Gov. Quinn backs off pension plan

Doug Finke

Gov. Pat Quinn on Wednesday dropped his proposal to have teachers, state workers and others pay more toward their public pension benefits.

However, Quinn reiterated that the state needs to save money on pension costs and said the way to do that is to put in place a revised plan with lower benefits that will apply to workers hired after a certain date.

"There will be a two-tiered system in Illinois," Quinn told a rally of teachers who gathered at the Capitol to lobby for more education funding and to block Quinn's proposed pension changes. "I'm sure that won't get many applauses. It will still be a generous pension, especially compared to people in our society who don't' have a pension."

But Quinn said he will no longer seek to have people enrolled in the five, state-funded pension systems pay an additional 2 percent of their salaries to their pensions. The amount contributed by workers varies with the pension system.  Teachers contribute 9.4 percent of their salaries to the Teacher Retirement System for their pensions. State employees contribute either 4 percent or 8 percent depending on whether they are covered by Social Security benefits. State lawmakers pay the most, 11.5 percent of their salaries to participate in the General Assembly Retirement System.

Quinn acknowledged that his plan to have employees pay more for pensions probably would not have been approved by either lawmakers or employee unions. He said it was better to drop the idea and focus instead on getting other changes to the pension systems, including lower benefits for people who enroll in the systems in the future. Current enrollees cannot have their benefits lowered.

The idea of reducing benefits for future hirees is opposed by the American Federation of State, County and Municipal Employees, the Illinois Federation of Teachers and others whose members belong to the pension systems.

"We believe research has shown they are modest retirement benefits that are at or below national averages," said AFSCME spokesman Anders Lindall. "Costs (to the state) are significantly below the national average. We believe strongly there is no justification for reducing benefits for future hires."

Quinn, though, said his proposed changes will save the state billions of dollars over several decades. Lindall and others argue that creating a different program for new hires will do nothing to solve the huge financial problem facing the state now - that the pension systems are short more than $70 billion in funds they need to be considered well funded. At least some of that shortfall is the result of investment losses sustained by the five funds because of the nation's economic problems.

A just-released report from the General Assembly's Commission on Government Forecasting and Accountability said that under Quinn's plan the financial health of the pension systems actually gets worse over the next few years. The report said a new, long-term payment plan needs to be developed to ensure the pension funds debt can be eliminated over time.

The problem facing state finances is staggering. State officials for decades didn't pay enough money into the pension systems, instead using the money to pay other state expenses. Consequently, billions are now owed to the pension systems. Quinn's budget calls for the state to contribute about $1.5 billion to the pension systems in the next budget. A payment scheduled adopted by the state in 1995 said the payment should be nearly $4 billion.

AFSCME and others are pushing for various tax increases to pay for the pension shortfall, eliminate the backlog of Medicaid bills and avoid cuts to other state programs. Their suggestions include raising the state income tax, gasoline tax, tobacco taxes and/or expanding the sales tax to cover services that are now exempt.

Contact Doug Finke at doug.finke@sj-r.com.