Union leaders: Madigan pension plan will bring lawsuit

Union leaders: Madigan pension plan will bring lawsuit

JOHN O'CONNOR,AP Political Writer

SPRINGFIELD, Ill. (AP) — Labor leaders threatened a lawsuit Wednesday over House Speaker Michael Madigan's pension-reform proposal to lower the retirement benefits of public employees in Illinois, but a committee advanced the plan anyway.

Madigan pledged a vote Thursday on the House floor after the Personnel and Pensions Committee approved it, 9-1.

Hours later, Senate President John Cullerton announced he had negotiated a union-backed pension bailout that would survive a court challenge — a "credible and constitutional plan" he said he'd put before his Democratic caucus and Madigan.

The far-reaching Madigan plan represents the Chicago Democrat's first direct involvement on a piece of legislation to tackle a $96.7 billion pension deficit, kicking the General Assembly's machinery into high gear. The bill addresses four of the five pension systems representing state employees, university professionals, primary-school teachers, and legislators.

"It will bring solvency and stability to the four systems," Madigan said, later explaining that the fifth account, covering judges, was left out as a "practical judgment." Reform advocates say judges are exempted because it will be the Supreme Court that ultimately decides the plan's constitutionality, a likelihood endorsed by half-a-dozen union leaders protesting the legislation.

"It will invite and get a legal challenge," said Mike Stout, business manager of ISEA-Laborers' Local 2002.

Unions have long contested legislators' attempts to get the pension mess under control, holding up a provision in the state constitution prohibiting the state from diminishing promised pension benefits. They point out that employees have for decades made required pension contributions out of their paychecks while the state notoriously shorted or even skipped pension payments.

Union official Henry Bayer said the plan appears to take care of the underfunding, but it shouldn't at the expense of employees.

"It's good that you're not kicking the can down the road," said Bayer, executive director of the 40,000-member American Federation of State, County and Municipal Employees. "It's bad that you're kicking our members in the butt."

Trying to catch up with the shortfall will force the state to pay $6 billion to pension counts alone in the coming fiscal year, nearly one-fifth of the total available in general revenue that must also go toward education, health and public safety.

"Illinois' economy will not fully recover until the General Assembly passes this comprehensive pension reform and sends the bill to my desk," Gov. Pat Quinn said in a prepared statement.

Madigan's plan calls for employees to pay 2 percent more of salary toward their retirement plans. Workers would only be able to collect pension on a salary up to $110,000, which would increase by 50 percent of the inflation rate per year.

Retirees would keep the 3 percent compounded annual cost-of-living increases received up to now, but future COLAs would be 3 percent of $1,000 per year of service, or $800 for someone receiving Social Security.

Madigan put his language into a bill that had arrived in the House from the Senate, where President John Cullerton, D-Chicago, designed it as limited test plan which included his proposed "consideration" — a choice between continued compounded COLAs or retiree health care. Giving participants a choice wards off constitutional questions, Cullerton believes.

Cullerton, another Chicago Democrat, consented to Madigan using his bill. By mid-afternoon Wednesday, Cullerton, said he had a new, union-endorsed pact.

"Today, I concluded a series of meetings with representatives of teachers, nurses, police officers and other public employees," Cullerton said in a written statement. "This coalition of labor leaders offered a credible and constitutional plan for consideration."

He did not release any details but said discussions would begin with his members and Madigan.

The potential for House victory was aided, however, by Republican Leader Tom Cross's signature as co-sponsor on the Madigan plan. Cross noted the Madigan bill's similarity to one Cross had earlier negotiated with Rep. Elaine Nekritz, D-Northbrook.

"It puts a lot of pressure on the Senate and creates some momentum, where you've got a bipartisan measure coming out of the House, for the Senate to act on it or some form of a very meaningful bill," Cross said in a statement released by his office.

The proposal omits any mention of a cost-shift of some downstate teacher-pension costs from the state to local school boards, a contentious prospect that suburban lawmakers fear would increase local property taxes. But Madigan promises he will address the matter in a separate bill later this month.

It does, however, include a unique, nine-page preamble that lays out in detail the fiscal crisis facing the state, including $9 billion in overdue bills, and steps lawmakers have taken to address them, including a 67 percent income-tax increase and cuts to Medicaid health care programs for the poor. Supporters hope it provides a bibliography of sorts to help Supreme Court justices see the necessity of the action.

