There may be a solution to the state’s $100 billion unfunded pension liability.
This is Illinois, so we caution against getting too excited, but Senate President John Cullerton said last week he’s working to build support for a bill that would save $138 billion over 30 years. Cullerton, in a discussion with the editorial board of The (Springfield) State Journal-Register, said estimates show the plan would have state pensions fully funded by 2043.
Cullerton cautioned that the legislative pension reform committee formed last spring to work on the issue has helped to develop the plan, but has yet to reach agreement.
There are still details that need to be considered, but from what has been revealed the proposal looks promising.
The proposal would reduce active employee contributions by 1 percentage point. That reduction seems counter-intuitive but it is put into the plan in an attempt to meet constitutional requirements that pensions not be reduced.
The cost-of-living adjustments received by retirees, currently set at 3 percent, would be changed to half of the Consumer Price Index. The adjustments would have a minimum of 1 percent and a maximum of 4 percent. Cullerton said that’s important “because if there is inflation, there could be an actual opportunity for people … to get more than they’re getting now.”
The proposal lands between two bills that were the center of the debate during the spring session. Cullerton backed Senate Bill 2404, which would have required employees to choose between cost-of-living adjustments and health insurance. That bill would have saved the state about $58 billion over 30 years and was criticized by many for not going far enough.
The other bill, Senate Bill 1, would have saved $163 billion over 30 years and was supported by House Speaker Michael Madigan, D-Chicago. Cullerton criticized that bill as being unconstitutional.
Cullerton said that the proposal on the table is “less unconstitutional than Senate Bill 1.” He expects the unions representing public employees to oppose the proposal he’s pushing and that it will be challenged in court. Cullerton said if that happens he would be willing go back to his original bill, change it to get more savings, and push it through.
Pension reform will undoubtedly be on the agenda for the fall veto session, which begins Oct. 22. The proposal being backed by Cullerton, from what we know, is an encouraging compromise. It will not totally satisfy any of the interested parties in the pension reform debate, which is one indication that it’s headed in the right direction.
The proposal has a long way to go before it becomes a bill and then a law. It will need the support of the pension reform committee and it is difficult to pass any bill without the support of Madigan. Legislators, many who have been reluctant to take any significant positions, will also have to support some form of pension reform.
A decision on the pension issue has been delayed for far too long. Cullerton’s proposal appears to be a reasonable compromise and it deserves further discussion.