Pension committee hears higher ed testimony

Photo of gold pocket watch and retirement greeting cardHigher education leaders from across the state, including Northern Illinois University acting executive vice president of business and finance Steven Cunningham, testified before a 10-member bipartisan legislative conference committee during a 9 a.m. July 3 meeting at the Michael Bilandic Building in Chicago. The group advocated for the Institute for Government and Public Affairs’ (IGPA) six step plan for reforming the State Universities Retirement System (SURS) outlined in its March 2013 “Six Simple Steps: Reforming the Illinois State Universities Retirement System” report.

Cunningham, Avijit Ghosh and Jeffrey Brown from the IGPA, and Southern Illinois University president Glenn Poshard each provided testimony to the committee.

Poshard told the committee that universities see the plan as “our last best hope going forward” and a way to achieve “long-term stability based on shared sacrifice.”

“Our students rely on a sound system of higher education,” Cunningham said about the gravity of the decisions being made. “There is no single greater budgetary influence on higher education than the state’s general revenue funding that currently includes employer pension contributions….We believe this package best serves the overall interests of our students, faculty and staff.”

Steve Cunningham

Steve Cunningham

Cunningham pointed to the faculty and staff turnover that has taken place in just the past three years, noting 60 percent of the employee turnover has been at the mid-career level.

“We’ve experienced a 40 percent turnover in faculty and staff in the past four years, and the single largest determinant is the uncertain status of our pension system funding,” he said. “We’re trying to balance fiscal integrity with a reasonable set of options that brings about sustainability for the pension system. That in and of itself is important to our faculty and staff.”

“We are offering a new program that offers long term purchasing power protection, plus the mandatory state payments and the right to enforce those payments,” Ghosh told the committee.

Brown—who has extensive experience in analyzing the nation’s Social Security and Medicare programs in addition to Illinois’ state pension system—provided insights into the importance of offering retirees protection against inflation, especially as the SURS plays an important role in replacing Social Security. He explained how tying the COLA benefits to inflation would protect retirees and actually offer them a new benefit.

“The current system gives them (retirees) certainty in terms of nominal dollars but doesn’t provide certainty as to what these nominal dollars will buy,” he told the committee.

Brown also advocated for the hybrid system proposed in the six-step plan, which combines the best of defined benefit and defined contribution programs, while also avoiding the stress that the Tier II plan put on the system.

Committee member Darlene Senger told Brown, “Your comment on the hybrid plan made a lot of sense.”

Committee Chairman Sen. Kwame Raoul and Vice Chairwoman Rep. Elaine Nekritz said Wednesday the committee is dispensing with rival proposals sponsored by House Speaker Michael Madigan and Senate President John Cullerton in order to develop a new plan that achieves key goals of each chamber’s proposal: achieving enough cost savings to save the system, being fair to state workers and retirees and would be likely to survive a court challenge.

The leaders of the legislative committee trying to forge a compromise on Illinois’ pension crisis said the six-step plan proposed by colleges and universities provides an “attractive framework” for reform, and they want to study it further.

Gov. Pat Quinn gave the committee deadline of Tuesday, July 9. However, committee leaders said they won’t meet it. They asked for actuarial analysis, which will take several weeks to complete. They want to analyze how much the universities’ plan — with some “tweaks”— would save the state if applied to its other public-employee retirement systems.

The committee’s next meeting is set for 3 p.m. July 8, in Springfield. NIU administrators will remain engaged in the pension reform process and will report updates on NIU Today and its state pension and budget website as they become available.

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