CHICAGO May 6 A union-backed plan to reform the
worst-funded state pension system in the United States will be
introduced in the Illinois Senate this week, competing with a
plan passed by the House last week.
State lawmakers are under pressure to deal with a nearly
$100 billion unfunded pension liability. Costs arising from the
underfunding are threatening funding for core state services
such as education and health care, and the pension crisis has
pushed Illinois' credit rating to the lowest level among states.
John Cullerton, the Democratic president of the Illinois
Senate, said on Monday he plans to introduce the new bill
endorsed by public labor unions and bring it to a vote by the
full Senate on Thursday.
Cullerton said the measure, which he negotiated with the
unions, would not invite a legal challenge from them. The unions
had vowed to sue over the rival bill narrowly passed by the
Democrat-controlled House last Thursday.
"When this bill is passed, they're not going to sue,"
Cullerton told reporters in the state capitol in Springfield.
Cullerton estimated the Senate measure could save the state
about $46 billion over 30 years, though he acknowledged the
projected savings could rise or fall, depending on choices
people make among options offered by the bill.
By giving the state's public-sector workers a choice in how
their pension and health benefits are allocated, the bill seeks
to avoid a constitutional prohibition against reduction in
benefits promised to public sector workers.
The House measure, which was pushed by powerful Democratic
House Speaker Michael Madigan, is projected to eliminate the
entire $100 million funding shortfall over 30 years.
However, Cullerton said the House measure could end up
saving the state "zero dollars" if Illinois courts decide it is
Cullerton's approach offers an incentive - called a
"consideration" in pension parlance - designed to persuade
workers to accept changes in their pension benefits. Employees
who agree to the changes would do so willingly, and receive a
benefit for doing so, and this tradeoff would address a
constitutional ban on reduction of pension benefits.
Under Cullerton's plan, current workers would be given
choices involving changes in cost-of-living adjustments for
pensions, higher contributions, and the use of future raises to
determine pension payments.
In return, they would have access to state-sponsored health
care in retirement. Retirees would have to agree to a freeze on
current 3 percent compounded cost-of-living allowances to retain
their health care coverage.
The measure is similar to one passed by the Senate in March
that dealt solely with the Teachers' Retirement System, the
largest of the state's five pension funds.
The Cullerton plan is also similar to the House bill in that
it requires the state to make timely and adequate pension
contributions, while also exempting pension changes from
Madigan's bill sets a cap on salaries used to determine
pensions, limits cost-of living adjustments on pensions for
future retirees, increases retirement ages and hikes worker
It also introduces changes to calculating the state's annual
pension contributions that are designed to come closer to the
actual future cost of pensions.
Union officials have condemned the changes as violating the
Illinois Constitution and have warned they would sue if the
measure were signed into law.
"The union coalition has made a great effort to ensure
fairness for the public employees and retirees who did not cause
this problem, to ensure the stability of the pension systems for
future generations, and to offer a credible way forward," said
Michael T. Carrigan, president of the Illinois AFL-CIO, on
behalf of the We Are One Illinois coalition of public labor
"This agreement is our coalition's bottom line," he said.
Cullerton said he plans to meet with Madigan on the
union-backed measure, which will be heard in the Senate
Executive Committee on Wednesday. He also said his chamber would
hold off on considering Madigan's pension bill until senators
can take up the new measure.
(Reporting By Karen Pierog; Editing by David Brunnstrom)