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Cullerton floats union-backed, ‘constitutional’ pension-reform plan

Updated: June 8, 2013 6:40AM



SPRINGFIELD — Senate President John Cullerton on Monday touted a new, more generous pension-reform package crafted with public-employee unions — a deal the top Senate Democrat said wouldn’t invite a constitutional challenge and could pass his chamber this week.

Cullerton (D-Chicago) said the plan has the support of “virtually every Democrat” in his 40-member caucus and could be voted on by the full Senate as early as Thursday. Yet, it failed to win any initial plaudits from House Speaker Michael Madigan’s camp.

The Cullerton deal would save less money than a House alternative and would offer existing employees and retirees different benefit packages built upon tradeoffs that mostly involve existing 3-percent annual pension boosts that compound annually and state-subsidized health care.

The plan is “all based on a model that gives people a choice,” Cullerton told reporters. “I believe it’s the strongest argument for a bill to be constitutional.”

Cullerton said his proposal is “less risky” because unions intend to support it and not challenge it in court, as they vowed to do with a House version backed by Madigan.

The version is a more generous offer to unions and does less to make a dent in the state’s nearly $100 billion pension crisis than the plan that passed the House last week.

Cullerton’s proposal would wipe out about $10 billion of the nearly $100 billion pension shortfall, compared to about $30 billion under the House version.

The Senate Democratic plan also would save the state nearly $46 billion in pension payments over the next 30 years while the House plan would save about $140 billion.

“What they’re doing is they’re unilaterally reducing benefits,” Cullerton said of the House and its pension-reform version. “We’re asking folks to voluntarily reduce benefits. Contractually, that’s how we get around constitutional provisions. That’s why we don’t save as much. That’s why we feel it’s constitutional.”

A Madigan aide stopped short of shooting down Cullerton’s plan entirely but repeatedly emphasized that it doesn’t carry the same financial impact as the plan the House passed.

Madigan spokesman Steve Brown told the Chicago Sun-Times he had seen fact sheets about Cullerton’s proposal, and they “frankly don’t seem like they save much money. We’ll have to take a hard look at that. The idea is to try to save some money and get the pension systems out of the plight they’re in.

Asked if the union plan would pass the House if it emerges from the Senate, Brown said, “I have no way of knowing. It doesn’t look like it saves money.”

Under the union-backed Cullerton plan, existing employees would have two basic choices. They could keep their compounding 3-percent cost-of-living increase as retirees in exchange for variations of giving up state-subsidized health care; not having pay increases count toward their pensions; delaying pension boosts by three years, or paying 2 percent more in employee contributions over two years.

Or, they could keep a less generous, non-compounding 3-percent cost-of-living increase in retirement, get state-subsidized health care and enroll in an optional cash-balance plan.

Existing retirees could keep their 3-percent compounding cost-of-living increases and state-subsidized health care if they agree to a two-year freeze on cost-of-living increases in non-consecutive years.

Retirees unwilling to accept that freeze would have to give up their state-subsidized health care.

“The union coalition has made a great effort to ensure fairness for the public employees and retirees who did not cause this problem, to ensure the stability of the pension systems for future generations, and to offer a credible way forward,” said Michael Carrigan, president of the Illinois AFL-CIO. “This agreement is our coalition’s bottom line.”

Cullerton did not signal any intention to kill the House plan that passed last week.

“Let’s first see what happens with this and see what the reaction to this is,” he told reporters.

The House plan that passed last week focused heavily on changing how cost-of-living increases are figured in retirement for those with state pension.

It recalculated that cost-of-living increase in a far less generous manner, using a template offered by Senate Minority Leader Christine Radogno (R-Lemont). A retiree would get 3 percent of an amount equal to the number of years they worked for state government, a university or Downstate and suburban school district, multiplied by $1,000.



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