Friday, March 26, 2010

Surprise - Pension Reform

Well, what a week under the silver dome. The House was moving through bills on 3rd reading and going to committees on amendments for those bills. The Senate was working on their bills and amendments trying to get their initiatives over to the House. But what we always have to remember is that this is not the only thing going on at the State House. The legislative process is more like a hurricane, everyone watches where the eye of the storm is, but there are plenty of other things happening. That is exactly what was going on this week.

The Governor and his key staff have been meeting to push his proposed budget. They have been pulling in legislators and groups trying to get support for all the different parts of the budget. We were called in and in our conversations of their plans it became obvious that the Governor's budget office was extremely concerned with how "Wall Street" was viewing the continuing financial failings of the state. This was further confirmed by public statements made by the Governor's budget director this week.

The State of Illinois has been "shopping" the sale of $1 billion in bonds on "Wall Street" and have been told that if the state continued to ignore the continuing, spiraling downfall of the state's budget, the state's bond rating would be downgraded once again. The bond analysts indicated the rate would be lowered two more levels, putting Illinois on the same level with California. That would mean that on the $1 billion bond authorization the state would be charged an additional $94 million a year in interest for the higher interests rates that would be assessed. As we all know paying more interest is not a wise financial path.

As part of the Governor's plan to address the crisis he continues to call for the passage of his proposed income tax increase for education. At the same time negotiations have been ongoing on other portions of the budget, and one of those was on the state employee pension systems. The public employee union AFSCME, Illinois Federation of Teachers, Illinois Education Association, and others were in discussions with the Senate Democrat majority. They were trying to work on a compromise. We picked up that some movement was being made and supposedly the parties were getting close to cutting the future potential costs of the pension systems by $80 billion over 50 years.

On Wednesday morning things started popping in the House surrounding the pension issue. By the afternoon the hurricane was at record force and then the eye of the storm hit the House Personnel and Pensions committee. The calm came as the lead sponsor, Speaker Madigan, of SB 1946 and his lead co-sponsor, Rep. McCarthy, walked into the room. The calm did not last long as the sponsors presented their proposed pension reforms and the Governor's budget director supported the legislation. The Illinois Federation of Teachers, Illinois Education Association, and AFSCME were outraged and lashed out as we all have seen in the media.

SB 1946 was amended, moved to the House floor and was voted on just a few minutes after the committee adjourned. The House approved the bill with 92 yes, 17 no, and 7 present votes. The bill was quickly taken back to the Senate for consideration of the House's amendments, where it was taken to the Senate Executive Committee expeditiously and approved to be sent to the Senate floor, and shortly thereafter was voted on by the full Senate. The bill was approved by a resounding 48 yes, 6 no, and 3 present votes. This all took place in less than 12 hours.

This was a very strong action. We believe part of this was done to show Wall Street that Illinois is serious about repairing the financial woes and structural problems. Another point it makes is that the General Assembly has heard the voters that the pension system was out of control. It also sends a few other political messages of who is in charge in the Capital.

Pension Detail

SB 1946 (President Cullerton/Speaker Madigan) is a very comprehensive bill dealing with numerous different pension systems. The changes affect 13 pension systems that cover state employees, teachers, Chicago municipal and park district employees, Cook County employees, members of the General Assembly, and judges. The new pension provisions would apply to new employees hired after this legislation is signed into law.

The retirement age of affected employees would be increased to 67 years old with 10 years of service in order to qualify for full benefits. State employees could retire at age 62 with 10 years of service, but with a reduction in benefits of 6 percent per year. Pension payments to retired employees would be based on the highest average salary earned during eight consecutive years of the last 10 years of service (currently benefit is based on four years of service) not to exceed a maximum capped salary for calculation of $106,800.

New employees that were in high risk jobs, correctional officers, state police, and state firefighters would be the only class of employees who qualify for the "alternative formula" which provides a higher level of retirement benefits. Over many decades, many non-high risk employee groups were added to this classification to enhance their benefits.

