Archive - Pension Update
From: Keith Boeckelman, UPI/WIU Chapter Legislative Director
To: Members of UPI/WIU Bargaining Unit
09/27/2005
Pension Funding in the State of Illinois: An Update
SB 27 (Public Act 94-0004) alters the funding of and initiates other changes to the Illinois public employee pension systems. The legislation reduces scheduled payments into various state pension funds by $1.2 billion in FY 2006, the current fiscal year, and $1.1 billion in FY 2007. These scheduled payments would have gone into investment funds that the state will later use to meet its pension obligations. The long term financial impact of the "pension holiday" is debatable, with the governor arguing that accompanying reforms will take care of any shortfalls and the House Republican caucus projecting a net cost to the state that exceeds $25 billion. More "neutral" experts have come up with various estimates in between. It is probably worth noting that when this legislation passed last spring Illinois' pension liabilities already totaled $35 billion, the largest of any state. SB 27 also overrides a 1995 law that was designed to make sure that the state's five pension systems met ninety percent of their expected obligations by 2045.
The proposed savings in the legislation come from various benefit changes in state employee pension systems, including the following:
- A 6 percent cap on state funding for "end-of-career" pay raises for K-12 teachers and university employees
- An end to the "money purchase" option for teachers and university employees in the future
- Creation of a new commission to explore increasing retirement ages and limiting annual cost-of-living adjustments for pension recipients
- A "pay as you go" system for adding new pension benefits
At this time, basic pension benefits are guaranteed by the Illinois Constitution. Therefore, with the exceptions noted above, this bill's passage does not directly affect most current UPI members. If the legislation imposes future costs on state government, however, it threatens funding for all programs, including higher education. Also, the new pension commission appears to have an agenda that, if adopted, could negatively affect public university employee pensions. Passage of the legislation probably saved higher education from significant cuts in the current fiscal year, however.
Senate President Emil Jones (D-Chicago) and House Speaker Michael Madigan (D-Chicago) initiated this legislation. Governor Blagojevich also supported it as a way to address shortfalls in the state budget. Area legislators voted as follows:
Voting Yes
- Sen. Mike Jacobs (D-Moline)
- Sen. John Sullivan (D-Rushville)
- Rep. Mike Boland (D-Moline)
- Rep. Patrick Verschoore (D-Rock Island)
- Rep. Michael Smith (D-Canton)
Voting No
- Rep. Rich Myers (R-Colchester)
- Rep. Art Tenhouse (R-Quincy)