By Kevin Caufield and Jeff Dankert
Area school and political leaders have given subdued remarks about a recent bill passed in Springfield meant to overhaul public employee retirement pensions.
The pension reform bill passed Dec. 3 is estimated to save the state $160 billion over the next 30 years. Estimates also show an immediate savings of $1.2 billion to $1.5 billion in its first year.
However, despite the bill being passed, most are withholding comment until the bill passes constitutional challenges in court.
In the meantime, Peru superintendent Mark Cross said he hopes pension reform helps restore school funding, he said.
“This is not to say they couldn’t come back and shift costs (of pensions) to local school districts,” Cross said. “The entire time during this pension crisis, they have shifted the cost. They have been under-funding the general state aid formula (for schools).”
As for contributions for public school employees on the state pension system, some school districts, including Peru, made the 9.4 percent contribution on behalf of those employees, Cross said. The pension bill reduces that contribution by 1 percent, down to 8.4 percent, he said.
With $100 billion in pension debt, Illinois has the worst funded pension system in the nation and the worst credit rating in the nation. The reform was an attempt to stabilize the system and help assure that essential state services are not crowded out by unaffordable pension payments.
Opponents criticized the measure from both sides, with some arguing it went too far and required public employees who have paid their contributions to the systems to now make up for the state’s failure to meet its obligations. Others argued the reforms did not go far enough, suggesting the system of granting employees specifically defined benefits should be scrapped in favor of a system that would provide a defined contribution to individual workers’ retirement accounts.
The measure’s savings projections and constitutionality also were questioned. Public employee unions announced just a day after the bill had passed that they would take the measure to court once Quinn signs it.
Supporters acknowledged it would be challenged in court, but argued that the measure had been crafted to increase the odds that it would win court approval. They also said it was important to pass the changes so that the state’s Supreme Court could decide the issue and offer the legislature additional guidance if the changes are ultimately ruled unconstitutional.
A city perspective
While the pension reform’s impact on teachers’ pensions has taken center stage, the bill also requires cities to pay more for police pensions next year.
That could be troublesome for some cities that aren’t fully funding their pension programs to begin with.
La Salle alderman Tom Ptak told city council members Tuesday the city already has an unfunded liability of $9.6 million in its pension fund. He said the new bill’s requirements to pay more should cause the city council to rethink some of its spending ideas such as buying a new leaf vacuum truck if the council is unwilling to raise taxes.
“We have to cut somewhere,” he said. “We don’t need to borrow money for things that are nice to have when we have obligations out there.”
Mautino votes no
State Rep. Frank Mautino (D-Spring Valley) voted “no” on the bill because, he said, “the retirees which had a constitutional protection, they’ll receive compounding diminishment” of their pension.
It is under this provision that retirees’ representatives will file a lawsuit against the bill and one of the reasons Mautino voted against it, he said.
This constitutional protection in Illinois has identical language for this provision in other states where the protection was upheld by courts, Mautino said.
Illinois and these other states say pension benefits “shall not be diminished or impaired.” Arizona is one of those states and in 2011 it made changes to reduce pension costs, similar to Illinois. Illinois is anxious to see what happens in the Arizona case, Mautino said.
Mautino said he has no objections to changes in the retirement age structure, because the aging population is living longer.
Rezin votes yes
State Sen. Sue Rezin (R-Morris) called the pension reform bill one of the most controversial and divisive issues to come before lawmakers in years.
“This was not an easy vote for anyone,” Rezin stated. “We have been struggling with this issue for over three years now. There have been numerous legislative scenarios with no final agreement. I took the difficult vote to move this process forward in an effort to bring some fiscal stability and solvency to the state retirement systems.”
Rezin said she welcomes that constitutional challenge because no one in Springfield can come to a consensus on what the law states is legal.
“The only way to move forward is to have the courts rule on what is, or what is not, constitutional since it is blatantly clear that the General Assembly has as many opinions on this issue as there are members,” she said. “Those opinions are highly unlikely to change.”
Kevin Caufield can be reached at (815) 220-6932 or firstname.lastname@example.org. Jeff Dankert can be reached at (815) 220-6975 or email@example.com.