Legislator: IL taxpayers could be out ‘billions’ as bills enhancing pensions advance

[April 15, 2024]  By Catrina Petersen | The Center Square

(The Center Square) – Proposed Tier 2 pension enhancements in Illinois could come at a taxpayer cost of "billions," according to a state legislator.

State Rep. Blaine Wilhour, R-Beecher City, said originally lawmakers’ conversations surrounding the Tier 2 pension system were about fixing Tier 2 to ensure it didn’t run afoul of safe harbor, a requirement where certain public employees do not have to pay into Social Security as they are covered by pension plans that provide retirement benefits deemed equivalent to Social Security benefits.

"I suspected at the time [the conversation] would transform into a massive pension enhancement the taxpayers simply can’t afford,” Wilhour told The Center Square. “We passed through the pensions committee a couple bills that are going to put billions of dollars onto the taxpayer when property taxes are already out of control. Let’s be honest about the conversation we are having. Are we trying to fix the Tier 2 system or are we trying to do a massive pension enhancement?”

Wilhour said nobody has been able to show lawmakers where a single pensioner is going to fall below safe harbor. State Rep. Stephanie Kifowit, D-Oswego, said there was expert testimony last summer.

"We had extensive subject matter hearings regarding safe harbor last summer and there were examples from both the Teacher Retirement System and State University Retirement System of individuals that would trigger safe harbor,” Kifowit told The Center Square. “So his [Wilhour's] statement is technically false. I’m not sure what he’s basing it on. We had expert testimony that said we would trigger the safe harbor provision with regards to individuals that are retiring as soon as this year or next year.”

Illinois enacted a second tier of benefits for public employees hired after 2011. The change was meant to reduce retirement benefits for newer employees and help address the state's unfunded pension liability. The state has an unfunded pension liability of $140 billion.

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House bills 4098 and 4099 propose changes to Tier 2 pension benefits for participants in the State Employees Retirement System, SURS and other state-funded pension systems.

HB4098 is sponsored by Steven Reick, R-Woodstock, and Kifowit and remains in committee. HB4099, sponsored by Kifowit, advanced out of the House Personnel and Pensions Committee earlier this month and could be taken up for final House passage.

Wilhour said he has a bill that says if individual pensioners trigger the safe harbor, then the state could put a statute in place where the state pays the difference, plus a dollar.

“The bill is very, very simple, something we don’t do here in Springfield often," Wilhour said. "It says if any pensioner at the end of their career, when he or she determines their pension, if their pension falls below safe harbor then the state makes up the difference. It’s the cheapest and most fiscally responsible way to fix it and it doesn’t put broad enhancements across the whole system that is severely underfunded."

Kifowit said the pension enhancements actually won’t hurt taxpayers and that it’s false to say they will.

“The bills in their current form aren’t going to be moving. What we are doing is continuing to look at the subject as a whole and making sure we have the best package that takes into account the cost to the taxpayers and the state. We also want to look out for the municipal mayors and managers that have pension issues,” Kifowit said. “The bills are in rough draft form, they won’t be the bills that are passed.”