Senator Jim Oberweis said he voted “yes” on Senate Bill 1 – the pension reform agreement that passed the General Assembly December 3 – because it is a step in the right direction.
“As one of the few lawmakers who actually sat down and read through the entire bill, 325 pages, I have some concerns about what is included in this bill and what is not included in this bill. Senate Bill 1 does offer future employees the option of defined-contribution plans, similar to one of the provisions in a plan I offered in April; however, that option is only made available to 5 percent of the employees, which I question. And there is also no guarantee that the money saved by these reforms will actually be used to pay down debt, instead of being used for new programs,” Senator Oberweis said.
“This bill is not true reform, but it seems to be the best we can get at this time. State officials have made pension benefit promises they knew or should have known they couldn’t possibly keep. We must take action now and resolve these issues for our state’s long-term fiscal health,” he added. “While this bill doesn’t really solve our problems, it is at least a step in the right direction.”
Senate Bill 1 is expected to reduce Illinois’ pension payments by about $100 billion over the next 30 years. The state’s pension unfunded liability would be reduced by about $14 billion under this plan, including a $7 billion upward adjustment in 2016 for adopting the Entry Age Normal actuarial method in that year. That is a 14% reduction in our $100 billion debt, and would reduce that debt to $86 billion, again after taking into account the 2016 accounting adjustment.
The COLA paid annually for current and future retirees’ benefits would be lowered for most beneficiaries though some could actually see an increase over time. Right now, the systems pay 3% compounded on full benefits. Going forward, the state would pay 3% on a portion of benefits based on the retirees’ years of public service, with that base being adjusted for changes in the CPI, thus still providing a compounding effect for the COLA. Employee contributions would be reduced by 1% of salary (so teachers go from 9.4% to 8.4%, most state employees go from 4% to 3%, etc.).
Passed by bipartisan votes of the Senate (30-24-3) and the House of Representatives (62-53-1), Senate Bill 1 now awaits action by the Governor.