Fire, police pension cutback bill expected to move to House floor

By CHRIS WETTERICH

THE STATE JOURNAL-REGISTER

Lawmakers are finalizing the details of a bill that would reduce pension benefits for future police officers and firefighters and are expected to move it to the House floor Tuesday.

“I believe this bill is about as agreed (to by both sides) as we’re going to get to,” said Rep. Kevin McCarthy, D-Orland Park, the legislation’s chief sponsor. “This isn’t going to be the panacea … I think both sides received some things they were very happy about.”

The bill was being drafted by the Legislative Reference Bureau Monday morning and wasn’t immediately available, but McCarthy described its contents to the committee.

Rockford Mayor Larry Morrissey said while it is time for the General Assembly to act on the issue, benefits for existing employees and retirees also will have to be changed. He wants to see everyone put into a 401(k)-style defined contribution plan.

“We’re debating about what’s going to happen with future employees when we’re not doing any hiring,” Morrissey said. “What about all the existing employees and existing retirees?

Morrissey said there is warfare between citizens who don’t want a tax increase to fund oversized benefits and existing employees and retirees.

“We’re not doing the job we need to do as trustees … for them if we’re suggesting that somehow this bill, if it passes, is going to deal with all of our problems. It’s not,” Morrissey said. “We’re going to have to deal with the fact that we have a system for the existing employees and the existing retirees that’s not sustainable.”

Morrissey told the committee the legislature should realize that barring a vast improvement in the economy, some of the systems will go bankrupt and cities will end up in court. Public officials need to have a plan to reorganize those funds, he said.

“This is a problem nationwide,” Morrissey said.

Pat Devaney, president of the Associated Fire Fighters of Illinois, said most of the fiscal problems in the state’s 636 police and fire pension funds stem from cities underfunding them. Devaney said his group is waiting until the bill’s final language is drafted before taking a position. Who’s to blame for the shortfall in some of the systems is a major flashpoint, with the mayors blaming overly generous benefits passed by the General Assembly.

Devaney said he was “incredulous” that Morrissey did not think the bill went far enough.

“They’re solving it (pension problems) on the backs of benefits for future police officers and firefighters,” Devaney said. “Without question, it’s (changing benefits for current employees and retirees) unconstitutional.”

Springfield Mayor Tim Davlin said there probably are “things in there both sides feel are despicable” but said the bill is “a good start where we’re at today.”

Davlin said the coalition of cities seeking the changes would not seek to change benefits for existing police and firefighters. But he hoped the General Assembly would consider legislation aimed at finding more efficiencies in the systems in the spring.

Although no specific figures were available, the city of Springfield could realize savings quickly because the number of police and fire it employs is so low, it will have to hire new employees who would fall under the new system, Davlin said.

“We’re going to reap the benefits faster than any other community,” Davlin said. “We’re going to be doing more hiring than anybody else.”

Chris Wetterich can be reached at 788-1523.

What Senate Bill 3538 does:

-- Changes the standard retirement age for police and firefighters from age 50 to age 55

-- Allows police and firefighters to retire early at age 50, with a 6 percent reduction in their pension for each year they retire before age 55.

-- Leaves intact current provisions allowing firefighters and police to retire with maximum pension benefits of 75 percent of their salaries after 30 years of service. Police will continue to contribute 9.91 percent of their salaries and firefighters will continue to contribute 9.45 percent of their salaries.

-- Caps the maximum salary upon which a pension can be based at $106,800. That number will increase annually at half the urban consumer-price index.

-- Seeks to end the “spiking” of salaries through late-career raises and promotions by basing pensions on the employee’s final average salary, which will be calculated by using an employee’s highest paying eight years out of the last 10 years they worked. Today, police and fire pensions are based on the employee’s salary on their last day of work.

-- Cost of living increases will be based on 3 percent or half the urban consumer-price index, whichever is less. Today, COLAs are an automatic 3 percent.

-- Requires cities to have the systems 90 percent funded by 2041.

-- Starting in 2015, it allows the pension funds to petition the state comptroller to subtract funds from tax money owed to the cities by the state if a city does not make complete payments to the system.

-- Requires the Commission on Government Forecasting and Accountability to assess the status of the 636 police and fire pension funds. It will also study the feasibility and desirability of pooling those funds together. Mayors believe that the pension funds would be more solvent if they were combined into one or two funds, similar to the Illinois Municipal Retirement Fund, which provides pensions for non-public safety workers in local governments. COGFA’s report is due Jan. 1, 2013.

An Opportunity to Reform Workers’ Compensation

If someone wrenches his back while hanging holiday lights at home, should his employer be forced to pay compensation just because he aggravated that same injury while at work?

