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JANUARY 2013 NEWSLETTER

New District Office

Beginning in January of this year, the boundaries of the 57th district have officially changed.  The district moved north and west and will include parts of: Northbrook, Mt. Prospect, Prospect Heights, Wheeling, Arlington Heights, Buffalo Grove, and Palatine.  I will be moving my district office in the next few weeks to: 830 S. Buffalo Grove Rd., Suite 120, Buffalo Grove, IL 60089.  My email will stay the same but my phone and fax will change.  I will be getting that information out as soon as possible.  We will also be hosting an open house in the new office so look for that invitation.

RTA New Web App

The Regional Transportation Authority (RTA) recently introduced a new web app that provides a more powerful online map and trip planner tool that provides its users with directions, travel itineraries, public transit schedules, maps, alternative routes, and travel alerts.  The web app can be accessed by logging on to www.goroo.com from the browser of any smart phone.  It is the RTA’s hope that this app will enhance the customer’s experience and increase transit ridership.

Pensions, Pensions, Pensions

I wanted to take the time to update you on the latest pension bill I have introduced – House Bill 98.

As you are no doubt aware, Illinois has the most underfunded pension systems in the nation.  This puts both taxpayers and public employees at risk.  For example, the Teachers Retirement System currently has inadequate assets to pay for the benefits of those ALREADY retired.  Therefore, all investment returns are going to pay benefits for those already retired and not building up equity for anyone currently paying in to the system and expecting a benefit in the future.  Future benefit payments are in jeopardy and the systems risk becoming insolvent.

This under funding is due in part to the failure of the State to make past payments in to the systems.  But that is only 50% of the story.  According to the bi-partisan Commission on Government Forecasting and Accountability, the other 50% of the under funding is due to the failure of actuarial assumptions, investment losses, benefit enhancements and other factors.

While there is plenty of finger pointing to go around, my view is that we can fix the blame or work to fix the problem.

I have introduced House Bill 98. This legislation makes comprehensive changes to four of the state pension systems to provide retirement security for those who are expecting a pension from the state and to make them affordable for taxpayers.

In making these changes, we attempted to protect those who receive small pensions and who need greater protection from inflation, as well as those who have more time invested in the systems, are closer to retirement and therefore least able to make career adjustments.  The bill also contains a strong funding guarantee to assure that the State keeps its promise to fund the pensions in the future.

This proposal cannot be viewed in isolation.  The General Assembly continues to make dramatic cuts to education funding, is closing prisons and mental health facilities and is reducing spending on health care for the poorest and most vulnerable citizens in Illinois, including, for example, children who rely on ventilators for their every breath.  Difficult and painful choices are required in order to balance all the competing demands facing state government.

I have laid out the details of House Bill 98 below:

TIER I Members (state employees in the current state pension system)

COLA (Cost of Living Adjustments)

Cost of living adjustments would apply only to the first $25,000 of someone’s pension if the retiree does not receive Social Security and $20,000 if the state pension is coordinated with Social Security.  The COLA adjustments wouldn’t take effect until a pensioner reaches age 67 or five years after retirement, whichever comes first.  This would apply to current retirees.

 

Retirement Age

-Retirement age increases would not apply to employees age 45 and older.

-One year is added to the current retirement age for employees between 40-44 years old.

-Three years for employees between 35-39.

-Five years for employees 34 and younger

Employee Contributions Increase

Tier 1 employees (employees in the current state pension systems)

– 1% for first fiscal year the legislation is in effect (Fiscal Year 2014 at the earliest)

-2% each year thereafter

Pensionable Salary (the amount of salary that counts toward a pension) is limited to the higher of the Social Security wage base or the participant’s salary when the legislation becomes law.

Tier 2 Members (employees hired since 2011)

All new employees in the Teachers Retirement System and State University Retirement System are placed in a cash balance plan. Employees are guaranteed a minimum defined benefit but employers have predictable costs and are protected from investment risk- this combines the best features of defined contribution (or 401k) plans and defined benefit plans. Local school districts can negotiate the generosity and cost of the benefit with employees

-TRS and SURS employees hired before the effective date can choose to remain in Tier 2 or join the cash plan

Employer Contributions

-Schools and colleges/universities will assume employer costs for benefits in the TRS and SURs systems now paid for by the state, with that responsibility shifting to them at a rate of 0.5 percent of payroll each year.  According to TRS, the total amount to be shifted is less than 1% of payroll.

-TRS and SURS employers will pay the specific pension cost of any employee’s salary they increase, to prevent a school from increasing a superintendent’s salary and then having other schools share in the cost of paying that increase once they have the responsibility of paying the pension costs for their employees.

-Employer contributions will be on a 30-year level funding plan to achieve 100 percent funding.

-Employer contributions will be enforced through court action or intercept of other state funds if payments are not made as required under the new funding plan.`

-Revenue now being used to pay pension obligation debt will annually go to pay the broader pension deficit down once the pension obligation bonds are paid off.  This would mean $693.5 million per year going to pay off pension debt starting in FY 2016, and $900 million per year starting FY 2020.

State Contributions

-Contributions set on a 30-year funding plan with 100% funding goal by 2043.

-Unions are allowed to take court action to force state, school districts and universities to pay their required pension contributions.

-Once Illinois pension bonds mature, revenue that had been used for debt service payment would be used to pay off unfunded pension liabilities.

-COLAs for General Assembly Retirement System members will match those of Tier 2 members in the other pension systems

I appreciate you keeping in touch with me on this issue.  Any input from current or retired teachers, school administrators, and those concerned with teacher pensions are helpful when crafting this complicated legislation.

 

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