CHICAGO -- A pension reform plan endorsed by leaders of Illinois’ public universities and touted as a potential model for an overhaul of the state’s other funds received a hearing last week before a legislative committee.
The proposal outlined in Senate Bill 2591 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 a compounded model to one that is tied to inflation. The state government’s 11% employer contribution would move over to the schools over 12 years with the state guaranteeing to hold aid levels at least steady. New employees would participate in a hybrid plan with defined contributions.
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 and would cover just the state’s public university and public community colleges employees who participate in the State Universities Retirement System. It’s one of five state funds that make ,up the state’s retirement system along with funds that cover public school teachers, lawmakers, general state employees, and judges.
Combined, the five funds are just 40% funded and have unfunded obligations totaling $95 billion. Legislative inaction to date drove two recent downgrades in the state’s general obligation rating.
Supporters believe because the COLA adjustment could result in a benefit increase during time of high inflation, the package could better withstand a constitutional challenge by unions or retirees arguing that it impairs or diminishes pension benefits.
A legislative conference committee begins meeting Thursday in an attempt to craft a pension reform package that can break a stalemate between the House and Senate over rival plans.