Thursday, June 27, 2013

First conference committee session on pensions yields little progress

By Meredith Colias

A 10-member legislative conference committee met in Chicago today for its first public hearing in an effort to fix the state’s $97 billion underfunded pension systems.

But lawmakers hoping to move forward on a compromise between two polarizing pension plans broke little new ground as they heard testimony largely backing one plan or the other. Talks will continue in private until their next public meeting on July 3. Illinois adds an estimated $17 million per day to its pension liability.

During its spring session, the General Assembly was unable to reconcile differences between Senate Bill 1, backed by House Speaker Michael Madigan, and Senate Bill 2404, supported by Senate President John Cullerton and unions. Senate Bill 1, which passed the House, would raise retirement ages for state employees younger than 46, phase in a 2 percentage point increase in their pension contributions over two years and cap pensionable salary levels. Senate Bill 2404, which passed the Senate and is supported by public employee unions, would give retirees choices between keeping their health care benefits or their current cost of living increases. Both bills were controversial and lacked support to pass the other chamber. Opponents question whether either plan would be constitutional and stand up to a challenge in court.

Despite this, committee members said they believed there was willingness to compromise. Palatine Republican Matt Murphy said: “There’s not a lot of new ground here. It’s time to get into the room and hash this out.” Chicago Democratic Sen. Kwame Raoul told members if they allowed themselves to be “pigeonholed” into supporting just one plan or the other, “we are not going to solve this problem.”

Either way, Northbrook Democrat Rep. Elaine Nekritz, a main player in pension negotiations, said the estimates needed to be backed by hard numbers, and the state had to stick to it. "We have never adhered to actuarial science. We have always made political judgments about what [the yearly state payments] should be."

Illinois has the lowest percentage-funded pension systems in the country. The state Constitution prevents state government from slashing existing public sector pensions. Union representatives argue that teachers and other state employees should not bear the burden for the state’s failure over decades to fully fund the pensions to their required level. “These are folks that have paid their contribution when the state didn’t,” said Sean Smoot, director of the We Are One coalition of unions.

Skokie Democratic Rep. Lou Lang, who opposes Senate Bill 1, told committee members they needed to consider ways to increase revenue to reduce the liabilities, such as preventing the personal income tax rate from dropping below 5 percent as it is scheduled to do in 2015. “We have a crisis. We have to find the dollars available to pay for that crisis,” Lang said. Another suggestion he made was considering funding the systems at less than 100 percent. “If we were at 80 percent, none of us would be in this room.”

For a historical view of Illinois’ pension crisis, see “The Pension Chasm” by Charlie Wheeler from the February 2010 edition of Illinois Issues here.

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