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Illinois Pensions

Illinois Pensions: Madigan, Cullerton Win Swift, Bi-Partisan Approval of Public Pension Reform Plan to Save Illinois $100 Billion


Speaker Michael Madigan (left) and Senate President John Cullerton

(Springfield, IL) — March 24, 2010. In less than 12 hours, House Speaker Michael Madigan (D-Chicago) and Senate President John Cullerton (D-Chicago) today bulldozed a massive Illinois pension reform bill–which creates a two-tier public employee retirement system–through the Illinois legislature.

That’s legislative light-speed.

In the unexpected move, Madigan rolled out the legislation, Senate Bill 1946, on Wednesday morning to the Illinois Personnel and Pensions Committee, which quickly approved the plan 8-2. Later in the afternoon the full House ok’d the bill 92-17. The Senate followed suit later in the evening, 48-6.

Madigan estimates that the pension changes for all new employees hired after January 1, 2011–changes which Illinois AFSCME Council 31 hotly opposed–will save the state nearly $100 billion over the next three decades.

Asked by reporters why the bill emerged suddenly today, Madigan responded that pension reform had been under negotiation for nearly a year and that all parties had recognized that the current system was unsustainable.

Additionally, Madigan noted that Governor Pat Quinn‘s budget office had indicated that an upcoming $1 billion bond offering was at risk of incurring a higher interest rate from bond rating agencies if Illinois made no concrete effort to repair its battered public finances.

In a statement following the legislature’s action, Quinn said:

“The General Assembly tonight took an important and vital step toward rescuing Illinois from fiscal calamity by passing public pension reform. The legislation approved by the General Assembly will stabilize the public pension system, protect current state employees and provide attractive pension benefits to future state workers.

I congratulate House Speaker Michael Madigan and Senate President John Cullerton for their leadership on this crucial issue. I also thank members of the General Assembly for their bi-partisan support and for bringing in a new era of greater fiscal responsibility and accountability to Illinois. I look forward to signing this important bill into law.”

The changes to the Illinois pension system include the following:

  • New Retirement Age: The new retirement age for new employees will be 67 with full benefits after 10 years of service. There will be reduced benefits at a retirement age of 62 with 10 years of service. The reduction will be at of 1% per month, which equates to 6% per year.
  • Maximum Pension: Maximum pension salary will be $106,80.
  • Final Average Salary: Highest consecutive 8 years of last 10 years of service.
  • Alternative Formula. The alternative formula will be limited to correctional officers, state police, and state firefighters.  They can retire at age 60 with 20 years of service.
  • COLA: Simple interest COLA the lesser of the Consumer Price Index or 3%.
  • Survivor Annuity: Survivor annuity will be set at 66.7%.
  • Pension Suspension: No new pension plan employees may receive a pension from one system and a salary from another.  If this occurs, the pension will be suspended.  However, when the individual ends the employment, the pension will be reinstated.

  • Chicago Public Schools Pension Payments Rescheduled: Allows CPS to pay normal cost for the next 3 fiscal years and extend their funding schedule by 15 years.

The Illinois public pension systems effected by the new legislation are:

  • Chicago Teachers’ Pension Fund
  • Metropolitan Water Reclamation District
  • Cook County Employees
  • Chicago Municipal Employees
  • Cook County Forest Preserve
  • Chicago Park District
  • Judges Retirement System
  • General Assembly Retirement System
  • State Employees Retirement System
  • IMRF
  • Teachers’ Retirement System
  • Chicago Laborers
  • State Universities Retirement System

Despite bi-partisan support for the pension overhaul, Madigan has no expectation that the House and Senate Republicans will change their opposition to an income tax increase even though pension reform was key GOP demand in the tax increase debate.

Though an income tax hike may fail to materialize, Madigan said the new pension plan “maybe–under line maybe” provide some relief to the pressures faced by next year’s budget.

Madigan and Cullerton today pulled-off a real doozy. Wow.

About David Ormsby

David, a public relations consultant and Huffington Post blogger, is an ex-Press Secretary of the Illinois Democratic Party.

Discussion

9 thoughts on “Illinois Pensions: Madigan, Cullerton Win Swift, Bi-Partisan Approval of Public Pension Reform Plan to Save Illinois $100 Billion

  1. Please let me get this straight…these changes only apply to people hired after January 1, 2011 that belong to one of the aforementioned Illinois public pensions system, correct?

