By Jim Hagerty
Illinois Gov. Pat Quinn (D) declared victory Tuesday, Dec. 3, as lawmakers passed a long-awaited overhaul of the state’s shattered public-employee pension system.
The Senate approved the measure minutes before the House passed it with a 62-53 vote. The bill now heads to Quinn’s desk.
“Since I took the oath of office, I’ve pushed relentlessly for a comprehensive pension reform solution that would erase a $100 billion liability and restore fiscal stability to Illinois,” Quinn said at a press conference. “Today, we have won. The people of Illinois have won.”
The 321-page bill projects to save taxpayers $160 billion in pension payments and eliminate the debt over the next three decades. It centers on an array of changes, including raising the retirement age to 67 and restrictions on cost-of-living adjustments. Workers 50 and older will miss one cost-of-living raise while those 43 and younger will miss five.
Employees will also now have the option to participate in a 401k-type plan instead of a public pension.
Chicago not included
Lawmakers voted not to include Chicago public workers in the plan. Officials say the city will use the state’s system as a model when it tries to tackle it’s own problem– more than $30 billion worth of unpaid pensions. Chicago Mayor Rahm Emmanuel (D) said the Windy City’s shortfall has been felt throughout the state.
“The pension crisis is not truly solved until relief is brought to Chicago and all of the other local governments across our state that are standing on the brink of a fiscal cliff because of our pension liabilities,” Emanuel said in a statement. “Without providing the same relief to local governments, we know that taxpayers, employees, and the future of our state and local economies will remain at risk.”
It wasn’t a day to celebrate for labor unions, as spokesmen say they plan to file lawsuits to stop the legislation. In a statement released by the Union Coalition, leaders called Tuesday a dark day for Illinois, claiming teachers, police, firefighters and others in the public sector stand to lose large portions of their life savings.
“It’s bitterly ironic that, on the same day legislators used the state’s troubled finances to justify stealing the retirement savings of public servants, they approved millions of dollars in new tax giveaways for big corporations,” the statement reads. “A majority of legislators ignored and defied their oaths of office today—but Governor Pat Quinn doesn’t have to.
“He can stay true to his oath and the legal promise made to public employees and retirees by vetoing this unfair, unconstitutional bill. If he doesn’t, our union coalition will have no choice but to seek to uphold the Illinois Constitution and protect workers’ life savings through legal action.”
House Speaker Michael Madigan (D) applauded the bill, saying Illinois has depleted its ability to continue without addressing what has now become the worst pension debacle in the country.
“We’re here today because the cost of our present state systems are simply too rich for the resources available,” Madigan said.
The bill comes after about three decades of fiscal mismanagement, resulting in a rapidly falling state credit rating. As cash became scarce, so did payments to the public pension fund. When the state did contribute, funds were taken away from social services, education and other areas of the budget.
Even a 1996 plan hatched by former Gov. Jim Edgar (R) couldn’t stop the bleeding. Edgar promised that the state would make graduated annual payments, making the fund solvent by 2045. Instead, the state scrambled to fill the growing hole left by almost 10 years of various payment holidays. The result was far from what officials wanted, as the Securities Exchange Commission, after an extensive investigation, charged Illinois with securities fraud.
According to charges filed by the SEC May 11, 2013, Illinois “failed to inform investors about the impact of problems with its pension funding schedule as the state offered and sold more than $2.2 billion worth of municipal bonds from 2005 to early 2009. Illinois failed to disclose that its statutory plan significantly underfunded the state’s pension obligations and increased the risk to its overall financial condition. The state also misled investors about the effect of changes to its statutory plan.”
The charges marked only the second time the SEC accused a state of fraud. New Jersey faced similar charges in 2010.
Posted Dec. 3, 2013