Nekritz, Biss lead push for lame-duck pension reforms
Updated: December 11, 2012 11:35AM
Two north suburban lawmakers outlined a package of pension reforms they hope can break a stalemate and spur action before the legislature adjourns Jan. 9 and many newcomers take office.
At a press briefing Dec. 5, State Rep. Elaine Nekritz, (D-Northbrook), and State Rep. Daniel Biss, (D-Evanston), announced a proposal that would, among other things, curb benefits for educators and state employees hired before 2011 and challenge past claims that pensions cannot be “diminished or impaired” under the state’s 1970 constitution.
The lawmakers have introduced House Bill 6258, which they say will bring the state’s long-term pension costs under control while simultaneously providing retirement security for hundreds of thousands of state workers and teachers.
The bill would gradually shift the “employer” contributions for suburban and Downstate teachers’ pensions from the State of Illinois to the local school districts that set salaries, something that Illinois House Republicans have staunchly resisted. The shift, which would occur at a rate of .5 percent of eligible payroll each year, also would affect state university and community college employees, with the university and community college boards assuming the employer contributions.
“Daniel and I understand this is a difficult issue for all of us, and we do not approach it lightly,” said Nekritz, who chairs the Illinois House Personnel and Pensions Committee and is a key pension negotiator.
“We have supported other reform legislation and would definitely consider other good ideas moving forward. But we must continue to push this issue forward and not let excuses get in the way of progress. Hopefully, this bill moves the conversation in the right direction because we must not let the pension problem ruin this great state.”
We Are One Illinois, a coalition of unions representing teachers and state employees, reacted with a statement saying the proposal, like others, “balances the pension debt on the backs of teachers” and other public servants who are not to blame for the problem.
“The pension debt was caused by the state’s failure to make actuarially adequate pension contributions, not by public employees,” said the coalition. “It is also unclear at this juncture whether this proposal is constitutionally or actuarily sound.”
The state’s five pension systems are only 40 percent funded on average. A recent report from the state’s actuary showed the pension debt had swelled to $94.6 billion by conservative calculations during the fiscal year that ended June 30. More than half the unfunded liability is in the Teachers’ Retirement System, which pays pension benefits to suburban and Downstate teachers and school administrators. That fund is $52 billion in arrears.
The reforms would rein in the growth in pension payouts by limiting annual cost-of-living adjustments to the first $25,000 of the pension, or $20,000 in the case of employees also eligible for Social Security. Retirees can currently count on 3 percent increases each year on the full amount of the pension.
The amount of salary that counts toward the pension would be capped at the Social Security wage base, which is $113,700 for 2013. For current employees who earn more than that amount, their current salary would become the cap.
Going forward, the retirement age would be raised for employees who are currently 45 years of age or younger, and all employees would need to contribute more toward their pensions.
The package proposes larger changes for those employees hired since 2011. Newer employees would be placed in a hybrid cash balance plan that combines features of a 401(k) style plan and a defined benefit pension.
The reforms also seek to bring discipline and fairness to a a state with a long history of deferring its pension obligations and taking “pension holidays” when budgets were tight. Pension contributions would be put on a 30-year schedule to achieve full funding over the next three decades. As the state pays off its pension obligation bonds, the revenue freed up would go toward paying down the state’s pension debt.
More than a dozen members of the Illinois House of Representatives are supporting the effort, including outgoing State Rep. Karen May, (D-Highwood), and Robyn Gabel, (D-Evanston).~.