"It would be used in the argument to the court and as happens in all major legislation, we're concerned about legislative intent," Madigan said, "and that's part of the intent."

___

The bill is SB1.

 

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WOW wrote on May 01, 2013 at 12:05 pm

$97,000,000,000 Short!!!!!!!!! EVERY lawmaker in the state should be doing serious jail time, including those that have retired!

That's a fraud of almost $8000 per person for every person in the in Illinois. A baby born in Illinois today, on average, starts off with a debt to the state of $8000!

Since it is Illinois State workers that caused their shortfall, they should average the debt between only state workers. In the private sector, that is how it works. If a private sector business goes bankrupt and squanders the pension of its workers, the workers suffer the loss. But, if State workers (called legislators) bankrupt their own and fellow state worker's pensions, somehow us taxpayers are to blame?!?

To tell how bad that is, ALL state workers combinded have a total wage and benefits equal to 1/10th the shorfall!!! If every state worker worked for the next 10 years for free, with no salary or benefits, it could pay off the shortfall.

If Enron were a state, it's name would be Illinois.

Bulldogmojo wrote on May 01, 2013 at 12:05 pm

Maybe we should hire a team of forensic accountants to track down and clawback that stolen money that was redirected so we can see who benefited. Maybe it even directly or indirectly went to non state employee tax payers. That would give them the opportunity to return said funds or face prosecution also. 

If you are getting double dipped we are getting triple dipped as we pay taxes also.

The only real solution is for the IRS to revoke the state's pension exemption and everyone go back to paying Social Security.

BTW, I'm in the self managed plan with Tiaa-cref and the state has made all the payments into it because no private company would be stupid enough to take an IOU.

Sid Saltfork wrote on May 01, 2013 at 12:05 pm

Bulldogmojo;  Thanks for responding to the foolish statement.  WOW demonstrates the greed, ignorance, and larceny that has been promoted by the conservative media, and the paid corporate front groups in their propaganda.  Investors in state bonds are nervous about the state's creditability in honoring debt.  Stealing from current, and retired public service employees will make the sale of state bonds that much more difficult.  The Judges Pension System is exempt from the fraud of "pension reform".  Yet, it will be the State of Illinois Supreme Court who decides how the State of Illinois Constitution can be violated, or not.  Even if Madigan's plan succeeds, the legislators will come back for more money from the employees. 

WOW forgets that he is a citizen of Illinois.  He is responsible for the debt just as you, and I are responsible for the debt.  He benefited from the "skipped", and "borrowed" payments into the pension systems also.  The details on the General Assembly Pension System are yet to be known.  Expect them to steal from the state employees, the university employees, and the teachers while exempting the judges, and possibly themselves.  It is Illinois Corruption at it's finest.

Bulldogmojo wrote on May 01, 2013 at 2:05 pm

I also always find it very entertaining when non-union public employees (AP's and the like) fall silent with their anti-union rants when there is a matter of pension issues on the table that our union dues go to legally defending their pensions as well as mine. They get a free ride on our coat tails on that one.

Sid Saltfork wrote on May 01, 2013 at 3:05 pm

Wheather unions are involved, or not; this is an un-constitutional move.  The state will plead the financial inability to pay the debts while at the same time state money is being spent on pork barrel projects, corporate tax breaks, and municipal grants for un-necessary wants.  It will send a message to investors, and businesses regarding the corruption increasing in Illinois.  The reason that the Judges Pension System is exempted is an attempt to buy a favorable outcome via the court.  If the state refuses to honor it's debt, and disregards the state constitution; why is one of the state pension systems being exempted while the others are being robbed?

WOW wrote on May 01, 2013 at 5:05 pm

Because I put some money in a bank, doesn't mean I robbed the bank if the bank managers steal the money to use at their discretion.

If there is any greed, it is in the state employees expecting there stolen pensions to be replaced by us regular taxpayers that neither stole the funds nor received the stolen funds. It's also in the legislators spending public funds to finance their own personal ambitions and legacies. The funds were squandered mostly on worthless stuff that has no market value.

