SPRINGFIELD – Taxpayers would pay more to Springfield and more in local taxes as well to cover Illinois' $130 billion pension debt under the latest plan floated at the Capitol.
State Rep. Lou Lang, D-Skokie, wants to pay for pensions by extending Illinois' temporary, 2-percentage-point income tax increase until the pension debt has been eliminated and shifting the retirement costs for teachers and university professors to schools and universities. Lang's plan would keep the corporate tax increase in place as well.
"Taxpayers are now paying the 2 percent," Lang said Wednesday at the statehouse. "And so the taxpayers of the state of Illinois, even those that will be the most angry about this, will tell you that the state of Illinois is in dire straits and needs the cash."
Lang would rely on the temporary rate increases passed in early 2011, when the individual income tax rate went from 3 percent to 5 percent, the corporate rate from 4.8 percent to 7 percent. In 2014, the rates are supposed to fall to 3.75 percent for individuals and 5.25 percent for corporations.
The cost shift, which would have local taxpayers pay for the retirements of local teachers, would happen over nearly two decades, according to Lang.
Lang wants Illinois' public employees to pay more toward their own retirement and wait to leave their jobs until age 67. Lang wants to bump employee contributions up by 3 percentage points. Current contribution rates vary by pension system.
But Lang's plan would not change the defined benefit plan or reduce benefits already promised to thousands of public employees and hundreds of thousands of teachers.
"I expect to get some significant interest from unions, teachers, AFSCME, members of the General Assembly," Lang said. "And I expect to find some support because this is the first proposal that does not take away benefits from any public employee."
Representatives for the coalition of Illinois' public employee unions, including the American Federation of State, County and Municipal Employees, the Illinois Federation of Teachers, the Illinois Education Association and the state's AFL-CIO only would say they are "reviewing" the proposal.
The unions long have pushed for a tax increase and guaranteed pension payments, included in Lang's proposal. But they have not been generally supportive of a higher retirement age or increased employee payments.
State Rep. Darlene Senger, R-Naperville, said Lang's proposal does nothing to fix the structural imbalance of Illinois' defined benefit plan.
"This is not a finite problem. This is always fluid," Senger was quick to say. "If we have another market crash, if they lower the interest rate assumptions, if people work longer. All of those things move that unfunded liability needle over again."
Senger said even if Lang's plan becomes law, Illinois will be looking at a massive unfunded pension debt in five years.
Laurence Msall, president of the nonprofit Civic Federation in Chicago, said the math of Lang's proposal doesn't add up.
"It's very difficult to determine, even with his proposed income tax increase, if that would be enough to make this plan viable," Msall said from Chicago. "And the notion of 80 percent funded over 50 years is a creation of the General Assembly."
Lang's plan would have the state's five pensions systems 80 percent funded by 2063. Msall is quick to point out that the goal for every government retirement plan is 100 percent funded within 30 years.
But Senger said there is another math question voters need to answer for themselves.
"You've got 5 percent of those who are actually in a public pension system, and 95 percent of the state of Illinois that is not," Senger said. "They're being asked to pay for someone who is retired because there is not enough money to fund them."
Lang's plan now faces an arduous trip through the General Assembly. Lawmakers have been told they have until the end of May to pass some type of pension reform.
Today is Monday, March 10, the 69th day of 2014. There are 296 days left in the year. 1864 -- 150 years ago: Numerous counterfeiters are around, taking advantage of the influx of currency to pass their worthless trash. 1889 -- 125 years ago: J.J. Reimers, secretary and treasurer of the Rock Island Lumber and Manufacturing Co., on behalf of that firm, contributed $500 toward construction of a new Methodist church. 1914 -- 100 years ago: Samuel Ryerson, county recorder, was re-elected president of the 19th District of Knights of Pythias. 1939 -- 75 years ago: Three condemnation suits have been filed by the city of Rock Island to acquire property needed for an approach to the Rock Island-Davenport bridge, which has been under construction since March 6. 1964 -- 50 years ago: Plans for an eight-story Sheraton Inn in downtown Rock Island were announced today at a luncheon meeting at the Gay Nineties sponsored by the Rock Island Chamber of Commerce. Cost of the structure is estimated at $2.5 million. 1989 -- 25 years ago: Representatives of the Hardee's Golf Classic and tournament sponsor Hardee's Food Systems may meet next week with PGA Tour Commissioner Deane Beman to discuss a possible change in the tournament dates.