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Illinois' Pension Fix: Workers to Pay More, Retire Later

Workers would keep their defined benefit contributions, something that has largely disappeared from the private sector.

April 20, 2012
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In his second big move in two days to shore up state finances, Illinois Gov. Pat Quinn on April 20 called for major changes in the state's grossly underfunded employee pension plans, changes that would affect both employees and local governments.

The plan would have employees paying an additional 3 percent of their salary each year toward their pension, reduce cost-of-living increases to 3 percent, or one-half the rate of inflation—whichever is smaller—and boost the normal retirement age to 67. It now begins as low as age 55 in some plans.

Local taxing bodies—specifically school districts, community colleges and public universities—would be responsible for paying the normal costs of pensions for their workers themselves. Those costs now are borne by the state, and Quinn said the change will be phased in "over the next several years."

In exchange for that, Quinn said, the state's pension systems, which now collectively have $83 billion in unfunded liabilities, would be 100 percent funded by 2042, with the state subjected to stiff new requirements forcing it to make regular payments toward that goal.

And, he said, workers would keep their defined benefit contributions, something that has largely disappeared from the private sector.

Blowback from worker unions is expected to be fierce, and Quinn, who is continuing a press conference on this matter as I write, did not immediately explain how he would get past possible constitutional objections.

On April 19, the governor proposed a $2.7 billion fix for the state's Medicaid program. That proposal, as well as the pension plan, would have to be approved by the General Assembly.

Greg Hinz writes for Crain's Chicago Business, a sister publication of Workforce Management. To comment, email editors@workforce.com.

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