Northern Illinois University

FY2010 Budget

Quinn abandons proposed pension cost hike

By DOUG FINKE (doug.finke@sj-r.com)
The State Journal-Register
Posted May 06, 2009 @ 08:12 PM
Last update May 07, 2009 @ 07:20 AM

Gov. Pat Quinn Wednesday dropped his proposal to have teachers, state workers and others pay more toward their public pension benefits.

However, Quinn reiterated that the state needs to save money on pension costs and said the way to do that is to create a new pension system, one that would reduce benefits for workers hired after a certain date.

"There will be a two-tiered system in Illinois," Quinn told a rally of school teachers who gathered at the Capitol to lobby for more education funding and to block Quinnís proposed pension changes. "Iím sure that wonít get many applauses. It will still be a generous pension, especially compared to people in our society who donít have a pension."

But Quinn said he no longer will seek to have people enrolled in the five state-funded pension systems pay an additional 2 percent of their salaries to their pensions.

Quinn acknowledged that his plan to have employees pay more for pensions probably would not have been approved by either lawmakers or employee unions.

As a result, he said, it makes more sense to focus instead on getting other changes to the pension systems, including setting lower benefit levels for people who enroll in the systems in the future. Under the state constitution, current enrollees cannot have their benefits lowered.

The idea of reducing benefits for future hirees is opposed by the American Federation of State, County and Municipal Employees, the Illinois Federation of Teachers and other unions.

"We believe research has shown they are modest retirement benefits that are at or below national averages," said AFSCME spokesman Anders Lindall. "Costs (to the state) are significantly below the national average. We believe strongly there is no justification for reducing benefits for future hires."

Quinn said his proposed changes will save the state billions of dollars over several decades. Lindall and others argue that creating a different program for new employees doesnít deal with the stateís current problem: the fact that the pension systems are short more than $70 billion in funds to cover future retiree costs.

Some of that shortfall is the result of investment losses sustained by the five funds because of the nationís economic problems.

A just-released report from the General Assemblyís Commission on Government Forecasting and Accountability said that ,under Quinnís plan, the financial health of the pension systems actually would get worse over the next few years. The report called for a new, long-term payment plan to ensure that Illinoisí pension debt can be eliminated over time.

State officials for decades didnít pay enough money into the pension systems, instead using the money to pay other state expenses. Consequently, billions are now owed to the pension systems.

Quinnís budget sets aside about $1.5 billion in state contributions to the pension systems over the next fiscal year. A payment scheduled adopted by the state in 1995 calls for payments of nearly $4 billion next year.

AFSCME and others support various tax increases to pay for the pension shortfall, eliminate Illinoisí backlog of Medicaid bills and avoid cuts in other state programs. Their suggestions include raising the state income tax, gasoline tax, tobacco taxes and/or expanding the sales tax to cover services that are now exempt.

Doug Finke can be reached at 788-1527.

Pension contributions

The amounts contributed by workers covered by state pension systems vary according to which system covers them. Some examples:

  • Teachers contribute 9.4 percent of their salaries to the Teachersí Retirement System.
  • State government workers contribute either 4 percent or 8 percent, depending on whether they are covered by Social Security benefits.
  • Lawmakers pay the most, 11.5 percent of their salaries, to participate in the General Assembly Retirement System.

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