Quinn's pension fix: workers to pay more, retire later

Friday, April 20, 2012

In his second big move in two days to shore up state finances, Gov. Pat Quinn Friday called for major changes in the state's grossly underfunded employee pension plans, changes that would affect both employees and local governments.

The plan would have employees paying an additional 3 percent of their salary each year toward their pension, reduce cost-of-living increases to 3 percent, or one-half the rate of inflation — whichever is smaller — and boost the normal retirement age to 67. It now begins as low as age 55 in some plans.

Local taxing bodies — specifically school districts, community colleges and public universities — would be responsible for paying the normal costs of pensions for their workers themselves. Those costs now are borne by the state, and Mr. Quinn said the change will be phased in "over the next several years."

In exchange for that, Mr. Quinn said, the state's pension systems, which now collectively have $83 billion in unfunded liabilities, would be 100 percent funded by 2042, with the state subjected to stiff new requirements forcing it to make regular payments toward that goal.

And, he said, workers would keep their defined benefit contributions, something that has largely disappeared from the private sector.

Blowback from worker unions is expected to be fierce, and Mr. Quinn, who is continuing a press conference on this matter as I write, did not immediately explain how he would get past possible constitutional objections.

On Thursday, the governor proposed a $2.7 billion fix for the state's Medicaid program. That proposal, as well as the pension plan, would have to be approved by the General Assembly.

2:15 p.m. update — The unions finally are out with their response and, if predictable, it is bitterly negative.

"The proposals are insensitive and irresponsible," state AFL-CIO President Michael Carrigan said on behalf of the We Are One Illinois coalition. "We strongly disagree with the proposals.

"By appearing to endorse these unfair and unconstitutional cuts, the governor has made the process of finding common ground much more difficult," the statement adds. "Forcing public servants to choose between two sharply diminished pension plans is no choice at all. It is a clearly illegal attempt to solve the problem caused by past governors. . . .Public employees must be treated and heard as full partners."

The average public employee pension today, according to Mr. Carrigan: $32,000 a year.