Move is on to halt inflated local pensions

Lawmakers outraged by local maneuvers, but doubts are cast on possibility of reform

Monday, September 20, 2010

State Sen. Terry Link compares it to winning the lottery.
Local government executives get fat bonuses and retire. Their pensions also are inflated by the bonus amounts, and so their retirement checks get fatter, to the point that they make more from extra pension payments than the actual bonuses.

"These boosts are making people lottery winners, and they don't even have to buy a ticket," said Link, D-Waukegan.

A Tribune investigation published Friday exposed the millions of dollars that such inflated pensions cost suburban taxpayers. Public officials across the spectrum decried the practice and promised reform. But proposals made so far face key hurdles, with unclear support.

The investigation found local executives, from village managers to park district directors, routinely got inflated pensions in the Illinois Municipal Retirement Fund from perks awarded in the final years of employment.

In looking at 44 recent retirees making at least $100,000 in retirement, the Tribune found the extras boosted their pensions by an average of $20,000 a year. For just those 44, it cost taxpayers nearly $13 million more than if pensions had been set from just base pay — which is what other Midwest states try to do.

State Rep. Tom Cross, the House Republican leader from Oswego, called the inflated pensions "gross misuses of taxpayer money."

But ideas for reforms were rife with questions about who could make changes, how much could be done and when reforms might actually happen, if at all.

The pension fund's board of trustees said it will discuss reform ideas at its Friday meeting. Board president Ruth Faklis said trustees would model reforms after the best practices of other states and Illinois pension funds.

Yet, the municipal fund's executive director, Louis Kosiba, has cautioned that the board may not have much power to change the rules. He said the fund has to follow the state's pension law, which doesn't limit the kinds of perks that can count toward a pension.

That would put the onus on state lawmakers.

Rep. Karen May, D-Highland Park, sits on a House pension committee and comes from a community whose park district created one of the biggest inflated pensions. She wants local governments to give public disclosures about executive pay and how that translates into future pension costs. She wants to stop counting any perks toward pensions and to further limit the effects of late-career salary spikes.

The House committee's chairman, state Rep. Kevin McCarthy, D-Orland Park, said he wants pensions to be determined solely by base pay, with limited exceptions. He said his committee will hold hearings this fall on municipal pension spiking.

The Senate Republican leader, Christine Radogno, of Lemont, said she also wants local pensions limited to base pay and is confident some type of reform could be passed by both parties.

"I think there's a growing awareness among all legislators that pensions are a huge problem," she said. "Limiting (a pension) to base pay is a very obvious and clear step in the right direction."

Those ideas, however, have a long way to go before becoming law. Link and McCarthy — both key lawmakers on negotiating local pension reforms — said they could start moving legislation during a handful of session days this fall.

Democratic leaders who control the House and Senate say they want reform, but won't talk specifics.

John Patterson, a spokesman for Senate President John Cullerton, D-Chicago, said Cullerton "fully intends to address the local pension issues raised in these recent stories."

But the real hurdle may not be getting a bill passed. It may be getting the courts to OK it. Illinois' constitution says public pensions can't be "diminished or impaired."

The legislature last year cited that provision in explaining why, as many pension funds drown in red ink, it could not scale back the pensions of current employees, only for next year's new hires. The law passed this year would largely stop pension-spiking for that generation of workers, but not the current one.

And Gov. Pat Quinn's administration said that's as far as the state can go.

But some lawmakers want to try anyway — hoping a carefully tailored law could pass a court test.

"Some people have really gamed the system," McCarthy said. "I think it would be a good test, because no one should defend what are clearly abuses."