Everytime you read "State Grant" think "stolen pension funds given to someone else". Illinois State Grants are everywhere, like magic money that appears to come from heaven. U of I has more $20 million dollar parking garages than it needs, Lake of the Woods Mahomet got $1 million for their prairie museum because 4000 kids visited the park last year, Danville is building a $3 million potty for their bus riders, Urbana can't fix Airport Road without a $1.4 million state grant, Champaign Park District got a $2.5 million rec center, $2.1million Urbana/Danville bike Trail. Illinois State Grants are passed out like lollipops, millions here millions there. The grant recipients NEVER say no and never care about where it came from. It's very easy to spend other people's money. It's thoughtless.

General Motors was in a similar situation a couple of years ago. All the bond holders got burned so the union employees that bankrupted the company would get paid. GM's stock was totally worthless, and they had to drastically cutback and sell off assets. The state should be selling off assets too, because they can't afford to keep them. Maybe China will buy 1/5th of the state, like they purchased 1/5th of GM. The bond holders in Illinois should totally be worried.

You totally sidestep that $100 BILLION dollars is MISSING! In reality, the money isn't missing, it was SPENT. It's because the people in charge of it squandered it like 2 year olds in a candy shop, instead of putting it in a pension account. The bigger problem is that they are still spendinding the money that should be in this account, instead of putting it in the pension fund. The staggering sum of this fraud far exceeds any ponzi scheme ever punished. Our state and nation have a spending problem, like gambling addicts.

As funny as it sounds, the state employees pension fund was robbed by the state employees. The state is corrupt, from the top down. A classic pyramid scheme. Totally unsustainable.

Sid Saltfork wrote on May 01, 2013 at 7:05 pm

So you separate yourself from being a State of Illinois citizen when it benefits you.  You did benefit from the stolen pension money because your taxes did not increase significantly until recently.  The stolen pension money paid for services, pork barrel projects, municipal grants, and kept taxes from being raised.  Yes, you benefited from it; and so did I.  We are Illinois citizens who elect our officials, pay our taxes, and bear the responsibility of maintaining a functioning state.  You cannot say that the officials who you voted for, and the employees who paid their share of their pensions are the only two who should be blamed.  You are specifically to be blamed because you encouraged the situation; and it is not your life savings being stolen.

You made an initial rant that state employees could work for no money over the next ten years.  You expect slavery to return?  Thank you for initially responding to the article.  Your response allows rationale citizens to see what the conservative media, and the paid corporate front talking heads have created.  That is a person who lives in Illinois, benefits from stolen pensions, and declares themself not to be an Illinois citizen when it suits him.   

Bulldogmojo wrote on May 01, 2013 at 10:05 pm

Wow states "Because I put some money in a bank, doesn't mean I robbed the bank if the bank managers steal the money to use at their discretion."

Sorry if you ever voted for any of them you helped elect all the bank managers like everyone else did. This wasn't a one administration trainwreck. If California can get back on track so can we but there is the little matter of constitutional wording and contractual law that doesn't lend itself to your truncated list of expenditures.

You caught me, the cat is out of the bag, we state employees took the $100 Billion. We all have summer homes in the Hamptons.

At the end of the day you are free to leave Illinois. You are not being held hostage here. We may actually beneift from your abscence as part of a larger course correction. A downsizing if you will, but what does a Nobel winner like Krugman really know anyhow?

http://www.thechicagocouncil.org/Files/Event/FY13/01_January_13/Paul_Krugman_on_How_to_Fix_the_Economy.aspx

Lostinspace wrote on May 01, 2013 at 3:05 pm

"Workers would only be able to collect pension on a salary up to $110,000, which would increase by 0.5 percent of the inflation rate per year."

.5 percent or 50 percent?

Sid Saltfork wrote on May 01, 2013 at 3:05 pm

What is not included in the article is the freezing of any COLA for a multi year period on retirees.  Regardless of their age; they will have no COLA, or substitute cost of living increase for years.  Their insurance is now subject to co-payments, and a monthly cost that will increase with time.  For those who paid into both the pension system, and Social Security; they will be put on a Medicare Advantage Plan with them paying the majority of the cost.

