Illinois lawmakers propose new pension fix, but unions vow suit

SPRINGFIELD, Ill Sun Jan 6, 2013 11:38pm EST

1 of 2. Illinois Governor Pat Quinn delivers his State of the State address to the joint session of the General Assembly in the House Chambers of the Illinois State Capitol in Springfield, Illinois February 1, 2012.

Credit: Reuters/Sarah Conard

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SPRINGFIELD, Ill (Reuters) - Illinois lawmakers unveiled a plan Sunday they believe can fix the state's huge pension crisis, but labor unions blasted the proposal and vowed to sue to protect their benefits.

State representatives Elaine Nekritz and Daniel Biss, both Democrats, said the proposed amendment resulted from weekend pension reform talks between legislative leaders and reflects a bill they co-sponsored last month. House Republican Leader Tom Cross supports the plan and is urging fellow Republicans to join him.

House Speaker Michael Madigan, a Chicago Democrat, said he thought it possible to reach a deal in time for a vote this week. Nekritz sounded more cautious.

"We think the bill will get out of committee, and then we'll see," Nekritz said. "This has been so fragile at every step along the way that if we can get it to committee, great, and if we can get it off the floor, great, but we're still working our way through it."

But the labor union coalition We Are One slammed the proposal Sunday, claiming union representatives had been shut out of negotiations and that politicians were using unconstitutional schemes to ruin retirement security for hundreds of thousands of Illinois workers.

If the General Assembly tries to pass the plan before the lame-duck session ends Tuesday night, the coalition said it will go to court. They are confident they will prevail given strong protections for pension benefits in the Illinois Constitution.

Illinois' finances are buckling under the weight of a huge $96 billion unfunded pension liability that is rapidly siphoning off money needed for state services such as healthcare and public safety.

We Are One wants to meet with legislators in mid-January to craft a pension reform plan that offers workers ironclad guarantees, closes corporate tax loopholes and requires employee payments into the system. The coalition said in a statement that its plan "remains the only fair, constitutional and sustainable proposal on the table."

Nekritz said legislators met with coalition representatives in December and feels the two groups are at an impasse.

Quinn has been pushing the Democratic-controlled Legislature to pass pension reforms before the new legislative session begins Wednesday.

In an apparent attempt to focus on pension reform, Nekritz recessed a House panel Sunday that had been scheduled to discuss an automatic weapons ban.

State Senate Leader John Cullerton, a Democrat, has also questioned the pension proposal's constitutionality, and has pushed a bill he sponsored that addresses two of the five pension systems in Illinois - those that cover state workers and legislators. The bill does not address the Teachers' Retirement System, which is the state's largest.

Cullerton said the Senate might come back before the end of the lame-duck session.

Biss said he thinks if passed, the new proposed amendment would withstand a court challenge given the enormity of Illinois' pension problem.

"I think the threshold question for constitutionality is 'What is the size of the problem, and are we solving it?' I think it's important that the General Assembly speak with one voice about how big a solution is needed or else we'll muddy the question with the courts," he said.

Biss said that the coalition would have viewed the proposal the unions advanced last month as unconstitutional five years ago, too, but the state's current fiscal pressures make that view "untenable."

The lack of a pension fix has led to downgrades of Illinois' credit ratings, with Moody's Investors Service warning last month it could drop Illinois below the current A2 rating, the lowest among the states it rates.

A potential breakthrough on a pension fix surfaced on Friday when Quinn announced that Madigan had agreed to defer until a later date a measure to gradually shift state payments for teacher pensions onto local school districts. Republican lawmakers were concerned the move would lead to local property tax hikes.

Madigan on Saturday said that will lead to a partial pension fix, leaving lawmakers to deal mainly with benefit levels.

The new proposal - an amendment to a senate pension bill - includes boosting worker contributions, raising retirement ages and limiting cost-of-living adjustments for retirees. It also caps pensionable salaries, creates a 30-year payment plan to reach 100 percent funding and provides a guarantee that if the state does not make its payment, the pension systems can sue.

Nekritz acknowledged that the fight to pass the amendment will be tough.

"We've got to get 60 votes," she said. "That's what we're focused on."

(Reporting By Joanne von Alroth; Editing by Mary Wisniewski)

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Comments (4)
marinevet69 wrote:
If they could find a way to get the offshore bank accounts of former Governors and other elected officials currently serving time in jail for corruption the problem would be solved. Most corrupt history of local and state officials by far. Yet we elect an Illinois politician as POTUS,not once but twice. The POTUS sends his closest advisor back to mayor of Chicago,hmm, then the son of a revered civil rights leader is forced to resign from congress. This has been going on for generations in Illinois.

Jan 07, 2013 4:56am EST  --  Report as abuse
actnow wrote:
I live in Illinois and can say without a doubt that the ability of this state to perform it’s most basic functions are crumbling despite the sky high taxes we pay. We now face a downgrade of our credit to the lowest in the nation. And the bulk of the problem is related to the benefits that current and retired state employees recieve, which are far higher than the national average. The Democrats have rigged the Constitution so that these benefits can not be reduced, even if all state functions cease and taxes are 100%. This is the product of a state government that has been completely dominated by one party for decades, and I fear is the model that Democrats seek for our Federal Government as well. America, take heed, Illinois is the canary in the cole mine. Please don’t follow our tragic example. Save yourself while you can.

Jan 07, 2013 11:21am EST  --  Report as abuse
Algernon wrote:

The Colorado Court of Appeals has reversed and remanded an initial District Court ruling that denied the contractual status of public pension COLAs in Colorado. The Court of Appeals confirmed that Colorado PERA pension COLA benefits are a contractual obligation of the pension plan Colorado PERA and its affiliated public employers. A huge victory for public sector retirees in Colorado! The Colorado Legislature may not breach its contracts and push taxpayer obligations onto the backs of a small group of elderly pensioners.

The lawsuit is continuing. Support pension rights in the U.S. by contributing at Friend Save Pera Cola on Facebook!
In 1977, the U.S. Supreme Court (in U.S. Trust Co, 431 U.S.) clarified that state attempts to impair their own contracts, ESPECIALLY FINANCIAL OBLIGATIONS, were subject to greater scrutiny and very little deference because the STATE’S SELF-INTEREST IS AT STAKE. As the court bluntly stated:

“A governmental entity can always find a use for extra money, especially when taxes do not have to be raised. If a state could reduce its financial obligations whenever it wanted to spend the money for what it regarded as an important public purpose, the Contract Clause would provide no protection at all . . . Thus, a state cannot refuse to meet its legitimate financial obligations simply because it would prefer to spend the money to promote the public good rather than the private welfare of its creditors.”

Jan 07, 2013 11:43am EST  --  Report as abuse
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