Illinois Public Pension Reform Advances from House

 

(Credit: Chicago Tribune)
Credit: Chicago Tribune

On one of the more contentious issues in a state that has almost become a byword for corruption and financial ineptitude, the Illinois public pension plan faces a nearly $97 billion shortfall. Unable to enact reform over the years, the issue has been further compounded by the state’s credit downgrade.

Earlier this week, the Illinois State Senate rejected a comprehensive pension reform plan.

Then on Thursday, the Illinois General Assembly passed another pension reform 66-50 with bipartisan support, but in separate provisions. Speaker of the House Michael Madigan may package the provisions into a single bill to send to the Senate. If passed in the upper chamber, the measure would “affect current and retired state workers, university employees, legislators and downstate and suburban teachers.”

According to the Illinois Issues Blog, an outfit of the Center for State Policy and Leadership at the University of Illinois:

“The measure would cap the amount of salary on which retirees could earn the compounded 3 percent cost of living adjustment [COLA] at $25,000. Anyone earning more pension income would receive a flat COLA of $750 annually. Under the bill, retirees would not be eligible for a COLA until they have been retired for five years or they reach age 67, whichever comes first.”

A potential problem of the proposed Illinois public pension reform, as brought up by the Illinois Retired Teachers’ Association, is its constitutionality. The Illinois Constitution prohibits the siphoning of pensions. Section 5, the relevant part, reads:

“Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”

So, should this measure pass the Senate and reach the desk of Governor Pat Quinn, the courts may yet become involved.

The Illinois public pension issue has been bubbling for years. Much of the problem has been the state’s long history of politicians meddling with the overall pension system, dating back at least to Mayor Richard M. Daley, who led Chicago from 1989-2011.

In his first year in office, the now-incarcerated former governor Rod Blagojevich issued $10 billion in pension obligation bonds to create the illusion that the state was solvent in its promises. Gov. Quinn, Blagojevich’s immediate successor, has raised the state income tax to five percent with ambiguous revenue growth.

Now that the House has passed public pension reform legislation, the onus falls on the Illinois Senate. The Senate just rejected a plan that only dealt with downstate public employees and did not affect current retirees.