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Madigan overhauls Cullerton pension plan

Illinois House Speaker Michael Madigan looks as lawmakers argue pensilegislatiHouse floor February. |  Seth Perlman~AP

Illinois House Speaker Michael Madigan looks on as lawmakers argue pension legislation on the House floor in February. | Seth Perlman~AP

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Updated: June 2, 2013 6:35AM

SPRINGFIELD — In a potential breakthrough, a new pension package pushed by House Speaker Michael Madigan surfaced Tuesday that scraps a framework favored by Senate President John Cullerton but still angers labor unions, who derided the plan as “illegal” and vowed a legal challenge if it passes.

Madigan’s 277-page revision to a Senate-passed bill originally backed by Cullerton would reel in the size of annual pension boosts retired state workers and teachers get and spare suburban and Downstate school systems from shouldering the state’s share of educators’ pension costs.

The plan could be voted on by a House committee Wednesday and perhaps by the full House later this week. But it still appears to leave the House and Senate at odds over how to solve the state’s nearly $100 billion pension crisis while living within the constraints of Illinois’ Constitution.

A spokesman for Madigan (D-Chicago), Steve Brown, expressed confidence the newly drafted legislation would get enough votes to pass the House.

“We hopefully can get 60,” Brown said, referring to the number of votes needed for passage.

“I think people have gained a better understanding of the state of the pension system and the economic impact it has for retirees and state spending on other programs and services, and they’ve come to the conclusion it needs to be fixed,” he continued.

Gov. Pat Quinn’s administration, long stymied in a bid to pass pension reform, rallied around the House speaker’s legislative handiwork.

“The governor would like to see this comprehensive solution be sent over to the Senate as quickly as possible,” Quinn spokeswoman Brooke Anderson said.

The Madigan plan targets four of the state’s five pension systems — judges are left out — and resembles an earlier package backed by state Rep. Elaine Nekritz (D-Northbrook) and House Minority Leader Tom Cross (R-Oswego).

Madigan’s plan, which would fully fund the state’s four pension systems by 2045, would knock up to $30 billion off Illinois’ nearly $100 billion unfunded pension debt. The measure also would save up to $160 billion off of the projected $397 billion in state pension payments necessary during the next three decades, the legislation’s supporters said.

Compared to the Cross-Nekritz plan, the speaker’s push changes how annual cost-of-living increases would be calculated for retired state workers and teachers.

Now, in retirement, they automatically get 3-percent, compounding increases. Cross and Nekritz had proposed allowing that COLA to apply to no more than $25,000 of a retiree’s annuity.

But Madigan is proposing a slightly more generous approach that would give retirees 3 percent of an amount based on their years of service. The cap on future cost-of-living increases would be based on $1,000 for each year a retiree had worked. For example, a retiree with 20 years of service would get 3 percent of $20,000 or $600, which would accumulate annually.

Madigan’s plan also would reduce the ceiling on the maximum amount of pensionable salary at $109,000, down from the $113,700 proposed by Cross and Nekritz.

Madigan left out a plan to make suburban and Downstate school districts pick up the state’s tab for paying the pensions of retired teachers and school administrators, which he had identified as a top priority.

Brown said that issue could resurface before the scheduled close of the spring legislative session May 31.

But more significantly, the speaker avoided including language favored by Cullerton and the Senate that would make retirees choose between continuing to get state-subsidized health care or the annual, compounding 3-percent COLA, but not both.

Cullerton and his legal staff have maintained that choice is essential for a pension package to withstand a certain legal challenge from public-employee unions. The Illinois Constitution bars the state from diminishing or reducing pension benefits for government workers.

Cullerton and Madigan have been working closely on the pension issue, though a spokesman for the Senate president continued Tuesday to express doubts about the constitutionality of the speaker’s approach.

“The Senate president will work with all parties to pass meaningful pension reform. However, the president maintains that ideally the bill would be constitutional,” Cullerton spokesman Ron Holmes said.

A similar proposal failed in the Senate last month, drawing only 23 of the 30 votes needed for passage.

The We Are One Illinois coalition of labor unions fighting efforts to reduce pension benefits for public employees came out with even stronger criticism for Madigan’s amendment.

“Our coalition has said time and again that we oppose unfair, unconstitutional pension cuts. Public workers and retirees should not be punished for a problem politicians created,” the group said in a statement.

“While we want to work together to solve the pension problem, the amendment filed today by the House speaker represents the same illegal approach to slashing hard-earned life savings protected by the Illinois Constitution. Should it become law, we believe a successful legal challenge is all but certain, with the bill saving nothing and the state’s budget problems made worse,” the group concluded.

The absence of the so-called cost-shift that Madigan had favored and that aimed to make suburban and Downstate school districts cover the state’s tab for pensions could mean House Republicans will align themselves with the speaker’s plan.

However, a Cross spokeswoman late Tuesday stopped short of issuing an endorsement for Madigan’s amendment.

“There have been tweaks in a lot of different areas. We have to take a hard look at it. This is a very important issue, and we’re taking it very seriously,” Cross spokeswoman Sara Wojcicki Jimenez said.

“Obviously, we welcome the speaker’s engagement in pension reform. I think our position at this moment is that we’ve got to really dive into it and get our analysis done,” she said.

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