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Illinois lawmakers propose new pension fix, but unions vow suit

Michael Madigan, speaker of the Illinois Representatives, listens to the State of the State address in the House Chambers of the Illinois St
Michael Madigan, speaker of the Illinois Representatives, listens to the State of the State address in the House Chambers of the Illinois St

By Joanne von Alroth

SPRINGFIELD, Ill (Reuters) - Illinois lawmakers unveiled a plan Sunday they believe can fix the state's huge pension crisis, but labor unions blasted the proposal and vowed to sue to protect their benefits.

State representatives Elaine Nekritz and Daniel Biss, both Democrats, said the proposed amendment resulted from weekend pension reform talks between legislative leaders and reflects a bill they co-sponsored last month. House Republican Leader Tom Cross supports the plan and is urging fellow Republicans to join him.

House Speaker Michael Madigan, a Chicago Democrat, said he thought it possible to reach a deal in time for a vote this week. Nekritz sounded more cautious.

"We think the bill will get out of committee, and then we'll see," Nekritz said. "This has been so fragile at every step along the way that if we can get it to committee, great, and if we can get it off the floor, great, but we're still working our way through it."

But the labor union coalition We Are One slammed the proposal Sunday, claiming union representatives had been shut out of negotiations and that politicians were using unconstitutional schemes to ruin retirement security for hundreds of thousands of Illinois workers.

If the General Assembly tries to pass the plan before the lame-duck session ends Tuesday night, the coalition said it will go to court. They are confident they will prevail given strong protections for pension benefits in the Illinois Constitution.

Illinois' finances are buckling under the weight of a huge $96 billion unfunded pension liability that is rapidly siphoning off money needed for state services such as healthcare and public safety.

We Are One wants to meet with legislators in mid-January to craft a pension reform plan that offers workers ironclad guarantees, closes corporate tax loopholes and requires employee payments into the system. The coalition said in a statement that its plan "remains the only fair, constitutional and sustainable proposal on the table."

Nekritz said legislators met with coalition representatives in December and feels the two groups are at an impasse.

Quinn has been pushing the Democratic-controlled Legislature to pass pension reforms before the new legislative session begins Wednesday.

In an apparent attempt to focus on pension reform, Nekritz recessed a House panel Sunday that had been scheduled to discuss an automatic weapons ban.

State Senate Leader John Cullerton, a Democrat, has also questioned the pension proposal's constitutionality, and has pushed a bill he sponsored that addresses two of the five pension systems in Illinois - those that cover state workers and legislators. The bill does not address the Teachers' Retirement System, which is the state's largest.

Cullerton said the Senate might come back before the end of the lame-duck session.

Biss said he thinks if passed, the new proposed amendment would withstand a court challenge given the enormity of Illinois' pension problem.

"I think the threshold question for constitutionality is 'What is the size of the problem, and are we solving it?' I think it's important that the General Assembly speak with one voice about how big a solution is needed or else we'll muddy the question with the courts," he said.

Biss said that the coalition would have viewed the proposal the unions advanced last month as unconstitutional five years ago, too, but the state's current fiscal pressures make that view "untenable."

The lack of a pension fix has led to downgrades of Illinois' credit ratings, with Moody's Investors Service warning last month it could drop Illinois below the current A2 rating, the lowest among the states it rates.

A potential breakthrough on a pension fix surfaced on Friday when Quinn announced that Madigan had agreed to defer until a later date a measure to gradually shift state payments for teacher pensions onto local school districts. Republican lawmakers were concerned the move would lead to local property tax hikes.

Madigan on Saturday said that will lead to a partial pension fix, leaving lawmakers to deal mainly with benefit levels.

The new proposal - an amendment to a senate pension bill - includes boosting worker contributions, raising retirement ages and limiting cost-of-living adjustments for retirees. It also caps pensionable salaries, creates a 30-year payment plan to reach 100 percent funding and provides a guarantee that if the state does not make its payment, the pension systems can sue.

Nekritz acknowledged that the fight to pass the amendment will be tough.

"We've got to get 60 votes," she said. "That's what we're focused on."

(Reporting By Joanne von Alroth; Editing by Mary Wisniewski)

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