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 Illinois Gov. J.B. Pritzker and the state’s largest public
employee union just approved a deal that will cost state taxpayers $3.6 billion
more than it needed to.
A summary of the agreement produced by the American Federation of State, County
and Municipal Employees Council 31 details the $2,500-per-worker automatic
bonuses, automatic raises and taxpayer-subsidized platinum health insurance
benefits state workers will receive until the contract expires June 30, 2023.
Union members ratified the deal with Pritzker, AFSCME announced June 22.
The Illinois Policy Institute outlined possible savings under a fair contract in
Budget Solutions 2020, a five-year fiscal plan for the state of Illinois. The
new contract will cost $3.6 billion more than what taxpayers would have paid
under a taxpayer-friendly contract. Illinois state workers are among the highest
paid in the nation, and make significantly more than the private-sector workers
asked to support them.
The proposed contract includes a number of questionable
provisions, which include making it more difficult for employees to learn about
their rights under the U.S. Supreme Court’s Janus v. AFSCME decision and
weakening management rights to require overtime work.
 However, the costliest provisions for taxpayers and the state budget relate to
pay increases and health insurance.
Automatic raises, backpay and a new bonus for the nation’s second-highest paid
state workers
Illinois state workers are already the second-highest paid in the nation, after
adjusting for regional costs of living, according to the most recent data from
the federal Bureau of Economic Analysis. Also, total
compensation for Illinois state workers, including both wages and benefits, is
much higher than the average compensation of private sector workers and is
growing faster. From 1998 to 2017, average state worker compensation grew 70%
faster than Illinois’ average private sector wages. Despite
these facts, the new contract includes the following:
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$2,500 bonuses as compensation for the “hardship” of
working for the state under former Gov. Bruce Rauner. Multiplied by the more
than 35,000 AFSCME employees working for the state in 2018, these bonuses
could cost taxpayers up to $88 million.
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Annual raises to employees’ base pay for four years
starting at 1.5% in January, going up to 2.1% in July and then by 3.95% each
July thereafter. For the average AFSCME employee, this will raise their base
pay from $63,025 to $70,575. Contract raises will cost up to $266 million.
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Resumption of automatic raises based on years of service,
known as “step increases.” The Governor’s Office of Management and Budget
estimated the cost of these raises at more than $200 million per year.
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Earlier step increases will also receive a $25-per-month
bump for three years, which when fully implemented will raise the annual
value of these steps by $900.
Pritzker had already agreed to pay “backpay” for missed step
increases from the four-year wage freeze imposed by Rauner. After the state’s
last contract with AFSCME ended on June 30, 2015, while the Rauner
administration and AFSCME were still negotiating a new agreement, the parties
disagreed over whether step increases should continue to be paid. As reported by
the State Journal-Register, litigation between the two parties led to a court
order in AFSCME’s favor that required the Illinois Labor Relations Board to
settle the dispute.
However, the Rauner administration continued to maintain that step increases
were not due after the parties reached an impasse in negotiations in January
2016. By limiting backpay to a roughly six-month period, rather than four years,
the state would have significantly reduced its liability.
 Pritzker’s decision to agree to AFSCME’s demands on step increases for 2016-2019
made the dispute moot, and the fiscal year 2020 spending plan budgeted $410
million for AFSCME backpay.
Under the new contract, Illinois state workers will continue to be paid far more
than the private sector workers who fund government spending and will continue
to be among the highest paid in the nation.
Platinum-level health insurance at 80% discount
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State workers currently receive platinum level
health insurance benefits at heavy taxpayer expense. Pritzker’s
contract continues that practice with negligible changes. The most
recent data available, received pursuant to a Freedom of Information
Act request, show state workers paid just 20% of the cost of their
own health care in fiscal year 2018. This data
reflects both premiums and out-of-pocket expenses, such as
deductibles and co-pays, to present a comprehensive picture of
taxpayer costs.
By contrast, the average private-sector employee pays more than
double what AFSCME pays – 43% – according to the 2018 Milliman
Medical Index. That means the average taxpayer who funds AFSCME
benefits is subsidizing a benefit they almost certainly don’t enjoy
at their job. Moreover, platinum level coverage is not even
available for Illinoisans purchasing health insurance on the
individual market exchanges.
The state’s final offer to AFSCME before Pritzker’s election would
have right-sized group employee health insurance costs by bringing
them more in line with the private sector. The plan would have
created three tiers of insurance: one with higher premiums, one with
higher out-of-pocket costs and a mixed plan. Each of the plans would
have increased the total employee share to 40% on average, with a
mix of higher out-of-pocket or higher premium costs, depending on
the plan selected.
Compared to Pritzker’s offer, this plan would have saved just over
$2 billion during the contract.
Pritzker’s AFSCME contract does include small increases in premium
costs for employees and small increases in deductibles and co-pays.
Premium costs would go up by $35 for employees making more than
$125,000 on Jan. 1. For all employees, premium contributions will
increase on Jan. 1 by $13 per month for the employee and $18 per
month for dependents, with increases on July 1 of subsequent fiscal
years for the term of the contract.
This represents a 9% average increase in employee premiums and a 10%
average increase in dependent premiums. Had these changes been
implemented in fiscal year 2018, the state would have saved just
$9.7 million on group health insurance costs. These savings are more
than wiped out by salary increases and bonuses in the new contract.
 With the 12-month inflation rate for health insurance recently
topping 10.7%, the increase in employee premiums secured by Pritzker
is likely to be largely offset by increasing costs for health
insurance, negating taxpayer savings.
Pritzker’s expensive AFSCME contract increases need for meaningful
pension reform
As a result of the proposed agreement, taxpayers will be on the hook
for $3.6 billion more than they would have been under a taxpayer
friendly contract. With the state locked into paying for this
expensive contract, it will be significantly more difficult to
repair Illinois’ worst-in-the-nation fiscal crisis without
economically harmful tax increases.
To protect taxpayers, balance budgets and free up resources to pay
off high-interest debt on the state’s $6.7-billion bill backlog,
Illinois must pursue meaningful pension reform.
For the fiscal year 2020 budget, Illinois will pay $10.2 billion
towards pension costs. That includes:
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Direct contributions to the five state systems
of$9.225 billion
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Debt service on pension obligation bonds worth
$674.5 million
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The state’s contribution to Chicago Teachers’
Pension Fund normal costs (the employer share of pension costs
created by an additional year of work) of $245.5million
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$92 millionin new debt service costs for
pension buyout bonds
Compared with the state’s new revenue projection of
$40.2 billion, this means more than a quarter of money taxpayers
send to Springfield is going to pension-related costs.
A constitutional amendment allowing for reductions in the growth
rate of pension benefits, while still protecting benefits already
earned by workers and retirees, can save between $1 billion and $2
billion annually while fully funding the state’s struggling pension
funds by 2045.
With Pritzker forgoing other options for reducing spending, the case
for real pension reform has never been stronger.
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