Letter to Governor Quinn
November 2, 2011
This letter was sent on behalf of Illinois Public University Chancellors and Presidents to Governor Quinn, Senate President John Cullerton, Senate Minority Leader Christine Radogno, Speaker of the House Michael Madigan, and House Republican Leader Tom Cross.
Dear Governor Quinn:
We recognize the State of Illinois is faced with an unprecedented fiscal deficit that results in not only billions of dollars of unpaid obligations to state agencies and vendors, but leaves state leaders with few options to address the estimated $85 billion underfunded pension liabilities shared by the five state pension funds.
The SURS defined benefit program for University and Community College employees was established in 1941. Had all three required funding components been fulfilled over the years,the SURS program would now be stable, affordable and solvent. Two of the three necessary components of full funding have been steadfast and consistent: employee contributions and there turn on assets from pension fund investments.
As chief executives of the state’s public universities, we understand all too well that the present situation facing the state’s five pension funds is not sustainable. Notwithstanding the state funding history, successfully resolving this financial obligation requires all parties (university employers, employees, employee organizations, and the State of Illinois) to participate together in crafting a fair and equitable solution.
Within the context of the state’s fiscal crisis, examples of excessive individual pension benefits have often been emphasized in the call for reform. But these exceptional situations do not represent the reality of the vast majority of pension system participants. Among its nearly 200,000 members,the average SURS retiree has 20 years of service and receives a monthly pension of $2,760 per month, or about $33,000 per year. Teachers and university employees do not participate in Social Security. With decades of service already invested, employees and retirees cannot turn back and recalculate their career choices and retirement planning measures in response to unpredictable state funding.
Senate Bill 512, backed by the Civic Committee of the Commercial Club of Chicago is but one approach. As leaders of the state’s public universities, we share grave concerns over Senate Bill 512 in its current form. However, we agree that SB512 also has favorable aspects:
- The state would amortize the unfunded accrued liability through an enhanced funding stabilization methodology (30-year straight line).
- The state would maintain responsibility to fund benefits accrued to date.
- There is an assumption of adequate revenue sources (e.g., a continuation of the tax surcharge). It is very evident that the under-funding of pension obligations enabled Illinois to fund alternative legislative priorities while maintaining an artificially low income tax rate for many years.
Unfortunately, our concerns over other problematic areas of SB 512 overshadow the positive aspects of the legislation. Chief among them, state pension funding would be limited to approximately 6% of payroll as the level of state contribution for continuing benefits, leaving a significant funding shortfall to cover the normal cost of current benefits. SB512 proposes to shift those costs to employees. Employees are the least prepared to shoulder new unplanned obligations for the normal costs of their pensions. Furthermore, the actuarial experts participating in the Working Group discussions have confirmed that enactment of SB512 would lead to a wide range of unintended funding consequences leading to significant new obligations for the state, with real cost reductions not realized for decades. It is difficult to consider such outcomes to be in the best interests of the state, its colleges and universities, or its employees.
Pension system participants have relied upon the state’s representation and the Pension Protection Clause to expect a predictable and secure set of core pension benefits that also serve as a replacement for Social Security. SB512 would undercut these assumptions.
Universities compete in a national, and sometimes a global marketplace, to recruit and retain the talented faculty and staff who teach our students, provide services to them and conduct ground breaking research. They have career opportunities that are not limited by the boundaries of this state. Reducing their benefits or forcing them to pay significantly more for benefits that were promised to them is likely to cause a significant migration of talented people out of this state. This is one of our greatest concerns.
There is no denying the critical nature of our current fiscal situation. We are certain that higher education employees and institutions are prepared to contribute to a long-term solution. The public higher education community is prepared to participate in the design of options and alternatives that help solve this critical issue. We believe it is possible to complete such work in time for the Spring 2012 session of the General Assembly and we look forward to taking this opportunity to develop a durable, equitable and long-term solution, especially in the SURS sector.
Sincerely,
Illinois Public University Chancellors and Presidents
CMS Health Insurance Plan Update
September 9, 2011
Central Management Services (CMS) has notified Human Resource Services that all of the 90-day emergency contracts for managed care vendors have been extended through the remainder of the fiscal year, June 30, 2012. As a result, all employees will be able to remain enrolled with their current vendor until the end of the fiscal year. Previously, CMS announced their intention to hold a Special Enrollment Period for members to change their health carrier if desired.
This Special Enrollment Period will take place from October 10, 2011 through October 28, 2011. The following guidelines have been provided regarding the Special Enrollment Period:
- The Special Enrollment Period will be open to all members.
