Carol Marin and her panel of lawmakers look ahead to the possible agenda of next week's Springfield legislative session.
PBS Chicago Tonight, 11/21/11
President's Updates on
Pension & Budget Issues
From Clout Street:
Gov. Pat Quinn said he will convene a panel to examine the state's troubled pension system and suggest changes that will prevent abuses. The complete article can be viewed here.
Media reports out of Springfield indicated that action on pension legislation maybe postponed until spring 2012.
The Illinois House of Representatives has adjourned until Nov. 29 without taking action on the amended version of pension bill SB512. However, that version of the bill has been placed on the House Calendar for a third reading and short debate when the house reconvenes on the 29th.
NIU legislative liaison Lori Clark represented NIU at the Nov. 8 meeting of the Personnel and Pensions Committee to share the universities objections to SB512 as it is currently written. The meeting, in a packed committee room, drew a long list of organizations opposing the bill. Clark filed this report (.doc).
The House Personnel and Pension Committee endorsed SB512 on a 5-4 vote Tuesday evening, sending the bill to the House floor for consideration.
The bill would create three different "tiers" of pension benefits and costs, some of which would compel employees to pay significantly more, another that would offer reduced benefits, and a third option similar to a corporate 401K plan.
House Republican leader Tom Cross, a sponsor,criticized the unions for not offering an alternative while acknowledging the state has a pension problem.
The NIU legislative liaison, Lori Clark, represented the university at the hearing.
Human Resource Services has reviewed the proposed changes to SB512 and identified the following changes:
Employees hired on/after January 1, 2011 who have not selected the self-managed plan
All Employees: Required Election of Plan Options as of June 30, 2013
Employer Contributions and Unfunded Liabilities – requires that from 2014 – 2045 the State will make the minimum contribution equal to the sum of the contribution as defined in the statute plus an amount determined by the system to be sufficient to bring the total assets of the system up to 90% of the total actuarial liabilities. Beginning in 2017 the contribution will be calculated as a level percentage of revenue provided by the individual income tax, sales tax, and corporate income tax assuming a 2.3% average annual growth rate in these revenues. The amendment also provides for additional state contributions beginning in 2013 and each fiscal year thereafter.
Employee Contributions – effective July 1, 2013 all participating employees will be required to make the following contributions:
All of these proposals must be authorized by passage through the General Assembly before becoming law and are, therefore, frequently subject to revision and amendment. All pension policies, regulations, procedures, and calculations for university employees are the responsibility of and administered by SURS www.surs.org. This summary is for your information only and is subject to correction/modification.
The amended version of Senate Bill 512 will come up for discussion at 2:30 p.m. today before the House Personnel and Pension Committee. NIU's Lori Clark will testify on behalf of the university and register the university's objection to the legislation as written.
Rep. Tom Cross has filed an amended version of Senate Bill 512. Changes are a indicated using strikethroughs (deletions) and underlining (additions). Analysis of the changes will be forthcoming.
The Monday, Nov. 7 Capitol Fax Blog offers an excellent round up of pension related news including:
This letter was sent on behalf of Illinois Public University Chancellors and Presidents to Governor Quinn, Senate President John Cullerton, Senate Minority Leader Christine Radogno, Speaker of the House Michael Madigan, and House Republican Leader Tom Cross.
Dear Governor Quinn:
We recognize the State of Illinois is faced with an unprecedented fiscal deficit that results innot only billions of dollars of unpaid obligations to state agencies and vendors, but leavesstate leaders with few options to address the estimated $85 billion underfunded pension liabilitiesshared by the five state pension funds.
The SURS defined benefit program for University and Community College employees wasestablished in 1941. Had all three required funding components been fulfilled over the years,the SURS program would now be stable, affordable and solvent. Two of the three necessary components of full funding have been steadfast and consistent: employee contributions and thereturn on assets from pension fund investments.
As chief executives of the state’s public universities, we understand all too well that the presentsituation facing the state’s five pension funds is not sustainable. Notwithstanding the state funding history, successfully resolving this financial obligation requires all parties (university employers, employees, employee organizations, and the State of Illinois) to participate together in crafting afair and equitable solution.
Within the context of the state’s fiscal crisis, examples of excessive individual pension benefitshave often been emphasized in the call for reform. But these exceptional situations do not representthe reality of the vast majority of pension system participants. Among its nearly 200,000 members,the average SURS retiree has 20 years of service and receives a monthly pension of $2,760 per month, or about $33,000 per year. Teachers and university employees do not participate in Social Security. With decades of service already invested, employees and retirees cannot turn back and recalculatetheir career choices and retirement planning measures in response to unpredictable state funding.
