* From a press release…
The presidents and chancellors of the 14 public universities in Illinois have unanimously endorsed a six-point proposal for addressing the state’s pension funding crisis as it relates to the State Universities Retirement System (SURS), and in a letter to the governor and legislative leaders they called it “a thoughtful and responsible approach.”
“We write to inform you of our unanimous endorsement of the reform proposal recently published by the Institute of Government and Public Affairs (IGPA) of the University of Illinois entitled, ‘Six Simple Steps: Reforming the Illinois State University Retirement System.’ We believe that, as a package, the steps outlined in this proposal represent a viable path forward for reforming the SURS pension plan,” the university chiefs stated. “Compared to other options, it represents the most desirable long-term solution.”
The individual steps outlined in detail in the IGPA paper (http://igpa.uillinois.edu/node/1753), which is part of the institute’s ongoing contribution to the pension funding dialogue, would do the following:
· Change the annual cost of living adjustment (COLA) to link it to the consumer price index
· Change the value of the Effective Rate of Interest to eliminate a so-called “hidden subsidy”
· Shift pension contributions by the state to colleges and universities in a gradual transition
· Increase employee contributions by an additional 2 percent
· Require the state to amortize the current SURS unfunded liability
· Provide a new “hybrid” defined-benefit/defined-contribution plan for new employees
The letter (http://go.my.illinois.edu/pensionletter) to Gov. Pat Quinn and the four legislative leaders, Democrat House Speaker Michael Madigan and Senate President John Cullerton, and Republican House Leader Tom Cross and Senate Leader Christine Radogno, was sent by the university presidents and chancellors on April 4. The General Assembly returns this week from its spring recess and faces a May 31 deadline for adjournment.
“Our goal has been to identify potential reforms that are financially prudent and consistent with principles of constitutionality, fairness, and equity,” the letter stated. It acknowledged the additional financial burdens to be borne by the universities and their employees through the cost shift and COLA adjustment.
“The cost shift will be feasible only if phased in slowly, as recommended in the (IGPA) paper, and made concurrent with a stabilization of general revenue appropriations during the transition,” the letter stated. “We also realize that linking cost of living adjustment to the CPI will reduce retiree earnings in the short term. But this change also provides long-term insurance against high inflation, a valuable benefit for participants.”
In closing, the presidents and chancellors reiterated their continued collective interest in “working with you and others in the General Assembly to translate these ideas into legislation.”
The cost shift they could agree to is not specifically defined out than as a “limited” shift, but the state would have to maintain “at least the current level of state appropriations” to the universities. So, no more cuts.
Linking COLAs to actual cost of living increases would obviously be quite costly during periods of high inflation. But here’s how it would work…
The retirement annuity of current and future retirees will increase annually by one-half of the unadjusted percentage increase (but not less than zero) in the consumer price index-u in the previous twelve months, compounded upon the preceding year’s annuity.
Read it all here.