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Gov. Pat Quinn backed SB001 as a way to fix Illinois' pension crisis. "Together, we can guide Illinois safely through this pension challenge that we face," he said.

COLA freeze as part of pension reform

by Tanya Basu
Feb 6, 2013

Calling Illinois ’pension woes the “toughest of issues facing the state,” Gov. Pat Quinn on Wednesday voiced his support for a controversial bill that would freeze cost of living adjustments for the next four years.

The governor declared his support for the measure, called SB0001, during his State of the State speech.

“Our vision for our Illinois cannot be fully realized without pension reform,” Quinn said.

Quinn thanked Senate President John Cullerton (D-Chicago), Rep. Tom Cross (R-Oswego), and Rep. Elaine Nekritz (D-Des Plaines) for introducing the bill, calling it “a comprehensive bill that stabilizes our pension systems and fixes the problem.”

As proposed, the bill has two parts. Part A proposes freezing cost of living adjustments (COLA) until 2017, after which there will be a cap of $750 a year or 3 percent of the payable pension that year.

The proposal doesn’t sit well with Joy Joyce, an activist with We Are One Illinois, an organization seeking pension reform and protection.

“The only reference the governor made to curtailing the pension risks in the future was to propose support for a bill that would cut benefits,” Joyce said. “This punishes the people of Illinois, but [pension trouble] comes from a failure to fund the pension obligation in an actuarially sound manner.”

Further complicating the matter? Part A might be unconstitutional.

Article XIII, Section 5 of the Illinois Constitution states: “Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”

In other words, a promised pension cannot be adjusted or changed – exactly what Part A proposes to do.

To combat a potential constitutional snafu, legislators have added a Part B, which essentially offers the choice of accepting cuts to COLA or to forgo some healthcare benefits.

“This perception of uncertainty puts Illinois in a quagmire of expensive litigation that seems to be a great disservice to the people,” Joyce said. She noted that “litigation takes a long time” – potentially destroying future financial plans of current workers.

Supporters of the bill are bracing for a lawsuit.

“We know there will be litigation,” said Quinn’s budget director Abdon Pallasch. “That was always a given. It will wind up in court.

“Once we pass pension reform, it most likely will face court challenge.”

Critics say having promised pensions severely reduced is unfair.

“I am totally opposed to reneging on previously held promises,” Joyce said. “[Gov. Quinn] implies that what’s holding us back is our pension obligations. But to me, that’s an egregious disregard for citizens, public employees and unions.”

For now, at least, SB0001 seems to be the only choice on the senate floor.

“There is no easy answer,” Pallasch said. “There may be refinements, but at this time [SB0001] appears to be the best vehicle.”

State Treasurer Dan Rutherford, who is expected to enter the Illinois gubernatorial race later this year, backed the governor’s call for pension reform. He called it a “top priority in this session,” while hinting at the political gridlock pension reform faces in Springfield.

“The fact of the matter is that because of its finances, the state of the state is in need of repair,” Rutherford said in a statement. “We need strong leadership to get our state back in line. Illinois is a wonderful state with tremendous potential, but the state’s pocketbook needs to get back in check.”

Quinn agreed there is a pressing need for reform.

“This problem cannot be delayed, deferred, or delegated to the next session, to the next generation,” Quinn said.