Thursday, March 12, 2009
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Gov. Quinn considers 2-tiered pension system

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[March 12, 2009]  SPRINGFIELD -- The state of Illinois is looking to save money, and new state employees might end up getting the short end of the stick.

Gov. Pat Quinn and the Senate's top Democrat on Tuesday both proposed that Illinois offer new employees fewer pension benefits than current workers -- creating a two-tiered system.

The new governor is preparing to present a budget plan next Wednesday that he says will include "castor oil," but he stopped short of saying an income tax increase would be the bad medicine he offers.

But Senate President John Cullerton later told The Associated Press that without a tax increase, Illinois faces "pretty Draconian cuts," and asked Republicans to offer suggestions for reductions and help if taxes are needed.

Quinn, speaking to reporters in his Capitol office, said his top focus is to "cut, cut and cut." But he continued to warn of possible tax increases, suggesting an income tax hike could be cushioned by increasing the personal exemption, which would proportionally offer greater tax shelter to less-affluent residents.


A "two-tiered" pension system would reduce benefits for future state employees to soften the pain of paying up $54 billion in unfunded obligations to five pension systems. There would be no change for people already on the payroll.

"The people of Illinois who pay the taxes, they don't have a Cadillac pension plan, and we're going to have to take a look at everything in state government," the Democratic governor said.

He would not discuss specifics of what he will propose, but dismissed the notion that it would be a defined-contribution plan like a private-sector 401(k).

The amount saved depends on how much benefits are reduced, Cullerton said. Current law calls for a $4 billion contribution in the budget year that begins July 1.

"The only way we can pay less money into the pension fund next fiscal year is if we lower the overall benefit that we'll have to pay out over a 40-year period," he said.

A pension change would likely have to be negotiated with employees' unions. The largest one, the American Federation of State, County and Municipal Employees, opposes the idea, said spokesman Anders Lindall. He called Illinois' retirement plan "modest," with an AFSCME retiree receiving an average annual pension of $18,000.

"A reduction in benefits for future employees is not going to appreciably reduce costs anytime soon," Lindall said.

Cullerton, acknowledged union complaints that the problem is that state government has not kept up with its payments while employees have paid their share.

"Our response has to be, 'Folks, in order for us to pay your current members, we need to do something here,"' Cullerton said.

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Democratic House Speaker Michael Madigan is open to the idea and currently sponsors legislation that would set up a similar system for the General Assembly's pension plan, said spokesman Steve Brown.

Cullerton called on Senate members to work together to find budget solutions, but Senate Republican Leader Christine Radogno of Lemont said Cullerton's Deficit Reduction Committee is "playing out as a cover for why we can't do anything differently and have to raise taxes."

Radogno supports a new pension setup but is reticent to immediately reduce state payments. She supports Quinn's call for a $25 billion capital construction plan but, like Quinn, opposes Cullerton's idea to pay for it with an increase in the gasoline tax.

Radogno would rather reconsider expanded gambling -- a voluntary tax, she said -- or leasing the state lottery's management.

Quinn maintained he's still focused on cutting spending and pledged "the frills of government will go away," but acknowledged the budget proposal will be painful.

"There will be some castor oil in it," Quinn said. "When you take castor oil, you hopefully get better in the long run."

[Associated Press; By JOHN O'CONNOR]

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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