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Opposition Mounting to Parts of Plan Under Consideration by General Assembly Conference Committee

A group of university presidents and chancellors have endorsed a pension plan authored by five individuals associated with the Institute of Government and Public Affairs (IGPA) at the University of Illinois. Political insiders believe the IGPA plan will be the backbone of the pension bill being drafted behind closed doors by the conference committee on pensions.

Unfortunately, the IGPA plan contains deep pension cuts that would harm retirement security for public employees and retirees. It's more of Senate Bill 1 -- just a wolf in sheep's clothing.

First, the IGPA plan would create a "Diet COLA" -- a cost-of-living adjustment (COLA) that only keeps pace with half the inflation rate. The loss of pensions' purchasing power rivals that of House Speaker Michael Madigan's SB 1. In fact, the current 3% compounded COLA has actually tracked with inflation accurately over the last thirty years. In sum, the Half-CPI "Diet COLA" offers no more than the illusion of inflation protection, and it is likely unconstitutional. Read the coalition's brief below for more:

Half-CPI Brief

The coalition is not alone in its criticism. Two economists recently released a critique of the IGPA plan, where they essentially agree with the coalition's findings on the COLA cut. They go further, arguing that the IGPA plan would provide some of the worst inflation protection in the nation for senior citizens. They also identify problems with the partial defined-contribution hybrid plan for new hires, believing it could actually increase the state's pension debt while providing worse retirement benefits for working families. You can view the full report below:

In addition, the former head of the IGPA, Robert Rich, had letters published in the News-Gazette (Champaign-Urbana) and the State Journal-Register (Springfield) where he describes the unfairness of a Half-CPI "Diet COLA." He writes:

"...[I]t is very discouraging to continue to hear over and over again that the COLA (cost of living adjustment) is the major cause of our continuing pension problems. There are a few facts with respect to the COLA which should be highlighted:

"The Consumer Price Index has gone from 97.6 in 1982 to 229.6 in 2012. The cost of living has more than doubled over this 30 year period. In other words, a person receiving a pension of $9,760 in 1982 would need a pension of $22,960 in 2012 to maintain the same purchasing power.

"Over this same 30-year period a person in the State Universities Retirement System earning a $10,000 pension is receiving $24,272.62 in 2012 under the current COLA system (a 3 percent compounded annual increase).

"If a person is part of the current United States Social Security system or a federal government retiree and received a $10,000 pension in 1982, they would receive $24,175.23 in 2012, reflecting the Social Security system COLA.

"However, if this same person was limited to one-half of the consumer price index (the current IGPA proposal), he would be receiving a pension of $15,687.31 in 2012. In other words, this person would have lost about $8,500 in purchasing power at a time when their health insurance and medical expenses would be increasing.

"These figures illustrate that the current COLA system almost keeps up with inflation and is not different from the Social Security system which many Americans are entitled to. Significantly limiting the COLA is not fair, just or ethical for state of Illinois retirees."

Lastly, our coalition has consistently opposed attempts to shift pension costs onto school districts, colleges, and universities. The "cost-shift" could result in any mix of increased tuition, property tax increases, school program cuts, and teacher layoffs. The IGPA plan proposes a cost-shift for universities and colleges and says that its plan could be applied to other retirement systems, meaning the cost-shift could expand to school districts. Our coalition's cost-shift fact sheet is below:

Pension Cost-Shift Fact Sheet

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