Senate Bill 512, backed by the Civic Committee of the Commercial Club of Chicago is but one approach. As leaders of the state’s public universities, we share grave concerns overSenate Bill 512 in its current form. However, we agree that SB512 also has favorable aspects:
Unfortunately, our concerns over other problematic areas of SB 512 overshadow the positive aspects of the legislation. Chief among them, state pension funding would be limited to approximately 6%of payroll as the level of state contribution for continuing benefits, leaving a significant fundingshortfall to cover the normal cost of current benefits. SB512 proposes to shift those costs to employees. Employees are the least prepared to shoulder new unplanned obligations for the normal costs of their pensions. Furthermore, the actuarial experts participating in the Working Group discussions have confirmed that enactment of SB512 would lead to a wide range of unintendedfunding consequences leading to significant new obligations for the state, with real cost reductionsnot realized for decades. It is difficult to consider such outcomes to be in the best interests of thestate, its colleges and universities, or its employees.
Pension system participants have relied upon the state’s representation and the Pension Protection Clause to expect a predictable and secure set of core pension benefits that also serve as a replacementfor Social Security. SB512 would undercut these assumptions.
Universities compete in a national, and sometimes a global marketplace, to recruit and retain the talented faculty and staff who teach our students, provide services to them and conduct ground breaking research. They have career opportunities that are not limited by the boundaries of this state. Reducing their benefits or forcing them to pay significantly more for benefits that were promised to them is likely to cause a significant migration of talented people out of this state. This is one of our greatest concerns.
There is no denying the critical nature of our current fiscal situation. We are certain that higher education employees and institutions are prepared to contribute to a long-term solution. The public higher education community is prepared to participate in the design of options and alternatives thathelp solve this critical issue. We believe it is possible to complete such work in time for the Spring2012 session of the General Assembly and we look forward to taking this opportunity to develop a durable, equitable and long-term solution, especially in the SURS sector.
Illinois Public University Chancellors and Presidents
The NIU Operating Staff Council will host State Rep. Robert Pritchard, R-Hinkley, 10 a.m., Thursday, Nov. 3, in the Skyroom of the Holmes Student Center to address issues related to the ongoing debate over pension reform in Springfield.
Jim Lockard, legislative chair of the NIU Annuitants Association, will join Pritchard as part of the program.
The legislature is expected to resume its debate over pension reform during the final three days of the Fall Veto Session Nov. 8-10.
The State Journal Register reported Thursday that House Republican Leader Tom Cross says a deal has been reached in the House to vote on SB512. The bill proposes a three-tiered session that would give state workers, teachers and university employees the choice of paying more for the current benefit plan, paying the same for reduced benefits or entering 401-K type system. Cross says the deal is a bi-partisan one, with both Democrats and Republicans expected to put an equal number of voters toward approval.
Legislators in the Illinois House of Representatives today passed a pair of bills aimed at prohibiting union officials from collecting state benefits for time worked for the union. That practice has been the focus of much media attention in recent weeks. HB3813 passed the House on a vote of 11-3-1 and HB 3815 passed 113-2-0. Both bills now move on to the Illinois Senate for approval.
There were a number of bills introduced within the last two weeks related to pension reform, primarily in response to recent stories by the Chicago Tribune and Fox News. These bills are intended to close "loopholes" that have allowed the type of lucrative pension benefits that have been highlighted by the media.
With the Fall Veto Session underway, the main pension bill (SB512) remains on the sidelines for now.
Over the next several weeks during the Veto Session, legislators are expected to take action on Senate Bill 512, which would impose significant changes in the way that pensions for state employees are managed.
The university has had and will continue to have a presence in Springfield during Veto Session to represent the interests of our university community—faculty, staff and students—in this debate.
Our primary goal is to guarantee the education an NIU student receives is the best we are capable of providing. Northern Illinois University's academic quality is directly related to the acclaim and reputation of our faculty. We must continue to be able to attract the best faculty and staff in order to ensure that our students are well-served through their NIU experience as they move into a highly competitive professional environment.
Towards that end, I have grave concerns over SB 512 as drafted.
The first week of the Illinois General Assembly’s fall veto session begins Tuesday, Oct. 25, and will run through Thursday, Oct. 27. It promises to be an interesting week, with many issues on the table.
These bills do not deal with the larger issue of pension reform, but, rather, with closing “loopholes” in the pension systems largely in response to recent media coverage of individuals taking leaves of absence to work for a labor organization and then coming back into a pension system and claiming benefits based on their much higher salary when employed by the labor organization.
On Wednesday, the unions have scheduled a State Capitol Rotunda Rally from noon to 1 p.m. regarding the pension reform issue and protecting the benefits of current employees.
On Thursday, all of the pension reform working groups appointed by the House are scheduled to meet.
At this time, no one can say with any certainty if SB 512, sponsored during the spring session by House Minority Leader Tom Cross and House Speaker Michael Madigan, will be brought up for a vote. This is the bill that creates the three options for existing employees under the five state pension systems, including SURS. Keep checking the NIU State Pension & Budget Update website for updates as they might occur during the week.