A controversial fix for Illinois’ ailing state-run pension systems is on its way to Gov. Pat Quinn after barely squeaking through both houses of the General Assembly.
In a landmark Tuesday vote, the House and Senate approved a bill aimed at saving the systems by reining in annual cost-of-living increases and raising retirement ages.
Senate Bill 1 – which will undoubtedly face a court challenge over its constitutionality by the state’s public-sector unions – passed 30-24 in the Senate and 62-53 in the House. It passed by the minimum number of Senate votes needed, and two more than is needed in the House. Quinn has said he will sign the bill into law.
Those who represent Grundy County were split on the measure.
State Sen. Sue Rezin, R-Morris, and state Rep. John Anthony, R-Plainfield, voted in favor of the measure. State Rep. Kate Cloonen, D-Kankakee, and state Sen. Toi Hutchinson, D-Olympia Fields, voted against it, according to vote totals posted on the Illinois General Assembly website.
“Senate Bill 1 is a step in the right direction in terms of stabilizing our pension system and also ensures the state will be able to make future payments and benefits,” Rezin said.
She said not making pension payments is not an option, and the measure has provisions to stop that from happening.
“What is also important in this bill, especially for our area, is there is no pension cost shift to the local school districts and the bill does create an optional 401(k) program, which is a good start,” Rezin added.
Messages left Tuesday afternoon with Anthony and Cloonen were not immediately returned.
The five state-run pension systems for suburban and downstate teachers, rank-and-file-state employees, judges, university employees and General Assembly members are underfunded by at least $100 billion. More than 20 percent of the state’s current 2014 budget is going to pay the state’s ballooning pension obligations, which have eaten up almost all of the historic 67 percent income tax increase that lawmakers imposed in 2011.
Under the plan, the 3 percent COLA still will be compounded, but only off a base salary of $1,000 for each year an employee works, plus the rate of inflation. The COLA will skip some years on a sliding scale based on state workers’ current age – employees at least 50 years old will only miss one increase, while those 43 and younger will miss five, spaced out every other year.
The plan also will raise the retirement ages for employees 45 years or younger by four months for each year an employee is younger 46, for a maximum of five years. The provision does not apply to “Tier 2” employees hired since 2011, whose retirement is set at age 67 under a previous pension reform bill. But the bill imposes the Tier 2 benefits cap on pensionable income on all employees. That cap, annually adjusted by 3 percent or half the rate of inflation, whichever is less, was $109,971 for 2013.
Senate Bill 1 does not include the retirement system for judges, likely in an attempt to improve the legislation’s chances of surviving a court challenge on its constitutionality – the Illinois Constitution states that pension benefits “shall not be diminished or impaired.” When former Gov. Rod Blagojevich tried stripping judges of their 3 percent COLAs, they sued, got to hear their own case, and won.
State employees’ contributions to their pensions will decrease by 1 percent, and the measure will require lawmakers to pay the full annual amount required into the pension system, and the five state-run pension systems can take the state to court to force them if they don’t.
The proposal will also allow up to 5 percent of employees hired before 2011 to enter a 401(k)-style plan if they so choose.
The bill will save an estimated $160 billion over the next 30 years with the aim of fully funding the pension systems by 2044.
• Morris Daily Herald reporter Christina Chapman-Van Yperen contributed to this report.