In a recent post, I focused on the fact that we still have the worst pension debt among all U.S. states and yet there seems to be little focus on trying to do something about that this spring in Springfield...
Don’t get me wrong. A budget deal with cuts, purchasing reforms, efficiencies and an actual balance without gimmicks would be welcome.
But it still wouldn’t address the gargantuan pension elephant in the Illinois living room. It’s been a year since the Illinois Supreme Court rejected lawmakers’ first attempt at pension changes. We can’t just let it go and push that burden onto the backs of our children and grandchildren.
And I know some of the teachers out there who are worrying more and more that their retirement security won’t be there by the time it’s their turn to retire.
So, what solutions are floating around the Capitol rail in Springfield? Let’s examine a handful:
1. Back in late January, Gov. Bruce Rauner said he would support Illinois Senate President John Cullerton’s plan, but we’ve heard little and seen little about it since. Cullerton has said it could save $1 billion per year, which isn’t much, but nothing to forgo either.
The “consideration” concept is so named because you essentially offer state workers something in consideration or exchange for them giving something up. The plan Cullerton previously offered would apply to all but the Judges Retirement System. Boiled to its essence, Cullerton’s consideration plan, which union managers once had agreed to, would offer workers options that would save the state money. They could, for instance, choose to accept a simple cost-of-living adjustment and in return would get free health care for life, a guarantee that future raises would count toward their pensions and the chance to enroll in a 401-(k) like plan while also keeping the pension they’d built.
Will that plan end up being part of the ultimate budget deal that has eluded politicians for 11 months? Perhaps it will if more of us start demanding some pension relief. As it stands, 21 cents of every tax dollar in the state’s main checking account goes toward pensions and that amount is projected to rise.
2. There’s another plan that’s been out there for a year now that’s being promoted as legal and constitutional because it, too, gives state workers a choice of options. HB4427 is sponsored by state Rep. Mark Batinick, R-Plainfield.
This bill has the support of a few suburban Democrats who are co-sponsoring with Batinick. HB4427 would apply to all five pension funds. Workers could keep their pension the same, or they could choose to to take a lump sum accelerated pension payment worth 75 percent of its current value, or they could choose a combination of a lesser lump sum partial payment that would reduce the remaining retirement amount they would receive.
The choice is the workers. A model of various scenarios of this plan ordered by the Commission of Government Forecasting and Accountability concluded it could save the state money. (You can read about the modeling here: COGFA Accelerated Payment Proposal-5578827_2 (2))
In an April 8 letter to colleagues, Batinick explained further:
Why would a pensioner want an immediate lump sum payout? It provides more flexibility. Significant savings on federal taxes can be made with structured withdraws, while giving employees control over their own money. I’d also like to note that a lump sum would become a willable asset. You cannot will a pension the same way.
At this time, this legislation is written to only offer a buyout at retirement. We as a General Assembly could expand the bill by offering other types of buyouts to current employees. For example, we could buy out COLA’s. We can buy out a Tier 1 employee into Tier 2. Also, we can offer current employees an option to enter into a hybrid plan. Under this scenario they would stay on track for a portion of their pension but the rest would be put into a retirement account. That account would receive matching money moving forward.
Furthermore, one of the biggest opportunities for savings may come from the buyout of vested, inactive employees. There are tens of thousands of these in the system. They likely have other retirement vehicles like 401K’s and social security. Many may have moved out of state. This is a group that should likely want and accept an accelerated benefit.
At the moment, it sounds like this bill won’t be called for a vote on the House floor controlled by House Speaker Mike Madigan. Batinick tells me he will continue to work on improving it or it could be added onto another bill before lawmakers adjourn at the end of May. State Sen. Matt Murphy, R-Palatine, has a similar plan, SB3280.
The Cullerton and Batinick plans are the broadest attempts at pension savings for the state’s taxpayers, but there are a few more that would tackle some of the pension loopholes we’ve highlighted before.
No double dips
3. State Rep. Jack Franks, D-Marengo, continues to push a bill, HB1334, that would require that future local police and fire employees notify a pension fund if he or she becomes a full-time employee of another system so that their retirement annuity can be suspended until they are no longer working.
This bill passed the House 105-2 April 14 and was assigned to be heard in a Senate committee April 27. It’s designed to stop, in the future, double dipping. That’s the all-too-common situation where police and fire managers qualify for retirement, quit, collect a pension and then are rehired by their same department or another department to essentially the same or a similar job so that they can collect a pension and a six-figure salary.
Municipal officials allow it so they don’t lose good, experienced managers, but it’s gaming the system and ripping off taxpayers. Retirement should mean retirement.
You spike, you pay
4. Lastly, Murphy, who has a stalled amendment to ask voters to remove the state constitution’s pension clause, also introduced legislation last year that would have required local school districts to pick up the cost of any end-of-career raises for teachers that are higher than the consumer price index.
Some school districts give the raises as a kind of incentive to push teachers to retire so they can cut payroll expenses, but all it does is push more costs onto all state taxpayers, Murphy noted. A plan to push back and require local districts to pay to the state anything over the index rather than the current anything over six percent will help control costs for the Teachers Retirement Fund.
That was something Murphy offered last year that didn’t make it into law, but could it be something added into a budget deal? Who knows. Anything goes often in Springfield.
Have you told your lawmakers what you want done about pension debt, pension spiking and double dipping? Tell them. We make it easy for you with our Sound Off tool. Power up, people. Our pension debt is enormous compared to our also-awful budget deficit. Let’s not leave that to our children.