Tag: Illinois budget

Illinois Gov. Rauner Would Fine Schools For “Spiking” Pensions

Bruce Rauner

Illinois public schools that hand out late-career pay raises could be subject to heightened penalties under the Rauner administration.

Gov. Bruce Rauner this week laid out a series of pension-related measures as part of his budget proposal; among them was the idea of levying a penalty on schools that give late-career raises to teachers.

Illinois already penalizes schools for handing out such raises if they exceed 6 percent. Under Rauner’s proposal, schools would be penalized for any such raise that exceeds the cost of inflation, which is a much lower threshold.

More from the Daily Herald:

Tucked away in his plan to cut teachers’ pensions, though, is a detail school districts would have to be wary of should Rauner’s plans become law.

Here’s all it says on the list of details released publicly by the governor’s office: “Eliminates spiking.”

Rauner wants to change a state law that makes local school districts pay penalties if they give big end-of-career pay raises to teachers and administrators.

School districts can still give the pay raises, but the state says local officials have to pay for the pension consequences.

Now, school districts have to pay penalties if they give late-career pay raises of more than 6 percent. Rauner wants to enact penalties for those pay raises if they’re greater than the rate of inflation, which lately has been around 1 percent.

Suburban schools have already had to pay big bucks when they’ve been caught by the 6 percent law. For the 2012-2013 school year, for example, Elgin Area District U-46 had to pay $135,393.

The year before that, Schaumburg Township District 54 had to pay $489,841.

Most districts avoid big penalties, even writing in a 6 percent pay raise cap into their contracts with teachers. But 1 percent is a lot lower, of course.

“While a so-called reform was enacted in an effort to prevent pension spiking, teacher contracts in recent years have made the six percent cap a floor rather than a ceiling,” Rauner spokesman Lance Trover said.

A teacher’s salary during his/her final year of teaching plays a large role in determining pension benefits.

 

By Steven Vance [CC-BY-2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

“Phantom Savings”: Top Illinois Senator Questions Gov. Rauner’s Pension Cuts

Bruce Rauner

Illinois Gov. Bruce Rauner laid out his budget plan on Wednesday, and it included a number of pension cuts – decreasing annual COLAs, freezing benefits, and moving employees into a plan that yields fewer benefits.

(Under Rauner’s proposal, police and firefighters would be exempt from these changes.)

One lawmaker on Wednesday accused Rauner of using “fuzzy pension math” to calculate the savings the cuts would yield.

That followed the accusatory words of another top lawmaker, who claimed Rauner’s pension changes produced “phantom savings”.

Here’s Illinois Senate President John Cullerton:

The basic math still doesn’t work in his proposal. Governor Rauner leaves a $2.2 billion hole in the budget by relying on unrealistic revenues from a questionable pension proposal. Even as the courts review a significant test case, the governor’s plan banks phantom savings for a pension plan that may fail key legislative and judicial tests. When we passed pension reform last year, we took care to exclude possible savings from budget plans pending a legal resolution. The governor’s plan rejects that wisdom.

Indeed, when the state passed its pension overhaul in late 2013, it never included the savings in the budget. That’s because a legal challenge was sure to be brought against the law and Illinois didn’t want to assume savings only to get burned later.

Rauner’s proposals, if enacted, are likely to end up in court as well, depending on the outcome of the state’s current pension lawsuit.

 

Photo by Tricia Scully via Flickr CC License

Documents: Illinois Gov. Rauner’s Budget Will Recommend Pension Cuts

Bruce Rauner

Illinois Gov. Bruce Rauner will give his budget address on Wednesday afternoon. He’ll announce a number of cost-cutting proposals, and pensions are sure to be featured.

What specifically does Rauner have in mind for the state pension system?

Greg Hinz of Crain’s Chicago Business got a hold of budget documents that hint at Rauner’s plans.

