By Rachel Wells
Gov. Pat Quinn today signed pension reform legislation expected to provide $400 million in budget relief for next year and reduce the 2045 liability by $220 billion, according to the governor’s office.
Under the new law, teachers and state workers hired after January 1, 2011, will be required to work at least 10 years before they can retire at age 67, up from eight years at age 60, before they can collect full benefits. New employees will receive a lower cost-of-living adjustment, and the law will also lower the cap on earnings that can accrue benefits,. The new cap will be $106,800, down from $240,000.
Quinn’s original budget proposal for Fiscal Year 2011 assumed $300 million in immediate pension reform savings to help ease the $13 billion budget gap, but he said today he would be comfortable aligning the budget to $400 million in savings, the amount he says has been conservatively estimated by actuaries.
“I think it’s important, given the history of this issue, that we be conservative, that we not take … a front-loaded approach,” Quinn said. “This is a long journey to 2045.”
While the governor’s office said the reforms will result in future payment savings of $67 billion through 2045, the reforms don’t apply to current employees or help diminish the amount currently owed to those employees’ systems.
The year 2045 is significant because that’s when, by law, pension liability funding must be at least 90 percent funded. In 1995, to make up for skipped or inadequate pension payments, the legislature devised a payment system that forced the state to make larger and larger payments for each of 15 years, followed by 35 more years of payments at a level rate. But over the years, lawmakers have opted to continue to push payments off, creating even larger obligations in future years.
“This is really a good first step in setting our state finances on the right track,” said Senate Minority Leader Christine Radogno, a Lemont Republican. She added, “I think we can still do some more with pension reform.” She said the state owes it to its residents to find out whether pension reforms can be applied to current employees’ benefits.
However, Quinn, Senate President John Cullerton and the Illinois State Bar Association agree that changes to current employee benefits would be unconstitutional.