SPRINGFIELD — Illinois’ state universities and community colleges have agreed to gradually start picking up their own retirement costs under a preliminary deal that emerged at a public hearing Thursday, a step forward on a concept that’s been debated by lawmakers for more than a year.
Southern Illinois University President Glenn Poshard was among those testifying Thursday who said that they were willing to do their part to address Illinois’ nearly $100 billion pension crisis even if it would mean difficult decisions in the future.
“We are lean. There’s no question about that,” Poshard said during the hearing. “But we’re also deeply concerned ... that the long-term unfunded liability problem of this pension system get fixed because bottom line that’s where our employees depend on the stability and security of that system.”
Illinois currently pays pension costs for public universities, community colleges and most school districts. Proponents say shifting that obligation to schools will help Illinois’ financial mess.
But it’s been a controversial idea and had been a sticking point on pension talks. Opponents say the shift will raise property taxes, and universities have also said they’d have to raise tuition and cut programs.
Neither of the two pending pension overhauls have the concept included, though House Speaker Michael Madigan reiterated his promise that it would be on the table by lawmakers’ scheduled May 31 adjournment. Thursday’s hearing was the second Madigan held on the topic.
The leaders of several higher education institutions met with Madigan this week and agreed they would start paying half of 1 percent of retirement costs each year starting in fiscal year 2015 until they assume the full cost. Estimates on how long that would take varied. Poshard guessed about 10 years and others said it would be closer to 20 years depending on the outcome of a pension overhaul.
University and college officials said the proposed slow phase-in made it easier.
University of Illinois President Robert Easter said the university would have to be more efficient and the annual change would cost roughly $5 million or $6 million each year. Poshard said it would cost SIU roughly $3 million a year. For the City Colleges of Chicago it would mean roughly $1 million more each year.
Madigan, a Chicago Democrat, said more discussion is expected next week, along with a likely drafted bill. He and other lawmakers said they have to discuss a potential cost shift with local school districts, too.
Madigan has often said that schools get a “free lunch” because the state pays their teacher pension costs. Chicago Public Schools pays its own retirement costs.
“We will resolve the question of the ending the free lunch before we end this session for all components,” Madigan told reporters. “The goal here, at the end of all of this: The employer will pay the pension costs.”
Shifting the cost of employee pensions from the state to universities, community colleges and public schools is just one piece of the pension reform puzzle being pieced together in the waning days of the spring legislative session.
The idea, first floated by Senate President John Cullerton, would phase in the shift over a period of years to help ease the transition.
The state would eventually see the savings and the universities and school districts might rein in some of the end-of-career pay increases that have boosted the cost of pensions.
Madigan has said he hopes to push a pension reform through by the end of the May legislative session.