Friday, January 4, 2013

Pension Reform Debate from WTTW

"A coalition of Chicago civic groups are calling for a vote on a pension reform bill sponsored by members of both parties. The groups -- including the Civic Federation, the Metropolitan Planning Council, and the Better Government Association -- are backing HB 6258. The bill would reduce cost of living increases, raise the retirement age, increase employee contributions, shift costs to local school districts for their teachers' pensions, and guarantee state payment into the pension system. That could save the state $169 billion by 2045 and cut the unfunded pension liability by 29 percent, according to an analysis of the bill by the state pension systems.

"'The proposal focuses on reducing the main drivers of pension costs while being sensitive to lower-paid employees and those close to retirement,' the groups said in a prepared statement. 'While not a panacea for the State's financial problems, we believe HB 6258 is a significant step forward.'

"But union leaders -- which offered to increase their contributions, but oppose limits on cost of living adjustments -- say the plan saves money by cutting benefits by about one-third. Anders Lindall, a spokesman for the American Federation of State, County and Municipal Employees Council 31, says he would also favor stricter language to ensure the state pays into the system. '[HB 6258] gives a right of action to the systems if they don’t receive the whole payment—they can sue,' he said. 'We want individuals to also have a right of action. And if a judge finds the state didn’t pay, the payment plan can’t force the state to pay into the system if another expense takes precedence. That’s what caused the whole problem.'

"Opponents of the bill also question whether it violates the Illinois constitution, which protects pension benefits. The civic groups say that passing the reform, even with questionable legality, is better than waiting for a new plan. 'It should be noted that any comprehensive pension reform is likely to face legal challenges that might delay implementation,' they wrote, adding the General Assembly should pass reform 'without delay.'

"But Ralph Martire, executive director of the Center for Tax and Budget Accountability, says there's 'no way' the bill would survive a legal challenge. Arizona has a similar constitutional provision, he said, and reform there raised worker contributions. 'The Arizona Supreme Court ruled that an increase in contributions was an illegal diminishment of benefit,' he said. 'You’re not even taking anything from retirees in Arizona, and it got shot down. There’s no way that flies.'"

Watch this debate:

Please read some of the pension analyses on this blog. Click on the "Pension Analyses" tab above the "Total PageViews." Many of the solutions proposed months ago are finally being discussed today.

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