CHICAGO Aug 23 Cost of living increases for
pension checks would be tied to inflation under a plan being
considered by an Illinois legislative panel charged with
reforming the state's woefully underfunded retirement system, a
source close to the negotiations said on Friday.
Employee contributions toward their pensions also would be
reduced by 1 percent under the plan being considered by the
10-member bipartisan panel of state lawmakers. Taken together,
the two changes could amount to a "consideration" that could
help address constitutional challenges to any cuts in pension
An actuarial review of the plan, which includes other
elements, found it could result in $145.6 billion in savings for
Illinois through fiscal 2045 and could cut the state's $100
billion unfunded pension liability by $18.1 billion. The pension
system for state, university, college, legislative and local
school district workers would be fully funded in 30 years.
"This is what they are discussing pretty seriously," the
State Representative Elaine Nekritz, a panel member and the
House Democrats' point-person on pensions, said there is no
final plan yet. She said COLA changes and contribution decreases
could be items under consideration.
"Things are still very much in a state of flux," she said.
The legislative panel is looking at changing the current 3
percent compounded cost of living allowance (COLA) to reflect
half of the inflation rate, subject to certain compounding,
according to the source.
The plan being hammered out in a series of private
small-group meetings could emerge as an alternative to two bills
previously proposed by top legislative leaders, neither of which
is under active consideration, panel members have said.
One bill, pushed by Illinois Senate President John Cullerton
and state labor unions, would give workers and retirees choices
between reduced benefits and continued access to state-sponsored
healthcare in retirement would save only an estimated $47
billion. House Speaker Michael Madigan's bill, which calls for
unilateral cuts to retirement benefits, could result in savings
of $187 billion.
Neither bill made it out of the Democrat-controlled
legislature's spring session, which ended on May 31. The impasse
led to the formation of the panel.
"I would like to think we are close enough to join hands and
jump in the pool," Nekritz said, regarding a final plan.
She said a decrease in employee contributions could be used
to offer workers and retirees "consideration" for agreeing to
cuts in pension benefits. Cullerton's bill offers consideration,
while Madigan's does not.
Any pension reform is expected to face a constitutional
"We want to give ourselves as many arguments before the
court as we can," she said.
Cullerton has argued that giving workers a choice is the
only way around strong protections for public worker retirement
benefits in the Illinois Constitution. And lawmakers, credit
rating agencies and others believe any pension changes will be
challenged in court on constitutional grounds.
Pension payments are squeezing out funding for core state
services such as education and health care. Illinois' structural
budget imbalance and pension liability have weakened its credit
ratings to the lowest among U.S. states.
Frustrated with continued inaction on pension reform,
Democratic Governor Pat Quinn suspended lawmakers' pay starting