5
savings for the state. This proposal calls for cutting
the current annual 3 percent compound COLA to 3
percent compound of the lesser of a retiree's pension
annuity or the retiree's number of years of service
times $1,000.
Following the presentations by Ingram and the two
legislators, Clark defined his role on the panel as that
of a “color commentator,” and then offered his opinion
about what is happening with pension reform. He said
he thinks the potential passage of a pension reform
bill that slashes retirement benefits from public
employees and retirees is really about three things: 1)
the next election, 2) a cost shift to local school
districts, and 3) taxes.
Clark noted
that the timing of
the
special
session, the day
after the filing
deadline for next
March’s primary
meant
that
legislators
couldn’t get any
farther
away
from a possible
primary
challenge. He
laid
out
a
possible scenario that included:
Legislators passing pension reform in early
December, knowing full well that it likely would be tied
up in a court challenge;
After the March 2014 primary passing a cost shift
to local school districts;
After the general election in November of 2014
passing a bill to deal with income taxes, possibly
extending the temporary increase or looking at some
sort of progressive income tax.
The topic of a potential shift of employer pension
responsibility from the state to local school districts
sparked a lot of discussion.
Clark said if the $160 billion pension reform
package contains some of the elements that have
been reported – raising the retirement age, a salary
cap and the decimation of the COLA – he has been
advised that based on the pension protection
language in the Illinois Constitution those elements
would be unconstitutional, though the Illinois Supreme
Court would make the final determination. However,
he said there is no constitutional protection against a
cost shift, though it is a political hot potato for many
downstate legislators.
“It’s constitutional, but it’s a train wreck if there is
no way for school districts to pay for it,” he said, noting
that in the spring of 2012 pension reform negotiators
and stakeholders “were the closest we’ve ever been
to pension reform that we could have swallowed, but it
fell apart because of the cost shift.”
Ingram, the TRS executive director, said the
normal pension costs for TRS employees currently is
6 percent of payroll, but he predicted that would
decrease because of the Tier 2 reduction of benefits
for employees hired after January 1 of 2011 and if
legislators cut Tier 1 employees’ and retirees’
benefits.
If a gradual cost
shift ever passes, Clark
said school districts
would need some
flexibility from the
state.
“School districts
should
have
the
opportunity to opt out
of mandates that don’t
fit your district,” Clark
said, prompting a
wave of applause from
the mix of school
administrators
and
school
board
members that filled the
room to capacity.
Clark also mentioned looking at the possibility of
including normal pension costs outside of the tax
caps, perhaps as part of the IMRF levy that already is
on the books, and said that restoring General State
Aid (GSA) to full funding also would be critical to allow
school districts to take on the employer pension costs.
There were several questions about the drastic
cuts to retirees’ COLA, which everyone agreed was
the biggest financial piece of pension reform.
“If someone were to do a historical autopsy of the
TRS system, other than the state failing to make its
payments, I think they probably would make one
change: Going back to a simple COLA instead of a
compound COLA,” Clark said, referring a 1989 law
that made the COLA compound.
When questioned about reducing the COLA, Biss
allowed that “ideally it should be in line with Social
Security,” which includes an increase tied to the full
CPI.
“No doubt, the best way would be to use the CPI
like Social Security does – if we could afford it,” Biss
said. However, tying the retirement benefits to actual
inflation would not generate the $160 billion in savings
that some legislative leaders are seeking.
(Continued from page 4)
IASA Executive Director Dr.
Brent Clark said he thinks the
potential passage of a pension
reform bill that slashes
retirement benefits from public
employees and retirees is
really about three things: 1) the next election, 2) a
cost shift to local school districts, and 3) taxes.
