I spent much of the spring legislative session working on pension stabilization for the State of Illinois. My goal in taking on this issue is to make sure the pension systems have the resources they need to pay benefits and to make the pension payment affordable for the State.
A solution is critically important. In the state budget that was just approved at the end of May, the increase in the pension payment was approximately $1 billion. Our entire anticipated new revenues for the year are $750 million. Every new dollar in revenue, and more, went to pay for pensions. As a result, everything else was cut significantly.
The situation doesn’t get better for the budget to be developed in the spring of 2013. We can anticipate an increase of around $800 million for the pension payment. At this point, new revenues are anticipated to be around $1 billion. While that generates some new revenue, it is barely enough to restore education funding back where it was last year or meet other state priorities.
The proposal being considered was to ask employees to take smaller increases in their check after retiring. In addition, the increases would not start until 5 years after retirement, or age 67, whichever is earlier.
In return, employees would receive guaranteed access to a retiree health care benefit and a guarantee that all future salary increases would be included in the pension calculation – guarantees that employees do not currently enjoy.
Conversely, an employee could elect to keep the current 3% compounded increase but not have access to the retiree health care system, and, for active employees, salary would be frozen at its current level for purposes of determining the pension benefit at retirement.
The legislation would require the State to pay for all pension debt accumulated to date. It would also shift, over a number of years, the cost of pension benefits going forward onto the local employer, namely school districts, community college districts, and public universities. It does this very slowly, while the going-forward cost will also be declining as a consequence of other reforms.
The policy behind this shift is to assure that the organization setting wages and benefits takes into account the full cost of awarding those wages and benefits.
The pension debate is just one part of the effort to bring fiscal stability to the Illinois state budget. As I mentioned above, every part of the state budget has been cut. We voted to reduce health care for the poor and aged in Illinois (see the Medicaid discussion below). The General Assembly cut our own pay for the last four years and will be imposing the same pension changes for our pensions as outlined above. There is pain being imposed everywhere in the state budget.
None of this is pleasant. But it is necessary to achieve a sound and predictable state government for the future.
I wanted to update you also on some recent changes made to the Medicaid program in Illinois. The Medicaid system in Illinois was on the brink of collapse this past year, with a $2.7 billion hole in the FY 2013 budget plus a backlog of unpaid Medicaid bills. Legislation was passed to close the hole and find new revenues for the program. Some of the legislation passed included:
* Senate Bill 2840 (SMART Act) – “Save Medicaid Access and Resources Together Act” – includes $1.6 billion in 62 spending reductions, utilization controls, and provider rate cuts; and
* Senate Bill 2194 – $1 per pack cigarette tax increase provides $700 million for Medicaid; a new hospital assessment program provides $100 million for Medicaid (and $480 million for hospitals); also includes charity care standards for property tax exemptions for non-profit hospitals.
I supported both of these bills and will continue to work to make sure the Medicaid system is properly funded in years to come in Illinois.
Northbrook 4th of July Parade
This year I will be walking in the Northbrook 4th of July parade that takes place at 2:30 p.m. on the Fourth. It begins on Cherry Lane in Northbrook. I hope that you and your family will be able to join me this year. Please RSVP to firstname.lastname@example.org or call 847-257-0450 for more information.