Illinois Democrats Enrage Public-Worker Unions With Drive to Tame Pensions

Illinois Democrats are leading a charge to reduce the state’s pension costs, provoking a million- dollar opposition ad campaign from their traditional allies, public-sector unions, and signaling a new phase in efforts to contain retirement expenses.

While the push to control public worker benefits and wages has been defined this year by clashes over collective bargaining in Republican-dominated Wisconsin and Ohio, Democrats in states such as Connecticut and Massachusetts are pushing for concessions as well.

In Illinois, which has underfunded pensions for decades, Democratic House Speaker Michael Madigan has suggested cutting benefits. Senate President John Cullerton is backing a bill to make retirees pay premiums for health care and to force school districts to shoulder more teacher-retirement costs. Lawmakers may act before the session ends in three weeks.

“We paid our share for the pension and the politicians did not put in their fair share,” said Kathy Reno, 55, a certified nurse’s aide at the state-run LaSalle Veterans’ Home, who makes about $38,000 a year. “Why should we be punished for something they didn’t do?”

In the Legislature, committee work continues on bills that would require active and retired employees to pay more for benefits. Steve Brown, Madigan’s spokesman, said yesterday that the details haven’t been worked out.

“There are questions that need to be resolved,” Brown said.

On The Air

Unions aren’t waiting for details. This week a labor coalition, We Are One Illinois, started a television ad campaign it said cost $1 million aimed at stopping changes to pensions and health care.

“All I have is the pension I paid for,” says one voice in a 30-second montage featuring a firefighter, teacher and police officer. “But the politicians broke their promise, failed to make payments. And now they want to punish me for their mess?”

The campaign comes after radio ads from a Chicago-based business group called the Illinois Is Broke Campaign that warn public employee benefits could “bankrupt the state.”

“Right now, 95 percent pay higher taxes so 5 percent -- bureaucrats and other public workers -- can retire at 55,” one ad says. “Sweet deal for them. Raw deal for us.”

Illinois manages pension funds for state employees, teachers, university employees, judges and lawmakers, and it has the least-sound system, with a funded ratio of about 51 percent, followed by Oklahoma and Kentucky, according to data compiled by Bloomberg.

In The Hole

Illinois’s unfunded pension liability is at least $80 billion and it has amassed a $40 billion long-term obligation for retired public employees’s health care, according to a report from the Pew Center for the States.

The state spends $473 million annually on retiree health care, while the retirees themselves pay about $12 million, according to the Department of Healthcare and Family Services.

“Illinois is in a lot of difficulty,” Madigan said in a March 29 speech in Springfield, the capital.

The state is projected to close the current fiscal year June 30 with $8 billion in unpaid bills, according to the comptroller’s office. Madigan cited health-care benefits as a “problem that demands attention” and “demands action.”

A 67 percent increase in the state income tax approved in January will produce $6 billion annually, Madigan said in the speech to the Associated Firefighters of Illinois. That’s “the exact amount of money that the Legislature will be required to pay over to the five state pension systems in the next budget.”

Devouring All

House Republican Leader Tom Cross sponsored a bill that would require a higher employee retirement contribution and let workers enter a self-managed retirement plan. He said he expects a vote before the end of the month because benefit costs have the potential of “overtaking everything else.”

“It’s our third-highest expenditure in the budget this year,” Cross said in a telephone interview from Springfield.

“People who are currently in the system are not putting in enough to justify or support the benefit they are getting,” Cross said. “I don’t see it as a reduction at all. I see this as an adjustment to put you on par with the benefits you are going to get.”

It isn’t clear that a benefit cut will be part of the package. Cullerton has said that would violate the state constitution, which says benefits “shall not be diminished or impaired.”

Public workers in Colorado, South Dakota and Minnesota are suing their states, which are among 18 that want to increase employee contributions, raise the retirement age or curb cost- of-living increases.

“There’s a core fairness question here,” said Anders Lindall, spokesman for the American Federation of State, County and Municipal Employeesin Illinois. “They’ve been paying all of their careers while politicians have been shirking their share.”

Lawmakers, he said, are looking “at what they can get away with, within the context of the constitution.”

To contact the reporter on this story: Tim Jones in Chicago at Tjones58@bloomberg.net.

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net