PI Original Matthew Blake Tuesday May 29th, 2012, 3:49pm

Pension Cuts Advance Amid Fierce Union Opposition

A bill to wipe out unfunded liabilities for public employee pensions passed the Illinois House Executive committee 6-3 this morning, though the landmark legislation’s future is uncertain. Meanwhile, union leaders contend the bill violates the state constitution and is an affront to hundreds of thousands of current and retired state employees.

A bill to wipe out unfunded liabilities for public employee pensions passed the Illinois House Executive committee 6-3 this morning, though the landmark legislation’s future is uncertain.

House Republican leader Tom Cross (R-Oswego) said this afternoon he will oppose the bill unless it is amended to reverse a planned transfer of pension costs from state government to local school districts and universities.

Republicans are a minority in both the Illinois House and Senate, but Cross says the amendment has bipartisan support.

Meanwhile, a handful of union leaders came out swinging at the committee hearing, contending the bill violates the state constitution and is an affront to hundreds of thousands of current and retired state employees.

“These are all real people doing the real work of the state,” testified Dan Montgomery, president of the Illinois Federation of Teachers. Montgomery listed the kinds of workers who would lose thousands of dollars in retirement savings from the proposal including teachers, school support staff, bus drivers, state troopers, and food safety inspectors.

Public sector workers took jobs that pay less than comparable private sector positions with the understanding that they would get a livable pension, Montgomery added. Labor leaders also hammered home that while state government skipped out on their annual contributions to the state’s five public pension systems, employees made every payment.

Written by State Rep. Elaine Nekritz (D-Northbrook) and pushed by Speaker of the House Mike Madigan (D-Chicago), the current pension bill tries to pay off an estimated $83 billion in estimated pension liabilities by 2040 in two main ways – the transfer of payments to local school bodies and, much to the chagrin of unions, changing the annual Cost of Living Adjustment, or COLA.

The bill would change basing COLA payments on compound interest to simple interest for both current employees and retirees. Henry Bayer, executive director AFSCME Local 31, testified that the new COLA would be “totally inadequate” and not keep pace with inflation.

Employees, though, get a choice under the bill: Stay with a COLA that is compounded annually, but then forgo state retiree health care. Or keep their health care, but go along with a lower COLA.

According to its supporters, the choice enables the bill to adhere to the 1970 Illinois Constitution, which reads that state pension payments, “Shall be an enforceable contractual relationship, the benefits of which should not reduced or impaired.” As PI previously reported, state legislative leaders and Gov. Pat Quinn believe that by offering employees two alternatives to the current contractual arrangement, they are following the constitution.

But John E. Stevens, legal counsel for the We Are One coalition of unions, testified that it is “quite clear” the bill is unconstitutional, because either choice results in a “reduction or impairment of benefits.”

“It’s a coercive choice made under duress,” Stevens said.

There was little disputing Steven’s logic at the hearing. Tyrone Fahner, president of the Civic Committee of the Commercial Club of Chicago – a group that has been working with the state on pension issues since 2006, testified that he thinks the current bill is constitutional, adding “But I’d rather not get into the whole constitutional debate.”

No lawmaker pushed the debate. Instead, the most vocal bill dissenter was State Rep. Darlene Senger (R-Naperville), who – as with Cross – requested Madigan take out the payment transfer from states to local school bodies.

Cross told reporters this afternoon that the transfer provision is a “poison pill” slipped in by Madigan to signal the House Speaker was not serious about reforming the teacher pension system. As of this afternoon, Cross had taken his complaints to the House floor.

With the political focus then on the education pension, it may be the courts that decide the constitutionality issue: The General Assembly’s overloaded spring legislative schedule ends Thursday, adding to the pressure from Quinn and media editorials like the Chicago Tribune's to pass a pension overhaul in the next 48 hours.

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