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Editorial: Pension reform – time to set Illinois right

Illinois Speaker House Michael Madigan D-Chicago testifies during House Personnel Pensions Committee hearing Illinois State Capitol Tuesday May 29 2012

Illinois Speaker of the House Michael Madigan, D-Chicago, testifies during a House Personnel and Pensions Committee hearing at the Illinois State Capitol Tuesday, May 29, 2012 in Springfield, Ill. Lawmakers began acting on legislation to cut pensions for hundreds of thousands of public employees and make school districts take over retirement costs for their employees on Tuesday. (AP Photo/Seth Perlman)

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Updated: July 3, 2012 12:37PM

The moment has come to set Illinois straight for a generation.

With just two days left in the spring legislative session, a bill that dramatically reduces public employee pension costs finally has emerged.

For the sake of a state on the brink of financial collapse, for the sake of public workers who are counting on a solvent pension system when they retire, state legislators should pass this bill.

Already this session, legislators have proved themselves up to the task. They cut $1.6 billion out of the state’s Medicaid system and agreed to raise the cigarette tax to support Medicaid, a vote the Senate took on Tuesday. Legislators deserve much credit for taking those very difficult steps.

God knows the next step — a pension vote — isn’t easy. It reduces public employee benefits for both current and retired state workers, downstate and suburban teachers, legislators and university employees by ending a highly expensive and unsustainable automatic annual benefit increase.

But the time for “baby steps,” as acting state Budget Director Jerry Stermer put it Tuesday, has long passed. The state’s unfunded pension liability, among the largest in the nation, is $83 billion, forcing the state to scale back funding on the most basic of state services, including schools, social services and health care.

“Unless we do something bold, we have failed all of Illinois,” Stermer told a House committee Tuesday before the panel voted for the bill. It still must pass the full House and Senate, all before midnight Thursday.

We support this pension bill because it dispenses with painful pension changes that don’t produce big savings, including a higher retirement age and increasing the employee contribution amount. And though the unions vehemently oppose this bill, they got to weigh in, which wasn’t the case with earlier proposed pension reform bills.

The bill focuses on the biggest cost driver — a 3 percent compounding annual cost-of-living increase for retirees. After 21 years, that single component doubles the size of a retirees’ benefit. The bill includes a greatly diminished cost-of-living increase.

The biggest roadblock to passage is a component pushed by House Speaker Michael Madigan. School districts and universities currently contribute nothing toward the cost of their employees’ pensions. A provision gradually shifts the costs to school districts and universities.

This change is strongly opposed by school districts and by the House and Senate Republican leadership. We get their concerns. They think this will lead to property tax increases to cover the new costs. We think those fears are overblown and have been addressed by the Democrats who drafted the bill — or will be before a final vote.

House Republican Leader Tom Cross also dismisses Madigan’s decision to include this measure in the pension bill, calling it an election-year ploy. By inserting it, Cross says, Madigan hopes to force the Legislature to exempt completely the teachers retirement system from the bill’s painful pension reforms, much to the relief of the teachers — a key Madigan voter constituency.

Cross may be on to something, but Madigan is still right on the argument, regardless of his real motive. School districts today can bump an employee’s pension by handing out end-of career-raises — but then it’s up to the state to pay for the pension benefit.

“When one person can spend and then send the bill to somebody else, that’s not responsible,” Madigan said on Tuesday. “They hand out the benefits, but then it’s up to the state to pay the bill.”

Changing that is an essential part of pension reform.

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