Gov. Pat Quinn’s proposal Friday to reform Illinois’ public employee pension system was met with firm resistance by state unions, who represent the workers directly impacted by the governor’s proposal.
However, Senate President John Cullerton (D-Chicago), who sided with unions against earlier pension proposals, provisionally backs Quinn’s plan, and, unlike unions, says it passes state constitutional muster.
Illinois AFL-CIO President Michael Carrigan released a statement Friday sharply critical of the governor.
“Considering that the subject at hand is the ability of hundreds of thousands of Illinoisans to support themselves in retirement, we believe the proposals are insensitive and irresponsible,” Carrigan said, adding that labor was not invited to Quinn’s pension working group.
Kelly Kraft, Quinn’s budget spokeswoman, says that the governor is negotiating with unions, and that a labor-friendly plan to address the state’s $83 billion in pension liabilities is still possible.
Last year, unions successfully fought back a pension deal from House Minority Leader Tom Cross (R-Plainfield), and supported by Speaker of the House Mike Madigan (D-Chicago).
Cross wanted current state employees moved into a new pension plan. Unions – and Cullerton’s own legal counsel –said Cross’s proposal violated the Illinois constitution, which reads that state pension payments “shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”
By contrast, Quinn’s plan would make Illinois’ pension system solvent by 2042 through giving employees a choice of two unpleasant options: Increase their contribution by three percent and get lower annual cost of living adjustments to their benefits; or keep their current level of payments and benefits, but receive no retirement health care subsidy. The current plan pays for heath insurance of retirees.
The Illinois AFL-CIO says Quinn’s plan is unconstitutional. “Forcing public servants to choose between sharply diminished pension plans is no choice at all,” Carrigan said.
Quinn, and Cullerton, says that this choice is precisely what makes the plan constitutional. “The only way to change benefits is some sort of offer, consideration, or exchange – [Quinn’s proposal] does that appropriately,” says Cullerton spokeswoman, Rikeesha Phelon.
Cullerton supports the “framework” of Quinn’s pension plan, according to Phelon. “That said, all the details have not been worked out,” she added.
Indeed, key parts could either be figured out by the General Assembly – or lead to the plan’s collapse.
One is whether the state transfers retirement costs to local school districts, community colleges, and universities outside of Chicago, which has its own retirement system. The Chicago Tribune reported that these payments are 78 percent of the state’s yearly pension costs.
Almost all sides, including credit rating agencies like Moody’s that have downgraded the state’s bond rating, acknowledge that pension liability stems from Illinois using its pension fund like a bank account – using money earmarked for pension obligations to instead pay down other debts or fund state programs, and, in doing so, shortchanging public employees.
Ralph Martire, executive director for the Center for Tax and Budget Accountability, a Chicago think tank, wants the state to treat pension debt like it would bank debt or any other outstanding obligation.
“We need to treat it for what it is – real debt – and pay it back through real debt payments,” Martire says, like front-loading interest payments and back-loading principal payments. But, Martire says, “this is not being discussed.”