The Illinois Senate on Thursday passed a pension reform bill that is projected to save the state $45 billion to $51 billion over the next 30 years.
The vote was 40-16.
The bill was introduced by Senate President John Cullerton and is designed to withstand a constitutional challenge by offering active employees and retirees different options aimed at ultimately reducing benefits. The options mainly revolve around keeping the current compounding cost-of-living adjustment, pensionable salary increases and receiving retiree health care. If participants want retiree health care and pensionable salary increases, their employee contribution will increase two percentage points over the next two years and there will be a three-year delay in receiving the compounding COLA.
The bill is in direct competition with one passed by the House last week that is further reaching in reducing benefits and decreasing the unfunded liability. Mr. Cullerton said the House bill might not survive a court challenge. The Illinois Constitution states membership in a retirement system “shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”
“The courts, bond houses and our funding priorities demand a law that is clearly constitutional. This bill is fair and respects the plain language of the pension clause,” Mr. Cullerton said in a statement Thursday. “For that reason, I believe that it has the best chance of withstanding a court challenge.”
Illinois has the lowest credit ratings in the country, the lowest funded status of its state plans and total unfunded pension liabilities of about $100 billion.