Thursday, May 9, 2013

Illinois Senate Passes Sen Cullerton's Pension Reform bill SB-2404

SPRINGFIELD – The following statement was released by Senate President John J. Cullerton following Senate passage of SB 2404:

“I’d like to thank my Senate colleagues, the representatives of teachers, nurses, police officers, and public employees who worked together to pass a plan to address our pension crisis.

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. For that reason, I believe that it has the best chance of withstanding a court challenge.

The framework of this bill also achieves the goal of relieving financial pressures starting with the $1 billion pension payment scheduled for FY 15. The plan is estimated to save the state $45 to 51 billion over the next 30 years.

Ambitious savings projections should always be balanced against the prospect of netting zero with an unfavorable court decision. Members of the Senate have calculated this risk and demonstrated their adherence to the plain language of the Illinois Constitution today.”


Under the bill, Active Members would have three options:
Choice A: Agree to a 3% simple COLA which they would receive two years later than when they would currently receive their first COLA, have access to retiree healthcare, receive all future salary increases as pensionable, be able to enroll in a cash balance plan, and members of TRS would be eligible for early retirement;
Choice B, Option 1: Retain the 3% compounded COLA, but have no access to retiree healthcare, and have all future salary increases always offered as non-pensionable; or
Choice B, Option 2: Retain the 3% compounded COLA but with a 3 year delay, have access to retiree healthcare, all future salary increases would be offered as pensionable, and contribute an additional 2% of salary.

Under the bill, Retirees and members who have given a notice of retirement as of January 1, 2013 would have two choices:
Choice A:  Retain the 3% compounded COLA, but agree to skip their compounded 3% COLA on a two-year staggered basis in exchange for retiree healthcare access; or
Choice B: Retain the current COLA, but lose access to retiree healthcare.


1 comment:

Joe Fougerousse said...

SB 2404 is a Trojan horse backed up by a more draconian version in the House. It’s an old political maneuver. Take this deal or we’ll give you something worse. You’re being played. Let’s review SB 2404.

First, in the civic interest of compromise active members would contribute an additional 2% of their salaries, providing more than $3 billion over the next decade. What’s wrong with that? Well, on its own merit, it is unfair to place such a burden on active working members without assessing the 2% levy on retiree’s pensions as well. The whole concept of “union” is solidarity for all. When solidarity breaks down, people break down. When people break down, the union breaks down.

But the benefits of inactive members are also threatened. According to the Illinois Retired Teachers Association, the We Are One Illinois Coalition, including IEA, have negotiated an agreement with Senate President Cullerton concerning pension reform. The agreement is structured as a choice proposal affecting current retirees. The proposal will provide a choice between access to health care and accepting a staggered two-year COLA freeze or keeping your 3% compounded COLA and no retiree health care access. As active and inactive members are being asked to fix a problem they didn’t create, the IEA leadership is expressing more concern for the state’s budgetary health than the welfare of its own constituency.

Second, the IEA’s hard-fought funding guarantee requiring lawmakers to make the annual pension and debt payment each year isn’t worth the paper it’s written on. It’s backed up by nothing more than the right of state retirement systems or individuals to bring court action if the payments are not made. But since past failures of the state to make payments into the pension fund already empower retirees and their representatives with actionable legal rights, the IEA is simply trading promises with no effect. State lawmakers acted quickly to influence the legal process in their favor by guaranteeing the pensions of court judges who would adjudicate any such challenges. Hence, except for judges who have been recruited to the state’s cause, the guarantee is just a “feel good” clause. It has no teeth and it can’t bite.

Fourth, though it is correct to say the pension crisis is a fiscal crisis that can be resolved only by new sources of revenue, it is a pipe dream to believe that a handful of squeamish lawmakers will close corporate tax loopholes to help boost the state’s future revenues. That has not happened in the past, it is not happening now, and it is not going to happen in the future. Monopoly corporations run the state. They own the media; they control the legislature; and they write the laws to serve one purpose only – maximizing their profits. Their biggest problem is finding new ways to squeeze interest payments on outstanding debt. The state’s future budget will not be balanced by any fair assessment. The austerity psychology that has gripped the state will prompt local districts to close schools and increase class sizes to meet their budgets, and the $3 billion projection will be challenged as fewer and fewer teacher positions are filled.

Before buying into SB 2404, as sponsored by the IEA, members should wake up from their fairy tale world. The pension shortfall cannot be resolved within the very system that created it. Focusing on a mirage of legal formalities and insincere budgetary pledges only makes matters worse. How dare we teach our children and grandchildren about democracy and our republican form of government, yet tolerate the festering rot within our institutions! Perhaps a younger generation will learn self-respect in revulsion to the cowardice of our generation.