Lawmakers punt on pensions as $85B liability grows

[November 14, 2011]  SPRINGFIELD (AP) -- The state's biggest bill, already at $85 billion, will keep growing.

Civic and business groups had hoped lawmakers would cut government pension costs during the fall legislative session. But those hopes ran smack into the reality of union strength, politics and the Illinois Constitution. The session ended without any decisions, either on reducing benefits or making up for state government skimping on past pension contributions.

Unions remain firmly opposed to reducing retirement benefits for current government employees, and they're inundating legislators with emails and phone calls from angry constituents. The Illinois Constitution says pension benefits "shall not be diminished," raising legal questions about the whole issue. And as primary elections draw closer, lawmakers will grow more skittish about controversial votes.

On the other side of the ledger, there's no extra money available to make up for state government's history of not contributing its full share of pension costs. And there's no will in Springfield to come up with extra money so soon after raising income taxes.

So the state's pension systems will continue falling deeper into the hole, at least for now. It's unlikely lawmakers will address the problem in the one-day session they have scheduled for Nov. 29, meaning they have no way to address it again for six more months, until they reconvene in the spring.

The top Republican in the Illinois House, Rep. Tom Cross of Oswego, warns that the problem can't be put off forever.

"If we do nothing, there's a real possibility down the road there will not be a pension system or there will be a dramatically different pension system," Cross said Friday in an interview with The Associated Press. "As much as people don't want to address this issue, we can't just put our heads in the sand."

The problem involves pension funds for state workers, university employees, downstate teachers, judge and legislators, who have been promised billions and billions of dollars in pension checks over the coming decades. But the retirement systems don't have enough money to make those payments in the long run.

There's no danger to the pension checks going out now or in the near future. But eventually the state will have to make sure the retirement systems have enough money to meet their liabilities. Right now, the projected shortfall is $85 billion, the worst in the nation.

A major union representing thousands of state workers agrees the pension systems need to be strengthened.

"Our members understand ... that we're facing a crisis so great that it requires everyone to be at the table and everyone to be part of the solution," said Anders Lindall, spokesman for the American Federation of State, County and Municipal Employees.

But the solution, he said, isn't to change the rules on people who were promised specific retirement benefits when they accepted government jobs. AFSCME absolutely won't agree to cut future benefits for workers who are still paying into the system, Lindall said. The funding problem was caused by state officials skipping payments to the pension funds, not by the cost of benefits, he said.

The average retirement benefit is $32,000 a year, and 80 percent of workers are not eligible for Social Security.

AFSCME has been willing to negotiate in the past on how much money employees will contribute toward their retirements, Lindall added, but that won't happen again unless lawmakers set up a system that guarantees the state will make its future payments, too.

Cross, with support from Democratic House Speaker Michael Madigan, has been trying to round up votes for a plan that would give current employees three choices: stay in the current traditional pension plan but contribute far more of their pay; pay a lower amount for a plan with lower benefits; or join a new 401(k)-style investment plan.

The theory is that this approach gets around the constitutional ban on reducing pension benefits by letting employees choose their plan but giving them a financial incentive to choose one that will cost the state less money. AFSCME maintains the bill would still be unconstitutional. So does Senate President John Cullerton, D-Chicago, although he says he will allow a Senate vote on the issue if it ever passes the House.

Cross says he has 30 House Republicans willing to vote for the legislation and now it's time for Madigan to provide 30 Democratic votes. He questioned Madigan's commitment, saying the speaker has not provided any recent feedback or updates on efforts to build Democratic support.

"You do wonder. What's he thinking about? Is he thinking about the next election?" Cross said. "I don't know."

Madigan spokesman Steve Brown said the speaker continues to support the bill. He noted Madigan has helped pass legislation reducing pension benefits for future government employees, rather than the current employees under discussion now, and that Cross' bill did win committee approval during the two-week fall session.

Brown said he couldn't estimate how many Democrats support Cross' proposal.

"We'll continue to work on the issue," Brown said. "There are people concerned about the constitutionality. There are people concerned about the impact on employees."

One group that has been pushing for pension changes accused lawmakers of ducking the issue because of upcoming elections. Lawmakers "weighed political calculations in anticipation of the March primaries over the best interests of the state by not calling the bill for a vote," leaders of the Civic Committee of the Commercial Club of Chicago said in a statement.

But presidents and chancellors for Illinois' public universities oppose the measure. They sent a letter Nov. 2 to Gov. Pat Quinn saying it could make it more difficult to recruit top-notch faculty and researchers.

That kind of push-and-pull illustrates the complexity of reaching any agreement, particularly when it touches on the emotional issue of people's retirement security.

"It's a really hard thing to do because you're taking a promise that had been made to people and you're changing it," said Sen. Matt Murphy of Palatine, a Republican leader on budget and pension issues. "Even people who think we should do this, like me, don't relish the fact that you have to do that to people."

In the end, Murphy said, government employees, their unions and their allies will have to face the fact that Illinois doesn't have enough money to keep its pension promises.

"The reality of there not being enough money trumps all," Murphy said. "You can have whatever guarantee in writing you think you have; if the money's not there, there's nothing to pay you with."

[Associated Press; By TAMMY WEBBER and CHRISTOPHER WILLS]

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