CHICAGO – Under growing public pressure to act, the leaders of Illinois’ General Assembly announced Wednesday they’d reached an agreement on how to solve the state’s $100 billion pension problem and would begin trying to persuade other lawmakers to approve it in a special legislative session next week.
The deal was a significant breakthrough after months of negotiations and years of unheeded calls to shore up what’s considered the nation’s worst public pension shortfall. Without action, millions of dollars have been diverted from education and other programs and forced financial service companies to repeatedly lower the state’s credit rating.
But getting final approval for the deal in the full House and Senate is no sure thing: State employee unions are adamantly opposed to the curtailing of workers’ benefits, there’s a constitutional challenge on the horizon and many lawmakers are already in the throes of 2014 re-election campaigns.
“It’s going to be a very difficult roll call (of votes). Unions will be against the bill,” House Speaker Michael Madigan told reporters after the morning meeting in which the deal was reached.
Madigan told reporters that the proposed agreement would save the state an estimated $160 billion over 30 years.
Even before details of the deal became widely known, some lawmakers expressed resistance.
State Sen. Linda Holmes, a member of a special committee that had worked on a solution over the summer, said Senate President John Cullerton had called her to inform her of the deal. A staunch ally of unions, Holmes said she doesn’t plan to vote for it.
“He told me, ‘The leaders have come to an agreement, and you’re not going to like it,'” Holmes said.
The proposal includes pushing back workers’ retirement age on a sliding scale, a funding guarantee, a 401k-style option and reducing the employee contribution.
Madigan also said it would replace the current 3 per cent annual compounded cost-of-living increases, with retirees continuing to receive that rate up to a certain amount of annuity payments, based on years of employment.
The increase for any pension benefits beyond that amount would be equal to the inflation rate. The previous proposal, which had been a sticking point in negotiations, would have cut the increase to half the inflation rate.
The funding guarantee allows retirement systems to sue Illinois if lawmakers don’t make the full contribution to the fund each year.
The plan also would require the state to put 10 per cent of the money saved annually through benefit cuts back into the pension funds beginning in 2016. It also will redirect the money the state currently uses for pension bond payments into the retirement funds once those bonds are paid off in 2019.
A spokesman for Cullerton, who sponsored a plan last spring that was backed by unions but would not save as much money, said the Chicago Democrat would “work members over the next couple of days to try and garner support for the package.”
Both the House and Senate have been called back to Springfield for a special session that begins Tuesday.
“At the end of the day he’s tried to compromise,” spokesman Ron Holmes said. “He’s come a long way from where he was a couple years ago. But ultimately, he wants to get something done.”
House Republican leader Jim Durkin and Senate Republican leader Christine Radogno also signed off on the deal Wednesday. GOP senators later were updated via conference call.
“Our goal from the beginning was to have something that constituted meaningful reform and can pass,” said State Sen. Matt Murphy, a Palatine Republican who dialed in to the conference call from vacation. “I think that clears that bar.”
Lawmakers reached an impasse on competing plans at the end of the spring session.
Gov. Pat Quinn is making pension reform one of the main issues in his re-election bid, and even tried to halt lawmakers’ pay until the issue was resolved— a move a Cook County judge found unconstitutional this summer.
In a statement Wednesday, Quinn commended leaders and committee members, but stressed there’d be more work in the coming days.
A spokesman for the state’s largest employee union said his organization would oppose the deal, even before seeing the final details.
The unions have been left out of negotiations and believe some elements of the plan will be ruled illegal, based on a clause in the state constitution that prohibits the involuntary takeaway of any government employee benefits, said American Federation of State, County and Municipal Employees union spokesman Anders Lindall.
“We have tried for three years now to work with legislative leaders and the governor to develop pension reform … that is fair to workers and retirees,” Lindall said.
Madigan said he wouldn’t be surprised by a court challenge.
However, he said, things have been included in the proposed agreement that would help them defend it in the courts, such as the funding guarantee and an ability for the pension systems to file a lawsuit if not enough money is provided to cover employees’ retirement costs.
“Those are the essential elements that I used in order to forge the final deal,” Madigan said.
Associated Press writer Sophia Tareen contributed to this report.