For a retiree with 45 years of service with a pension of $33,817.50 based on a salary of $45,000, they will have to wait years with no increase for inflation only to receive 1/2 of the cost of inflation based on certain consumer items later.  By that time, they will be under the poverty line.  They will be able to get Medicaid though.

Basically, the State of Illinois General Assembly is admitting that they stole from the pension systems; but the theft needs to be erased by stealing more from the employees, and retirees.  Once this is done, they will come back for more.  The state does not honor contracts, debts, promises, or it's own constitution.  Who will loan money to the State of Illinois, or work for the State of Illinois after this?

Be assured; the Fix is on, or Madigan would not be so confident.  Gee... his daughter is the Attorney General.... maybe, she will do the right thing, and defend the workers and retirees.....

Mike Howie wrote on May 01, 2013 at 4:05 pm
Profile Picture

Thanks for asking. We asked the local AP bureau, who passed the question on, and The AP is sending a corrected version, to reflect 50 percent of the inflation rate rather than 0.5 percent.

squeaky wrote on May 01, 2013 at 4:05 pm

It is reasonable to ask employees to pay more. However the bill as written contains unconstitutional impairments and also violates fundamental contract law.   Sid is spot on in terms of why the judges were not included. The long preamble is clearly an attempt to lay the groundwork for a police power arguement at the Illinois Supreme Court.  As long as corporate tax breaks and non essential spending is being made, the police power argument should not have a chance of prevailing 

Sid Saltfork wrote on May 01, 2013 at 7:05 pm

Thanks for speaking up, squeaky.  I am reminded though of the joke that Ronald Reagan made during his first campaign for president.  "How do you know that the Mob is involved at a cock fight?  The duck wins." 

I have little faith in the State of Illinois Supreme Court.  SB 1313 last May changed the constitutional belief that retired public employees had insurance benefits that had been agreed on for years.  A Family, and Youth advocate judge in Springfield decided the issue instead of a judge who deals with constitutional issues.  The judge in question has a wife who is a lobbyist.  She had lunch discussing the support of her business interests with the legislator who sponsored the bill the day before the judge who has no background on the matter made his decision.  Illinois Corruption cannot be ruled out at any level of government.  The pension issue looks clear cut based on law; but I would not be surprised if "the duck wins".

Erik wrote on May 03, 2013 at 9:05 pm

I hired in with the sate 28 years ago. We were not given an option when pensions were concerned. The state option was the only option. Now when I am close to retirement they want to tell me that even though you did your job for 28 years the rules have changed. Don't get me started on the deal with the judges. Could that be more transparent? If the first family of Illinois by that I mean the Madigans wants to hold someone responsible for the states problems maybe they should take a history lesson regarding this  states legislators. If I am not mistaken wasn't Mike Madigan one of them. For years they have used our retirement account like a credit card without making the monthly payments. I realize that the Madigan family has been fortunate enough to send their children to excellent Universities such as Notre Dame but I would like to have the opprotunity to send my son to college to. I am told that Speaker Madigan's plan requires state workers to work untill age 67. Can he really expect a 66 year old correctional officer to deal with a 20 year old violent inmate? I guess that if we die on the job the state will not be burdend with the payment of our retirement. It might be a good idea for our legislators to visit our work sites and see the job that we do. I do have to hand it to them they have managed to convince the people of the state that we are nothing more than parasitic individuals who cause the people of Illinois financial problems. If they need to see the cause of this states financial woes I would suggest a full lenth mirror. Yes I am a state employee but I am also a tax paying member of this state with a family to think about. 

highspeed wrote on May 04, 2013 at 9:05 am

Why is it reasonable to ask employees to pay more? They have agreed to several increases over the years, and look what that got them. On the other hand we the people have elected and re eclected these people year after year expecting a different result!!

  It`s shameful that legislators make these decisions, knowing the outcome! Until Chicago gets fixed,things will never change!! 

Sid Saltfork wrote on May 04, 2013 at 9:05 am

If it were only asking the employees to contribute more into their every paycheck pension deduction; but it is not.  The other parts of Madigan's "pension reform" would make Al Capone blush.  The previously mentioned age until retirement clause, the stopping of any inflationary small percentage for years, the increase in insurance, and the violation of the state constitution go along with the increase in employee contributions.  Mike Madigan has been there 30 years.  He helped create this mess.  The employees paid their required payments into the pension system; but the employer, the State of Illinois, did not.  The State of Illinois spent the stolen money on pork barrel projects, corporate tax breaks, illegal aliens, and municipal grants.  It was all done for the sake of votes, and "campaign donations" ( BRIBES ).  Check on what an Illinois elected official can legally do with their "campaign donations".  The "donations" are not all spent on buttons, TV commercials, and signs. 

