A coalition of public employee unions Wednesday blasted legislation to address the state's underfunded worker pension systems and offered instead to make increased contributions — if the state guarantees its share of retirement payments and raises $2 billion by ending corporate tax benefits and imposing new taxes.
Appearing at the James R. Thompson Center, members of the We Are One Illinois coalition said plans backed by Gov. Pat Quinn and another proposal supported by a bipartisan group of lawmakers would violate the state constitution by reducing pension benefits guaranteed to workers. They predicted such a change would be overturned by the courts.
The unions said the primary problem is the state's failure to regularly fund its annual required contribution. The offer to require state workers and teachers to pay 2 percent more toward their retirement was conditional upon getting an "ironclad guarantee" in state law that government would fund its share of pension obligations as workers have done over the years.
To help fund those obligations, the unions proposed eliminating several corporate tax benefits as well as imposing new taxes on auto trade-ins, satellite TV service and downloaded digital entertainment. The new money also could be used to help offset cuts in other public social services, the group said.
But even with a new General Assembly soon to be sworn in, the prospect of closing so-called corporate tax loopholes — many of which have been on the books for decades — as well as imposing new taxes remains politically unpopular.
The proposal was the first comprehensive offer on the pension crisis from the union coalition, which includes the state's two major teacher organizations and the American Federation of State, County and Municipal Employees. The unions also called for a summit with Quinn and legislative leaders when the new General Assembly convenes Jan. 9. Quinn has asked that lame-duck lawmakers consider pension legislation in the days before new lawmakers are sworn in.
Kathy Griffin, vice president of the Illinois Education Association, said teachers and the vast majority of workers covered by the state's pension plans are not eligible for and do not receive Social Security, meaning their state pensions represent their retirement income.
"Illinois' pension problem is a revenue problem, and it is crucial that we have a revenue solution," she said.
At an appearance in Cicero, Quinn said he has made the state's full share of pension payments as chief executive, unlike previous governors. But the Democratic governor, who has received sharp criticism from traditional Democratic allies in organized labor, stopped short of backing a guaranteed pension payment.
"We want to work with the labor unions and the employee groups as far as we can, but ultimately the taxpayers come first, and that's what we have to do," Quinn said.
Illinois has the nation's most troubled state public employee pension system, with an unfunded liability of $95 billion.
Quinn has tried to bring public attention to the problem, notably through an online video featuring Squeezy the Pension Python, to demonstrate how the growing amount of tax dollars devoted to pensions threatens to overwhelm funding for education and other services.
The governor has backed a Senate-passed proposal that would require state workers to forgo an automatic compounded 3 percent cost of living increase in their pensions in exchange for accessing state-subsidized health care. Those keeping the cost-of-living increase would lose access to state health care in retirement. In addition, their pension benefits would be capped at their current salary level even if their paychecks went up.
Union officials said Quinn's plan was a "no-win" choice for workers who would see a significant loss of purchasing power as they grew older in their retirement years.
A more recent plan offered by a bipartisan group of lawmakers is also problematic, the unions said, including its cuts in cost-of-living increases and increased retirement ages.
Both bills would be subject to lengthy and costly lawsuits "and we think ultimately the courts will find it unconstitutional, which means all the work that they're putting into those bills will have been for naught," said Henry Bayer, executive director of AFSCME Council 31.
The unions said their offer of increased employee contributions of 2 percent of income would generate about $350 million a year toward pensions, or about $10 billion if amortized over 30 years.
At the same time, the unions proposed the end to more than $1.5 billion worth of tax exemptions. They include repealing recent tax breaks for CME Group Inc. and the Chicago Board Options Exchange, a tax break for for-profit hospitals, lowering the size of estates subject to taxes and curbing spending on economic development incentives for business.
The group also proposed a 5 percent tax on satellite TV service; requiring sales tax to be paid on the entire price of a new car rather than just the remaining balance after trade-in; and imposing the sales tax on e-books, movies, music and games digitally downloaded to smartphones and other electronic devices.
The new-car sales tax would raise an estimated $300 million, the group said; it pegged revenue estimates for the satellite tax at $75 million and the digital tax at $10 million. Quinn already has suggested the new-car sales tax as a way to plug a $300 million hole in repaying bonds used to fund public works projects.
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