No clarity on legislative action on pensions

No clarity on legislative action on pensions

State lawmakers say they'd like to fix a provision in the pension reform law that is prompting thousands of unplanned retirements at state universities, but as the spring legislative session starts it's unclear how quickly a measure will be introduced.

"I think it should happen, and it's something I'm encouraging my colleagues to do. Obviously it's delicate," said state Sen. Daniel Biss, D-Evanston, a co-sponsor of last winter's pension reform legislation.

Some legislators are reluctant to reopen the bill passed hastily last November after years of inaction on the state's $100 billion pension debt. The fear is that unions, pensioners and others unhappy with the bill's provisions would line up to lobby for other changes.

"The feeling is that it's a very long, very complicated, very controversial bill," Biss said. "Every punctuation mark is controversial in different ways."

The bill included a provision that changed the interest rate for employees who use the so-called "money purchase" annuity option when they retire. For employees who retire after June 30, it will be a market rate based on the 30-year U.S. Treasury bond rate on July 1, 2014, plus 0.75 percent — which would be several percentage points below the current rate.

It was one of several tools to cut the state's pension obligations in future years, but it also could reduce an employee's annuity check significantly, according to the State Universities Retirement System.

Fearing a mass exodus at universities this summer because of the change, legislators added language intended to provide a "floor" for employees who work past July 1, so their benefits would not be cut below what they would have earned as of June 30 of this year. The problem is, the way the language was written in effect pushed that date back to June 30, 2013.

For some employees, losing that year of earnings will cost thousands of dollars each year in retirement.

Officials say several thousand UI employees are affected by the provision, from professors to building service workers.

As of April 16, 550 UI employees had submitted applications for retirement since Jan. 1, compared to 269 for the same period in 2013, according to SURS. Statewide, a total of 1,915 employees have submitted retirement applications since the start of the year.

Northern Illinois University President Douglas Baker said last week that about 800 NIU employees are affected.

State Sen. Bill Brady, R-Bloomington, said the so-called "trailer bill" to fix the language could come as early as this week.

"I think it's likely," Brady said Friday. "I think you can argue that people who opposed the pension reforms might support this. And most of the people who support the pension reforms would support this, because it was our original intent.

"We wanted to kind of smooth it so there wasn't such a brain drain. That was the rationale, the original intent of the language. Now we're trying to see if we can't do that," said Brady, who served on the conference committee that produced the pension bill.

But state legislative leaders have to be on board.

"We are aware of the drafting error and the leaders are in discussion about how to approach it," Rikeesha Phelon, spokeswoman for Senate President John Cullerton, said Friday. "I think the question is how and when it could be fixed. That has not been determined yet."

Steve Brown, a spokesman for House Speaker Mike Madigan, D-Chicago, was noncommittal.

"I know there are people talking about it. I don't think it's resolved itself yet. We'll be around for roughly another month. We'll have to just see how it works out," he said.

Biss said a bill should be introduced sooner rather than later. The provision was unintentional and "it's not how the bill should work. It harms people."

But he added, "It's an argument that has to be laid out carefully. It's not a change of heart, it's a correction."

UI spokesman Tom Hardy said President Bob Easter and other officials have communicated directly with legislative leaders about the problem and the need to "have it corrected as soon as possible." UI trustees also urged legislators to act, asking faculty members to testify at a recent meeting about the impact on their pensions.

"Hopefully when the session resumes ... we can bring the dialogue to a mutually agreeable solution," Hardy said last week.

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kiel wrote on April 29, 2014 at 8:04 am

Just last year, the U of Illinois was touting a plan to hire 500 new faculty. This was pie in the sky, as far as anyone close to the U could tell. Looks like they'll need to hire 1,000 instead, just to try to keep up with the new retirements this fiasco has caused. Where's that money going to come from? State funding for the U is being slashed over and over again. So good luck with that hiring...

Sid Saltfork wrote on April 29, 2014 at 2:04 pm

Who will accept state employment?  Definitely; no employer trust, no long term employement plan, and low pay.  After seeing what happened this past year, why would any qualified person apply for state employment?  Services will continue to be contracted out, and more non-tenure academics will be hired.  A union will result like UIC at UIUC in a short time.  

The News Gazette should run a poll asking if the correction to the bill will be made before June 30th.  Yes, before June 30th.  No, not before June 30th.

Why would anyone eligble for retirement take the chance by staying on past June 30th?