Friday, April 20, 2012

IEA Pension Update (April 19, 2012)


The fiscal situation of the State has deteriorated to the point that the Board no longer has confidence that the State will be able to meet its existing funding obligations to TRS.  As a result, the Board believes that action must be taken now to ensure the continued solvency and viability of the plan. This action must be based on the following principles:

·         The impact of any proposal, and all future contributions to the plan, must be determined using generally-accepted actuarial principles and standards and not the funding scheme and pension bond limits currently in Illinois law
·         All future contributions must be guaranteed by statutory language substantially similar to that presented to the Governor’s pension assembly in February
·         Any changes to the Pension Code must first correct the existing inequities and funding flaws created with the enactment of Tier II and,
·         Any changes to the Pension Code must be based on the simplest and most straightforward changes possible
·         Further, the Board resolves that it will only certify future contributions that are calculated based on generally accepted actuarial principles and standards

II. Governor Quinn’s Pension Working Group’s Proposal
Governor Quinn would like to move every active teacher into Tier Two without any changes to Tier Two.  However, most likely that will not happen.  Here is the proposal as it will probably be presented.  Springfield is forever changing; thus, these details may be different when released to the press:
·         Increase active teacher contributions by 3% 
·         COLA adjustment for Tier One – simple ½ of CPI or 3%, whichever is less
·         COLA begins 5 years after retirement or at 67, whichever comes first
·         Retirement age increase (62?  67?)
·         Transfer normal cost of pensions to local school districts
·         Address pension abuses
·         Choice between a COLA or healthcare

Meetings between all parties will continue next week.  Quinn’s goal is to reach an agreement by May 31st.

III. IEA’s Proposal

This is an issue about funding.  The union coalition’s proposal is to create a strong contractual agreement that will guarantee the State of Illinois will make its annual pension payments going forward.

Other options:

·         Close corporate loopholes
·         Gaming revenue
·         Graduated income tax

IV. Member Survey
In February, 600 IEA members were surveyed across the state.  Thirty-five percent said we should fight any changes to our pension benefits.  Sixty-five percent said we should negotiate.

V.  Lobbying
  • Any proposed changes must be legal under the Illinois Constitution:
    “Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired” – Article XIII, Section 5
  • After meeting the constitutional requirement, any modifications should be fair to our members
  • Any change must maintain the stability of the state retirement systems
  • The problem is funding, not benefits
  •  Teachers and university staff (TRS and SURS participants) do not receive social security for their years as an educator
  • Teachers, education support professionals, and university staff have always paid their share for their retirement and have never missed a payment
  • Educational employees are not responsible for the current pension problem.  The solution should not rest solely on them

VI. HB 4513 and HJRCA 49
Both of these bills are moving quickly with unanimous support.  HJRCA49 is problematic for a number of reasons, but especially because it would not allow for any resolution for the problems with Tier II.
HB4513 was NOT negotiated by the local unions as had been falsely reported to the legislators!  Local unions were NOT on board with this House Bill.  This is “probably” a constitutional test case according to Jim Reed and (Representative Michael Connelly).  (The bill affects the Water Reclamation District Pension, increasing member contributions 3% over the next three years).

VII. Other Information Gained During the Question-and-Answer Session
·         According to Mitch Roth, IEA General Counsel, increases in a member's contributions can be considered constitutional IF there is a benefit that comes with it.  In negotiating changes to benefits, one needs to ask:  Does a change only diminish, or does it coincide with a benefit?

·         The IEA is opposed to shifting regular costs to local school districts

·         You can be assured that legal action will be taken by the IEA if an unconstitutional bill is signed by Governor Quinn.  The IEA is prepared

·         According to President Cinda Klickna, many items under discussion are unconstitutional.  “If we are talking about a topic, it doesn’t mean we agree to it.”

 These notes may be subject to change -- Dave Madsen

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