Legislative leaders take different approaches to possible pension model
SPRINGFIELD -- Recently passed legislation that changes pension benefits for workers at the Chicago area’s sewage agency may serve as a model for solving Illinois’ overall pension crisis.
But differences between the General Assembly’s most powerful leaders could be a harbinger of difficulties to come.
The Metropolitan Water Reclamation District of Greater Chicago faces a $1 billion unfunded liability in its pension system. A solution passed unanimously by the House on March 29 calls for increased contributions to the pension system by both the agency and the district’s roughly 2,000 workers.
The plan, House Bill 4513, faced opposition only from the Teamsters, one of 16 labor unions that represent workers in the district. One union filed a witness slip in favor of the bill, while the others were neutral, according to the district’s legislative liaison, Kevin Fitzpatrick.
“We explained to them that we as an agency haven’t neglected to pay into” the pension system, said MWRD commission president Terrence O’Brien. “What has hurt us has been the investment aspect (stemming from the 2008 economic collapse). A lot of members that serve in leadership of the union serve on the boards for their own pension plans. They’re faced with the same situation.”
Choice for all?
Both House Speaker Michael Madigan and Senate President John Cullerton see the bill as a potential model for pension changes aimed at erasing the $83 billion funding shortfall facing the five state pension systems. The systems cover state workers, teachers, university employees, judges and lawmakers.
But the two Chicago Democrats see the water reclamation district plan in different ways — Madigan believes changes can be imposed after negotiating with unions, while Cullerton thinks all employees have to be offered a choice.
Cullerton wants to let workers decide between an altered pension, which would cost the employee more but be better funded, and the current system, which would cost workers the same but could have other consequences, such as not having future raises counted when pensions are calculated.
The concept is called “consideration” by Cullerton and the Senate Democrats’ legal counsel, Eric Madiar.
The choice would apply to all public employees, not just those in unions. The state constitution makes public employee pensions a contractual right regardless of whether an employee participates in collective bargaining.
Cullerton and Madiar contend that simply negotiating with unions won’t be enough for any legislation to comply with the state constitution’s language. Late last month, after proposing a plan that follows the Cullerton-Madiar structure, Gov. Pat Quinn said he also believes that simply negotiating with the unions won’t pass constitutional muster.
In the case of the water reclamation district, only about 800 of the 2,000 employees are unionized.
On Tuesday, Cullerton took over Senate sponsorship of the water reclamation district bill. The next day, he filed an amendment to alter the bill to fit the Senate Democrats’ model for pension restructuring. The original bill, sponsored by Rep. Elaine Nekritz, D-Northbrook, would have simply imposed the new contribution rates on the district’s employees.
Cullerton’s amendment changed the bill to offer workers a choice between the higher contribution rates and staying with their current rates. If the MWRD employees choose the current contribution rates, however, any pay raise they get after the law goes into effect would not count toward their pensions.
That provision mirrors an aspect of Quinn’s plan to restructure the five state pension systems. Quinn’s plan calls for reduced benefits in the form of lesser cost-of-living increases and raising the retirement age to 67. It would affect employees with so-called “tier 1 benefits” — those hired before Jan. 1, 2011.
When the Senate’s Pensions and Investments Committee met Wednesday, Cullerton abruptly withdrew the amendment, citing significant opposition to it.
Cullerton’s spokeswoman, Rikeesha Phelon, said he saw the proposal as potential test legislation.
“He saw the opportunity to amend the language so it sat within the framework we’ve favored for the last year and a half,” she said. “We structured the amendment so the MWRD would be OK with it.”
But Madigan and his staff were not.
“I’m not sure the proper word was ‘opposition.’ There was a question whether (Cullerton’s language) was necessary to accomplish our goals,” said Madigan spokesman Steve Brown. “At the end of the day, it was concluded it was not. I think everyone concluded that. The (Senate) staff had advanced an idea that we needed to put additional wrinkles in the bill. … The conclusion was it wasn’t necessary.”
Asked whether Madigan believes that employees need to be offered a choice, Brown declined to give a direct answer.
“I’m not sure it’s productive to get into who buys into what,” Brown said.
But those familiar with the pension talks say the speaker tends to think giving public employees a choice is unnecessary.
That’s significant because Madigan and his staff are conducting their own negotiations with unions over restructuring the five statewide pension systems. If the negotiations lead to a bill that does not meet the Senate Democrats’ principles, Cullerton would face a predicament.
Madigan sees the legislation involving the water reclamation district as a model, Brown said, but it’s because the changes were negotiated.
“It shows that public employers and unions that work with public employers can negotiate for a solution,” Brown said.
Nekritz, the bill’s House sponsor, isn’t sure the bill works as a model.
“The county systems are not as underfunded as the state systems,” she said. “I don’t think a one-size-fits-all-approach works.”
One potential weakness with the Senate approach is that not enough employees would make the choice policymakers hope for, she said.
“If you have half of the employees that don’t take the deal, then the solution is not a solution,” Nekritz said.
Nekritz nor O’Brien said they have no strong preference for either the House or Senate model.
“We can accept whatever way they want to go,” O’Brien said.
Chris Wetterich can be reached at (217) 788-1523.