 "I don't think anybody in this room -- whether you're for this bill
or against this bill -- would disagree with the fact that our
(pension) systems are in very, very poor shape," said House Minority
Leader Tom Cross during a House Personnel and Pensions Committee
hearing Thursday.Pensions stand to become the biggest consumer of
state tax dollars if the system is not changed to provide upward of
$80 billion in benefits it currently cannot pay, according to
proponents of the plan.
"Every time a dollar leaves the Legislature and goes over to the
pension systems, that's a dollar not available for education, for
social service programs, for whatever else the Legislature chooses
to appropriate the spending of money," said Illinois House Speaker
Michael Madigan, D-Chicago.
The plan,
Senate Bill 512, would stop the unfunded liability from
continuing to grow, allowing the state to get to 85-90 percent
funded liability by 2045, Cross said. He is co-sponsoring the plan
with Madigan and said the state would take responsibility for the
current $8 billion unfunded liability through a long-term plan of
increased pension payments by the state.
A few organizations, however, peg the unfunded liability for the
state's five pension systems much higher than $8 billion. The
American Enterprise Institute, a free-market think tank, put the
number at $190 billion.
The proposed plan would swap the burden of making up the growing
costs of Illinois' pensions from state taxpayers to state employees.
State taxpayers would contribute 6 percent toward an employee's
pension annually, with the employee contribution being recalculated
every three years to reflect any increased costs of providing
pension benefits.
The measure creates a menu of three options: Employees hired
before Jan. 1 could keep their current benefits but would be asked
to contribute the more annually; all employees could move to the
benefits package created for people hired after Jan. 2, which means
working longer to get a pension, the second most expensive option;
and lastly, any employee could move to a 401(k)-style, defined
contribution package, the cheapest option.
Beginning July 1, 2012, a tiered system would go into effect for
most employees. Cross said that because it would allow employees to
pick their own plan, he could not give an estimate on annual
savings.
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If no action is taken on the pension systems, 61 percent of the
state's tax income revenue would go to pay for benefits, said Tom
Johnson, president of the Taxpayer Federation of Illinois, a
proponent of containing government spending.
"If our tax dollars have to be used ... to pay for prior debts,
and those dollars are not available to buy current services, whether
they be human services or health care or education, both K through
12 and so forth, other states will be more competitive because their
tax structures will be able to buy those services," Johnson said.
Unions representing state workers, teachers and college
professors have come out hard against the proposal.
"The problem isn't the modest $32,000 a year the average
public-sector worker earned on their retirement. These workers have
made their contributions, they have paid in, and they deserve an
adequate retirement," said Michael Carrigan, president of the
Illinois chapter of the AFL-CIO, a conglomeration of more than 55
unions.
He and other union leaders blamed the state, which skipped
payments or recently borrowed to make payments to the pension funds.
This year marked the first time in two years the state made its
scheduled payments from cash on hand.
Language in the current proposal makes sure the state puts up at
100 percent of its prior year's contribution.
[Illinois
Statehouse News; By ANDREW THOMASON]
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