June 28, 2012

In the End, Nothing

A pension bill offered by House Speaker Michael Madigan originally was expected to pass, but when he withdrew his support the Illinois General Assembly declined to pass a pension bill yet.
AFTER TWO  months of all sides agreeing that this was the legislative session in which pension “reform” would be enacted—but not agreeing on much else—it failed in the Illinois General Assembly on May 31.

OTHER THAN a big change in retiree health benefits—what formerly was free would now be paid for by retirees at a cost to be determined by Central Management Services and ratified by the General Assembly—our pensions and benefits remain what they were.

GOVERNOR PATRICK Quinn originally called for raising the retirement age from 55 to 67, increasing employee contributions by three percentage points, reducing and delaying Cost of Living Adjustments (COLA), and guaranteeing that the State would pay its full annual contribution to the State Universities Retirement System (SURS) and other pension systems.

SENATE BILL 1673, proposed by House Speaker Michael Madigan, a Democrat, offered two retirement plan options for employees who joined the University before January 2011.

OPTION ONE was a plan that included State-sponsored retiree health care in return for lower annual cost of living increases than those now offered. The COLA would start later, at age 67 or five years after retirement, whichever occurred first, and it would be the lesser of 3% or half the consumer price index, calculated on the original annuity.

OPTION TWO offered the same annual cost of living increases now available, 3% annual COLA on a compound interest basis, but took away participation in the State-sponsored retiree health care program. The proposed legislation would not have increased the pension contribution by employees or changed the effective retirement age.

HAD THE legislation passed, employees could have chosen either option.

PART OF the bill called for shifting the non-employee part of the pension costs from the State to the State Universities and local school districts. Republicans were opposed, so Madigan dropped that provision.

WITH THAT, however, Madigan said that it was now a Republican bill, and then word leaked out that he would not vote for it. With most Democrats expected to go along with the Speaker, Governor Quinn asked House Republican Leader Tom Cross to withdraw the bill and to try again later in a special session.

THROUGHOUT THE process and no matter which of the various forms the bill took and which amendments were being considered, opponents said that nearly every proposal made to reduce pension payments violated the State constitution, which says that pension payments made from the State to public employees constitute an enforceable contractual relationship that cannot be taken away even through legislation.
PROPONENTS ARGUED that by providing employees and pension holders with a “voluntary” choice between cost-of-living increases at traditional levels or healthcare at traditional levels, but not both, they were adhering to contract law and the state constitution.
KENT REDFIELD, a political science professor at the University of Illinois-Springfield, told Progress Illinois, “You could argue that the choice is not that different from a protection racket saying ‘give us money or we’ll break your legs.’”
“IT IS likely that the Governor will call a special session to deal with pension reform, said Merrill L. Gassman of UIC United, the UIC Chapter of SUAA. “In the meantime, UIC United, SUAA, and all of its members can take a bow for doing their part in getting us to this point. With renewed vigor and having a fleshed-out bill to study and critique, we can hopefully make headway in showing the bill supporters the error of their ways.”
ILLINOIS’ FISCAL condition factored into other legislative outcomes that are important to the University:
FISCAL YEAR 2013 budget appropriation. The General Assembly passed and sent to Gov. Quinn's desk a higher education operating appropriation that is 6.17 percent less than the current fiscal 2012 appropriation. This represents a $42.5 million reduction in the University of Illinois appropriation to $646.6 million. A reduction in the University's appropriation of general revenue funds was anticipated by the University, so budget scenarios to deal with it are being developed across the campuses.

MEDICAID CUTS. The legislature enacted major Medicaid reforms that included a $1.6 billion budget cut for the program; an increase in tobacco taxes to help fund health care; and new requirements for charity care provided by hospitals in Illinois. The University's Hospital & Healthcare System's patients and clinical operations were not spared from the budget cuts.

HEALTH CARE Insurance for Retirees. In an effort to address the cost of providing health care for State retirees, the General Assembly passed, and Governor Quinn said he will sign, legislation (SB 1313) that modifies premium payments for retiree health care insurance by allowing the director of the State Department of Central Management Services (CMS) to set the premiums. Premiums will be based on income and length of service. The effective date would be July 1, 2012. An annual rate-setting process will occur, providing universities, employees, and retirees an opportunity to express their views.

RE-EMPLOYMENT OF retirees. The University worked closely with legislative sponsors on a bill that limits public universities in re-employment of their retirees (HB 4996). It was passed in the House and Senate, and Gov. Quinn is expected to sign it into law. Effective in the 2014 academic year, it sets financial conditions on the University for retirees who are employed for more than 18 weeks in an academic year and earn more than 40 percent of their previous salary. However, it would exempt from these rules those whose salaries are funded by grants or gifts. Human resource policies and procedures are being reviewed to determine what changes should be made to comply with the new law.

FOR ADDITIONAL information about these and other legislative initiatives you can go to the General Assembly website, www.ilga.gov. The University will provide updates as events may warrant.

SEE ALSO “Legislators may consider pension changes during special Session,” UIC News, May 6: http://www.uic.edu/htbin/cgiwrap/bin/uicnews/articledetail.cgi?id=16424.

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