The employees did not cause this.  They are being singled out as the guilty, and punished for it.  Every citizen benefited in some manner from the stolen money; some more than others.  Once this theft known as "pension reform" is done; the state will keep spending money, and borrowing money.  The thiefs will be cheered for coming back to steal all of the employees, and retirees money in the future.  It is not a democrat, or republican thing.  Both parties did it.  It is an Illinois Corruption thing; and we all voted for the thiefs.  

highspeed wrote on May 04, 2013 at 11:05 am

Sid,

That is  as well put as i have read! You are spot on. My hat is off to you!

quincy2 wrote on May 05, 2013 at 2:05 pm

Can anyone spell compromise???  Of course, it is not the fault of the workers who paid their pension contributions, but what good will that do if there is no money to pay the pensions. We voted for the crooks who spent the money,and now EVERYONE has to clean up the mess. Employees should have to pay more and wait longer to retire. Who in the real world gets to retire at 55 with 75 percent of their income?  The income tax has to stay, and the COLA has to be adjusted, but not so drastically. Tie the COLA to social security, which by the way, may be looking at the same kind of scenario.  If the end of career bumps can be stopped, workers should get to keep their 4 year average.  Unlike social security, which are supposed to be supplements, these pensions are supposed to support the workers. That is why they pay more into the system than social security.  No, my retirement isn't as cushy as a teacher or a firefighter, yet. But I didn't want to risk my life as a firefighter or my sanity as a teacher.  I also paid the price for Enron, bad housing decisions, and other crap that our government allowed to happen. So, as I said, this has to be a shared sacrifice.

Sid Saltfork wrote on May 06, 2013 at 6:05 am

quincy2;  Thank you for your comments on shared sacrifice.  I would like to explain a couple of misconceptions that the media encourages. 

First in regard to the retiring at age 55 with 75% of their income.  The state university employee pays more into their pension system than the state employee; but they do not pay into Social Security.  For a university retiree on the old system, they would work 34 to 35 years to achieve the maximum pension of 75%.  If they started work at age 21, and worked until age 55 or 56; they could achieve the 75%, but with no Medicare in the future.  For a state employee, they would work 45 years to achieve the maximum pension of 75%.  If they started work at age 21, and worked 45 years; they could retire at age 66.  However because they pay into Social Security; they can retire at age 62 with Early Social Security Retirement, or they continue to age 65 for full Social Security Retirement.  Few state employees, or university employees unless they have top jobs retire at age 55.  Under the proposed "pension reform", they would not be able to receive any retirment monies until age 67.  You will see old employees in state employment increase after "pension reform" passes.  The state had the lowest ratio of employees to public of any of the states.  It is decreasing every day.  People complain about their FOID cards, services delayed, mistakes made, etc. when it is due to more administrators, and less workers.

Second in regard to "pay more", and "wait longer" for retirement.  That ship has already sailed for new employees.  That was changed.  This "pension reform" falls on the employees close to retirement, and mostly on the retirees already retired.  It is an ex post facto legislation.  It violates the State of Illinois Constitution.  When the lawmakers started "skipping", "borrowing", well really "stealing" the employer required pension payments; they added to the State of Illinois Constitution what was supposed to be a "guarantee" that benefits would be paid, and not "diminished".

"Shared sacrifice" applys to all Illinois citizens; not just the retired employees, and current employees.  Under the legal, perhaps not Illinois, definition of contract and constitutional law; the State of Illinois would have to show that it cannot raise revenue ( taxes ), and stop spending.  As long as Illinois keeps spending on corporate tax breaks, municipal grants, new programs, and pork barrel spending without raising taxes; it cannot pass the legal test anywhere except, perhaps, in Illinois.  Remember that the Judges Pension System is now "exempt from pension reform".  The spending by the lawmakers for votes, and "campaign donations" will continue even if "pension reform" is passed.