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Thursday, March 7, 2013 12:09 pm

Pension reform proposals that might work

On Feb. 20, 2013, Rep. Lou Lang, D-Skokie, introduced HB 2375 which he described as “credible, comprehensive, constitutional pension reform legislation.” This constitutional proposal by Rep. Lang may act to the consternation of the many Illinois organizations which coalesced to defeat last November’s Constitutional Amendment 49. CA49 would have eliminated the Illinois Constitution’s protection of the earned benefits of public employees, including teachers.

CA 49 was opposed by the nonpartisan League of Women Voters, as well as by numerous organizations such as the Illinois Federation of Teachers, the Illinois Education Association, the Fraternal Order of Police, the Chicago FOP, the State Universities Annuitants Association and the Retired Teachers of Chicago. Added opposition came from labor organizations, exemplified by the AFL-CIO, AFSCME, the Teamsters, and associated local groups. Most Illinois media outlets, such as the Chicago Tribune, also opposed CA49.

However, Rep. Lang’s 2013 legislation HB 2375 co-opts much opposition by proposing a general constitutional framework for legislative negotiations.

Rep. Lang’s proposed permanent continuation of the state income tax increase passed by the 2011 lame-duck legislature would doubtless be opposed by Republicans as further enabling fiscal irresponsibility by the legislature. The $8 billion already raised in 2012 as part of the tax increase was supposedly designated to remedy the state budget, but watchdog groups have complained that as usual the monies have been misdirected and misused and that the state budget continues to disintegrate.

To obviate these criticisms, Rep. Lang proposes legal provisions to “dedicate” to the five Illinois retirement systems most of the $8 billion per year generated by the increased state income taxes. Political pundits have noted that during the November 2012 elections, not a single legislator lost reelection because of a vote supporting the 2011 tax increases.

The other more controversial components of Rep. Lang’s proposal include raising the retirement age to 67, increasing employee pension contributions by 3 percent, and embracing gradual cost-shifting at .5 percent of payroll to local educational institutions.

While these aspects, as well as other provisions in Rep. Lang’s legislation, are contentious, the overall legal framework appears constitutional.

As such, Rep. Lang correctly notes that if specifics can be incorporated into his proposed framework, the legislation will be effective on “day one.” Otherwise, years of court cases will delay the implementation of alternate proposals – most notably SB1 which is so convoluted with legal minefields, including the bizarre “Part A” and alternative “Part B” provisions, that there can be no stability of expectations.

The Illinois legislature’s inability to solve the problem of more than $90 billion in unfunded liabilities is substantially caused by the negligence of legislative leaders to consider seriously the well-researched 2012 proposal by the Institute of Government and Public Affairs at the University of Illinois. Over the last few years, relevant IGPA proposals have been updated and refined by such academic experts as Professors Avijit Ghosh, Jeffrey R. Brown and Robert F. Rich.

In this context, what appear to be minor savings in current dollars can transpose into major savings involving projections into future years.

The vested Illinois organizations which opposed Constitutional Amendment 49 would be well-advised to insist that legislative leaders reinvestigate and then codify the insightful IGPA proposals.

Otherwise, like it or not, these vested Illinois organizations, including teachers groups and public employees, will need to refocus on Rep. Lang’s serious constitutional proposal.

University of Illinois Professor John Kindt has served in various academic capacities addressing issues involving Illinois public employees and earned benefits.

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