Quinn: Raise retirement age to 67 to help fix Illinois pension crisis
By ABDON M. PALLASCH and DAVE MCKINNEY Staff Reporters April 20, 2012 12:19PM
Illinois Gov. Pat Quinn
Updated: May 22, 2012 8:05AM
Picking a fight with labor unions, Gov. Pat Quinn Friday unveiled a “bold step” to make the state’s grossly underfunded pensions whole in three decades by raising the retirement age, increasing employee contributions and threatening to withhold retiree health care for anyone who balks.
Quinn, legislative leaders civic groups and even the unions agree something’s got to give with the ballooning pension deficit exceeding $80 billion.
Quinn calls for:
◆ Raising the retirement age for government workers from 55 to 67.
◆ Increasing employee contributions by 3 percentage points. Contributions currently range from 4 percent to 11.5 percent.
◆ Reducing cost-of-living adjustments to 3 percent or one-half of the Consumer Price Index, whichever is less.
The pension under-funding has been years in the making.
“I did not create the problems,” he said at a news conference in Chicago, “but I’m here to solve those problems. I know I was put on Earth to get this done.”
Perhaps the most surprising reaction to Quinn’s far-reaching proposals was the enthusiasm with which most legislative leaders greeted them.
With the financial ratings agencies threatening to downgrade the state’s rating — escalating the state’s cost of borrowing — legislative leaders and civic groups agree a change is needed this year.
Unions representing state workers immediately denounced the proposal as “insensitive and irresponsible.”
“Forcing public servants to choose between two sharply diminished pension plans is no choice at all,” Illinois AFL-CIO President Michael Carrigan said. “It is a clearly illegal attempt to solve the problem caused by past governors and the Legislature solely on the backs of teachers, caregivers and other public workers.
The state constitution prohibits cutting pension benefits for government workers and the unions are prepared to go to court to fight any cuts. Quinn aims to get around the constitutional prohibition by making the cuts “voluntary.”
If state employees don’t want to opt into this new plan, the governor instead would let them stick with the current plan, but then they would forfeit their retirement health-care coverage.
The Illinois constitution doesn’t guarantee health care in retirement.
And for those who opt to stick with the current plan, they would see no benefit from any pay raises they get between now and retirement.
If the state employees, university professors and suburban and Downstate teachers who are covered by the state pension plan opt for the new plan, with its higher employee contributions and later retirement age, they would get health benefits in retirement and any pay raises they get would also increase their pensions.
The new health plan would not be as generous as the current one, Quinn said.
He said he expects at least three-quarters of the employees covered by the state pensions to opt for the new plan.
People who have already retired would not be affected.
Senate President John Cullerton “is pleased that the Governor’s proposal embraces the legal framework that will allow the State to control pension costs in a constitutional way,” his spokeswoman said.
Quinn said he assumed the law would eventually wind up in court.
House Republican leader Tom Cross and Senate Republican leader Christine Radogno both showered praise on Quinn’s proposal, saying it reflects suggestions that Republicans have been making for years.
“We’re glad the administration and the Democrats have finally got religion,” Radogno said.
She and Cross expressed optimism the plan will win Republican support.
What gave them pause was this paragraph in Quinn’s news release: “The Governor’s plan also calls for phasing-in the responsibility for paying normal costs of pensions to each employer, including school districts, community colleges and public universities.”
Cross and Radogno read that to mean suburban and Downstate school districts that currently contribute nothing to their employees’ retirement plans will have to raise property taxes to start funding them.
They don’t like that. But Speaker of the House Mike Madigan has pointed to the inequity of the current system under which Chicago residents are taxed twice — once for the Chicago Teachers Union self-funded pension and once for the suburban and Downstate districts funded by the whole state.
Three quarters of retirees in state pension systems are not state employees — they are school teachers and community college professors.
Quinn told the Sun-Times that his projection to save the pension funds $65 billion to $85 billion assumes no transfer of responsibility to school or community college districts.
Any such transfers would just help the system more, he said.
“If we make these benefit changes, these school districts will save considerable money,” Quinn said. “Some even have quite a bit of money right now in their pocket.”
Quinn and his aides Jerry Stermer and Jack Lavin said they have kept Madigan informed as they developed the plan, and they hope to get his support.
“What really is important is whether there’ll be the bipartisan coalition on this and Medicaid to get a bill passed,” Madigan spokesman Steve Brown said.
Wavering legislators should be more afraid of letting the ballooning pension deficit eat up more important programs in the state budget than of angering state pension holders who don’t want to pay more, Quinn said.
“I really expect the Legislature to rise to the occasion here,” Quinn said. “This is not a time for timidity. This is a time for fortitude.”