Thursday, May 2, 2013

Madigan's pension reform bill (from Illinois Association of School Administrators)

Big question is whether bill will pass in Senate

The Illinois House of Representatives today approved by a 62-51-2 vote a pension reform bill that would reduce pension benefits, increase the retirement age, and cap pensionable salaries. Senate Bill 1, which contains an amendment by House Speaker Michael Madigan (D-Chicago), now goes back to the Senate, where it faces an uncertain vote.

The House vote was bipartisan in nature, with 22 Republicans, led by House Republican Leader Tom Cross (R-Oswego), joining 40 Democrats in voting for the bill. The bill closely resembles an earlier proposal put forth by Cross and Rep. Elaine Nekritz (D-Northbrook).

The Senate adjourned during the House debate on the bill and is not scheduled to return until 3 p.m. Monday. In fact, some members of the Senate came into the House to observe the debate.

Senate President John Cullerton (D-Chicago) long has maintained that in order to pass constitutional muster a pension reform bill would have to include a "choice" provision for employees and retirees to accept a reduction in pension benefits. Cullerton had been meeting with union representatives, who had submitted a proposal, but it is unclear whether that effort will continue or whether Cullerton instead will call SB 1 for a vote. Senate Republican Leader Christine Radogno (R-Lemont) endorsed SB 1.

During the debate, Madigan listed 14 features of his bill, a listing of which can be accessed by clicking here.

In response to questions, Madigan said that language in the bill included a state "guarantee" to make its payments to the pension systems, but then acknowledged that future General Assemblies could choose to circumvent that intent -- much like past General Assemblies have shortchanged the pension systems or skipped payments, the main reasons the pension systems are underfunded.

The state "guarantee" as well as a plan to start making $1 billion payments to the Pension Stabilization Fund beginning in 2020 is tied to a reduction in the cost-of-living adjustment (COLA) in terms of severability. [In other words], if the courts strike down the reduced COLA then the funding guarantees also would be removed.

The bill includes four of the state's five pension systems, the Judges Retirement System being excluded, Madigan said, because a court challenge is expected and he wanted to relieve the judges of the conflict-of-interest burden. The controversial cost shift is not part of SB 1, but Madigan said he planned to bring that issue up as a separate piece of legislation…

SB 1 includes a new section (Section 7.5) that eliminates pension benefits from collective bargaining. The bill also begins with a nine-page preamble that seems to be laying the groundwork for the inevitable constitutional challenges if the bill becomes law. Those nine pages lay out in detail the fiscal problems facing the State of Illinois, an attempt to lay out the foundation for an argument that the Illinois Supreme Court should overlook the very clear pension protection language (Article XIII, Section 5) in the Illinois Constitution.

Madigan on Wednesday predicted that "at least four" of the Illinois Supreme Court's seven justices would uphold the language in the bill, and Nekritz, speaking during the debate, said she thought proponents of the bill had a strong case based on the courts balancing the pension protection clause against the state's fiscal crisis. 

Governor Pat Quinn praised passage of the bill in the House saying, "Today the Illinois House of Representatives took the biggest step to date towards restoring fiscal stability to Illinois. With the passage of this comprehensive pension reform solution, Illinois is closer than ever to addressing a decades-long problem that is plaguing our economy, our bond rating and the future of our children."

If the bill passes the Senate, Quinn clearly would sign the bill into law. Madigan predicted the next step would be a court challenge and most likely a stay issued by the courts while the case over constitutionality plays out over a period of time many observers think will be one to two years.  

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

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