“It’s a good first step. We have had trouble getting the machine politicians to understand that there is a private sector out there that is struggling. And as state revenues have lagged, the majority party has continued to pit pension liabilities against good government. Calls for reform have been ignored and unfunded liabilities continued to escalate, which puts the entire system at risk,” Senator Brady said.
The state’s five pension systems have historically been underfunded and as a result, Senate Republicans worked with former Governor Jim Edgar to improve the situation with an advanced payment schedule. However, in 2005 members of the majority party and former Governor Rod Blagojevich started ignoring the schedule and taking pension “holidays” to skip payments.
Illinois’ fiscal rating has taken a hit because of missed payments and the overall underfunding. The state is officially ranked as the worst in the nation in terms of pension indebtedness and ability to make payments.
“This legislation will also protect taxpayers in future years – our children and grandchildren who were going to have to foot the bill for the unfunded liabilities,” Senator Brady said. “We initiated these reforms a long time ago and I am pleased to finally see them be adopted. We have a long way to go though. This is just the beginning to reforming Illinois’ pensions.”
Senate Bill 1946’s main provisions – affecting new hires only – include:
• Reduces benefits for members of the Judiciary and General Assembly;
• Increases the retirement age to 67 for employees with 10 years of service.
• Provides an early retirement option with reduced benefits at age 62 for employees with 10 years of service;
• States that the final average salary used to calculate benefits will be based on eight of last 10 years, capped at $106,800;
• Restricts the annual cost-of-living adjustments to the lesser of 3 percent or half of the consumer price index, with no compounding of the benefit;
• Limits survivor’s benefits to two-thirds of retiree’s benefits.
Passed by the House of Representatives and by the Senate March 24, Senate Bill 1946 now moves to the Governor’s desk and will become law with his signature.