Illinois Senate Passes Pension Reform

The Illinois Senate today approved an overhaul of the state's public safety pension system, similar to the changes made last spring for the remainder of municipal and state workers. It the state House on Tuesday.

The bill's chief sponsor in the House, State Rep. Kevin McCarthy (D-Orland Park), reportedly told Illinois Statehouse News earlier this week that it was time for the state to step in and force local communities do the responsible thing.

"This has to be done," he said. "We did it for state workers, now we have to do the same for local communities across the state of Illinois."

If signed by Gov. Pat Quinn, SB-3538 will reduce benefits and raise the retirement age from 50 to 55 of every police officer and firefighter hired after Jan 1, 2011. They'll be able to retire at 52 with a 6-percent reduction per year in benefits until 55.

Raise the retirement age any higher and you may wish you hadn't, said Bob Lanz, secretary treasurer for AFFI-IAFF 3405, which supported the bill with some trepidation.

"I'm not gonna say you shouldn't, but be careful when you do," the 38-year-old firefighter said. "You do not want a cop or firefighter in their mid-60s doing this job anymore. That's the reason they were set up the way they were, so (they) could retire at a young enough age that they could still function on the job."

Instead of a full paycheck, surviving spouses of those hired in 2011 and beyond will only receive about 67 percent of the employee's pension, which will be calculated based on the average of his or her eight highest salaried years. A pensionable salary cap will be placed at $106,800 and a cost of living cap at 3 percent or one-half of the urban consumer price index, whichever is less.

"The reform measures are significant," said Gerald Bennett, Palos Hills mayor and Southwest Conference of Mayors president. "It'll help in long term, but it's going to take time."

There were, of course, forcible concessions on both ends. Most notably, new police and firefighters will become vested in their pensions after 10 years instead of the current 20 years—though maximum benefits will not begin until after he or she works 30 years. The Illinois Municipal League (IML) recently prepared a report on behalf of the Pension Fairness for Illinois Communities Coalition—of which the Southwest Conference is a member—that advocates for an increase in maximum benefits to 35 years of employment and begin no sooner than 60 years old. They didn't get it, but they pushed for it during a press conference on Nov. 16.

Beginning in 2015, if a municipality's funding level falls below 30 percent, it will be penalized with the withholding of sales tax, motor fuel tax and other state-collected revenue and funding. The Illinois Department of Insurance will also reserve the right to sue those municipalities for insufficient pension contributions. It irks many mayors and city managers, but union representatives say it's only fair considering the other concessions they've been forced to make.

"Anyone who would be against (the penalty), basically you're just admitting that you don't want to pay the benefit that you're supposed to be paying," Lanz said. "The municipality has to be held to their fair share. We pay ours every paycheck."

The IML, which manages the state legislative affairs of communities, walked out of negotiations this summer after the contribution requirement was proposed. The Illinois Municipal Retirement Fund (IMRF), which includes municipal staff, has a similar stipulation in their system.

Chicago Mayor Richard M. Daley and staff tried to take steam out of the bill yesterday, warning at a press conference that it would cost Chicago taxpayers an additional $550 million, the Chicago Tribune reports. Senate President John Cullerton (D-Chicago) has reportedly vowed to address those concerns and others when he revisits the bill early next year.

State Sen. Terry Link (D-Waukegan) introduced his own set of changes in the Senate that would have put greater concessions on municipalities, though it never got beyond the committee level. Most notably, Link's proposal would have penalized communities if they failed to fund at least 50 percent of their pension obligations—a provision that could have end up costing struggling communities around the state a collective $105 million, according to the IML.

Currently, the state has more than 600 localized pension boards across the state, each equipped with a five-member governing body, lawyers and financial advisors. Both Bennett and Lanz—with some skepticism—said they advocate the creation of a statewide police pension board and fire pension board, like the IMRF, though it wasn't included in the bill just passed. Were it, all of the state's public safety pension funds would be compiled into one or two funds to make a greater return on investments.

"That may be a possibility," said State Sen. Ed Maloney (D-Chicago) on Tuesday. "I talked to another Senator today and we're looking into that down the line to…make a more efficient system."