CHICAGO — A last-minute measure to overhaul Cook County, Ill.'s troubled pension system sailed through the state Senate Tuesday just hours after it was introduced.
The chief executive of Cook County, which includes Chicago, traveled to Springfield Tuesday to lobby for the bill. The Senate Executive Committee easily approved the measure by a 10-5 vote. The full Senate then quickly approved the bill by a vote of 36-16.
The approval came despite opposition from at least one major county union that said the measure is unconstitutional. The measure now moves to the House.
Cook, like its largest local government, Chicago, is struggling to address its poorly funded pension funds after a series of downgrades from credit ratings agencies. The county's two pension funds are under 60% funded. Like Chicago, the county needs the state to approve pension changes.
State Sen. Kwame Raoul, D-Chicago, who introduced the legislation as an amendment to House Bill 1154, said Cook faced a downgrade that could "seriously impact its finances," and warned that doing nothing would render the two funds insolvent in 24 years.
In her testimony, County Board President Toni Preckwinkle
"For the last two years we've worked with our union representatives," Preckwinkle said. "At the end, about three or four weeks ago, it became clear we needed to do something if there was hope for action this session."
Preckwinkle and county Chief Financial Officer Ivan Samstein refused to provide details on how the county would pay for the proposal, which calls for a $147 million increase over its current contributions starting in 2016.
The legislation would give the county the authority to tap any available funds to make the payment. Currently, Cook is restricted to its property tax levy to make its pension payments.
"We're going to be very creative about making government efficient, just as we have done for the past three and a half years," said Preckwinkle, who took office in 2011. "But everything is on the table, and we're going to make our commitment any way we have to, including using our general revenue."
Preckwinkle added that the legislation gives the county 18 months to "figure out how we're going to meet the financial requirements," as the first increased payment is due in 2016. "I'm not going to predict how we're going to do this, but taxpayers can count on us to be as judicious and efficient as possible."
At least one lawmaker, Sen. Matt Murphy, R-Palatine, said he would not support the bill because he believed the county would eventually be forced to raise its property taxes to pay for it.
A representative from the American Federation of State County and Municipal Employees, said the union believed the proposal was unconstitutional, and would likely sue if it became law.
"This we believe does not stand the constitutional test," AFSCME political director John Cameron told the Senate committee, adding that the county's pensions are better funded than Chicago's or the state's. "It's not a crisis that needs to be solved in the next four days by this body." The General Assembly's spring session ends May 31.
The bulk of the increased payments would go toward pensions, with a piece going toward a new health care trust.
Cook's main pension fund has a funded status of 54%. The legislation would fully fund it and the county's forest preserve pension fund by 2043, the county says.
Employees' contributions would pay 2 percentage points higher starting in 2015. It would prohibit the county fund from future funding of other post-employee benefits, which would be funded with the separate county contribution to the health fund.
The reform would reduce annual cost-of-living increases for current workers and freeze all COLAs for current retirees for one year in 2016. It would also delay by one year the first COLA for retirees. The bill would raise the retirement age for most county employees by five years.
It includes automatic adjustment measures that adjust benefits to ensure the funds remain well-funded. If the funded level falls below 59%, the COLAs would be suspended. If the funding level exceeds 100%, the COLAs would revert to their current percentage, which is 4% a year compounded increases.
Moody's Investors Service rates Cook County A1 and Fitch Ratings rates the county AA-minus. Standard & Poor's rates it AA. Both Fitch and Moody's maintain a negative outlook on the county, chiefly due to the underfunded pension obligations.
The Cook County Employees' Retirement Fund's unfunded obligation grew to nearly $6.8 billion from $5.83 billion in fiscal 2012 while its funded ratio dropped to 54% from 57%. That includes retiree health care liabilities.
The Cook County Forest Preserve Employee Retirement Fund's unfunded obligations total $132 million, with a funded ratio of 57%.
The General Assembly in April approved legislation overhauling two of Chicago's pension funds, but Gov. Pat Quinn has not yet signed it.
