ROCKFORD — After 28 years of working at Singer Mental Health Center, Linda Flemming considers herself “blessed” to be getting subsidized health care from the state along with her pension.
But if the Poplar Grove resident had to pay the full cost of her premium, which she said would run about $700 a month, a third of her retirement income would walk out the door. And that, she said, could force her to start making choices between paying for food and rent or her medicine.
“I would be up a creek,” she said. “I would have to go and get a part-time job just to pay for those benefits. It would be devastating, just absolutely devastating.”
Although representatives from Gov. Pat Quinn’s office say Flemming and other retirees won’t be affected by Quinn’s recent pension reform proposal, his attempt to pivot the plan around the Illinois Constitution would force current employees to make a choice: take the less-lucrative pension plan he’s proposing, or keep the current plan but lose the health insurance subsidy now offered by Illinois.
Providing taxpayer-subsidized health care for retirees has been a long-fought battle by employee unions who won’t let go easily, said Robert Bruno, a labor professor at the University of Illinois.
“It’s a big deal. I can’t imagine there being any room for movement on that,” he said. “That’s a real heavy lift.”
Quinn announced his proposed pension changes April 20 after a group of state legislators had worked, unsuccessfully, since January to come up with a plan for reforming the system, which is $85 billion in debt. Quinn’s proposed changes in the state pension systems, which would affect current employees but not retirees, include increasing the retirement age, cutting cost-of-living raises after retirement and an increase in contributions.
Quinn projects his reforms will save $65 billion to $85 billion based on current actuarial projections, although his spokeswoman Kelly Kraft said more precise figures won’t be available until the plan is introduced as legislation.
Reducing pension benefits for current employees is generally considered a violation of the Illinois Constitution, which prohibits diminishment or impairment of retirement benefits. But by offering employees a choice between the two pension plans on which their health care subsidies hinge, Quinn seems to be trying to sidestep the issue.
In theory, Quinn has to get AFSCME Council 31, the state’s largest public employee union, and its sister unions to agree to the changes in retiree health care in a collective bargaining session. Kraft wrote in an email that while “health care is not a constitutional right,” it is part of the collective bargaining process that also has to be addressed legislatively for the changes to be adopted into state law.
AFSCME and Illinois are now at the negotiating table over the current pact, which expires June 30.
But Quinn could try to push a change through the Legislature on his own. He already skipped union approval when he required retirees to cover 100 percent of their dental insurance in 2009, a move that saved the state about $12 million a year. The dental coverage change didn’t require an amendment to the State Employee Group Insurance Act, but still sparked outrage from AFSCME and advocacy groups representing retirees.
The We Are One Illinois coalition of state employee unions already has called Quinn’s proposal “insensitive and irresponsible.” The reaction to a more sweeping overhaul of health coverage would be more pronounced, Bruno said, and would likely include a legal battle.
“I think preserving health care benefits is a jewel,” he said. “Since 2010, (unions) have been targeted left and right, and … going after those health care benefits, which are significant, would be perceived as an insult.”
$54 billion unfunded liability
State and university retirees get their individual health care premiums subsidized by the state, although they still have to pay the full amount for spousal or dependent coverage, plus copays and other out-of-pocket costs. Teachers get a portion of their premium subsidized; they and university employees contribute a percentage of their payroll while working toward their future health care costs.
The state’s retiree health care liabilities are, if possible, even more alarming than its pension bills. The state is projected to spend nearly $900 million on health care for retired employees this year, with $385 million more in separate subsidies for teachers and university employees. The annual cost is expected to top $6.8 billion in 30 years, according to a Government Accounting Standards Board review of Illinois’ retiree health care systems.
Unlike pension plans, however, the state hasn’t been funding future costs in advance, meaning the claims pouring in each year are being paid on an as-you-go basis and not out of a fund that could be earning interest and easing the year-to-year budget pain.
While advocacy groups across the state have been clamoring for pension reform for years, retiree health care costs have only recently received the same attention. The Illinois Policy Institute, a right-leaning government watchdog group, recently highlighted the issue in a position paper on the state’s $54 billion unfunded liability for retiree health care.
“The cost of providing that lavish benefit is growing three times faster than state revenues,” said Collin Hitt, the Policy Institute’s senior director of government affairs, in a news release about the study. “Lawmakers must act, or else the cost of giving free health insurance to state and university retirees … will crowd out money for core government services.”
Reach staff writer Sean F. Driscoll at 815-987-1346 or firstname.lastname@example.org.