Time to Consider IGPA Plan, Director Says

Robert Rich, Director of the Institute of
Government and Public Affairs at the University of Illinois.

ROBERT F. RICH is the director of the Institute of Government and Public Affairs (IGPA) at the University of Illinois. Rich, who also is a professor of law, of political science, and of medicine at Illinois, spoke with University of Illinois at Urbana-Champaign News Bureau business and law editor Phil Ciciora about the prospects for enacting legislation in a special summer session.

RICH SAID, “There are two major problems with the pension system for public employees: Illinois has the largest unfunded liability of any state in the United States (our system is currently 43% funded); and the inability to finance “normal costs” has increased the unfunded liability over time. If these issues are not addressed, then the rating agencies will further downgrade the State of Illinois, which will have a real negative impact on our overall economy. I believe the Legislature will pass legislation to address these issues by the end of the calendar year, at the latest.

CONCERNING Gov. Patrick Quinn’s decision to pull the plug on pension reform in the legislative session that ended May 31, Rich said, “It was a good idea because there was insufficient support to pass meaningful legislation. Now, the four leaders can craft a solution that both political parties can agree on. It will take a 3/5 vote to pass any legislation. Then, if an agreement is reached, a special session can be called.”

FOR REPUBLICANS, a big sticking point was the transfer of the State portion to the State universities and school districts. “I think,” Rich noted, “this will be addressed in one of two ways: implementing the transfer over 20 years as opposed to ten years, making it fiscally possible to achieve this goal; or shifting a portion (for example, 50%) away from the State.

“THE PROPOSED legislation would certainly have led to a court test. The non-impairment clause of the Illinois Constitution is one of the strictest in the United States. I do not believe that the provision that offers a “choice” to current employees and annuitants would survive a constitutional challenge because it does not offer a real, voluntary choice. A voluntary choice would be for alternatives of approximately equal value and where the choice is not coerced. The current language does not meet his test,” Rich explained.

WITH THE University administration concerned with attracting and retaining top faculty and staff, the current Tier 2 option of reduced benefits for new employees, which was implemented as of Jan. 1, 2011, “makes us non-competitive with many other institutions,” Rich asserted. “So, from our perspective, pension reform needs to also deal with Tier 2. The ‘cash balance’ plan, or the ‘hybrid plan,’ put forward by the Institute of Government and Public Affairs, will do this successfully.”

TIME MAY be running short, Rich indicated, noting “I suspect that the credit agencies will not wait any longer than the end of the calendar year and they may even act by the end of the summer.”

Editor’s note: To contact Robert F. Rich, call e-mail rfrich@illinois.edu.