Tuesday, April 30, 2013

Madigan makes pension move, submits own plan by Greg Hinz (Crain’s Chicago Business)

After months of preliminary maneuvering, Illinois House Speaker Michael Madigan today finally unveiled a plan for state pension reform that he’s sponsoring and that he will seek to push through the House as soon as Wednesday, [May 1].

In a 271-page proposed amendment to a pending Senate bill, Mr. Madigan calls for workers employed by the state, Illinois universities and school districts outside of Chicago to pay more, get reduced retirement benefits, and retire later if they’re younger than 45. In exchange, unlike in the current law, the state’s five major pension funds would be authorized to go to court to collect what they’re owed if the state fails to make its required annual contributions.

Various elements of that proposal have passed the House in recent weeks with Mr. Madigan’s backing and are similar to a proposal sponsored by Rep. Elaine Nekritz, D-Northbrook, and Illinois House GOP leader Tom Cross. But up to now Mr. Madigan has not put together all these elements into one bill. Of equal importance, the amendment puts Mr. Madigan on a different path than Senate President John Cullerton, who sponsored the measure, SB 1, that Mr. Madigan wants to amend.

Mr. Cullerton would allow retirees to choose between keeping state-provided health insurance and full benefits, saying the Illinois Constitution requires such “consideration.” Mr. Madigan disagrees, and his amendment would ban the use of pension funds to subsidize retiree health care.

Steve Brown, Mr. Madigan’s spokesman, said the bill definitely will be called for a hearing and, presumably, a vote, by the House Personnel and Pensions Committee at 8:30 tomorrow morning.

Asked if the speaker will ask for full House action tomorrow, Mr. Brown said, “It will be called at some point. But I don’t know whether the timing is set.”Mr. Cross told me his staff still is reviewing the proposal but indicated that with a couple of exceptions, it appears similar to measures he has backed in the past.

According to a fact sheet that Mr. Madigan is giving House Democrats this afternoon, the measure would require the pension systems to reach 100 percent funding by 2044. The size of payments would be much more level than under the prior funding scheme, which delayed the heaviest payments until decades into the future. Under the new scheme, the state would be required to pay an extra $1 billion a year above and beyond the required actuarial level starting in 2019.

Retirees would still get a cost-of-living allowance, but the COLA would be capped, applying only to the first $1,000 of income for each year of state tenure ($800 for those who get Social Security). That’s slightly different than an earlier bill, which applied the COLA only to the first $25,000 of a person’s annual pension. Of note, the change is modeled on a proposal pushed by Senate GOP Leader Christine Radogno.

Pensions also would be capped initially at the first $109,971 of salary. The figure would rise at one half the consumer price index for urban consumers. Retirement ages would go up on a sliding scale, with those younger than 35 today allowed to retire with full benefits five years later than they are now, generally at 67. Those over 45 would be exempted. Workers of all ages would be required to pay an additional 2 percent of salary for their benefits.

In one reform aimed at abuses by some labor leaders, “non-governmental” organizations would be banned from participating in funds that cover teachers, university employees and municipal workers. And all new employees of all state systems no longer could count sick time or vacation time in calculating their annuity…

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