The We Are One Coalition of labor unions and their advocates has reportedly reached an agreement with Illinois Senate President John Cullerton (D-Chicago) on the issue of pension reform.
The deal, which came out of meetings between Cullerton and labor leaders, includes a guarantee that the state will make its payments to pension accounts and would also create a Pension Stabilization Fund. State revenues would go into that fund, which would also be guaranteed money for Illinois' pension funds.
The agreement also addresses cost-of-living-adjustments, or COLAs, for different tiers of state workers.
For retirees, or those have announced plans to retire on or before January 31 of this year, there are two options: either opt to keep the 3 percent compound interest on COLAs and maintain guaranteed health care benefits by agreeing to a two-year COLA freeze that would not occur during consecutive years or keep the compounded 3 percent interest with no freeze, but lose the guarantee of health care benefits.
Michael T. Carrigan, president of the AFL-CIO, released the following statement on the deal on behalf of the We Are One Coalition:
The union coalition has made a great effort to ensure fairness for
the public employees and retirees who did not cause this problem, to
ensure the stability of the pension systems for future generations, and
to offer a credible way forward. This agreement is our coalition's
We continue to strongly oppose Speaker
Madigan's mega-bill, SB 1, which threatens to rob the retirement savings
of teachers, police officers, and others in public service, by 20-40
percent. His proposal is not only drastically unfair, but it is
blatantly unconstitutional, rendering any advertised savings fictional.
We urge lawmakers from both parties in both chambers to embrace the agreed bill and oppose SB 1.
More details on the deal between the We Are One Coalition and Cullerton are outlined by the labor group below:
1. Include an ironclad pension funding guarantee to ensure that the state cannot skip or short payments to the state’s retirement systems. This fixes the fundamental, chronic problem of state underfunding and ensures that future legislatures and governors can never again engage in the type of fiscal negligence that led to today’s pension funding problem.
2. Dedicate state revenues to a Pension Stabilization Fund to make supplemental payments on top of the state’s required contribution. This major financial commitment will strengthen the retirement systems’ solvency.
3. Establish three choices for employees in Tier I:
a. Move from a 3% compounded to a 3% simple COLA with a two-year delay. Employees choosing this option would a) receive guaranteed access to health care in retirement; b) ensure that all future salary increases count toward their pensions; c) have the option to enroll in a cash balance plan (on top of their defined-benefit pension); and d) for TRS participants, continued eligibility for the TRS ERO.
b. Choose to keep the 3% compounded COLA, but with a three-year delay before the COLA would take effect. These employees would also pay 2% more of their salary into the pension system. Employees choosing this option would receive guaranteed access to health care in retirement and ensure that all future salary increases count toward their pensions.
c. Choose to keep the 3% compounded COLA exactly as it is. These employees would not have guaranteed access to health care in retirement and would forgo any future salary increases counting toward their pensions.
4. Establish a choice for current retirees and those set to retire as of January 1, 2013.
a. Retirees could choose to keep their guaranteed access to health care and keep their 3% compounded COLA, but would agree to a two-year COLA freeze. The freeze would occur in non-consecutive years.
b. Alternatively, retirees could choose to keep their 3% compounded COLA without any freeze, but forgo guaranteed access to health care in retirement.
5. Create a Tier II task force to study improving the retirement benefits for Tier II employees.
Announcement of the deal comes just days after the House passed SB 1, an over 200-page amendment crafted by House Speaker Michael Madigan (D-Chicago) that overhauled a bill written by Cullerton and passed by the Senate. Labor leaders vehemently oppose Madigan's bill.