SPRINGFIELD – A Senate committee approved a union-backed approach for dealing with Illinois’ pension crisis Wednesday, saying it gives the state its best chance at surviving an inevitable court challenge and getting out of its nearly $100 billion mess.
The Senate Executive Committee voted 10-5 to send the proposal to the full Senate. It could get a floor vote as early as today.
The measure, sponsored by Senate President John Cullerton, was drafted in collaboration with some of the state’s largest public-employee unions. Michael Carrigan, president of the Illinois AFL-CIO, called it a “fair, responsible and constitutional solution” that will bring much-needed stability to the system.
Cullerton said it is “very significant” that some of the largest unions have agreed not to sue if the bill is passed as written. The Chicago Democrat also believes the bill is the only approach to pension reform that is constitutional.
The union coalition that negotiated the deal, We Are One Illinois, represents more than 1 million members. The group’s leaders have said they will oppose a competing pension-reform plan that was approved in the House last week. They say the House bill, sponsored by House Speaker Michael Madigan, violates a provision of the state constitution that says pension benefits cannot be reduced.
“Clearly this [union-backed bill] is a stronger argument for the constitutionality than the other options that are out there,” Cullerton said Wednesday.
Cullerton said the measure is constitutional because it gives a choice in benefits. Workers would choose among three benefit packages, while retirees would choose between two. For example, workers who want to receive 3 percent cost-of-living increases compounded annually wouldn’t get health insurance. If they want health insurance in retirement, they would receive smaller cost-of-living adjustments.
Cullerton says under his plan, the annual pension payment would be about $850 million less in 2015 than is currently scheduled.
But the hearing also provided an indication of the tough road ahead for the legislation.
Bob Pinkerton, vice president of the Illinois Retired Teachers Association, said his organization – which represents about 35,000 retired teachers – wasn’t involved in the negotiations with Cullerton and doesn’t support the bill. He said the association could file a lawsuit if the legislation is enacted because retirees shouldn’t have to choose between cost-of-living adjustments and health insurance.
“Either jump off a cliff or I’ll shoot you is not a very good choice,” Pinkerton said.
And the We Are One Illinois coalition’s support came with a firm warning that if any substantive changes are made, the union coalition will drop its support.
“Our position today is this is a final, bottom line agreement,” Carrigan said.
Republicans argued the legislation doesn’t save enough money. Senate Republicans had wanted Cullerton to call Madigan’s legislation in their chamber, but the Senate President opted to move forward with the union deal.
“I just don’t think this solves the problem,” said Sen. Matt Murphy, a Republican from Palatine.
And whether the measure has any hope of getting a vote in the House remains to be seen. Madigan prefers his bill, which unilaterally cuts benefits and which the Chicago Democrat says would reduce the annual pension payment by about $1.8 billion in the first year.
Cullerton believes the unilateral cuts in Madigan’s bill are unconstitutional, and says if the Illinois Supreme Court throws out the law, the savings would actually be zero.
Illinois has the nation’s worst state pension crisis, due largely to years of lawmakers skipping or shorting their payments to the state’s five retirement systems. The massive unfunded liability has put pressure on other areas of the state budget and prompted credit rating agencies to give Illinois the lowest credit rating of any state in the country. The bond houses have warned that another downgrade could occur if the General Assembly doesn’t take action by the end of the legislative session, which is scheduled for May 31.
The Cullerton bill is SB2404. The Madigan bill is SB1.