CHICAGO — Gov. Bruce Rauner says Illinois could save billions of dollars each year through an ambitious new plan to address hugely underfunded pension systems, a proposal he describes as "fair and reasonable" for both government workers and taxpayers.
But labor unions and their supporters — including Democrats who run the Legislature — say it's the latest attempt by the Republican to attach union-busting measures to broader policy changes.
The legislation would prohibit state employee unions from collective bargaining on issues such as wages, vacation and overtime, and would freeze salaries for five years beginning this month. It would then offer workers the option of getting raises, more vacation or more overtime — but only if they agree to switch to a less-generous pension plan.
Democratic leaders declared the plan all but dead last week, while labor unions called it "unconstitutional, unfair to workers and retirees, and a waste of taxpayer dollars and time."
"Instead of continuing his one-man political campaign to stomp out the rights of average people, Gov. Rauner should be working with legislators of both parties to find real solutions and revenue for the critical programs Illinois families depend on," said Illinois AFL-CIO spokesman Bill Looby.
Rauner, a businessman in his first elected office, insists there's a lot for Democrats to like in the 485-page measure. Included are changes to Chicago pensions sought by Mayor Rahm Emanuel — language Emanuel described as "a good thing." The bill also would affect pensions of police, firefighters and teachers outside Chicago.
It comes as lawmakers are fighting over a state budget and months after the Illinois Supreme Court threw out a 2013 pension overhaul, saying it violated a clause of the state constitution that says benefits can't be reduced.
Illinois' pension debt is now more than $100 billion, while retirement systems in Chicago and statewide hold a small fraction of the money needed to pay out as promised. Here's a closer look at Rauner's plan:
The legislation would provide state employees with incentives to switch to the pension plan the Legislature adopted for workers hired in 2011 or later.
The so-called "Tier II" pension plan requires employees to work longer before they may retire. It also provides smaller cost-of-living increases in retirement than the plan most workers are on, which provides 3 percent increases each year, compounded annually.
Workers who switch to the less-generous pension plan may choose from three incentive packages. They offer various increases in salary, vacation or overtime earnings, plus a $2000 "transition bonus."
Rauner says giving workers a choice in benefits is a nod to Senate President John Cullerton, who has long argued the approach is the only constitutional pension solution. But Rikeesha Phelon, spokeswoman for the Chicago Democrat, called Rauner's comments "lip service." She said taking power away from unions and freezing salaries of working people isn't what Cullerton had in mind.
Teachers across Illinois, state university employees, legislators and police and firefighters outside Chicago also would be given a choice in pension benefits.
They could choose to switch from the 3 percent cost-of-living increase, compounded annually, to an increase of either 3 percent or half the consumer price index — whichever is lower — that's not compounded. The other option is to base pension benefits off of salary earned to this point, and not on any future salary increases.
Rauner's plan would give Chicago and other local governments until 2055 — rather than 2040 — to get their police and fire pension systems to 90 percent funding, thereby reducing the annual payment. It also states that revenue from a future Chicago casino, which the Legislature would still need to approve, would go to the police and fire pensions.
The governor also is proposing the state pick up the employer costs for Chicago Public Schools' teacher pensions. Currently those costs are covered by Chicago taxpayers, even though the state makes the payments for other Illinois school districts.
New police officers and firefighters would be put into a so-called "Tier 3" plan, which would be a hybrid of a pension plan and a 401(k)-style defined contribution plan.
Rauner wants to give local governments the ability to file Chapter 9 bankruptcy — an idea he's pitched as a possible solution to Chicago Public Schools' financial mess.
Emanuel has said it's "the wrong thing to do." Madigan also indicated he opposes the idea.