Although the agreement described below might sound like a welcome relief to teachers, Gov. Rauner’s Turnaround Agenda pushed a local property tax freeze (pg. 9) and municipal bankruptcy (pg. 12) that may allow local municipalities to declare bankruptcy.
Currently, teachers’ pensions are protected at the State level:
For the foregoing reasons, the judgment of the circuit court declaring Public Act 98-599 to be unconstitutional and permanently enjoining its enforcement is affirmed.
The question is whether or not pensions funded locally will continue to be protected under state law if moved to the local level. Current legislation suggests they may not.
HB0298 will amend the Illinois Municipal Code. In provisions concerning finance, it provides that a municipality may file a petition and exercise powers pursuant to applicable federal bankruptcy law. Effective immediately.
The last action taken on this bill took place 1/10/2017 in the House: Session Sine Die.
HB2575 was introduced in the House on 2/8/2017.
HB2575 creates the Illinois Local Government Protection Authority Act. Provides findings of the General Assembly and establishes the Authority with the purpose of achieving solutions to financial difficulties faced by units of local government. Defines terms and creates a board of trustees. Sets forth the Authority’s duties and powers, including the ability to obtain the unit of local government’s records and to recommend revenue increases. Provides for a petition process, whereby certain entities may petition the Authority to review a unit of local government. Sets forth participation requirements.
Section 35 – Powers
The Authority shall have the power to:
m) Consider and make recommendations to the General
Assembly legislation regarding an economic safety net whereby
the State shall provide a set of fallback post-employment
benefits for employees in the event that a public employer has
not resolved the underfunding of its pension plan and
thereafter is unable to pay its retirees. The program shall use
the federal Pension Benefit Guaranty Corporation* as its model.
Contractual benefits would have to meet affordability tests
prior to being approved for safety net funding. The outcomes of
the affordability tests may result in smaller benefit payments
that were initially promised to the employees by the defaulted
Section 40 – Petition and criteria
The Authority may exercise its authority over a unit of local government
under this Act, if the Authority is petitioned and the Authority
accepts the participation of the unit of local government
identified in the petition. The Authority has absolute
discretion regarding acceptance or denial of any petition and
participation of a unit of local government. The Authority
shall create rules regarding the petition, procedure, format,
and required documentation.
a) The following parties may petition the Authority:
(1) the Illinois Comptroller;
(2) a unit of local government;
(3) a Significant Past Due Creditor; or
(4) a pension fund.
If the Illinois Comptroller, a Significant Past Due
Creditor, or a pension fund petitions the Authority, their
petition shall include documentation of the unit of local
government’s approval of the petition and participation.
* The Pension Benefit Guaranty Corporation (PBGC) takes over pension plans. The termination of a defined-benefit plan is initiated by the employer, either by a standard termination or a distress termination.
Under a standard termination, the employer must demonstrate to the PBGC that there are sufficient assets under the plan to pay all benefits owed under the plan to participants.
A distress termination occurs when the plan is being terminated but there are not sufficient assets under the plan to pay benefits.
Generally, the PBGC steps in to take over the administration of a pension plan when either a distressed termination is initiated by the plan sponsor or the PBGC determines that a plan will be unable to meet its obligations and mandates a takeover.
Distress terminations generally occur in conjunction with bankruptcy, but in most cases, a PBGC mandated takeover is the method by which the entity becomes responsible for a plan.
Post By: Illinois Policy Institute
RE: Illinois Policy Institute
• Meet the Little-Known Network Pushing Ideas for Kochs, ALEC
• Illinois Policy Institute (IPI)
• State Policy Network (SPN)
• Conservative Transparency
In the midst of Illinois’ pension crisis, River Forest District 90 has agreed to pay 100 percent of teacher contributions to the Teachers’ Retirement System – and it did so secretly
In Illinois, negotiations between local governments and government workers are done in secret. That’s a problem for taxpayers.
It means residents can be saddled with expensive contract provisions and can’t react until the contract is a done deal. And by then, it’s too late.
The latest example: River Forest District 90. That school district just renewed an agreement to pay 100 percent of teachers’ pensions contributions – the share the teachers are supposed to pay – as an additional benefit.
By law, teachers are obligated to pay 9 percent of their salary into the retirement system. But half of Illinois’ school districts take on that obligation themselves. Instead of having teachers contribute to their own retirement, the school districts agree to pay it for them.
Of course, forcing taxpayers to pay 100 percent of the contribution – while teachers themselves contribute nothing toward their retirement – isn’t the only issue.
A big problem is the secrecy of District 90’s negotiations. Bargaining between the union and school district happened away from public scrutiny. And that means taxpayers couldn’t find out the details of the deal until it was too late.
What’s more, the contract was negotiated under the leadership of School Board President Ralph Martire – whose own organization, the Center for Tax and Budget Accountability, or CTBA, is heavily funded by government unions.
That means taxpayers in District 90 were essentially left without true representation in the negotiation process.