It’s a critical time to fix Illinois' pension program for public-sector employees hired after 2011 — but it may not happen this fall, state Rep. Jay Hoffman told pension-eligible employees of Southern Illinois University Edwardsville on Tuesday.
“I don't think there's enough time to do it and do it correctly,” Hoffman said.
Hoffman, D-Swansea, chairs the Illinois General Assembly’s Pensions Working Group that has led negotiations on reforms. Lawmakers have been trying to change the state’s Tier 2 pensions for a couple of years and a legislative proposal could be one of the bigger subjects addressed during the fall veto session, which starts Oct. 14. Tier 2 pensions cover local public employees, such as teachers.
“Hopefully this spring, we're going to be able to pass something substantial that's going to fix Tier 2 long term,” Hoffman told SIUE’s chapter of the State Universities Annuitants Association, which advocates for university employee benefits.
Problems with Tier 2 pensions have created issues for school districts hiring teachers, specifically near state borders, Hoffman said. It’s the same for universities, according to Bryan Soady, executive director of the association.
“It's imperative, not only to Illinois’ economic well-being, but to our own future with higher education and training the next generation’s workforce,” Soady said.
Illinois lawmakers did not finalize legislation that would amend Tier 2 pensions, the retirement accounts for public sector employees hired after 2011, during the spring session.
One of the biggest problems with Tier 2 pensions is that some employees fail what’s known as the “Safe Harbor” test, Capitol News Illinois reported. That requires pension benefits to be equivalent to Social Security benefits. If not, the state must make up the difference.
A proposal filed late in the legislative session in May would have increased the limit on earnings for those entering the Tier 2 system to be equal to the base Social Security wage. It would have also raised cost-of-living adjustments 3% every year, and it would allow beneficiaries to retire at 62 instead of 67 if they’ve maxed out their pensions.
Because the negotiation was reached so late in the session, lawmakers and Gov. JB Pritzker opted to set aside $75 million in the budget to fund any gaps in Tier 2 until legislation is enacted.
While the legislation may have had the votes to pass, Hoffman said it wouldn’t be worth ramming through a bill that the governor’s office said needed more time to study.
“It does no good to send a bill to the governor until he’s comfortable with it and his financial people are comfortable with it,” Hoffman said.
Because the General Assembly runs on two-year cycles, the legislation can carry over to the 2026 spring session if lawmakers don’t pass it next month, Hoffman said.
Some critics of the larger reform have argued that further changes to the system would result in adding needless debt to the state’s coffers.
Making sure the bill is financially responsible will be top of mind for lawmakers and the governor’s office, Hoffman said. Both will want to keep the state’s credit rating from back sliding.
Hoffman said he was one of the few Democrats that voted against the creation of Tier 2 in 2010, joking that then-Gov. Pat Quinn didn’t talk to him for a year after the vote.
Hoffman, who was first elected in 1990, believes this legislation will address some historic disparities created by Tier 2 by getting state and local government employees on the same playing field. However, one of the biggest concerns will come from local governments in lower-income communities that are already falling behind on police and firefighter pensions, Hoffman said.
“The last thing we would want to do is say, ‘OK, we're going to fix the problem when it comes to state employees, but we're not going to fix the problem for local governmental employees,’” Hoffman said.
Illinois has diverted funds from East St. Louis’ budget because the city government had struggled to meet retirement contributions for police and fire pensions, for example.
Passing any improvement to the Tier 2 system will be critical for public employees, Soady said.
“We want any steps towards progress to begin immediately,” he said. “But we also recognize that there's a lot of people at the table, and Rome wasn't built in a day. We want to get it right.”
