’s approximately $95 billion in unfunded liability.

Their recommendations include closing tax loopholes to bring in an estimated $2 billion in revenue for the state.

The group, called We Are One Illinois, said union employees would be willing to put in 2 percent more of their salaries, which equals about $350 million, toward their retirements, if the state could guarantee that it would fully pay its pension obligations.

“We are here ... to firmly rebut the allegations that public employees and their unions are unwilling to tackle the state’s pension problems,” Michael Carrigan, president of the Illinois AFL-CIO, said at a news conference in Chicago.

The coalition proposed similar ideas in August, when Gov. Pat Quinn called lawmakers back to Springfield for a special session on pensions, a meeting that didn’t produce results. Wednesday marked the first time the group – including unions representing teachers, nurses and state employees – proposed specifics.

The group’s proposals for bringing in more revenue include closing tax loopholes, such as reforming corporate tax expenditures and getting rid of some tax credits and incentives.

The group cites several including repealing corporate tax breaks Quinn offered to CME Group Inc. and CBOE Holdings Inc. last year after they threatened to leave the state.

Other proposed ideas include ending the for-profit hospital tax breaks and repealing the state’s estate tax exemption increase.

Quinn, speaking at an unrelated event in suburban Chicago, said that the ideas from the union were something to consider, but he didn’t agree with their critiques of other plans before lawmakers.

“We always want to look at everything. It’s useful to look at everybody’s ideas,” Quinn, a Chicago Democrat, said.

Lawmakers at the heart of pension talks said the unions’ input was encouraging, but it was too early to tell if the willingness to pay more would affect current pension talks. Quinn has set a Jan. 9 deadline – the day the lame-duck session ends and new lawmakers are sworn in – to adopt a plan. Union members said they were aiming for a mid-January pension summit.

“Everything has to be on the table,” said state Democratic Rep. Daniel Biss, a sponsor of pension legislation proposed this month.

A spokesman for Senate President John Cullerton, a Democrat, said the ideas were appreciated but wouldn’t “produce savings significant enough to solve our pension problem.”

Republicans also welcomed the ideas. A spokeswoman for Senate Minority Leader Christine Radogno said she was reviewing the proposal.

Union members said the 2 percent figure was a fair offer that represented “shared sacrifice” on the part of public employees to fix the state’s pension crisis.

How much employee contribute toward their pensions depend upon which system the employee is in. Teachers currently pay roughly 9 percent of their salaries while university employees pay 8 percent. The 2 percent proposed Wednesday would be in addition.

Illinois has failed to make sufficient payments to pension plans over the years, and the problem gets worse each day, threatening the states already-shaky finances. Last week, Moody’s Investors Services revised Illinois’ credit outlook from stable to negative, citing the pension funding shortfall and money management practices.

Quinn has said overhauling the state’s five pension systems is his top priority, but lawmakers have failed to agree on a plan. The governor, who has vowed to get an overhaul in January, has said the November elections kept lawmakers from making tough decisions on pensions.

Meanwhile some lawmakers have blamed Quinn for not being aggressive enough.

Frustrated by inaction, a group of bipartisan lawmakers introduced a proposal earlier this month that would reduce annual cost-of-living increases for retirees and require workers to contribute more to their retirement. It also would require younger employees to work longer into their careers, and some costs for teacher pensions gradually would shift to some school districts. Specific projections on the plan haven’t been released yet. The proposal also includes a guarantee that the state will make sufficient annual payments.

Another plan introduced over the summer deals with two of the five pension systems. The legislation says that instead of 3 percent annual cost-of-living increases, retirees would get the lower of either 3 percent or half the inflation rate, among other things. It was estimated to reduce the unfunded liability by more than $5 billion, according to some estimates.

The union group largely rejected both plans saying that the pension benefit cuts would have drastic effects on retirees who live on limited incomes.

“It has the perverse ingenuity the older you are the more unable you are to care for yourself, the greater your needs, the less you will have,” said Dan Montgomery, president of the Illinois Teachers Federation.

Union leaders also questioned the constitutionality of the plans and said if lawmakers passed them they would be challenged in the courts.

The report did commend the bipartisan lawmakers’ plan for requiring the state to fully fund its pension, though said the language needs to be tightened.

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