CHICAGO – The head of a special Illinois legislative committee assigned to solve the state’s pension quagmire said the group expected to take initial steps toward crafting a framework for a reform plan, after taking testimony during its second public hearing Wednesday.

The group heard from various stakeholders that have offered up their own versions of reform plans, including public university officials, during nearly three hours of testimony Wednesday.

The hearing followed the 10-member conference committee’s first public meeting last week. The committee was appointed by Senate and House leaders last month at Gov. Pat Quinn’s urging after it became clear lawmakers remained gridlocked on reform ahead of a special session in mid-June. 

The impasse over two rival plans to put the system, grappling with $95 billion of unfunded liabilities and a funded ratio of just 40%, on an affordable path to solvency drove two new rating downgrades last month. The state’s fiscal 2014 payment will rise to $6 billion from $5.1 billion consuming more of the state’s $35.6 billion general fund.

After the Wednesday hearing, the committee was expected to break into two groups “to begin to come to some consensus on items that should be scored by actuaries so we can have a working framework to advance the ball” toward a “consensus on what we are going to do with regard to pension reform,” said the conference committee chairman, Sen. Kwame Raoul, D-Chicago.

Quinn has tasked the group with coming up with a solution that can be voted on by July 9 but Kwame made clear the group can’t meet that deadline especially given the administration’s request that the group seek actuarial calculations on specific reform measures it wants considered.

“It does take some time to have them [individual proposals] scored,” Raoul said, adding that the committee’s menu of options would receive an actuarial review first. Raoul said the panel takes seriously the governor’s urging to get it done as soon as possible, but the committee can’t get an actuarial review done by that deadline on the governor’s items.

The committee will reconvene late Monday afternoon ahead of the deadline. While a pension package won’t be ready by the Tuesday deadline, lawmakers were expected to return to the capital then to meet a legal deadline on a new concealed carry weapons law. Quinn issued an amendatory veto of the legislation this week and the General Assembly is expected to override the action next week.

Officials from the state’s public universities outlined their proposed package for university employees promoting it as one that could serve as the “framework” for a larger overall solution. The state system is made up of five funds.

Southern Illinois President Glenn Poshard stressed the importance of resolving the crisis. “With the myriad challenges we face none are even close by comparison to the on the verge failure of our pension system,” he said.

The pension crisis makes it difficult to recruit top teachers and researchers. “How do we fund our infrastructure needs with bond rating agencies subjecting us to increasing interest rates?” he said. Moody’s Investors Service recently put the state’s public universities on review for a downgrade over exposure to Illinois’ fiscal woes.

The package calls for a 2% increase in employee contributions to be phased in over four years and shifting how cost of living adjustments are calculated from to one that is tied to inflation. The state government’s employer contribution for normal costs would move over to the schools over 12 years with the state guaranteeing to hold aid levels at least steady. The state would remain on the hook for paying down the unfunded liability.

New employees would participate in a hybrid plan with defined contributions. The funding schedule could not be backloaded as is the case with the current schedule set in 1985.

The plan puts the fund on a path to full funding by 2044 and would trim about $36 billion off total state payments and about 28% of the current unfunded liability of $20.2 billion. The legislation puts a state guarantee behind pension payments, which is now lacking. The plan was crafted by the University of Illinois Institute for Government and Public Affairs.

Poshard described the package as “our last best hope going forward” to provide “long term stability based on shared sacrifice.”

Supporters believe because the COLA adjustment could result in an increase during times of high inflation, the package could withstand a constitutional challenge. The state’s constitution includes a pension protection clause that gives contractual rights to pension benefits and bars any impairment or diminishment of them. The clause does allow for “consideration” to be taken into account, meaning the negative change can be offset by a positive one.

University officials acknowledged under questioning that their belief the potential for a higher COLA at some times meets the definition of “consideration” represents their view and not a legal opinion.

One of the stalled plans before the General Assembly imposes direct cuts and raises contributions and the retirement age, while the other asks employees and retirees to accept benefit cuts in exchange for preserving their retirees’ healthcare subsidies.

The conference committee on Wednesday also heard from the Center for Tax and Budget Accountability and the Illinois Policy Institute on their own pension reform proposals. The state is rated in the low single-A category with a negative outlook by all three rating agencies.

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