Republicans balk at pension cost shift

By Jamey Dunn

Supporters of pension reform legislation approved by a House committee today say they want to see the bill called for floor vote. However, it may be difficult for them to find the support needed to pass the plan.

A House committee today approved Senate Bill 1673. Under the plan, state employees and others would have to choose between trading their current cost of living adjustments (COLAs) for less generous increases that would not kick in for five years after retirement or until age 67, or keeping their current COLAs but losing access to state health insurance. Employees who opt to keep the current 3 percent compounding interest COLA also would not have any future raises counted in figuring pension benefits. Retirees also would have to choose between their COLAs and their health care. The bill would apply to teachers outside of the Chicago Public Schools system, state employees, university employees, legislators and state officials. It would not apply to judges. House Speaker Michael Madigan said that judges are not included in the plan because some judges would likely have to rule on its constitutionality. He said if judges benefits were reduced under the measure, it would set up a conflict of interest for any judge who may have to rule on the plan in the future.

Union officials say that state workers, teachers and university employees faithfully made contributions to the retirement systems while the state skipped its pension payments. They argue that the bill violates a constitutional protection of pension benefits. Supporters of the plan say offering workers a choice allows the bill to pass constitutional muster. “This bill seeks to take from … workers their already hard earned and already paid for benefits in the guise of reform. I don’t think this bill is pension reform. I think it’s theft of earned benefits used to pay the state’s bills,” said Dan Montgomery, president of the Illinois Federation of Teachers. “It fails the constitutional test. … There’s no free choice here but a coercive dilemma where public servants choose between harm on the one hand or more harm on the other.”

Supporters argue that changes must be made to ensure that the pension system remains solvent for future retirees. “There are those that contend that the talk of disaster in our pension fund is just talk, that it would frankly never happen. I can tell you they are dead wrong,” said Rep. Elaine Nekritz, a Northbrook Democrat. Nekritz said that reducing the amount the state must spend on pensions would ease pressure on Illinois’ strained budget and free up money to spend in other areas, such as education and human services. “With this change, we can move away from being a financial laughing stock,”

However, some Republicans said that they cannot support a bill that would push costs onto local school districts that have been coping with state budget cuts in recent years. The measure would require school districts outside of Chicago to pick up the state’s portion of pension costs moving forward, but the change would be phased in gradually over years. The state would still be responsible for the unfunded liability already incurred. Beginning in 2013, colleges and school districts would pay an additional 1 percent of payroll cost into the pension system for six years. After that, they would pay an additional half a percent until they reach the point of covering all costs. They would also take on the liability if pension investments fail to perform as expected.

While the bill did not come up for a vote in the full House, some drama and shouting ensued on the House floor today as Republicans tried to push an amendment to the floor that would have taken the cost shift to schools out of the bill. House Minority Leader Tom Cross pointed to bipartisan efforts made in the House to pass Medicaid reform and work toward balancing the state’s budget. But Cross said that pension reform is a different story. “I had the false sense and hope that we were going to actually do something on pensions, a collaborative effort,” Cross said. Cross accused Madigan of inserting the “poison pill” of the cost shift in the bill to kill it because he says Madigan wants to stall on scaling pensions back for teachers until after the November election. “It became clear over the last couple of days that he was going to go down a route that reminded me of the old days of Mike Madigan. No more collaboration. No more bipartisanship,” Cross said. “And the biggest issue of the day, the biggest liability the state’s ever seen — we’re on the verge of getting it done, and he says: ‘No more. I’ve got a different idea. Take it or leave it.’”

Democrats used House rules to block Republicans efforts to have the amendment heard. “Total power in one person's hands is not the American way,” shouted Rep. Mike Bost, a Murphysboro Republican.

Madigan said that most in the chamber recognize that the state’s pension system is “financially unsustainable” and has to be changed and characterized the situation as one of simple disagreement. He warned that lawmakers should not get “swept up in the emotion of the minute.” “There’s a lot of frustration here in the House of Representatives and the General Assembly. We experience it all the time on a whole variety of issues — frustration, tension, interaction with different personalities pursuing different agendas. That’s life in the General Assembly. That’s life in the House of Representatives,” Madigan said. “Many people have worked on the question of pension changes, pension reform, for several several weeks — I being one of them. I’ve adopted a certain position on pension changes. Some of you agree with me; some of you don’t. That’s what happens here legitimately, and that’s what should happen. That’s why we come here. That’s why we’re sent here.”

Madigan added: “But it doesn’t serve any purpose to let our frustration and our disappointment get away with us. It doesn’t help. We have several major issues to get resolved before we end the session. I plan to work deliberatively on all of those issues. I don’t plan to issue any threats.”

Nekritz, who served on a pension working group, said she does not understand how Cross can oppose the cost shift to local school districts but not the shift to universities and community colleges. Cross’ amendment would only have eliminated the cost shift to K-12 schools. “I don’t quite understand how they can draw a distinction.” Update: According to a spokeswoman for Cross, he plans to file another amendment that would remove the cost shift to universities and community colleges.  She said said of SB 1673: “It would still be my hope that we would move forward. It’s still the right public policy.”

“Our hopes are to pass the bill,” said Madigan spokesman Steve Brown. Brown said the speaker is giving groups that support the bill time to lobby House members. Neither Nekritz nor Brown wanted to discuss what would happen if the bill were not approved. “I feel so committed to this [proposal] that I don’t know what the Plan B might be,” Nekritz said. “I would encourage people to focus on Plan A,” Brown said.