Passage of the Illinois pension reform bill has drawn the ire of public unions, while organizations of large employers are throwing their support behind the bill.
The bill — which passed the General Assembly Tuesday — is almost certainly headed to court on the contention it violates the state constitution, which states retirement benefits “shall not be diminished or impaired.”
We Are One Illinois, a coalition of unions representing more than 1 million Illinois public employees and retirees, said in a news release that if Gov. Pat Quinn does not veto the bill, “our union coalition will have no choice but to seek to uphold the Illinois Constitution and protect workers' life savings through legal action.”
Mr. Quinn said he plans to sign the bill “promptly” when it reaches his desk. “Today, we have won. The people of Illinois have won,” he said in a Tuesday news release. “This bill will ensure retirement security for those who have faithfully contributed to the pension systems, end the squeeze on critical education and health-care services, and support economic growth,” Mr. Quinn said in his news release.
The Civic Committee of The Commercial Club of Chicago, a group of senior business and professional leaders who seek to address important economic and social issues, supported the bill, as did a coalition of 11 Illinois major employers and civic groups, including the Illinois Chamber of Commerce, Civic Federation and Illinois Manufacturers' Association.
“While not a solution to all of the state's fiscal problems, this bill is a significant step forward. It will stabilize the pension system and help put Illinois on the path to fiscal stability,” the coalition said in a news release.
The bill is expected to save $160 billion over the next 30 years, shave off about $21 billion of the $100 billion unfunded liability immediately and fully fund the state-administered defined benefit plans by 2045. The state will contribute at least $1 billion annually through 2045, starting in fiscal year 2020.
The reform measure is similar to a bill passed by the House, but rejected by the Senate this summer. It decreases cost-of-living adjustments, caps pensionable salaries and raises retirement ages, but actually decreases employee contributions by one percentage point. It also creates a defined contribution plan that will be made available for a portion of employees.
Up to 5% of employees hired before Jan. 1, 2011, will be eligible to join a DC plan starting July 1, 2015; the plan will be revenue neutral for the state and employee contributions will remain at the same level. The employer contribution will be a uniform percentage of compensation that is determined each year. If a member joins the DC plan, pension accruals will be frozen.
William Atwood, executive director of the $13.1 billion Illinois State Board of Investment, Chicago, said he did not see any negatives in the bill for administering the pension plans moving forward. He said the only issue is the expected legal challenge and that ISBI is waiting to see what any judge rules. He added the DC component should not have any legal challenge.
William Mabe, executive director of the $15.6 billion State Universities Retirement System, Champaign, could not be reached for comment.