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House Amendments to Senate Bill 1 Oppose Unfair, Unconstitutional Pension Cuts

Public employees are willing to do their part to help preserve their pension benefits, but they arent willing to bear the entire burden. State employee pensions for those who worked for decades in public service are modest even with the cost-of-living allowances (COLAs) generated under the current pension formula. The We Are One Illinois coalition of public-employee unions is committed to working collaboratively to develop real pension system funding solutions that are fair and constitutional. House Amendments to SB 1 unilaterally and illegally diminish benefits for all state retirement systems (except the Judges), even though the Illinois Constitution specifically states that pension benefits are a contractual right that cannot be diminished or impaired. The amended bill would make it impossible for retirees to keep up with rising cost-of-living in retirement. Just through its COLA caps, the bill illegally cuts the value of a retirees pension between 28% to 31% after twenty years in retirement. On top of that, the amendment also freezes COLAs until age 67 or five years after retirement. o Pensions are the life-savings of public servants their most reliable means of retirement security particularly for the 80% of workers in state-funded retirement systems not eligible for Social Security. o All the while, senior citizens as major consumers of health care services are one of the most at-risk demographic groups subject to inflationary pressures. House Amendments to SB 1 increases retirement ages between one and five years without consideration for employees with physically-demanding professions, such as police officers, fire fighters, corrections officers, and nurses. o An increase in retirement age effectively causes an individuals accrued benefits to lose 6% in value for each year of increase. A younger worker under the age of 35 in this instance would lose 30% of his or her pensions value if this amendment became law. Even slightly older workers those between 35 and 40 would face a loss in value of 18% upon retirement. The amendment also increases employee contributions and caps the amount of salary that earns a pension. Combined with other cuts, this further balances Illinois pension debt on the backs of workers who did not cause the problem and paid into the pension systems out of every paycheck. Law changes made by the amendment are exempt from collective bargaining, denying democratic, representational rights to hundreds of thousands of workers. House Amendments to SB 1 create new problems. The bill breaches federal law by cutting pensions so steeply that TRS and, likely, SURS would fail to qualify as alternatives to Social Security. This would eventually force school districts, universities, and community colleges -- as well as employees -- to begin paying Social Security payroll taxes, leading to property tax hikes and higher tuition.

Inviting a legal challenge will lead to several years of budget uncertainty, doing little to address Standard & Poors concerns as expressed in its downgrade of Illinois bond rating. Further, if litigation overturns the amended bill, Illinois will have kicked the can down the road and further jeopardized its fiscal situation and the solvency of its pension systems. It may even owe back-payments to the pension systems.