SPRINGFIELD — The top House Republican and a key House Democrat unveiled a pension proposal today that would require state workers, teachers and others under state retirement plans to work longer, chip in more from their paychecks and scales back cost-of-living increases.
House Republican leader Tom Cross of Oswego called the measure the “answer” to lowering the $96.8 billion pension debt that is crippling the state’s ability to fund at proper levels the high-profile programs like education. Supporters claimed the debt would drop by $30 billion immediately and save $169 billion over time.
The plan calls for full funding of the pension system, which is now hovering around 40 percent, within 30 years, supporters said.
The Cross-Nekritz bill emerges as House Speaker Michael Madigan, D-Chicago, has filed a package of amendments viewed by some as a “scared straight” approach that could shock government workers opposing any kind of benefit rollback into thinking about the potential alternatives.
Madigan distributed to his Democratic troops a description that says one amendment would eliminate all future cost-of-living adjustments and one would halt the adjustments until the pension plans reach an 80 percent funding level. A third proposal would raise the retirement age for full benefits to 67 and a fourth would require employees to chip in another 5 percent of their paychecks toward retirement. The changes would apply to lawmakers, rank-and-file state workers, university employees and public school teachers outside of Chicago.
Republicans this week have grumbled that they expected Madigan to put these before the full House Thursday to test each measure’s support on up-or-down votes similar to the way he rolled out more than a dozen amendments on the concealed weapons legislation on Tuesday.
The Madigan amendments are separate from the Cross-Nekritz plan. They would require workers to chip in 2 percent more of their paychecks toward pensions than they do now at various levels, allow the current 3 percent annual compounded cost-of-living adjustments for only the first $25,000 of an employee’s pension and start the 3 percent adjustments when a person turns 67 or five years after they retire, whichever is soonest. Retirement ages would rise on a sliding scale from one to five years, depending on a current worker’s age. For workers 45 and older, there would be no change in their retirement age.
The measure also would start a new type of hybrid plan that has a defined benefit portion and a defined contribution plan for a 401k-style portion for university workers and teachers who start work after Jan. 1, 2014. It would put the burden of funding these new employee plans on local school districts and universities. But it does not call for the gradual cost-shifting plan backed by Madigan that would move the state’s funding for suburban and downstate teacher pensions onto local school districts.
In addition, the proposal would take advantage of money freed up when loans to cover pension costs are repaid. That would free up about a billion dollars a year to go directly toward paying down pensions.
With bond rating firms already ranking the state’s credit lower than all other states, the pressure to act on pension reforms is growing.
Cross said the proposal would “send a clear message to the bond houses that we are addressing our pension crisis.”