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Illinois moves to end defined benefit pensions for Chicago teachers... SB 512 is latest attack on teacher pensions as Big Business continues push to put teachers into risky 401k plans under guise of 'choice'

Jim Vail - May 28, 2011

Despite furious calls to legislators from public sector workers and pensioners around the state the past two weeks, the Illinois House of Representatives Personnel and Pensions committee took one big step forward to seriously gutting public sector pensions in Illinois during the last week of May 2011.

The committee passed by a vote of 6-2 an amendment to Senate Bill 512, which is now headed for a vote in the full house.

“This is big, negative news,” said Kevin Huber, the director of the Chicago Teachers Pension Fund director.

The latest bill, according to CTPF, would force teachers to choose one of three options:

1. The 'Tier 1' benefit structure at a cost of 12.75% of salary (up from 9%). This option is available only for those current employees hired prior to January 1, 2011.

2. The 'Tier 2' benefit structure at a cost of 7% of salary (this is the greatly reduced benefit structure that includes using the highest 8 years instead of 4, salary caps, lower cost of living increases, and a minimum retirement age of 67). This option is available for all current employees.

3. A "self managed" plan (basically, a defined contribution plan like a 401K) only for employees with less than five years of service. They would contribute a minimum of 6% of their salary to this plan, matched by a 6% employer contribution, and they would control the investment of the money and also assume the risk of investment.

According to CTPF, the contribution rate in options 1 or 2 will be recalculated every three years, which would allow the state to further decrease its contributions to the public workers pensions, eventually ending the teachers' defined pension benefit plan.

CTPF said employees would also get to reselect from the three options above every three years.

So who are public school teachers and state public workers up against in this pension fight? The powerful business lobby who helped write the anti-union Senate Bill 7 to effectively strip the Chicago Teachers Union the right to strike (former CTU treasurer Linda Porter who ran against president Karen Lewis noted in one of her speeches last year that the last Chicago teachers strike in 1987 forced the Board to pay 7 percent into the pension fund).

R. Eden Martin (above, testifying before the Illinois House School Reform Committee on behalf of the "Performance Counts 2010" legislation in Aurora on December 17, 2010) has been leading and orchestrating the hysterical attacks on teacher and other public employee pensions on behalf of big business in Illinois. Alternately identifying himself as from the Civic Committee of the Commercial Club, the Illinois Business Roundtable, or his law firm (Winston and Strawn), Eden Martin has been testifying and doing Op Eds (in the Tribune) pushing the ultra-conservative Republican agenda on union and fiscal matters, often with support from both Democrats and Republicans in Springfield. Substance photo by George N. Schmidt.If you need to catch the weather and traffic on WBBM radio, you’ll hear the ads ‘Illinois is broke’ because of the public sector pensions. The ads are financed by big business. R. Eden Martin, president of the Civic Committee of the Commercial Club of Chicago, who testified on behalf of the anti-union bill, is one of the backers of Illinois is Broke. He says the state is buried by a backlog of unpaid bills, and is sinking under its enormous unfunded pension and other retirement-related liabilities, Reuters reported.

[It should be noted here that the Reuters story that featured Eden's comments called the Civic Committee "non partisan" meaning they work with both Democrats and Republicans to push anti-pension laws onto the books.]

Martin stated in the Reuters story that if nothing is done to tackle Illinois' $130 billion of debt, which includes $120 billion of "unfunded pension liabilities, retiree health care benefits and outstanding pension bonds," the state will be forced to cut funding for essential services or turn to massive tax increases.

The campaign's website, IllinoisIsBroke.com, includes a continuously updating tally of the state's mounting debt, Reuters dutifully reported, while Wall Street rating agencies have also taken note of Illinois' fiscal troubles, giving the state the second-lowest general obligation bond rating among the states after California.

The Chicago Teachers Union (CTU) has asked its members to counter these claims and call their state reps who will soon vote on the devastating pension bill.

Here is what state rep. Deb Mell said in response to this reporter’s plea to vote against SB 512.

“Thank you for writing to me about the state employees’ pension system. I share your concern that cutting benefits for hard working teachers and others will not solve the underfunding of the public pensions systems that have been drained by state budgeters over the past several years. Real solutions should be identified that consider the contributions and hard work of our state employees.

“I agree that we need to fulfill our obligation to public employees. As the General Assembly continues to debate the budget, I will continue working with my colleagues to ensure budget reforms have the least impact on our most valuable professionals."

Mell joined her colleagues last year and voted in favor of house speaker Mike Madigan’s anti-pension bill that increased the retirement age to 67 from 62 for new teachers, and gave the state a billion dollar write off for future pension payments. 

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