- The Special Enrollment Period is limited to health carrier changes only.
- Changes made to health carriers will be effective December 1, 2011.
- Members who change health carriers will be required to satisfy all health plan and prescription deductibles associated with the new health plan, even if they have already accrued deductibles under the previous plan.
As the Special Enrollment Period approaches, CMS will send a postcard to all members with additional information. A health carrier change form will be available on the CMS website once the enrollment period begins.
Please contact HRS at 753-6000, if you have any additional questions.
President's Pension, Budget and Legislative Recap
June 2, 2011
We closed the books on another semester two weeks ago, which in theory means that it was a time to catch our breath...but not so this year.
The last few weeks have proven to be exceedingly busy for NIU administration and staff. We have been grappling with the decisions made or left unresolved by the Illinois General Assembly regarding future pension benefits for current employees, annuitant health care benefit changes, a reduction to our operating base budget for FY2012, procurement reform, and a new emphasis on performance-based funding and outcome measures.
I want to take this opportunity to bring you up-to-date on these critical issues.
Statement Regarding Pension Reform
May 30, 2011
We are absolutely committed to reforming Illinois’ public pension system for current employees. It must be done to stabilize our systems and address long term financial issues for both the public employee pension systems and state government.
We believe passage of legislation addressing this issue is essential to the state’s well being.
It was made very clear during the May 26th hearing in the Personnel and Pensions Committee that both those who support pension reform and those who are opposed to Senate Bill 512 acknowledge we have a problem and something must be done.
Our goal is to enact reforms to our pension systems that provide a long term solution for both those who are members of the pension systems and those who fund them.
We will convene meetings over the summer to address the issues and concerns that have been raised and work toward a solution in this year’s Fall Veto Session. [Emphasis added]
-Illinois House Speaker Michael J. Madigan
-Illinois House Republican Leader Tom Cross
-Tyrone Fahner, President, Civic Committee of the Commercial Club of Chicago
State Senate committee approves changes in retiree health care benefits
May 30, 2011
Legislation that could dramatically increase the cost of health insurance for current and future state of Illinois annuitants, including erasing the benefit of free health care for those who retire with 20 or more years of service, has moved to the floor for debate. Full story >>
Senate Bill 175
May 29, 2011
On behalf of the university, Lori Clark of NIU’s Office of Governmental Relations submitted to the Senate Executive Committee on Sunday, May 29, a written position statement from NIU Vice President of Human Resources Steve Cunningham. The statement outlines NIU’s opposition to Senate Bill 175 which would significantly alter retiree health care benefits. Read Cunningham’s statement >>
Senate Bill 512 Update
May 26, 2011
A recap of today's Illinois House Personnel and Pension Committee meeting can be found in NIU Today. SB512, which significantly alters the way the state handles pensions was passed out of committee and sent to the floor for debate.
Senate Bill 512 Analysis
May 26, 2011
Human Resource Services has analyzed Senate Bill 512 and provided the following synopsis: SB512 amendment analysis
Cunningham testifies at pension committee
May 26, 2011
NIU Vice President of Human Resources is testifying this morning before the Personnel and Pension Committee regarding Senate Bill 512 which would significantly alter the way employee pensions are handled. Cunningham's testimony, outlining our grave concern about these proposed changes, can be found here.
Update on Pension
May 25, 2011
An amendment to Senate Bill 512 has been filed and a committee hearing to consider the proposed changes will take place 9 a.m., Thursday, May 26.
The full text of the amended bill can be found here. Human Resource Services is reviewing the bill to determine the exact nature of the changes currently proposed.
Benefits Choice period extended
May 24, 2011
According to an update released May 24, by CentralManagement Services:
"FY 2012 ManagedCare Contracts – At this time, a final decision regarding the managed care contracts for FY 2012 has not been made. As a result, vendor names, coverage areas and rates are not available. In order to allow members sufficient time to make an informed decision, the Benefit Choice Period will be extended. Information will be posted to this website as soon as it is available.
"Once the managed care plans are identified, members will be advised of the extended Benefit Choice end date by which they must make a decision regarding their coverage choices for FY 2012. Contrary to the information in the Benefit Choice letter recently mailed, no one will be defaulted into the Quality Care Health Plan until after the revised Benefit Choice Period end date has passed."
Pension Proposal Summary
May 23, 2011
A story in today's Springfield State Journal Register provided an excellent synopsis of the proposed changes to the pension plan for university employees:
Most state, university, and school district employees and legislators would have to pay more in order to keep their current pension benefits, under pension legislation pending in the Illinois House, but judges would be excluded.
