Question of the day
Wednesday, Apr 8, 2026 - Posted by Rich Miller
* We Are One Illinois…
Yesterday, the Illinois Economic Policy Institute released a new report documenting the urgent need to fix Illinois’ woefully inadequate Tier 2 pension system. The report highlights the many ways Tier 2 has damaged public sector employment, creating shortages of teachers, firefighters, and state and local government employees who deliver critical services across the state. Tier 2 is also widely believed to be in violation of federal law, exposing state and local governments to a potentially devastating lawsuit.
The ILEPI report analyzed several potential fixes to Tier 2 pensions, including SB1937, proposed by We Are One Illinois. According to the report, “Tier 2 pension reforms could be funded without increasing income taxes, corporate taxes, or sales taxes. The reforms can be paid for almost entirely by repurposing legacy debt.” The report concludes that SB1937 “would be credit-neutral for the State of Illinois, would incentivize more highly qualified people to seek out and remain in the public sector, and would enhance economic activity by nearly $600 million annually.” […]
SB1937 makes a number of improvements, including:
• Improving the Tier 2 final average salary calculation to the average of the highest 6 of an employee’s final 10 years on the job.
• Lowering the Tier 2 retirement age to age 62 if the employee has maxed out their pension, 65 with 20 years of service, or 67 with 10 years of service.
• Improving the Tier 2 cost-of-living adjustment to 3% simple interest per year.
• Adjusting the Tier 2 pension salary cap to match the Social Security Wage Base, addressing the so-called “safe harbor” problem.
• Reforming the pension funding ramp to reach 90% funding by 2045 and 100% funding by 2049.
* From that Illinois Economic Policy Institute report…
The bill is here. It hasn’t moved since last December, when it was assigned to the House Rules Committee.
* The Question: Do you think all these fixes are needed? Explain.
- JS Mill - Wednesday, Apr 8, 26 @ 11:08 am:
SB1937 makes the most sense and seems to be the least costly of all of the proposals that I have seen. Probably why it won’t pass in this iteration, but it does seem to fix the problem. Especially by adjusting the salary cap to meet SSI.
I don’t think the 100% goal by 2049 is necessary. 80% would be just fine actually and iirc, is higher than many industry best practice levels.
- City Zen - Wednesday, Apr 8, 26 @ 11:37 am:
There is zero proof that any alleged worker shortage is due to a different pension tier.
If folks really want to be firefighters/social workers/teachers but Illinois Tier 2 is preventing them, there are 49 other states where you can be those things. Of course, there is a good chance your salary will be much lower and, therefore, your pension. I bid you farewell.
Outside of maybe the safe harbor adjustment, none of these enhancements are needed. I have yet to hear what they’re willing to exchange for increased pension benefits. Would Tier 2 teachers be willing to contribute 15% to retire five years earlier? 11% for 3% simple COLA? Everything has a price.
- Roman - Wednesday, Apr 8, 26 @ 11:39 am:
I’m sympathetic to the notion that Tier 2 is a lousy pension. It’s just that the fix is too costly.
My main quibble with the study is the authors say Tier 2 is an obstacle to attracting entry level workers based on interviews they’ve done with government agencies. They should survey young job seekers. Talk to anyone between the ages of 18 and 23 who is looking to start a career. Most of them have no idea what a pension is and those who do will never tell you “I was gonna take Job A, but I went with Job B because the retirement benefits are better.” That’s just not the way young people think.
On the other hand, I could see how Tier 2 impedes retention. Older employees could very well stick it out in job based on good retirement benefits.
- Friendly Bob Adams - Wednesday, Apr 8, 26 @ 11:45 am:
Tier 2 is a disincentive for employees, particularly teachers, to continue in their profession. I know some teachers who are seriously examining their future prospects and are likely to leave teaching. Reforms to Tier 2 might help keep good teachers teaching.
- Anyone Remember - Wednesday, Apr 8, 26 @ 11:47 am:
“ … The reforms can be paid for almost entirely by repurposing legacy debt.”
Logically it seems to make sense, but after 16 years of Blago / Quinn / Rauner, anything proposed with such an artful turn of the phrase sets off my spidey-sense, indicating a more thorough analysis is needed.
- The Chicken Man - Wednesday, Apr 8, 26 @ 11:57 am:
Tier 2 was the last sane policy implemented by Illinois Government. Let’s not go backwards.
- City Zen - Wednesday, Apr 8, 26 @ 11:57 am:
==80% would be just fine actually and iirc, is higher than many industry best practice levels.==
Those “industry best practice levels” only pencil out if the governing bodies follow those same industry practices, which they do not.
Our government pension systems assume obligations (discount rate) will grow at the same rate as assets (rate of return). Using these assumptions, only a 100% funding level is safe.
Pull up any corporate pension plan and you’ll see a discount rate lower than investment rate of return. That’s why 80% funding works because the investements over time will catch up to the liability.
The state could make sense of 80% actuarially, but that would result in a massive increase in the pension liability and they’d be in the same deep hole with a different end target.
