Pension group suggests lower benefits, higher contributions
Monday, April 16, 2012
Gov. Pat Quinn's pension working group is asking public employee unions to accept lower pension benefits and a higher contribution rate in exchange for a more ironclad guarantee that the state will meet its funding obligations.
The proposal also would shift the employer costs of local teacher and university employee pensions from the state to school districts and universities, according to Rep. Elaine Nekritz, D-Northbrook.
Nekritz has been part of a working group whose mission is to come up with ideas on how to deal with the state's $85 billion in pension debt. The group is led by Quinn budget director Jerry Stermer. It also includes state Sen. Bill Brady, R-Bloomington, state Rep. Darlene Senger, R-Naperville, and state Sen. Michael Noland, D-Elgin.
Nekritz declined to reveal further details of the proposal, which is expected to be unveiled next week. The proposal will not be in the form of legislation, but rather a list of “recommended options,” she said.
“I can’t say this is what the bill is going to be because we’re still discussing it. We’ve given labor a proposal, and they’re reviewing it,” Nekritz said.
In a statement, AFL-CIO president Michael Carrigan, who spoke for the We Are One Illinois Coalition, said labor has not been given enough information to analyze any potential proposal. The coalition is made up of the AFL-CIO, American Federation of State, County and Municipal Employees, the Illinois Education Association, the Illinois Federation of Teachers, the Associated Fire Fighters of Illinois, the Police Benevolent and Protective Association, the Fraternal Order of Police and the Service Employees International Union.
"Early in the process, we requested relevant data to analyze the impact of any proposal made by the working group," Carrigan said. "To this date, we have received no data."
Carrigan also said it's "no longer clear" whether the working group speaks for the four legislative leaders and Quinn.
"Our unions are firmly committed to negotiating a solution to the pension funding crisis," Carrigan said. "However, to go forward, we need both the data supporting any proposals and a commitment that the representatives with whom we engage are authorized to speak for the governor and the legislative leaders."
Quinn had talked about unveiling his pension ideas on Tuesday, but his spokeswoman said the governor instead will make his pitch sometime after Wednesday, when Quinn also is expected to unveil a plan to deal with the state's skyrocketing Medicaid bills.
“The governor believes very strongly that it’s absolutely urgent we address those two issues this year,” said press secretary Brooke Anderson.
Anderson declined to say what would be in Quinn’s proposal, but said it will be “based on work done in these groups.”
“I’m not going to weigh into what may or may not be in the final proposal the governor lays out next week,” she said.
Nekritz described labor as “noncommittal” when the ideas were presented to their representatives last week.
The unions have insisted that any solution must be constitutional and fair. They opposed a proposal made last year by House Minority Leader Tom Cross, R-Oswego, and House Speaker Michael Madigan, D-Chicago, to significantly increase the amount workers hired before Jan. 1, 2011 would pay toward their pensions and to create a 401(k)-style, defined contribution system as an option to the state's current defined benefit plans.
Brady said labor continues to seek a guarantee that the state will make payments into the system, instead of skipping or underfunding pensions, a practice that has caused the bulk of the state’s $85 billion in pension debt.
“Those representing the interested parties have asked for certain funding guarantees in exchange for understanding that reforms will take place,” he said. “They just received some information this Tuesday, so we anticipate they’ll meet over the weekend and come back with what they think the options are.”
State law requires the state to make pension payments according to a schedule outlined in a 1995 law aimed at bringing the pensions to 90 percent funding by 2045. But in the past, lawmakers often have simply adjusted the law to skip the pension payments.
Short of a constitutional amendment, the legislature could do the same in the future, Nekritz conceded. No one expects an attempt to pass a constitutional amendment.
“That’s not a viable option,” Nekritz said. “I’m not sure such a thing would pass. I’m not sure voters would be supportive of requiring the state to make the contribution.”
But if the state shifts the funding burden to local school districts and universities, it could require that the pension payments be made or else state tax money earmarked for the local agencies would be garnished. That’s what happens if cities and counties try to skip payments to the Illinois Municipal Retirement Fund.