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Local lawmakers eye Madigan's catchall pension plan

Published: Wednesday, May 1, 2013 5:30 a.m. CST
Caption
(AP photo)
Illinois Speaker of the House Michael Madigan, D-Chicago, listens to lawmakers debate from the speaker's podium April 16 while on the House floor in Springfield.

SPRINGFIELD – DeKalb-area lawmakers were cautious in their reaction to Illinois House Speaker Michael Madigan’s pension reform efforts Tuesday.

Madigan sought to tackle the pension crisis through a single piece of legislation that would require government employees and teachers to contribute more toward their retirement but receive fewer benefits in return.

Several similar bills already have received House approval, but Madigan’s proposal ties them together. That, supporters say, makes it a one stop shop for pension reform, rather than require disparate fixes through separate legislative measures. The bill was scheduled for a committee vote this morning.

Reps. Robert Pritchard, R-Hinckley, and Tom Demmer, R-Dixon, have voted in favor of at least two of those proposals, but they did not come out for or against Madigan’s plan.

“It needs to be fair to employees, just like it’s fair to taxpayers,” Pritchard said. “One remaining question: I haven’t seen those contributions we’re going to make every year, and what that will do to our budget.”

In moving the pension debate into high gear, Madigan, a Chicago Democrat, replaced language in legislation sent to the House by Senate President John Cullerton, removing Cullerton’s plan for offering affected state-government employees and teachers a choice of benefits. Instead, it unilaterally reduces them.

Notably, the proposal does not include shifting some teacher pension costs to school boards. Madigan has bemoaned the “free lunch” school districts get because the state pays the employer portion due to the retirement funds of elementary and secondary teachers.

Several of Madigan’s proposals have been discussed, but have a new twist. The highest salary on which a pension could be based would be about $110,000, instead of the $113,700 Social Security guideline. That salary would increase by only half the rate of inflation each year.

Pritchard said he was worried about how that could affect universities such as Northern Illinois as they strive to recruit for highly-sought faculty and staff.

“That disadvantages the more highly paid people – we’re going to lose faculty because of this kind of plan, unless the university makes its own 401(k) kind of plan,” Pritchard said.

But cost-of-living increases for retirees could be more generous under the Speaker’s plan. Instead of basing increases on the first $25,000 of an annual pension, it would be 3 percent of $1,000 for each year of service. So someone working 30 years would do better than under past proposals.

Demmer said he was open to this idea on cost of living adjustments, calling it reasonable. However, he said he wanted more time to study the plan.

“There might be something you don’t see in the first pass,” Demmer said.

Pritchard said he also wanted to see more analysis on the bill before judging it fully. He added that an actuarial analysis, which would detail how much it would save the state, has not been released yet.

Lawmakers have wrestled for years over the growing problem in the state’s five pension accounts covering state and university employees, teachers, judges and members of the General Assembly. Years of skipping or shorting payments to the pension funds have left the state almost $100 billion short of what it needs to cover the pensions of all current and retired employees.

To catch up, the state has to pay more than $6 billion in the budget year that begins July 1 — about a fifth of the total amount available for all services, including education, health care and public safety.

The Madigan proposal would bring the systems to full funding by 2044.

Key pieces of the plan have popped out of the House as Madigan set up a system where the entire House debated pension-reform issues individually instead of all at once. Tuesday’s legislation fulfills a prediction by Rep. Elaine Nekritz, a Madigan lieutenant on the issue, that those pieces would eventually be combined into one bill.

Other parts of the Madigan plan remain unchanged from those proposed by Nekritz, a Northbrook Democrat, and House Republican Leader Tom Cross of Oswego.

They include a promise that starting in 2020, the state will contribute an additional $1 billion annually to the pension funds, reflecting the retirement of bonds sold to borrow money for pensions. The final, $952 million payment is due in 2019.

And the bill would guarantee that the state would make the payment it owes each year — determined by actuaries — or the officials that operate the individual pension systems could file a lawsuit.

• Daily Chronicle reporter David Thomas contributed to this report.

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