    Posted by Jerry Roma | March 25, 2010, 10:19 AM
  2. Correct.

    Posted by David Ormsby | March 25, 2010, 10:26 AM
  3. Thank you, David.

    Posted by Jerry Roma | March 25, 2010, 10:30 AM
  4. This may help the pension plan, but can you tell me how it will help schools. New teachers will have less incentive to become teachers. Schools will be filled with aging teachers at the top of the salary schedule thereby bloating there budget. Teachers with new technology skills will be few and far between. It appears the state of illinois does not care about education at all with all the recent budget cuts and now this. Hopefully they will get their acts together so that future genrerations will not have to bear the burden of their mistakes.

    Posted by Randy Owen | March 25, 2010, 12:36 PM
  5. Sorry about the mistakes I am a really bad typist. their,budgets, Illinois and generations.

    Posted by Randy Owen | March 25, 2010, 12:41 PM
  6. Randy,

    The state may be able to book between $500 million to $1 billion in savings this year. Given that the Governor has proposed $1.3 billion in education cuts which would eliminate nearly 17,000 teaching jobs, this plan will save the butts of many, many teachers this year.

    Thanks for reading.

    David Ormsby

    Posted by David Ormsby | March 25, 2010, 12:47 PM
  7. The date that Illinois schools must release non-tenured teachers that they do not expect to hire back for next year has already passed. Ask anyone who has taught four years or less at U-46, Morton or many other local school districts. Those 17,000 teachers have already been released. Their butts are already in the wind.

    Of those released, some will be rehired due to their specialty and their exceptional skills. However, those with those skills are also the most able and likely to transition away from teaching after being summarily dismissed.

    One of the substantial benefits of teaching young people for 35 years is knowing that you will have a comfortable retirement at an age where you may be able to enjoy it. I don’t consider teaching for 47 years to have a less comfortable 67 year old starting retirement to be a very worthwhile incentive.

    No child left behind…Lots of educators left stranded.

    We can save serious pension dollars if we fund the pensions of those who slammed this bill through in 12 hours only if they can stay in the legislature for 47 consecutive years and show “annual yearly progress” for each of their constituent subgroups for all of those 47 years. Just to be fair, the test is to be administered in either English, Spanish, Mandarin or Hieroglyphics on a random, rotating schedule.

    Good luck. Actually, studying Mandarin might be a really good idea…

    Posted by David Martin | March 25, 2010, 5:57 PM
  8. Yeah – nice plan except for the 17,000 teachers that lost their jobs. They enact a plan that will not really help educational funding until 45 years down the road, when the new hire teachers of about 22 years old hit the 67 year old retirement mark. I agree it will help then, but why have fire extinguishers delivered next year when the house is on fire NOW! They need to address the PRESENT funding shortfalls FIRST. Or maybe they figure if they put in a plan that takes hold 45 years later they will be dead and long gone by the time it really goes into effect. They may be betting that the educational system in illinois may collapse before then anyway so it will be a mute point. Great job guys! They reduced the number of teachers – why not reducing the number of senators and reps? THAT would save all kinds of money!

    Posted by Charlie Niehaus | March 25, 2010, 6:01 PM
  9. Charlie, I agree. The pensions (and futures) of so many future state workers and public servants has completely been undermined. Illinois ranks dead last in education funding among our 50 states. By that number alone, it is apparent that our government cares little about the basic needs of our citizens… so why would they care about us in the long run? Maybe I’m naive, but I believe that the public workers do the most important jobs of society. We don’t get rich doing it… but we make enough to live. Living comfortably when you retire is (was) an idea that motivated so many to work as public employees, helping the greater good. Comparing Illinois to neighboring states… now Wisconsin, Indiana, Iowa, etc., all have a more stable pension system, and more motivation for qualified people to work elsewhere. The pension system was not the reason Illinois is in our fiscal mess, but (thank you House, Congress and Quinn) now we can save some money by hurting those who support our citizens the most. Those 17,000 teacher jobs that might be saved, will now have to work in underfunded, overcrowded, under-resourced, thankless positions… with little motivation to keep working for what comes at the end of their career. Thanks a lot government, your thoughtfulness and guidance through this tough time is invaluable, again. I know… I’ve been a CPS teacher for the better part of decade.

    Posted by RJ | March 27, 2010, 6:53 AM

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David Ormsby, Editor

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