Facing one of the worst pension funding crises of any city or state in the U.S., Illinois finally got its financial ducks in a row today.
State lawmakers passed a bill during a special session today that will address unfunded liabilities in the state pension plan. Illinois, which owes its pension plan $100 billion, will save $160 billion over the next 30 years, and will immediately reduce its unfunded liability by about 20 percent.
The bill made it through the Senate by a 30-24 vote and through the House by a 62-53 vote. It was supported by both Republican and Democratic legislative leaders and by Democratic Gov. Pat Quinn, who has pushed the legislature to pass pension reform all year. After attempts to get a bill done in spring failed, along with a summer session that led to a legislative committee that hammered out a bill, Quinn’s efforts seem to have finally paid off.
There is still one big road block ahead of pension reform, however. There is strong public labor union opposition to the bill. In order to cover the unfunded liabilities, retirement ages will be raised, cost-of-living increases will either be suspended or reduced, and the salaries on which pensions are based will be limited. The unions argue these changes violate a state constitutional prohibition against cutting pension benefits. About 500,000 current and retired public sector workers will be affected.
The governor has argued, though, that the reforms will help protect the financial security of future retirees in the system.
“This bill will ensure retirement security for those who have faithfully contributed to the pension systems, end the squeeze on critical education and healthcare services, and support economic growth,” Quinn said in a statement.
While the end result of a court battle between the unions and the government is uncertain, in the short term, this should mean good news for Illinois’ financial status. The bill’s passage likely wards off further credit downgrades and could spark more interest in a $350 billion bond sale Illinois has planned next week.
The opinions contained in this column are solely those of the writer.
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