Teachers would contribute nearly 14 percent of their pay toward their pensions instead of the current 9.4 percent. Contributions for state employees and university workers not on Social Security are expected to rise to 13.5 percent and 15 percent, respectively, instead of the current 8 percent.
Those numbers could change as the bill is finalized.
Instead of paying more, current employees could opt for a second tier of benefits, the same package that was approved by the General Assembly last year for employees hired after Jan. 1. Tier 2 benefits are lower than those in Tier 1, and employees generally must work longer and retire later. Depending on the rate of inflation, Tier 2 also is likely to provide lowercost-of-living increases in workers' pensions.
The other alternative would be to choose a new, third tier ofbenefits. In Tier 3, an employee's benefits would be accumulated through a defined contribution plan – similar to a 401(k) plan — in which the state would contribute 6 percent of an employee's salary and the employee would contribute 6 percent or more. Those funds would be invested for the employee's retirement.
Unions consider the plan to be unconstitutional and plan to challenge it in court.
Annuitant Insurance Changes Proposed
May 18, 2011
State lawmakers are reviewing a proposal that would require annuitants - both those currently retired, and those who will retire in the future - to pay a portion of their health insurance, regardless of the number of years they worked for the state.
Mercer Health and Benefits, a consultant hired by the state to analyze
health insurance costs for government employees has proposed that the state
require all annuitants - current and future - to contribute toward their health
insurance costs regardless of the length of service to the state.
Synopsis of the Mercer report >
Update on Budget
May 17, 2011
The House and Senate have passed budget bills, each with a different vision for higher education.
House Bill 3700:
- Reduces funding for public universities by 1.6 percent, or $15 million.
- Cuts funding for MAP grants by $17 million – an act aimed at students attending for-profit institutions.
- Cuts funding to the University Center of Lake County by 42 percent
Senate Bill 2443:
- Cuts public university funding 5.5 percent, or $65.8 million
- Increases funding for MAP grants by $25 million
- Cuts grants by 10 percent
- Cuts funding to the University Center of Lake County by 5 percent
In the days ahead, representatives from the two houses will work to find a compromise number that both can accept. However, it is important to note, that in the process of such negotiations, the two sides could ultimately agree to even larger cuts in public university funding than those that are currently found in Senate Bill 2443.
Update on Pension
May 16, 2011
Based on actions taken Friday, May 13, it appears that the language in HB149 will be the current strategy that lawmakers are looking to in their effort to make changes on existing pension regulations.
(For tracking purposes, the actual bill to follow will likely be SB 512, which will adopt language based on the general proposals contained in HB 149.)
This bill would impose significant changes in the way that pensions for state employees are managed and it requires very careful attention. The next few days and weeks are critical for this issue.
The information below provides a very simple synopsis of proposals that have been reported from Springfield, and a best estimate of the impact of the current proposals. Since the bill is still being debated, and the topic is highly complex, this may not be the formal shape of the bill, and final language as not been released.
According to a briefing prepared by the State University Annuitants Association, HB 149 would require current employees to choose among three retirement plans.
Tier I: Stay in your current plan, but contribute more to it:
Employee contribution rate increases from 8% to a yet-to-be determined amount in the range of 14-16%. The rate would be subject to periodic revision and increases, possibly every 5 years.
Tier II: Participate in the second-tier plan that passed last year, which implemented reduced benefits for those hired on or after January 1, 2011:
Employee contribution rate would decrease from 8% to as low as 6.5% (simply because of the lower value of this plan).
Tier III: Participate in the 401(k)-style Defined Contribution Plan in which the State would match employees’ contributions.
The defined contribution option would remain unchanged for current participants in the Self-Managed Plan (7.5% employee contribution with a state match). This would most likely be the default if no election were made to stay in Tier I. A different defined contribution option would be made available for new employees.
The plan as currently presented would have no impact on pension benefits that employees have already accrued under the SURS to date. Any pension savings accrued up and until the legislation took effect would be paid as promised.
Hearings on the bill are scheduled as follows:
Personnel and Pensions Committee Hearing 2 p.m., May 18, 2011, Capitol Building Room 122B Springfield, IL
Personnel and Pensions Committee Hearing noon, May 19 2011, Capitol Building Room 122B Springfield, IL
For more information:
A preliminary analysis of the bill by the Institute of Government Public Affairs is available here (PDF). As this analysis makes clear, this is an extremely complex bill, and many details have yet to be worked out.
Additional information may be available from the State Universities Annuitants Association at: www.suaa.org or at the SURS website at: www.surs.org.
