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Illinois senators to consider 2 pension options

SPRINGFIELD (AP) — Illinois state senators are considering two possible paths toward addressing the nation's worst state pension crisis, including one option that would cut benefits for retirees and is almost certain to be challenged in court.

The Monday afternoon meeting could determine whether Illinois is on the cusp of a deal to address the nearly $100 billion funding shortfall by cutting benefits to public employees and retirees, or if the Senate will try to advance a more union-friendly proposal less likely to trigger a legal challenge.

Democrats control both legislative chambers, and the governor's office, and their majorities are veto-proof.

A spokeswoman for Senate President John Cullerton says he believes it all comes down to risk: Do lawmakers want to advance a House-backed, unilateral plan that likely saves more money but that the courts could ultimately throw out? Or would they prefer to stick with something the Chicago Democrat believes the Illinois Supreme Court would uphold?

"There is a lot of risk associated with passing a unilateral pension reform bill that may not be constitutional," Spokeswoman Rikeesha Phelon said last week. "Then, we've wasted time, we've wasted money and the money saved would be zero."

The House last week approved a pension bill sponsored by House Speaker Michael Madigan that would require public employees to pay 2 percent more toward their retirement benefits, reduce annual cost-of-living increases for retirees and increase the retirement age for workers under 45. Madigan, a Chicago Democrat, says the bill would reduce the state's pension liability by $30 billion.

Gov. Pat Quinn called it "the biggest step to date towards restoring fiscal stability to Illinois." A spokeswoman for the Senate's Republican leader said GOP members also support the measure and want Cullerton to call it for a vote in their chamber.

But union leaders have said a lawsuit is almost certain if the measure is signed into law. They say it violates a clause in the Illinois Constitution that states pension benefits "shall not be diminished or impaired."

"Our coalition has said time and again that we oppose unfair, unconstitutional pension cuts," the union coalition, We Are One Illinois, said in a statement. "Public workers and retirees should not be punished for a problem politicians created."

Madigan has said he is confident his plan would be found constitutional. He and other supporters say the court could find that Illinois' financial situation is so dire that the cuts were necessary and should be allowed.

The unions and Cullerton said last week that they had come up with the framework for a different proposal that senators are being briefed on in a closed-door meeting Monday afternoon.

The details of that plan have not been made public, but Phelon said it is would offer employees a choice between health insurance or cost-of-living increases. Cullerton believes the only way for a pension bill to be considered constitutional is for employees and retirees to be given that choice.

If the Senate proceeds with the union proposal, the measure would still face a vote in the House, where it would have a tough go, considering Madigan already has made his preference clear with his own legislation. Madigan has said the union plan won't save enough money, and he has accused labor leaders of stall tactics.

Illinois' five public employee pension funds contain only about 39 percent of the money needed to pay benefits currently promised to workers and retirees — the lowest funding ratio of any state in the nation. The shortfall is due largely to lawmakers skipping or shorting pension payments, though the economy and the fact retirees are living longer also contributed.

Next year, the annual payment to the funds is estimated at $6 billion — almost one-fifth of the state's general revenue. That's meant less money for essential services like schools and police, it's also made New York bond houses nervous, prompting them to downgrade Illinois to the lowest credit rating of any state in the country.

Despite the increased pressure, lawmakers have been unable to come up with a deal to address the problem, even as other states across the country took action on their own crises.

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