U. of I. fears brain drain without change to pension reform
BY SANDRA GUY Higher Education Reporter April 18, 2014 11:02AM
3/11/97 University of Illinois, Champaign, Illinois. Sun-Times forum. Campus. (Robert A. Davis/Sun-Times) 97-03-205. kb.
Updated: May 20, 2014 6:09AM
The University of Illinois Board of Trustees decided Friday to push state legislators to change the new pension funding law so that hundreds, and perhaps thousands, of university faculty and employees don’t retire before July 1.
A wording glitch in the new state pension law is prompting university employees to consider retiring before July 1 to avoid significant benefit cuts, including cuts as high as 24 percent of total retirement benefits. The pension bill changed a guaranteed investment earnings rate for employees from 7.75 percent a year to a market-based rate based on the 30-year U.S. Treasury bond rate as of July 1, plus 0.75 percent. The market rate amounts to about 4.5 percent, according to a university press release.
Chancellor Phyllis Wise warned that the glitch threatens the university with “a dramatic loss of human capital — our bread and butter.”
U. of I. has about 5,700 employees eligible for retirement on its three campuses, and about 60 to 70 percent of them could be affected by the snafu, said university spokesman Tom Hardy.
University officials are concerned that many of the top faculty members would take their talent and research elsewhere, Hardy said.
“There has been talk and promises made that this will be fixed, but nothing has been done. This is making a lot of people nervous,” he said.
Since Jan. 1, 550 U. of I. employees have submitted applications for retirement, according to the State Universities Retirement System. Of those, 272 are from the Urbana campus and 251 are from the Chicago campus.
Hardy said the number of applicants is more than triple the usual rate.
Chemistry professor Kenneth Suslick at the university’s Urbana-Champaign campus warned trustees Friday that any professor between 40 and 55 could be lured away with a more attractive offer in the next five years.
Suslick said he had previously declined offers from Carnegie Mellon, the University of North Carolina and the University of California at Irvine largely because of the generosity of the university’s pension plan.
“The state, to me, has demonstrated itself to be an unreliable employer, and no longer deserves my services,” he said.
David Cahill, a professor in the materials science and engineering department, said he would lose $3,000 a month just on the growth of his pension investment.
“I don’t want to leave the University of Illinois,” he said. “I love my career here.”
Current and former employees at the University of Illinois at Urbana-Champaign have already filed a lawsuit saying the pension legislation passed by the General Assembly in December violates several provisions of the state constitution, which says retirement benefits should not be “diminished or impaired” and private property should not be “taken or damaged for public use.”
Illinois’ five public-retirement systems had a $100 billion unfunded liability when the Legislature passed the measure.
The bill saves an estimated $145 billion, largely by cutting benefits for employees and retirees.