Pension Reform: The Case of Illinois

By Hyde, Serah | Monthly Labor Review, September 2018 | Go to article overview

Pension Reform: The Case of Illinois


Hyde, Serah, Monthly Labor Review


Before the 2007-09 financial crisis, Illinois had already experienced low funding levels for state and local public pension funds. The financial crisis further reduced the state's coffers, heightening the urgency for a solution. The Illinois General Assembly legislature passed bills in 2013 and 2014 that would have changed funding requirements and reduced benefits for some retirees. The Illinois Supreme Court struck down both bills as violations of the pension protection clause.

The Federal Reserve Bank of Chicago (FRBC) and the Civic Federation met on April 17, 2018 to marshal solutions. Among the solutions offered, FRBC economists Richard Mattoon, Thomas Haasl, and Thomas Walstrum presented positive results from their research on the effects of raising property taxes on a statewide level to expand the state's revenue source.

Eric Madiar, of Madiar Government Relations, presented the Illinois Senate president's proposal to cut state pension obligations. Madiar argued that the proposal does not skirt the pension protection clause because state law allows employees to enter into an agreement for lower future payments in exchange for "consideration." The Senate president's proposal allowed state employees to choose between two different forms of consideration in exchange for lower future payments.

In choice one, the employee voluntarily gives up the 3 percent annual compound cost-of-living increase in exchange for a delayed and lower rate of increase in retirement. …

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