Higher education leaders agree to pension cost shift

By Meredith Colias 

Representatives from universities and community colleges negotiating with House Speaker Michael Madigan have reluctantly agreed to begin gradually taking over the payments for their employee pension costs.

The plan is for the higher education institutions to start to pay .5 percent of employee pension costs in Fiscal Year 2015, which begins July 1, 2014, and gradually increase that amount by an additional .5 percent increment each year until they fully take over the state’s payment, estimated at between 10 to 11 percent under the new plan.

Madigan is pushing the proposal, saying the state is no longer in a financial position to foot the bill for them. “Whenever one person spends money and another person pays the bill, it’s a bad policy, especially for government,” Madigan said. “They would prefer not to do this, but they all acknowledged in their public testimony that they think proposal is fair,” Madigan said. “They think they can manage it.” The proposed cost shift has been a point of controversy throughout the debate over changes to the pension systems. Republicans have argued that it would lead to layoffs, tuition increases and local property tax increases if it were applied to K-12 schools. Democratic leaders decided to remove the issue from the larger debate and deal with it on its own.

Glenn Poshard, president of Southern Illinois University, said the proposal would require sacrifice on the part of the university, but he said it was more important to show employees that there would still be a reliable source for their pension payment. “We’ll just have to do it, because they deserve stability and security in their pensions system.” Poshard said. “We are willing to go forward,” he said. “We know it is not going to be easy.”

Representatives from community colleges expressed more concerns. “We [will] manage, but it will be difficult. We will do the best we can,” said Tom Ryder, who represents the Illinois Community College Trustees Association. A “free lunch is a good thing if you’re consuming, but not if you’re paying,” he said. “We want to manage our way through it.” Ryder said changes made during negotiations with Madigan, including delaying the start of the shift until 2015 and settling on the .5 percent initial shift, “helps us feel comfortable” with the proposal.

University officials and community colleges called on lawmakers during the committee to fix the Tier II pension system. University employees cannot contribute to Social Security, and some have expressed concern that Tier II pension benefits may not be sufficient enough for them to continue to be exempt from the Social Security system. The worry is that sometime in the future, universities could be forced to pay into Social Security in addition to their pension costs. Some key players in the pension debate have proposed a Tier II fix that would give employees a 401(k)-type plan in addition to their defined benefit plans, but it was not included in either the pension proposal that passed in the House or a different one that passed in the Senate.

Poshard said that looking at the long-term consequences, he is concerned that less state funding and more obligations to pay from the state will force universities to raise tuition costs and price students out of a college education. “There is a plethora of things the state is not funding [anymore],” he said. “I think that’s the road we have been going down,” he said. “If we keep going in this direction, we are just going to privatize public higher education. That’s the meal ticket for the middle class,” he said. “We’re still hopeful that we won’t” end up with Quinn’s proposed 5 percent cuts to higher education, Poshard said after the committee meeting. “If we end up with one or two [percent in cuts from last year's funding instead] we would be happy.” Supporters of the cost shift hope to work out a plan for K-12 schools to also pick up future employee retirement costs. Madigan said today that the House would likely have another hearing on that issue next week.