Illinois’ pension crisis has been decades in the making, but lawmakers for years seemed content to push the politically sensitive issue further down the road. While other states were grappling with solutions, Illinois was shorting its payments to the state’s five pension systems—or skipping them altogether.
Those decisions proved costly, as the state’s credit rating was repeatedly downgraded and now sits as the worst in the country. In the meantime, annual pension payments ballooned to $6 billion in 2013, representing 20% of the general fund’s budget and siphoning money from education and social services.
Then, late last month, after months of meetings, closed-door negotiations and special sessions, lawmakers emerged with a proposed solution: Senate Bill 1, a sweeping pension reform law which aims to save the state $30 billion over the next 30 years and fully fund its pension system by 2044.
Illinois Governor Pat Quinn signed the bill into law during a private ceremony Thursday.
The specifics of the law, according to The Associated Press:
Under the new law, automatic, annually compounded 3 percent cost-of-living increases for retirees — considered to be the biggest driver of pension costs — would be replaced with smaller annual adjustments for the highest earners. Some workers would have the option of freezing their pension and starting a 401(k)-style defined contribution plan. Also, the retirement age will be pushed back for those 45 and younger.
Additionally, the law requires that Illinois make its full annual contributions, and allows the state’s retirement systems to sue if the payments aren’t made.
“Illinois is moving forward,” Quinn said after signing the bill. “This is a serious solution to address the most dire fiscal challenge of our time.”