And, is it logical that a state arbitrator’s opinion about the severity of a workers’ compensation injury is more influential than a medical doctor’s opinion and guidelines approved by the American Medical Association?
Of course not.
However, those two scenarios reflect the reality of a broken, biased and needlessly expensive Illinois workers’ compensation system that is overdue for reform.
Finally, some legislators – who have heard the Illinois Chamber’s call for workers’ compensation reform and seen the steady exodus of companies and jobs to states where business costs are lower – are willing to demonstrate leadership in addressing employers’ concerns.
Senate President John Cullerton (D-Chicago) announced last week that he has formed a bipartisan committee, the Special Committee on Workers’ Compensation Reform, which is an important first step in pursuit of meaningful legislation.
The group will conduct two hearings – Nov. 29 in Springfield and Dec. 8 in Chicago – before drafting legislation. The stated intention is to pass legislation out of the Senate before the close of the current General Assembly the first week of January.
It’s vital for the Illinois Chamber and our members to educate the six Senators on the committee – Cullerton, Republican Leader Christine Radogno (R-Lemont), Kirk Dillard (R-Hinsdale), William Haine (D-Alton), Kyle McCarter (R-Lebanon) and Ira Silverstein (D-Chicago) – about why strong workers’ compensation reform is absolutely essential for Illinois.
What You Can Do
Now is the time to tell your stories about how a costly workers’ compensation system filled with fraud and subjective decision-making has driven up costs for many businesses and compelled others to relocate out of state.
Until state leaders hear from employers like you, they will assume that the campaign to reform workers’ compensation isn’t a widespread concern. Your letters and e-mails directed to Senators Cullerton and Rodogno are extremely effective ways to build momentum toward real reform.
When you talk with legislators to let them know about your company’s struggles with workers’ compensation, remind them that Illinois has the third-highest workers’ compensation costs in the country, according to the Oregon Department of Consumer and Business Services’ national benchmarking study. Just four years ago, Illinois was 20th, according to the study. In those four years, Illinois’ workers’ compensation costs have jumped 15 percent while the national average has plunged 20 percent.
You can find more information about the Chamber’s battle for  workers’ compensation reforms in the Employment Law Council’s paper “A Case for Workers’ Compensation Reform in Illinois.”

The Illinois Chamber wants to hear about your frustrations with workers’ compensation and collect opinions regarding what you believe should be our priorities for reform legislation. Please send your stories and comments to jaydeeshattuck@gmail.comso the Chamber can share your workers’ compensation experiences with state leaders, the media and others.

 

Tell us about your most egregious examples of workers’ compensation judgments that have little basis in logic and hurt your business. Talk to us about how much your workers’ compensation insurance has gone up. We are especially eager to have comparative data and practical examples of disparities companies have experienced when comparing Illinois locations with those in other states.

Your input will help make it impossible for political leaders to ignore the need for significant changes in Illinois workers’ compensation statutes.
What Reform Looks Like
The Chamber’s goal is to persuade legislators to draft legislation that reduces workers’ compensation costs. Legislators should put these reforms at the top of the list when they’re considering changes:
In Illinois, employees can claim workers’ compensation if their injury was aggravated in any way by work, even if the injury took place somewhere else.
Therefore, we demand that the workplace must be more than 50 percent responsible for the cause of an injury before a workers’ compensation claim is approved. In fact, when Missouri changed to this standard recently, the workers’ compensation costs for businesses dropped significantly.
The Illinois workers’ compensation system does not follow the AMA guidelines but instead allows an arbitrator to conjure up numbers that are not as medically informed. We must incorporate the American Medical Association’s guidelines for disability, which are the standard for workers’ compensation claims in most states.
The 2005 law authorizing utilization review was designed to prevent the use of unnecessary medical procedures.  However, costly procedures and treatments in workers’ compensation cases continue to be a problem because utilization review is inconsistently applied in Commission rulings. California’s experience has proven mandatory utilization review is a better way to control costs.
Wage differential claims create tremendous abuse. It is reasonable to allow changes in wage differential cases for changes in economic circumstances, provide credit for previous wage differential claims and cap benefits to retirement age instead of providing awards for a lifetime.
Illinois law should acknowledge that workers have a responsibility to be alcohol and drug-free in workplaces. Impaired workers are a danger not only to themselves and property, but also to their fellow workers. A number of states, including Missouri, eliminate or dramatically reduce workers’ compensation benefits when injuries are caused by intoxication.
Employers should be able to initially direct choice in physician selections by an injured worker. Employer-directed care helps assure that quality care is provided and that the employee returns to work in a timely fashion.

Now is Our Chance

Businesses are well aware that the Illinois workers’ compensation system has been stacked against employers for far too long. For example, insurance companies often choose to settle cases rather than spend the resources to fight the system, even when employers are eager to challenge the claim. Meanwhile, insurance rates continue to rise and insurance companies continue to exit the state market altogether because they can’t make adequate margin on sales.
It is well known that employers have left the state or have declined to relocate to or expand in Illinois because of the high cost of doing business. Those businesses, and others, might think it logical to have a defeatist attitude when it comes to Springfield politics, and assume that no real reform will take place. To the contrary, the Chamber sees this potential legislation as a genuine opportunity to educate state leaders about the runaway costs associated with workers’ compensation in Illinois and to achieve meaningful change.

Our task is to make sure this round of reforms achieves significant bottom line savings. The last time the state addressed workers’ compensation was in 2005, but those changes proved inadequate and did not lower costs. Meanwhile, our neighboring states offer much lower costs and are successfully luring employers.

 

We hope you’ll join the campaign to fix a broken system and restore the prospects for job growth in Illinois.

 

Employers are encouraged to attend the Senate hearings and listen to the proceedings.  The first session will be at 1 p.m. next Monday, November 29 in Room 212 of the Illinois Statehouse. The Chamber staff also will provide a briefing for members that day at 11 a.m. at our offices at 215 E. Adams in Springfield.

 

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