SPRINGFIELD – Senate President John Cullerton announced Monday his chamber will move forward with a new union-backed pension reform proposal he says will save Illinois money and is at less risk of being tossed out by the courts than a plan approved by the House last week.
The decision creates dueling legislative plans and the possibility of further delays – or another stalemate – in addressing the nation’s worst state pension crisis. The nearly $100 billion shortfall already is squeezing out other areas of the budget and has prompted credit rating agencies to give Illinois the lowest credit rating of any state in the nation.
But Cullerton was optimistic the measure could move smoothly through both chambers, where Democrats hold veto-proof majorities and where a union-friendly proposal could pick up votes from lawmakers who have opposed other measures. He predicted bipartisan support, and said the proposal that moved through the House last week – sponsored by powerful House Speaker Michael Madigan – was beneficial because it pushed the unions to compromise.
“This [union-backed] plan is the best chance for the General Assembly to pass a clearly constitutional proposal that will save money and avoid an expensive and lengthy court battle,” Cullerton, a Chicago Democrat, said.
A Senate committee is expected to take up the measure Wednesday and a vote on the floor could happen Thursday. Madigan would then have to decide whether to call it for a vote in the House.
The measure gives workers and retirees a choice of benefit packages. For example, if workers choose to receive health insurance in retirement they would receive smaller cost-of-living increases. Those who choose to keep 3 percent cost-of-living increases compounded annually wouldn’t get health insurance. Current workers would get to choose from three different packages, while public employees who already are retired have two options.
Cullerton says under his plan, the annual pension payment would be about $850 million less in 2015 than is currently scheduled. Madigan says the payment would be about $1.8 billion less under his proposal.
But Cullerton insists that Madigan’s plan – which unilaterally cuts benefits – violates a clause in the Illinois Constitution that says pension benefits cannot be reduced. So a court would likely throw out the bill, making the savings essentially zero. He says his plan is safer because offering employees a choice in benefits makes it constitutional.
Steve Brown, a spokesman for Madigan, didn’t comment on the bill’s chances if it gets to the House.
Madigan’s bill would require public employees to pay 2 percent more toward their retirement benefits, reduce annual cost-of-living increases for retirees and increase the retirement age for workers under 45. Madigan, a Chicago Democrat, says the bill would fully fund the pension systems in 30 years. The plan Cullerton is backing would get the systems to be 90 percent funded in that same timeframe.
Senate Republicans wanted Cullerton to call Madigan’s bill for a vote because it would save more money than the union plan. But union leaders said a lawsuit would be almost certain if the measure were signed into law.
Michael T. Carrigan, president of the Illinois AFL-CIO, issued a statement Monday on behalf of a union coalition We Are One Illinois. He called the union-backed bill “our coalition’s bottom line.”
“We continue to strongly oppose Speaker Madigan’s mega-bill, SB 1, which threatens to rob the retirement savings of teachers, police officers, and others in public service, by 20-40 percent. His proposal is not only drastically unfair, but it is blatantly unconstitutional, rendering any advertised savings fictional,” Carrigan said. “We urge lawmakers from both parties in both chambers to embrace the agreed bill and oppose SB 1.”
Madigan has said he is confident his plan would be found constitutional. He and other supporters say the court could find that Illinois’ financial situation is so dire that the cuts were necessary and should be allowed.
Illinois’ five public employee pension funds contain only about 39 percent of the money needed to pay benefits currently promised to workers and retirees — the lowest funding ratio of any state in the nation. The shortfall is due largely to lawmakers skipping or shorting pension payments, though the economy and the fact retirees are living longer also contributed.
Next year, the annual payment to the funds is estimated at $6 billion — almost one-fifth of the state’s general revenue. That’s meant less money for essential services like schools and police and made New York bond houses nervous.
Despite the increased pressure, lawmakers have been unable to come up with a deal to address the problem, even as other states across the country took action on their own crises. The current legislative session is scheduled to end May 31, and Gov. Pat Quinn and lawmakers have said they want a deal before the Legislature adjourns.
Associated Press writer Regina Garcia Cano contributed to this report.
The Cullerton bill is SB2404. The Madigan bill is SB1.