Public Pension Reform

 

Call To Action: Click HERE to Support SB 1 to Reform Public Pensions Before Illinois Goes Bankrupt! 

Illinois legislators need to hear from local chambers of commerce, small business owners, and individuals who care about our economy.  They need to know that the crushing cost of public pensions threatens to bankrupt the State of Illinois!  Click HERE to contact your elected officials today!

 

Legislative Synopsis

Senate Bill 1 as amended in the House is a comprehensive package that will stabilize and bring solvency to 4 of the State’s pension funds (GARS, SERS, SURS, and TRS). This package will ensure the State meets its obligations to the pension systems by adopting an actuarially accepted payment schedule, providing an enforceable funding guarantee, and altering benefits for current and prospective annuitants.The concepts in this package are not new, and several have been approved by the House.

 

• New method for calculating the annual COLA, which is the major cost driver for the pension systems.  The cap of future COLA increases would be at $1,000 every year they worked. For example, if a retiree worked 30 years, the amount would be $30,000; their COLA would be 3 percent of that amount, or $900, and would accumulate each year. 
• Establish a pensionable salary cap for Tier I employee at $109,971,
• Increase the retirement age on a graduated scale based on current age, 
• Increase employee contributions by 2%,
• Funding schedule to reach 100% funding in 30 years,
• Prohibit the use of pension funds to subsidize retiree healthcare,
• Eliminate the subject of pensions for collective bargaining,
• Provides a funding guarantee by allowing the pensions systems the right to take mandamus action if legislature fails to follow new funding schedule,

Background

The Illinois Chamber formed with a coalition of local chambers, “The Chambers for Pension Reform”, to provide guiding principles of what the business community believes is required to adequately reform the public pension systems.  The recent legislative proposal mirrored some of these principles which include:

• Retirement age should be increased,

• No cost shift to locals without conditions (local control of benefits & other reforms secured),

• Conversion to defined benefit/contribution hybrid plan,

• Elimination of compounding COLA,

• Retirees share in healthcare costs,

• Consolidation of pension systems,

 

How did Illinois get into this mess?  The crisis did not happen overnight, but over the last 15 years of over promises and underfunding;

• Illinois government underfunded and/or skipped annual payments to the pension systems,

• Illinois elected officials enhanced retirement benefits without the funding to back them up,

• Increased life expectancies of public employee retirees,

• Lower than expected investment returns on public pension system assets,

 

Breakdown of $100 billion unfunded liability;

• 44% from Inadequate state funding,

• 22% lower-than-expected return on fund assets,

• 34% from benefit enhancements and inaccurate actuarial assumptions,

 

Legislative Status

SB 1 was the original public pension reform legislation sponsored by Illinois Senate President John Cullerton, however, it was so narrowed down in scope that the end result would not have provided much cost savings to the state.  It narrowly passed out of the Senate as amended but did not gain much traction in the House.  Speaker Madigan has now filed a number of amendments to SB 1 with reform ideas brought up by multiple parties in a number of "test votes" that passed the House prior to the House taking its two week Spring Break.  These amendments to SB 1 are largely a result of those "test votes" back in March.  

 

Call To Action: Click HERE to Support SB 1 to Reform Public Pensions Before Illinois Goes Bankrupt!