The bill makes further changes to stop the annual cost-of-living increases to benefit amounts. The increases will be based on the lesser of one-half of the consumer price index or 3%. The bill also prohibits a retired person to draw payments of a pension from one system while working full-time under another pension system.

A non-state pension item in the bill grants the Chicago Public School District the ability to reduce the amount of contribution to Chicago teacher's pension system. This was included to provide the ability of the Chicago School District to reduce its pension contributions by $1.2 billion over three years. It also changes the period when the Chicago Teachers Pension fund must be funded at 90%. Currently it is reported the Chicago Teachers Pension fund is funded at 74%.

The immediate savings in the upcoming state fiscal year is estimated to be $300 million. Others estimate that it could reduce the costs by an estimated $500 million to $1 billion in FY 2011. The total amount of the changes to future pension recipients versus the current system is estimated to reduce the projected costs by at least $100 billion over the next 50 years. The state’s total pension liability is $126.5 billion, $77.8 billion of which is unfunded.

Mentionables

Limiting Landowner Liability for Invited Recreational Guests - HB 5895 (Rep. Black)

In an effort to provide limited liability to landowners for inviting guests on your property for recreational purposes, Rep. Black introduced HB 5895. But as with previous bills, it has run into great opposition by the Illinois Trial Lawyers Association (ITLA). It is the belief of ITLA that if you invite someone on your property you should be totally liable for their presence on your property. ITLA has a very strong influence in the General Assembly.

We continue to work with Rep. Black and ITLA to come up with agreed language. ITLA's philosophical opposition to limiting liability continues to be the only hurdle. IFB has drafted another amendment and submitted it to ITLA. We will do our best to work to see limited liability restored for recreational purposes. The bill has been amended to become a shell bill and is now on 2nd reading in the House. IFB supports HB 5895.

Preempts Anticipatory Nuisance Suits and Reasonable Attorney Fees - HB 6142 (Rep. Myers)

After several discussions on this issue with the Illinois Trial Lawyers Association, Illinois Farm Bureau and the Sponsor, Representative Myers, it was agreed that the bill would not be called in House Judiciary Criminal Law Committee given the formidable opposition by ITLA. An agreement was reached with the opponents and sponsor to meet on this issue in the off season in hopes of coming up with an agreed bill. IFB staff will work with the involved parties in an attempt to reach that agreement. HB 6142 is being held in House Judiciary Civil Law Committee due to insurmountable opposition. Illinois Farm Bureau supports HB 6142.

ATV/UTV on Rural Roads - HB 4904 (Rep. Myers), HB 6094 (Rep. McAcasy/Sen. Wilhelmi), SB 2566 (Sen. Sullivan/Rep. Flider) & SB 3629 (Sen. Sullivan/Rep. Beiser)

These four bills would reinstate the agricultural exemption for use of ATVs/UTVs on rural roads. HB 6094 and SB 2566 are both in the second chamber and awaiting assignments to committees. HB 4904 was not moved out of the House Rules committee. A fourth bill, SB 3629, contains the ATV/UTV language along with other changes for golf carts in municipality. SB 2566 is in the House Rules Committee, HB 4904 was held in House Rules Committee, HB 6094 is in the Senate Committee on Assignments, and SB 3629 is in the House Rules Committee. IFB supports all four bills.

Task Force on Farmer's Markets - HJR 57 (Rep. Black/Sen. Sullivan)

HJR 57 creates the Task Force on Farmers' Markets for the purpose of reviewing the implementation of Acts that define which products and practices are permitted and which products and practices are not permitted at farmers' markets and other outdoor food sale events.  HJR 57 is assigned to Senate Agriculture and Conservation Committee.  Illinois Farm Bureau is monitoring HJR 57.

QuickLook

The following is a short description of bills with the current status and position on each bill.

Questions

If you have any questions on the items listed in this edition of QuickView or on other state legislative matters please contact us. The State Legislative Team can be reached at (309) 557-2308 or by e-mail at statelegislation@ilfb.org.