The Illinois General Assembly approved a budget bill Thursday that includes a voluntary buyout program for participants in the state's pension plans.
Under the bill, current public workers can exchange the 3% compounded cost-of-living adjustments for a lump sum payment of 70% of the value and a 1.5% COLA that is not compounded.
Also, vested former workers can opt to receive a lump-sum payment amounting to 60% of the value of their pension balance. In both cases, the lump-sum payments must be transferred to tax-qualified retirement plans or accounts, the bill said.
Up to $1 billion in pension obligation bonds would be issued to fund the accelerated pension payments, according to the bill.
The bill also requires local employers to cover pension costs for teacher salary increases above 3%.
The state's five pension funds faced $137 billion in unfunded liabilities combined as of June 30, 2016.
State spending on pensions, debt and other post-employment benefits is expected to grow by $1.3 billion and consume about 30% of the state's revenue next year, Moody's Investors Service said in a report Thursday.
Gov. Bruce Rauner in a news release called the bill "a step in the right direction, though it does not include much-needed debt paydown and reforms that would reduce taxes, grow our economy, create jobs and raise family incomes." Mr. Rauner indicated in the news release that he intends to sign the bill.
Bloomberg contributed to this story.