Senate Bill 2404

SB 2404 (Synopsis as Introduced)
Amends the Budget Stabilization Act. Provides for transfers from the General Revenue Fund to the Pension Stabilization Fund according to a specified schedule beginning in FY 2016 and continuing until FY 2045 or until the retirement funds have achieved a 100% funding ratio, whichever is earlier. Amends the General Assembly, State Employee, State Universities and Downstate Teacher Articles of the Illinois Pension Code. Changes the manner in which the annual required State contribution is calculated so that the affected systems are 100% funded by 2045. Provides that employee contributions to the retirement systems are increased an additional 1% on July 1, 2013 and [1] % on July 1, 2014 [for a total of 2%]. Provides that the State is contractually obligated to each retirement plan participant and retiree to provide funding to the retirement systems according to the specified amortization schedule beginning in FY 2016 and continuing until FY 2045 or until the retirement funds have achieved a 100% funding ratio, whichever is earlier, in addition to the annual required State contribution certified by the Board for each fiscal year. Provides that each retirement system has the right to bring a mandamus action against the State to compel the State to make any installment of the annual required State contribution certified by the Board and the transfers required under the Budget Stabilization Act. Further provides that if a retirement system shall fail to bring a mandamus action against the State to compel the State to make any required installment, then any participant or retiree may bring such a mandamus action. Effective July 1, 2013.

A Letter from Dan Montgomery, President of the Illinois Federation of Teachers:

State Senators Linda Holmes (D-Aurora) and Pam Althoff (R-McHenry) filed Senate Bill 2404, legislation that includes key components advocated by the IFT and We Are One Illinois labor coalition. In large part, this fair, constitutional bill provides a path to paying down the pension debt that, as you know, neither workers nor our modest retirement benefits are responsible for causing.

We [IFT] support this legislation, which addresses three of our key priorities:

1. Guaranteed Funding. You’ve always paid toward your retirement. The state has not. Decades of skipped and shorted payments have created a $90 billion debt and a serious crisis. This bill secures an ironclad promise that lawmakers must make the annual pension and debt payment every year. And, SB2404 establishes the right for the state retirement systems - or individuals - to bring court action if they don’t.

2. Creating a Pension Stabilization Fund. Beyond paying the annual costs, the state must also pay down the massive debt. In past years, Springfield leaders used creative borrowing schemes to make payments, which only created more debt through bonds that had to be paid off first by law. SB2404 would create a constitutionally protected fund to directly pay down the debt with resources already in the Illinois budget.

3. Shared Sacrifice. While public workers are not to blame for Illinois’ pension problem, we are willing to be part of the solution. With an ironclad funding guarantee to ensure employer underfunding can never happen again and the dedicated revenue source described above, active members would contribute an additional 2 percent of salary, phased in over the next two years. This will generate more than $3 billion over the next decade.

In the weeks ahead, organized labor aims to add more co-sponsors to this bipartisan legislation. We believe there is an appetite to support an initiative with the union coalition’s backing. This bill is just one piece of the puzzle. We will continue to work on solutions for retiring the debt and finding new revenue (by closing corporate tax loopholes, for example). We have always held that the pension crisis is a fiscal one and that revenue must be part of the solution. Like you, we’re looking forward to a fair resolution so we can better focus on providing our children with a world-class education and our citizens with great public services.

Thanks for all you do.

In Solidarity,

Dan Montgomery
President, Illinois Federation of Teachers