From Crain’s:

On pensions, Rauner is proposing to go substantially farther than the reforms passed a year ago by the General Assembly, reforms that now are being challenged before the Illinois Supreme Court.

Specifically, according to budget documents shared with me, Rauner intends to save $2.2 billion next year, cutting the state’s unfunded pension liability by $25 billion. He’d do that by freezing all benefits as of July 1, moving workers to a new plan in which cost-of-living hikes would be cut from the current 3 percent a year to the lesser of 3 percent or half of inflation, non-compounding; the normal retirement age would be 67, and overtime would not be counted in pension benefits.

These changes would apply to benefits earned after July 1. Benefits earned prior to that date would be paid at the previous rate. The Rauner document says that makes it constitutional as “earned benefits” are not cut. Expect a court challenge to that.

All of these changes would apply only to plans covering teachers, university employees and other state workers—not public safety employees.

Read an overview of the rest of Rauner’s probable budget proposals here.

 

By Steven Vance [CC-BY-2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

Illinois Supreme Court Expedites Pension Reform Appeal

Illinois flagThe Illinois Supreme Court on Wednesday complied with a request by Illinois Attorney General Lisa Madigan to fast track the hearing over the state’s pension reform law, which a lower court found unconstitutional.

From Reuters:

The court ordered public labor unions and retiree groups challenging the law and the state to file their briefs in January and February with oral arguments to be scheduled in March. Illinois Attorney General Lisa Madigan had asked the court last week to speed up the appeal process.

The state asked for oral arguments as early as Jan. 22 and no later than March 10 to enable Illinois’ upcoming budget to incorporate about $1 billion in cost-savings under the law, or adequate spending cuts or tax increases to offset those savings.

The pension reform law was supposed to go into effect on June 1 but was put on hold by Sangamon County Circuit Court Judge John Belz in May pending his Nov. 21 ruling in five consolidated lawsuits. The state’s new fiscal year begins July 1 and the legislature usually passes a budget by May 31.

The law’s opponents asked the supreme court on Tuesday not to speed up the case.

The law raises retirement ages and suspends COLAs for some workers, and makes state contributions to the pension system enforceable by the Illinois Supreme Court.

Fast-Tracking of Illinois Pension Case Could Be Blocked

Illinois flag

Last week, Illinois asked the state Supreme Court to expedite the hearing over the state’s pension reform law.

But on Sunday, attorneys representing the state workers and retirees said they could block the attempt to fast track the case. Such a move could drastically change the timeline for the lawsuit’s hearing.

From the Southern Illinoisan:

In a move that could play a significant role in how Gov.-elect Bruce Rauner crafts his first budget this spring, the lawyers say Illinois Attorney General Lisa Madigan’s bid to put the case on a fast track is unwarranted.

“We do not believe there is any need to impose an emergency schedule,” said attorney John Fitzgerald, who is among a team of lawyers representing retirees. “We see no need to depart from the rules.”

On Thursday, Madigan asked the high court to move quickly in hearing the case because of the financial ramifications the pension changes will have on the state budget.

[…]

Madigan suggested the court schedule oral arguments for as early as Jan. 22 or no later than mid-March.

Attorneys for the retirees, who say the expedited schedule is unnecessary, have until Tuesday to file their objections to the motion.

Without the expedited schedule, the deadline for filing the first significant set of records in the case wouldn’t occur until the final week of January.

After that, the typical court schedule calls for both sides in the lawsuit to trade paperwork for nearly three months. Once that is completed, the high court would then schedule oral arguments.

Under that scenario, the court could hear the case as early as May. If they miss the May docket, the next time the judges are scheduled to hear oral arguments is September.

Following the argument phase, the court could take months to issue a ruling. In a similar case regarding health insurance costs, the court took nearly 10 months to overturn the state’s attempt to force retirees to pay a portion of their pensions toward that expense.

Sangamon County Circuit Judge John Belz ruled last month that the law was unconstitutional.