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New Legislation Lowers Firefighter, Police Pensions

New Legislation Lowers Firefighter, Police Pensions

BusinessWeek

December 03, 2010

Illinois lawmakers approved legislation Thursday that reduces pension benefits for future local police officers and firefighters.

The measure also requires greater contributions from municipalities over the next 30 years to catch up with underfunded retirement programs.

The Senate voted 46-4 on the bill, sending it to Gov. Pat Quinn. A spokeswoman would not say whether Quinn would sign it.

Police and fire officials hired after Jan. 1 would have to work to age 55, instead of 50, to earn full benefits.

End-of-career pension bumps would end by requiring pension checks to be based on an average of an employee’s final eight years’ salary, not just the last year. The maximum salary that could be used to consider retirement benefits would be $106,800, adjusted each year for inflation.

Current employees would not be affected.

The proposal is reminiscent of a law Quinn signed earlier this year reducing benefits for future state employees to help ease the burden of state pension systems that are underfunded by more than $80 billion.

But the bill also requires cities and other municipalities to step up the pace in shoring up their retirement programs. They’d have to ensure that 90 percent of their obligations are covered by 2041.

“We’ve put a very strong commitment in here to make sure municipalities throughout the state pay their dues into the system,” said Sen. Terry Link, D-Waukegan, the legislation’s sponsor.

Unions representing police officers and firefighters agreed to benefit concessions as long as cities and counties were required to make adequate contributions to their employee retirement programs.

The Public Safety Employee coalition, a group of police and firefighter unions, said cities have traditionally overestimated the rate of return on invested funds, thereby justifying lower annual contributions. Others, they say, simply ignore the law.

But Chicago officials have complained because the city would have to pay $550 million more per year for 25 years beginning in 2015. Mayor Richard Daley’s chief financial officer warned this week that could mean a 60 percent increase in property taxes, the largest in the city’s history.

Senate President John Cullerton, D-Chicago, promised to work with city officials to ease the financial burden and to offer additional legislation when lawmakers return in January to take care of the problem.

But Sen. Antonio “Tony” Munoz, another Chicago Democrat, said the potential impact on Chicago is too great to risk adopting a proposal that didn’t address the matter with finality.

If municipalities don’t contribute the required amounts, the state comptroller must withhold state grants due the city or county, and contribute the money to the appropriate retirement fund.


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