The state's top politicians still can't reach agreement on how to fix Illinois' woefully out-of-whack public employee pension system, but there's an approach to the issue that both Democrats and Republicans have hailed as a model to follow.
There's pension peace over at the Metropolitan Water Reclamation District, the agency that treats water that's been flushed down the toilet and helps prevent flooding in the Chicago area. During the past year, commissioners sat down with unions that represent water reclamation workers and negotiated changes to help reduce retirement costs and ensure that the employee pension fund remains afloat. The result? A bill now sits on Gov.Pat Quinn'sdesk.
During the spring session, Speaker Michael Madigan took to the House floor to single out the cooperation on one of the most difficult issues in government.
"Both sides have said, 'There's a problem. We want to solve the problem, and we're both going to pay in more than we pay in today, and what we both get out of it is good, sound fiscal status for our pension system.'"
"I think this is how we should move forward on pensions," said Madigan, D-Chicago.
On the opposite side of the Capitol, Republican Sen. Chris Lauzen also complimented the water district's approach. It "seems to be a very good example of solving a pension problem in a collaborative way, where you get the job done, and there hasn't been a whole lot of negative feelings," said Lauzen, of Aurora.
So why haven't top state officials and union leaders sat down and negotiated a fix to Illinois' worst-in-the-nation $83 billion pension problem? State government is much larger than the water reclamation district, and so is the shortfall. Unions have chosen to mostly dig in their heels in opposition so far. There also are deep partisan divides among legislative leaders on what should be done, and those confusing signals have left labor leaders with a big question.
"Which leader are we negotiating with?" asked IllinoisAFL-CIOPresident Michael Carrigan, who leads the union coalition fighting to save benefits.
Democratic Rep. Elaine Nekritz of Northbrook acknowledged that "the divergent views in the Legislature will make it more challenging for us."
Quinn and legislative leaders have been talking about changes that would give state employees a choice. They could keep more expensive compounded 3-percentage-point cost-of-living increases each year but give up their health insurance when they retire, or they choose to take smaller yearly increases and hang on to the insurance.
The sticking point among Democrats and Republicans is the issue of who pays for suburban and downstate teacher retirement costs. Democratic Speaker Madigan has called for shifting those costs onto local districts, a point House Republican leader Tom Cross and Senate GOP leader Christine Radogno see as property tax hikes. Madigan's point is parity, noting that Chicago property taxpayers foot the bill for Chicago Public Schools pensions.
The differences have pushed back pension talks to August and diminished the Quinn administration's hope of passing comprehensive pension reform before the post-election fall session.
The unions representing state workers on the pension issues don't sit in on the summits with the governor and the four legislative leaders, but they've had opportunities to talk to most of the major players and met with the working group of lawmakers and Quinn aides along the way. Union leaders also have made it abundantly clear in public hearings that they don't believe the state should reduce pensions of workers or retirees.
At the water reclamation district, Executive Director David St. Pierre said he doesn't even use the word "negotiations" when talking about how the agency, its unions and nonunion employees worked out a way to rebuild its pension fund.
"It was more of a conversation," St. Pierre said. "Everybody agreed that pensions are worth saving and making sure that people who have worked 30 years, 35 years have a pension."
One major reason the water district needed to readjust was that market investments tanked with the economy. A decade ago, the pension system was about 85 percent funded, but it fell to 53.2 percent at the end of last year, according to the district's general counsel.
The state suffered similar market woes, exacerbating its underfunding problems. Unlike the state, however, the water reclamation district did a better job of making annual payments into the pension fund. Governors and state lawmakers spent decades scaling back or skimping on payments, a problem that drove the state's five retirement systems deeper and deeper in debt.
The water district's solution is not any one thing. It lowered costs of electricity, raised more from real estate leases, cut staff and increased retiree and employee health care costs. The combination of moves will allow the district to pump another $35 million into pensions — an annual figure that could actually drop as retirement funds grow with solid investments.
The employees gave too. Currently, workers contribute 9 percent of their paychecks to pay for pensions. Under the legislation, most employees would increase that amount by 1 percentage point a year until it hits 12 percent. The employee contribution would drop back down to 9 percent once the system reaches a 90 percent funding level.
Jorge Ramirez, president of the Chicago Federation of Labor, said the "one takeaway" from how the unions worked out the elements of the deal with the district is the "constant collaboration" and meetings with top officials. Ramirez said both sides attacked problems together from the beginning. He noted this doesn't mean everything was perfect, but unions and management figured out a way to resolve their differences.
In addition, Ramirez said, the district "also put more skin in the game," such as making full pension payments over the years and upping the amount of money it will put into the pension fund under the new legislation.
The district's pension fix was put in legislation and passed both houses overwhelmingly.
But cooperation isn't everything.
During debate, Senate President John Cullerton offered a thorough explanation about how the water district legislation could be declared unconstitutional. The potential flaw, Cullerton said, is that the Legislature voted to raise the amount of money employees contribute to the pension system, a unilateral move that may go against the state constitutional standard that basically says benefits cannot be reduced once they are put in place.
In short, can lawmakers vote to require public employees to pay higher contributions from their paychecks just so they can keep the same level of pension payouts they already had been promised upon retirement? Cullerton doubted it.
"It's a very unusual situation, where I'm asking you to vote for a bill, which may, in fact, be deemed to be unconstitutional, but it's certainly a welcome test case if that, indeed, is what it leads to," Cullerton said.
That test could have broad impact on all public employees, including the state, the city of Chicago and Cook County, all of which are looking for pension relief.
At a recent public appearance, the district's general counsel, Ronald Hill, said commissioners believe the bill will withstand "judicial scrutiny" but acknowledged that's the "$64,000 question."
First, however, Quinn has to act on the bill. If he signs it, a legal challenge awaits. It's one that much of state government will be watching.
Tribune reporter Hal Dardick contributed.
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