May, Turelli discuss state's pension problems

Wednesday, October 06, 2010

Candidates in Illinois' 58th House District have staked out differing positions on how to handle the state's ballooning pension debt.

With pension and retiree health liabilities climbing to an estimated $130 billion, most politicians agree the legislature needs to fix an out-of-control system that covers teachers and various state employees.

Republican challenger Lauren Turelli of Lake Forest supports “putting everything on the table” to right the ship, which could include reducing benefits, higher employee contributions or raising the retirement age.

State Rep. Karen May, the Democratic incumbent from Highland Park, favors strengthening laws to weed out pension spiking and abuse, but stops short of endorsing benefit cuts.

The two candidates spoke about pensions, the state budget and other issues during separate interviews with Pioneer Press last week.

They offered different responses to pension reform proposals put forward by business interest groups such as the Commercial Club of Chicago that suggest Illinois should freeze public pensions and start employees on a less generous defined-contribution plan, such as a 401(k).

Turelli said the system does not work as originally intended, in part because employees collect more payments and benefits in retirement due to longer life expectancies. She said an actuarial commission should update pension plans.

“So maybe the changes to those benefits are that (employees) have to contribute more to their health care, or their health care is reduced,” said Turelli, who owns a property management company and once worked for an investment firm that helped corporations move from pension funds to 401(k) plans. “While I'm not advocating for a reduction (in retiree benefits), I can't say that isn't part of it.”

May, who this year joined the House Personnel and Pensions Committee, said a pension freeze could be “problematic,” in part because implementing a employer-match 401(k) would eat into much of the potential savings.

She also believes such a move would violate the state's constitutional guarantee that pension plans “cannot be diminished or impaired” — the subject of much legal debate recently.

“I am open to all options,” said May, who added that freezing pensions and creating a 401(k)-type system would cause problems for some employees. “It's a lawsuit waiting to happen, but I think it's something we need to clarify.”

“I honestly think that it just wouldn't fly because so many of the (state) employees are members of unions and I just don't know we would be able to do it,” May said in a follow-up interview. “This is their nest egg.”

May pointed out that retiree health benefits are not covered by the state Constitution in the same way.

Turelli and May agree that pension benefits employees have already earned are untouchable. Any changes to retirement plans would have to apply on a going forward basis, they said.

“I cannot cut any current retiree's pensions. I think we have a contract with those people,” Turelli said. “The Legislature has kicked this can down the road for so many years — had they done what they were supposed to, we wouldn't be in this mess. It's not the pensioners' fault. It's not the employees' fault. It's the legislators' fault.”

May touted her support for new reforms that reign in abuses and excesses, and also create a two-tier system that applies stricter retirement rules to new employees. She said the changes will result in large savings over the long term.

Turelli called those reforms “a good start” but said she would support further cost-savings.