Illinois Pension Reform (Updated January 7)

“…A pension reform package is headed to the House floor for a vote that could come Tuesday after the House Personnel and Pensions Committee approved the plan by a 6-3 vote Monday afternoon. The bill's language is contained in Amendment 10 of Senate Bill 1673 and its framework includes much of what had been proposed in the Nekritz-Biss bill (House Bill 6258), including reductions in the compound cost-of-living adjustment (COLA), increased employee contributions, a cap on pensionable salaries and a stronger ‘guarantee’ that the state will make its future pension payments.

“…The provision to shift the state's normal pension costs to local school districts is not included, but Rep. Elaine Nekritz (D-Northbrook), the bill's sponsor and the chair of the committee that approved it, said that she believes the cost-shift issue would be addressed as a separate issue at a later date. The cash balance plan that was part of the Nekritz-Biss plan also was not included.

“…It is still uncertain whether there will be the necessary 60 votes for the House to approve the measure before the current lame-duck session ends at noon on Wednesday. At that point, a new General Assembly will be sworn in and the legislative process would have to begin anew.

“Nekritz said after the committee hearing that she was uncertain when the bill might be called for a vote on the House floor. ‘When we have the votes, we'll call it,’ she said. The House adjourned Monday without calling it for a vote.

“The three ‘no’ votes on the committee were Rep. Raymond Poe (R-Springfield), Rep. Thomas Morrison (R-Palatine) and committee Vice Chairman Daniel Burke (D-Chicago). Poe, whose district includes thousands of state employees, questioned the devastating impact the reduction in the COLA might have on retirees and said he didn't think the state had any 'skin in the game' regarding the proposal.

“The testimony at Monday's committee hearing revolved around two main issues: fairness and constitutionality. Nekritz addressed the constitutionality issue by saying that employees and retirees were getting a new 'right' in the form of a strong state funding guarantee and listed three factors she thinks might help the bill survive an inevitable court challenge despite the strong language in the Illinois Constitution protecting pension benefits. The three factors Nekritz listed include:

1. The state is facing a fiscal crisis;
2. The action of reducing pension benefits is necessary because of that crisis; 
3. The action taken was designed in the narrowest fashion possible.

“…Rep. Daniel Biss (D-Evanston), who will be sworn in as a member of the state Senate on Wednesday, laid out the specifics of the proposal. They included

• Pausing the COLA for six years;
• When the COLA resumes, paying the current 3 percent compound COLA only on the first $25,000 of pensionable earnings, on only the first $20,000 for those retirees who also qualify for Social Security;
• Not paying a COLA until a retiree reaches age 67;
• Increasing employee contributions by 1 percent each of the next two years;
• Capping the pensionable salary at the higher of either an employee's salary when the bill passes or the Social Security cap ($113,700 for 2013);
• A 30-year plan to pay 100 percent of the state's pension debt;
• When the current pension finance notes are paid off in 2020, using that money to pay down the pension debt;    
• A strong, actuarially based state funding guarantee.

“…Even if the House were to pass SB 1673 with the language in Amendment 10, it would face an uncertain fate in the Senate given Senate President John Cullerton being on the record as saying he believes a choice provision is necessary for any pension benefit reduction to be constitutional and his insistence that the House pass the pension reform legislation that the Senate passed last May.

“So while the bill getting out of committee certainly was one hurdle cleared for this pension reform proposal, there still appear to be large obstacles to be cleared in order to pass the measure during this session.”

Diane L. Hendren
Chief of Staff/ Director of Governmental Relations
Illinois Association of School Administrators

from Capitol Watch: “Controversial pension reform proposal heads to House floor”