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Illinois lawmakers approve fix for $100b pension crisis

Unions vow suit as retirees will get smaller check

Representative Elaine Nekritz and Senator Kwame Raoul, both Illinois Democrats, after pension legislation passed.

Seth Perlman/Associated Press

Representative Elaine Nekritz and Senator Kwame Raoul, both Illinois Democrats, after pension legislation passed.

SPRINGFIELD, Ill. — The Illinois Legislature approved a historic plan Tuesday to eliminate the state’s $100 billion pension shortfall, a vote that proponents described as critical to repairing the state’s deeply troubled finances but that faces the immediate threat of a legal challenge from labor unions.

The House voted 62 to 53 in favor of the plan, sending it to Governor Pat Quinn, who has said he will sign it. The Senate approved the measure 30 to 24 just minutes earlier.

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‘‘There will be changes here, much-needed changes, but this bill is a well thought out, well-balanced bill that deserves the support of this body, the state Senate, and the approval of Governor Quinn,” House Speaker Michael Madigan said at the start of the House debate. ‘‘Something’s got to be done. We can’t go on dedicating so much of our resources to this one sector of pensions.”

Public employee unions, which oppose the bill, vowed to quickly take legal action. They say the legislation is unfair to workers and retirees who for years made faithful contributions to retirement systems but now will see benefits cut because of government mismanagement. They also contend that parts of the measure are unconstitutional.

‘‘This is no victory for Illinois, but a dark day for its citizens and public servants,” the We Are One Illinois union coalition said in a statement soon after the votes. ‘‘Teachers, caregivers, police, and others stand to lose huge portions of their life savings because politicians chose to threaten their retirement security, rather than pass a much fairer, legal, negotiated solution.”

Illinois’s unfunded pension problem is considered the worst in the nation, primarily because lawmakers failed for decades to make the state’s full payments to the funds. The massive unfunded liability has led the major credit rating agencies to downgrade Illinois’s rating to the lowest of any state in the nation.

It has also siphoned money from education, road projects, and other areas.

Yet for years, lawmakers have been unable to agree on how to fix the problem.

The measure approved Tuesday emerged last week following negotiations by a bipartisan pension conference committee and then meetings of Illinois’ legislative leaders. They say it will save the state $160 billion over 30 years and fully fund the systems by 2044.

It would push back the retirement age for workers ages 45 and younger, on a sliding scale. The annual 3 percent cost-of-living increases for retirees would be replaced with a system that only provides the increases on a portion of benefits, based on how many years a beneficiary was in their job. Some workers would have the option of freezing their pension and starting a 401(k)-style defined contribution plan.

Workers will contribute 1 percent less to their own retirement under the plan. Legislative leaders say they included that provision, as well as language that says the retirement systems may sue the state if it does not make its annual payments, in hopes of boosting the measure’s odds of surviving the unions’ anticipated court challenge.

Quinn and the legislative leaders reached out to a number of lawmakers over recent days, urging them to support the bill.

In addition to the labor unions, some Republicans said they opposed the bill because it did not cut benefits enough. Other opponents said there was not sufficient time for lawmakers and the public to review it.

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