(Springfield, IL) — March 24, 2010. In less than 12 hours, House Speaker Michael Madigan (D-Chicago) and Senate President John Cullerton (D-Chicago) today bulldozed a massive Illinois pension reform bill–which creates a two-tier public employee retirement system–through the Illinois legislature.
That’s legislative light-speed.
In the unexpected move, Madigan rolled out the legislation, Senate Bill 1946, on Wednesday morning to the Illinois Personnel and Pensions Committee, which quickly approved the plan 8-2. Later in the afternoon the full House ok’d the bill 92-17. The Senate followed suit later in the evening, 48-6.
Madigan estimates that the pension changes for all new employees hired after January 1, 2011–changes which Illinois AFSCME Council 31 hotly opposed–will save the state nearly $100 billion over the next three decades.
Asked by reporters why the bill emerged suddenly today, Madigan responded that pension reform had been under negotiation for nearly a year and that all parties had recognized that the current system was unsustainable.
Additionally, Madigan noted that Governor Pat Quinn‘s budget office had indicated that an upcoming $1 billion bond offering was at risk of incurring a higher interest rate from bond rating agencies if Illinois made no concrete effort to repair its battered public finances.
In a statement following the legislature’s action, Quinn said:
“The General Assembly tonight took an important and vital step toward rescuing Illinois from fiscal calamity by passing public pension reform. The legislation approved by the General Assembly will stabilize the public pension system, protect current state employees and provide attractive pension benefits to future state workers.
I congratulate House Speaker Michael Madigan and Senate President John Cullerton for their leadership on this crucial issue. I also thank members of the General Assembly for their bi-partisan support and for bringing in a new era of greater fiscal responsibility and accountability to Illinois. I look forward to signing this important bill into law.”
The changes to the Illinois pension system include the following:
- New Retirement Age: The new retirement age for new employees will be 67 with full benefits after 10 years of service. There will be reduced benefits at a retirement age of 62 with 10 years of service. The reduction will be at of 1% per month, which equates to 6% per year.
- Maximum Pension: Maximum pension salary will be $106,80.
- Final Average Salary: Highest consecutive 8 years of last 10 years of service.
- Alternative Formula. The alternative formula will be limited to correctional officers, state police, and state firefighters. They can retire at age 60 with 20 years of service.
- COLA: Simple interest COLA the lesser of the Consumer Price Index or 3%.
- Survivor Annuity: Survivor annuity will be set at 66.7%.
- Pension Suspension: No new pension plan employees may receive a pension from one system and a salary from another. If this occurs, the pension will be suspended. However, when the individual ends the employment, the pension will be reinstated.
- Chicago Public Schools Pension Payments Rescheduled: Allows CPS to pay normal cost for the next 3 fiscal years and extend their funding schedule by 15 years.
The Illinois public pension systems effected by the new legislation are:
- Chicago Teachers’ Pension Fund
- Metropolitan Water Reclamation District
- Cook County Employees
- Chicago Municipal Employees
- Cook County Forest Preserve
- Chicago Park District
- Judges Retirement System
- General Assembly Retirement System
- State Employees Retirement System
- Teachers’ Retirement System
- Chicago Laborers
- State Universities Retirement System
Despite bi-partisan support for the pension overhaul, Madigan has no expectation that the House and Senate Republicans will change their opposition to an income tax increase even though pension reform was key GOP demand in the tax increase debate.
Though an income tax hike may fail to materialize, Madigan said the new pension plan “maybe–under line maybe” provide some relief to the pressures faced by next year’s budget.
Madigan and Cullerton today pulled-off a real doozy. Wow.