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December 3, 2013

Ill. Legislature OKs fix for $100B pension crisis

SPRINGFIELD, Ill. — The Illinois Legislature approved a historic plan Tuesday to eliminate the state’s $100 billion pension shortfall, a long-delayed decision proponents described as critical to repairing the state’s deeply troubled finances but that faces the immediate threat of a legal challenge from labor unions.

The House voted 62-53 in favor of the plan, which makes deep cuts in state employees’ retirement benefits, minutes after it was approved by a more union-friendly Senate, 30-24. Both chambers are controlled by Democrats, traditional allies of the unions.

The measure now goes to Gov. Pat Quinn, who said he expects to sign it promptly. The Chicago Democrat, who has pushed for years for a fix for the nation’s worst-funded state pension system, declared a victory.

“Today, we have won. The people of Illinois have won,” Quinn said. “This landmark legislation is a bipartisan solution that squarely addresses the most difficult fiscal issue Illinois has ever confronted.”

But the state’s finances are far from in the clear, even with the $160 billion in savings the plan is estimated to provide over the next three decades.

Public-employee unions said they will seek to have the law thrown out because they believe it violates a provision of the state Constitution that says pension benefits may not be diminished. That could delay any positive movement on the state’s credit rating, also the nation’s worst after the major ratings agencies have repeatedly downgraded because of the massive unfunded pension liability.

A coalition of unions known as We Are One Illinois, which lobbied heavily against the bill, issued a statement saying the legislation is unfair to workers and retirees who for years made faithful contributions to retirement systems but now will see benefits cut because of government mismanagement.

“This is no victory for Illinois, but a dark day for its citizens and public servants,” they said. “Teachers, caregivers, police and others stand to lose huge portions of their life savings because politicians chose to threaten their retirement security.”

Illinois’ unfunded pension problem is due largely to lawmakers’ failure for decades to make the state’s full payments to the funds.

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