- Flyin' Elvis'-Utah Chapter - Wednesday, Apr 8, 26 @ 12:05 pm:
Will they help, maybe.
I said it when Tier 2 passed. Thinking you’re going to get qualified, educated personnel to work in a prison/mental health facility for 30+ years for a pension that will make them lower middle class is pure foolishness.
Tier 1 was the overall enticement for workers that had options.
- JS Mill - Wednesday, Apr 8, 26 @ 12:17 pm:
=There is zero proof that any alleged worker shortage is due to a different pension tier.=
I doubt you have actually looked for proof. As someone who hires teachers and lost a lot of them in the 2020’s to the private sector one of the primary concerns they had was ever reaching pension age as a teacher. Part of the issue is working with Tier 1 teachers who talked a lot about it to them. This is real, I doubt there is a “number or percentage” that you can find. BUt the anecdotal evidence is real. You don’t have to believe me obviously, but I will survive.
=Talk to anyone between the ages of 18 and 23 who is looking to start a career.=
See above. I talk to recent college grads and they know what a teachers pension is so, at least as it pertains to my field you are wrong.
=Pull up any corporate pension plan=
This is a public sector plan. Public schools/state employees are not corporate. You can dream about that but it is a waste of time.
80% funding would save money but none of it would matter if the state does not pay its obligations.
At the end of the day, falling out of safe harbor compliance would cost the state and taxpayers more not less than getting into compliance because all of those employees would be eligible for SSI for those that want it to stay the same. And that is also a bargaining chip for the employees.
- ex-asa - Wednesday, Apr 8, 26 @ 12:25 pm:
The legislature knew that they were likely violating the safe harbor provision even before Tier II was passed — I think the quote from the committee hearing was, “well that’s a problem for a future legislative body.”
The Chairs of both Pension Committees have publicly stated that the current law is unconstitutional because it doesn’t complying with the safe harbor provisions.
The credit agencies have already stated that they will not downgrade Illinois’ credit rating if changes were made to Tier II in order to comply with federal law.
By not raising the Tier II cap up to the Social Security Cap, Illinois’ pension funds are missing out on receiving additional employee contributions as employee’s contributions now stop once they reach the Tier II cap.
Somebody needs to introduce a clean bill that simply raises the Tier II cap to the social security wage base — not a 650 page comprehensive pension reform bill, not a bill that with a bunch of other reforms that brings with it a 15 billion dollar price tag.
I know that Pritzker may be reluctant to do anything that’s going to harm his future run for president, but how is it going to play out on the campaign trail when someone in Trump’s administration brings a suit alleging that Illinois is violated federal law by shortchanging their public employee pensions?
- Jibba - Wednesday, Apr 8, 26 @ 12:30 pm:
Much of Tier 2 was done in a time of extreme budget crisis and was cheered on by those who wanted to punish state employees, portraying them as hogs at the trough. Some changes are clearly needed.
All jobs should have a decent pension and benefits. The safe harbor provisions need to be completely satisfied, and a decent COLA is absolutely necessary to keep people out of poverty in their old age. The exact numbers might need negotiation, but those are clearly needed as a start. I don’t support changing the ramp or final percent funding because that is the thin end of the wedge.
- Leap Day William - Wednesday, Apr 8, 26 @ 12:31 pm:
I think this is a sane series of fixes, and I would rank them in this order for solely personal reasons:
I’m a Tier 1 employee but the other half is a Tier 2 who came here after a decade-plus in private higher education in another state. Between my various stints in state and local agencies over my career, I hit 30-and-out at 56, and max out at fully at 62. They will hit 20 years of service at 63, but if certain family medical traits relating to ALZ end up being passed on they’ll be forced into retirement within a couple of years of that. It would be nice to not have the 0.5% reduction for every month they retired before age 67 as we’re looking at memory care costs.
Having the safe harbor problem addressed helps for sure, as does the COLA adjustment being less punitive. The salary averaging rule is a nice to have, but given the paltry raises that have come our way as of late, short of a title change and promotion this isn’t as important. The age 67 rule change would massively adjust our retirement calculus, though.
Even if the state does nothing to adjust Tier 2, the picture is at least a little brighter because we no longer have to forfeit Social Security to pension offset rules.
- Demoralized - Wednesday, Apr 8, 26 @ 12:32 pm:
Why would anyone want to be a teacher if when you start teaching right out of college you have to work 45 years before you’re eligible for a pension?
- H-W - Wednesday, Apr 8, 26 @ 12:34 pm:
@ Roman
=== Most of them have no idea what a pension is and those who do will never tell you “I was gonna take Job A, but I went with Job B because the retirement benefits are better. ===
I did. I left the private sector of higher education after 10 years (Millikin, Xavier University of Louisiana) and came to the public sector of higher education (Western Illinois University) because a guaranteed pension was a better option that the 401/403 in many ways.
- Rich Miller - Wednesday, Apr 8, 26 @ 12:39 pm:
===how is it going to play out on the campaign trail when someone in Trump’s administration brings a suit alleging that Illinois is violated federal law by shortchanging their public employee pensions?===
lol
Yeah, that’ll be the issue that topples him. For sure.