SPRINGFIELD — Kristen Perez, a nurse in her 30s, cringes at the idea of working until she's nearly 70.
But because changes were made to the state's vastly underfunded pension system 13 years ago, employees like Perez, who were hired by the state after the changes took effect, are given the same retirement as their long-serving Illinois colleagues. Not eligible to receive money. Nursing Association.
“This is divisive,” Perez said at a rally Wednesday at the Illinois State Capitol of thousands of unionized teachers, first responders and other public employees demanding changes to the state's pension system. “It will create a second class of state employees.” “Investing in our state employees and providing fair and equitable pensions for all state employees is essential to meeting the needs of our state and all the communities we all serve.”
At issue are concerns over reforms made to Illinois' struggling pension system in 2011. Workers hired after that date were placed into the “Tier 2” scheme, where benefits were reduced. The overall goal of creating the “Tier 2” plan was to reduce pension obligations, which currently stand at $141 billion.
However, at some point, the benefits paid under this plan would equal the benefits provided by Social Security to these employees, violating federal “safe harbor” laws. This would require states to pay large amounts of Social Security taxes in exchange for running their own pension systems, which would still be costly but give states more flexibility.
This week, bills aimed at addressing “Tier 2” issues were introduced in both the Illinois House and Senate. It warns that without meaningful changes, civil service shortages will continue due to difficulties in recruiting and retaining them.
But the cost of making these changes is a major challenge, as the state projects its budget deficit could exceed $3 billion next year.
“The reality is, what we have to do is make sure we meet the Social Security 'safe harbor' minimum. So it's completely uncalculated,” Gov. J.B. Pritzker said Wednesday at an unrelated event in Springfield. “But it is clear that this issue needs to be addressed, because if we don’t we will have a whole other responsibility to the state.”
Pensions are a major political issue for Mr. Pritzker and Democrats, who control the General Assembly and count on organized labor as one of their biggest allies. Solving this problem could cost billions of dollars over several years.
The Confederation of Civil Service Unions wants the final average salary pension calculation and retirement age for 'Tier 2' employees to be in line with the previous 'Tier 1' system, with a flat rate of 3% simple interest charge applied . Living arrangements for all “Tier 2” retirees. The coalition also called for the pension salary cap to be aligned with the Social Security wage base.
Those adjustments are reflected in a bill introduced this week by two Democrats, Rep. Stephanie Kifowit of Aurora and Sen. Robert Martwick of Chicago.
Mr Martwick said ordinary people planning to retire should aim to replace 85% of their previous year's salary, and this salary should be able to increase in line with inflation. But he said the “Tier 2” benefit is about half of a recipient's last salary.
“In terms of retirement plans for civil servants, we're giving them terrible benefits and it's getting worse and has so many negative effects,” Martwick said. “On the one hand, many of the employees who are aware of it are retiring, so there is a shortage of employees.On the other hand, many of the employees who are aware of it are retiring, so there is a shortage of employees. It will have a huge impact on their quality of life.”
Illinois' pension problems have been going on for decades and have proven to be a central obstacle for the governor and Legislature to balance the state's budget each year.
In 1994, the pension system was in such tatters that Democrats and Republicans came together to find a solution. The agreement, which was included in the bill as a “temporary measure” at the time, requires continued payments over the next 50 years, allowing the General Assembly to meet its constitutional obligations to hundreds of thousands of state employees. I will do it.
The plan called for the funding rate of the national pension system to reach 90% by 2045. But the law backloaded payments from key countries and was sometimes ignored, leaving the system even more insolvent. In 1997, the pension system's unfunded liability was $13.7 billion, and in 2010 it rose to $85.6 billion.
In the same year, the General Assembly made changes to the Pensions Act, resulting in the creation of a “Tier 2” system aimed at reducing long-term costs by lowering benefits for employees hired after January 1, 2011. . It is projected to reduce state contributions by more than $70 billion over the next 30 years, reducing total pension liability by nearly half by $256 billion.
Experts at the Teachers' Retirement System, the state's largest government retirement fund, say “Tier 2” benefits will be cut short by 2027 due to benefit limits and inflation adjustments that are much more stringent than those used by Social Security. It warned that it would start to become non-compliant. safety. This puts some workers at risk of receiving less retirement benefits than they are eligible for in the federal system.
Supporters saw the bill introduced in the General Assembly as a way to start lawmakers considering the pension issue. But the measure is not expected to be considered during a brief veto session this fall, due to the complexity of the issue and concerns about cost. Lawmakers are scheduled to reconvene in January for a lame-duck session before the new General Assembly is sworn in.
