It’s critical that you call your State Representative TODAY to urge a NO vote on SB 16, HB 4027, HB 4045 or any other bill that cuts the pensions of public employees. Dial 888-412-6570 or Click to Call. Make clear that these bills are unconstitutional, unfair, and you expect your representative to OPPOSE them.
In recent years, the Illinois Supreme Court has twice found legislation reducing the pension benefits of active and retired public employees to be unconstitutional. So why does Governor Rauner keep pushing to cut public employee pensions—and why are some legislators going along with him?
It’s important to note that no legislation before the General Assembly would cut the pension benefits of current retirees. There is widespread acceptance that the court has flatly rejected any reductions in the pensions of those who have already retired. And it’s important to remember that, despite strong opposition from the unions of We Are One Illinois, the General Assembly acted in 2010 to significantly reduce the pension benefits of all those hired after January 1, 2011 (Tier 2 pension participants). The courts have consistently ruled that only the benefits of current employees and retirees are constitutionally protected. Benefit reductions—or even elimination—are legal for any employee not yet hired at the time changes to the pension code are made.
Rauner and some in the General Assembly are focused on finding ways to get around the constitutional prohibition against cutting the benefits of all employees hired before 1/1/2011 (Tier 1 participants). Relying on the principle of “consideration”, they argue that if employees are given something in return for the reduction in benefits, then the cuts would be constitutional. Senate Bill 16, House Bill 4027 and House Bill 4045 are all based on this “consideration” model, as are several other bills that have been introduced.
SB 16, HB 4027 and HB 4045 affect all Tier 1 active employees in the SERS, SURS, TRS and Chicago Teachers pension systems. Each requires employees to make an irrevocable choice between:
1. Accepting a delay and reduction in his/her cost-of-living annual adjustment when he/she retires; or
2. Agreeing that his/her pension benefit would be calculated using only his/her current salary, excluding all future pay increases from calculation of his/her benefit.
These bills attempt to compensate employees who choose Option 1 above by providing for a “consideration payment” of 10% of an employee’s past pension contributions and lowering the employee’s future contribution rate by 10%. However, the amount that the employee receives through this payment would be far short of the amount he/she would lose.
Union attorneys argue that this scheme does not meet the “consideration” standard but rather is an involuntary and forced diminishment because either choice represents a reduction of benefits. No matter which choice an employee makes, he/she would lose tens of thousands, or even hundreds of thousands, of dollars over the course of his/her retirement years.
Moreover, both bills threaten further harm to retirement security because they initiate a process of moving new employees out of all the state’s pension systems and placing them in a defined-contribution plan. This will have the effect of reducing contributions into the systems, thus exacerbating the underfunding that has consistently plagued all the systems.
Now the battle shifts to the House of Representatives. HB 4027 and HB 4045 (which have the same core provisions as SB 16) passed the House Pension Committee earlier this week, but a number of those who voted to allow them to move out of committee made clear they intend to vote against them on the floor.
At this time, we don’t know whether the House will vote on SB 16, HB 4027 or HB 4045. But one of these bills is very likely to come to the House floor in the next few days.