Legislative Update: Pension Reform

Legislative Update: Pension Reform
December 5, 2013
From the Desk of Sean M. Smoot, Director & Chief Counsel

Yesterday, public sector employees, including a number of our members, suffered a major legislative defeat when the Illinois Senate approved the Conference Committee Report for SB 1 by a bare majority of 30 votes. Immediately thereafter, the so-called “pension theft” bill was approved again by a very thin two vote margin of 62 votes.  Leaders in the House and Senate, along with Governor Quinn, twisted legislator’s arms to the breaking point, and most assuredly made promises of political favors, to garner the minimum thresholds for approval. Governor Quinn will likely have signed this terrible bill into law by the time you read this report.

A Summary of the Bill (SB1 CCR):

Benefit Change Provisions
NOTE: Benefit changes affect four of the five state-funded pension systems: SERS, TRS, SURS, and GARS (excludes judges). These changes do NOT impact downstate or Chicago police and fire funds.

• Increases the retirement age on a graduated scale. Those under 45 would have to work an additional four months for each year under age 45;
• Reduces COLA’s by applying increases to a formula ($1,000 x years of service). For example, a 25-year employee would receive a compounded COLA on $25,000 of their pension. Any pension amount above that would not receive a COLA;
• Some COLA’s will be skipped for current employees. The skipped COLAs will be staggered so they don’t occur in consecutive years. Employees over 50 would lose one COLA. Employees from ages 47-49 will lose three COLAs. Employees from ages 44-46 will lose four COLAs; employees from age 43 and under will lose five COLAs;
• Employee contributions will be reduced by 1%.
• A salary cap based on Social Security will be imposed.  This cap will limit the salary amount used to calculate an employee’s pension. The 2013 cap is $109,971 and will increase by the lesser of half of CPI-U or 3%; and
• Creates an optional defined contribution (401k style) plan for Tier 1 active members.
  
  Funding and Actuarial Provisions
  

• Establishes supplemental contributions beginning in FY2019 that are “in addition to” and not “in lieu of” annually required contributions;
• Introduces a fairly weak “funding guarantee” that allows the retirement systems to litigate in the Illinois Supreme Court for full annual and supplemental employer contributions;
• Includes a change to the actuarial funding schedule to achieve full-funding by the end of FY2044; and
• Changes the some actuarial calculation methods starting in FY2016.
  
  Collective Bargaining and Health Care Provisions

•  All pension matters, except pension pickups, are removed from collective bargaining; and
• Prohibits the State pension systems from using pension funds to pay healthcare costs.
  
  IMRF Changes (Does NOT reduce IMRF general benefits)

• Prohibits new hires from having vacation and sick time included as pensionable salary; and
• Prohibits future employees of several statewide local government associations from enrolling in IMRF.

What have we done to prevent this?

The PBPA is a founding member of We Are One Illinois – a coalition of every major public employee union and organization in the State - formed to protect our pension rights.   We have asked you, our members, for help in this fight and you have answered time and again over the past few years by attending rallies at the Capitol, manning phone banks, and participating in telephone, social media and in-person outreach to elected officials. For your continued support we are extremely grateful.  We have committed countless hours and directed thousands of dollars to coalition efforts and we have successfully beaten back numerous attempts to raid pension benefits by Springfield politicians. 

What is the PBPA and We Are One coalition doing now?

The PBPA is fully committed to fighting along side our coalition partners to preserve the retirement security of our members and all public employees across the state.

Our legislative advocacy efforts will certainly continue to be a top priority. 

As you may have seen in news reports last night and in today’s newspapers – Chicago Mayor Rahm Emanuel was very quick to comment after the bill passed both chambers ,“[t]he work is far from finished. The pension crisis is not truly solved until relief is brought to Chicago and all of the other local governments across our state that are standing on the brink of a fiscal cliff because of our pension liabilities.”  In other words, the push to further cut Chicago and downstate police and fire benefits will continue.

You should also know that in addition to our lobbying and public relations efforts, the coalition has been preparing for the day when we would have to take our fight to the courts.  Accordingly, very early on in this struggle the coalition formed a litigation search committee on which I served.  The committee was charged with finding, interviewing, and retaining the best law firm to challenge any illegal or unconstitutional pension legislation.

Nearly two years ago, the coalition retained the Freeborn Law Firm headquartered in Chicago.  Specifically we have been working with attorneys John Shapiro and John Stevens who have assisted us in analyzing and advocating against several failed legislative proposals.   We have been in continuous contact with our attorneys throughout the legislative process including the most recent coalition conference call earlier this morning.  Today we directed them to prepare to file suit. We will challenge SB 1 as violating the constitution and ask for a stay of the legislation's implementation pending a ruling on its constitutionality.

We will continue to keep you informed and up to date via our Facebook page – www.facebook.com/illinoispbpa

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