Governor’s plan to affect those hired before Jan. 1, 2011

Gov. Pat Quinn’s new plan to fix state pension problems calls for employees with state pension plans, including university faculty and staff, to make sacrifices.

One month after Quinn presented plans to reform the state pension system, the governor announced Friday the specifics of his plans.

The state pension system is underfunded by more than $80 million and the debt is predicted to grow unless the system is changed.

To cut those costs, Quinn said he wants the retirement age to be raised and the amount of cost-of-living adjustments the state pays on pensions to be changed. He also said he wants employees to start contributing.

Quinn said the goal of his plan is to eliminate the unfunded $83 million in pension costs by 2042.

In a press conference Friday, Quinn said he thinks the pension problem is one of the most difficult Illinois has faced in nearly 35 years.

“I did not create the problems, but I’m here to solve those problems,” he said.

Quinn’s plan proposes:

A 3-percent increase in employee contributions toward the employees’ own pension plans.

A reduction to the cost-of-living adjustment the state pays on pensions and a change in how it is calculated. Employees receive a 3-percent cost-of-living adjustment which is calculated with compound interest. With Quinn’s proposal that adjustment could be less, depending on the actual change in cost-of-living, and will be based on simple interest.

A delay of the cost-of-living adjustment to age 67 or until 5 years after an employee retires.

An increase in the retirement age to 67, which would be phased.

The establishment of a 30-year funding schedule which would require the state to make payments on the pension costs in the future.

Limiting public sector pensions to public sector employees.

Although Quinn said those in retirement will not be affected by the plan, employees will.

While legislation passed last spring affects employees hired after Jan. 1, 2011, this proposal would affect those hired before then.

Of the Illinois pension systems in place, Quinn said about 22 percent are state employees, and 78 percent are university, community college or local school district employees.

SIU President Glenn Poshard, who gave a presentation in March to SIU employees on the pension problems, said he saw good and bad features of Quinn’s proposal.

On a good note, Poshard said he likes that the proposal doesn’t affect those who are already retired.

For present employees, he said one aspect of Quinn’s proposal they might not approve of is the change in cost-of-living adjustments. He said reducing them will eat away at employees’ pensions. He said if an employee retires during a period of high inflation, but the cost-of-living adjustment remains low, it may negatively affect them.

“That’s not an acceptable proposition for our people,” he said.

Poshard said he thinks the change in cost-of-living adjustments, the raising of the retirement age and the increase in employee contribution will prompt more retirements in future months.

Another aspect of public pension reform not addressed by Quinn that concerns Poshard is the financial burden it will place on universities. He said if some of the costs are placed on the employers, or SIU, it could cost the university tens of millions of dollars. He said university presidents are working to have revisions made to

lessen the impact.

But overall, Poshard said, he thinks employees will agree with some of the terms Quinn has proposed, if it will help the overall system.

State Rep. Mike Bost, R-Murphysboro, said there have been several factors which have caused the pension problem. He said a few of those factors were decisions made by legislators in the past. He said some of Quinn’s proposal addresses those problems, including the change of cost-of-living adjustment to simple interest from compound, because he said it is sometimes doubling an individual’s pension after a number of years because of interest alone.

“The reality is, this problem has come as a result of bad decisions,” he said.

But other factors such as people living longer have also led to the pension problem, Bost said.

He said he is glad to see Quinn is trying to solve the problem, although he thinks the proposal needs work.

State employees may be faced with the decision to make sacrifices for the system now, Bost said, but those sacrifices may prevent the entire system from failing future generations.

“I don’t want to place this burden on my great-grandchildren,” he said.

Bost said he has received many phone calls from worried employees who are concerned Quinn’s proposal is inadequate. Bost said there will be revisions made to the plan before anything passes. He said a reform plan may not pass this spring because it is an election year, but he hopes something does.

“We need to do something,” he said.