Ill. House Committee Advances Pension Legislation

November 09, 2011

A major overhaul of the state's pension system has for the first time achieved enough support to make it to the floor of the Illinois House. It would mean state employees and teachers will have to pay more to keep their current retirement plans.

The state for years didn't invest its share into government workers' pensions. That pattern may now be leading to workers' receiving smaller pensions in the future. The measure would lessen teachers' and state and university employees' future retirement benefits, or have them pay more to keep their current plans. A third option would allow workers to switch to a 401(k) style plan.

The proposal was developed by the Civic Committee of the influential business group the Commercial Club of Chicago. The Committee's Ty Fahner said Illinois needs to hurry to stabilize the pension systems.

"Simply put, without reform those funds would run out of money which would be a tragedy for everyone in Illinois," Fahner said.

But unions say it is unfair to give workers a smaller benefit, even though they always put their far share into the pension funds. They also say because there is no guarantee the state contribute its share, the government could easily slip into its old ways. There is also a question of whether cutting future benefits violates the constitutional guarantee protecting employees' pensions

"That's like saying if you have a contract to buy a car for $20,000, and you go to pick it up, say 'well it's $30,000,"' said Henry Bayer, executive director of AFSCME Council 31. "That's not the same contract. That's a different contract. When you're asking people to pay more money, and let's not kid ourselves, you're not asking voluntarily."

While the measure cleared a House committee despite unions' objections, it is unknown if the full House will take it up at least this week during veto session.

Meanwhile, a tax break measure intended to entice Sears and the Chicago Mercantile Exchange to stay in Illinois stalled, despite deadline pressure from the exchange's chairman.

The Chicago Mercantile Exchange is 90 percent electronic and its customers span 150 countries. Chairman Terrence Duffy said that would make it easy for his firm to pick up and move.

"The 150,000 jobs associated with us, if we walk out of the state of Illinois we're talking about $300 million of revenue leaving the state of Illinois in income taxes," Duffy said.

Duffy said he has gotten plenty of lucrative offers from other states. Those are offers he hasn't taken because he said the Chicago Mercantile Exchange wants to stay in Illinois. But Duffy said the state's tax code disadvantages the financial exchange, and unless Illinois changes it, the company may leave.

Hoffman Estates based Sears has also threatened to leave unless it gets a tax break. But there are only two days left of this week's veto session, a package wasn't even ready for a committee vote. In order to gain support the measure has grown into what's known as a "Christmas Tree" bill because there's something for everyone under it ... a tax break for the working poor, a higher estate tax exemption, and a research and development tax credit.

Critics say that will end up costing the state millions, and they question why Illinois should help big businesses when its cutting social services, closing facilities and laying off employees.

Other big-ticket items are also in flux. Regional superintendents who've gone unpaid since July when Gov. Pat Quinn vetoed their funding from the budget are trying to bolster support for a plan that would use a local tax to pay their salaries, but only for a year, while the state studies the regional office of education system. That proposal's also before the House.

Story source: AP