CFA Responds to President Easter’s Pension Proposal

We are glad to see President Easter and other university leaders throughout Illinois addressing the crisis in the state’s unfunded liabilities and the threat this poses to the pensions state employees have contributed to and planned on throughout their careers. As with other changes in state finances and their impact on the university, the proposals once again underscore the need for collective bargaining.

The proposal to increase employee contributions amounts to an immediate, permanent two percent pay cut at a time when faculty salaries at Illinois are already lagging behind peers. It also represents a permanent reduction in guaranteed retirement income, since the proposed change to the COLA limits and delays cost of living increases. An average salary increase of about four per cent would be required to offset this additional cost and the effects of inflation.

The plan also proposes to shift the pension burden to the University over time. Given the current and projected levels of state funding and the state’s inability to come up with even those funds, this is likely to add greater financial stress in the coming years. The university will either have to catch up on the quality of salaries and benefits, or suffer a further decline in its status.

The move from a defined benefit to a hybrid system would expose more recent Tier Two colleagues to market volatility, raising the possibility of continued problems for those basing retirement plans on this much less secure system.

Our most serious concern, however, has less to do with the details of this proposal than with the decision-making involved. As far as we are aware, President Easter arrived at his decision to support this plan without consulting the various campus senates, our senate benefits committee, or other shared governance bodies. The plan will now roll ahead without input from faculty or from other campus workers. Clearly, as it stands now the administration can make decisions about our current situation and even our futures without the consent of the faculty. The need for genuine consultation on such vital issues is one reason we need a union.

For those who might object that the problem is in Springfield and not in Urbana, this is another argument for and not against unionization. Legally, our academic senate cannot lobby on this or other issues even if it chose to do so. A powerful faculty union lobbying in concert with teachers and other public employee unions throughout the state would provide us a greater voice in Springfield to fight for better funding of the university and higher education generally. Without such representation, our futures will continue to be determined by others.

Jim Barrett, CFA President

(President Easter’s April 9, 2013 announcement was by mass mail; see also http://www.niutoday.info/2013/04/09/public-university-leaders-endorse-pension-plan)

Here’s a link to UIC’s United Faculty statement on pensions:

https://iftweb.ift-aft.org/6456/home/uic-uf-statement-on-pensions

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8 responses to “CFA Responds to President Easter’s Pension Proposal

  1. “As far as we are aware, President Easter arrived at his decision to support this plan without consulting the various campus senates, our senate benefits committee, or other shared governance bodies.”

    This is not true. The President has consulted frequently with the University Senates Conference, the primary advisory body to the President representing all three Senates, about the pension situation and specifically the IGPA proposal. In fact, we discussed it again this morning. Activities and discussions of the USC are regularly reported to the campus senates, where they are subject to further discussion and review. There is nothing outside the normal governance process about this issue. If you disagree about the merits of the IGPA proposal, that is a different matter.

  2. Nick is right… sort of….
    My statement was specifically about the IGPA proposal or at least those elements of it that President Easter signed onto recently. Although I was not aware of it when I wrote, apparently the IGPA proposal was discussed on the USC and Nick is correct that USC endorsement of that proposal, if that is what happened at its August 2012 meeting, was conveyed to our senate. This came in a two-line statement embedded in the USC report appended to back of our September senate agenda: “We also discussed the still-unresolved question of pensions. University leaders, including the USC, have expressed their support for the Institute of Government and Public Affairs proposal on pensions.”
    There was no discussion of this report, the USC endorsement, or the IGPA proposal in our own senate, however. If there was a resolution of some sort within the USC (as opposed to simply a “discussion”), our senate never saw it. Yet the USC apparently did endorse the plan in consultation with President Easter who has now signed onto its main points.
    Nick is also right that this leaves us with a difference of opinion of the IGPA plan itself. That part of my statement stands. We agree that there is a crisis which was produced by the state legislature’s failure over decades to adequately fund state pensions. We disagree with President Easter, and with the USC apparently, that the proper solution is a permanent 2% reduction in salary (the proposal for increased contributions), a substantial reduction in retirement income (the proposal regarding COLAs), and increased financial stringency for the university at a time when we need to recoup some of our faculty losses through adequate salary and benefit increases (the proposal for the university to take over part of the funding for the plan).

  3. Jim’s response mingles two different issues: our (qualified) statement of support for the 2012 IGPA plan, and our current discussion of the latest version of the IGPA plan, on which the USC has not formulated a final position.

    Here is what USC said in 2012, You tell me if it represents faculty interests well.

    Resolution on Pensions
    University Senates Conference
    April 27, 2012

    The University Senates Conference (USC), in its role as a faculty elected advisory body to the President of the University and the Board of Trustees, recognizes that the funding basis for the State University Retirement System (SURS) is not sustainable in its current form. Previous underfunding of the system has made SURS unable to continue to pay out benefits indefinitely at current levels, even though participants have fully contributed their portion of responsibility for the system.

    As has been documented, Illinois ranks 50th among the 50 states in adequately funding its public pensions. This situation cannot be allowed to continue; retaining and recruiting top faculty to our universities will be increasingly difficult unless this issue is addressed.

    Today we face a reality in which sensible, equitable reforms are needed. The USC writes to acknowledge this reality and to seek a constructive way forward. Reforms will be needed in order to return the SURS system to a sound financial footing, and all stakeholders — participants, the universities, and the State — have a necessary role to play in such reforms. These reforms must be guided by certain agreed-upon principles, the most important of which is fairness to university employees who entered the system on the basis of certain understandings and commitments that need to be honored.

    Other principles also seem to us reasonable and prudent as a solution is being worked out. Many of these principles are laid out and defended in the IGPA report authored by Jeffrey R. Brown and Robert F. Rich: Fiscal Sustainability and Retirement Security: A Reform Proposal for the Illinois State Universities Retirement Systems (SURS), Institute of Government & Public Affairs, University of Illinois, Urbana-Champaign. Chicago. Springfield, Feb. 9, 2012.

    • Any reformed SURS system must be financially sustainable for the State, the universities, and the participants, and it must respect existing constitutional protections of already-accrued benefits;
    • All promised benefits to current participants and annuitants should be maintained, as guaranteed by the State Constitution (Article 8, Section 5 General Provisions);
    • Existing unfunded liabilities must remain the State’s responsibility, and the State must provide credible guarantees that future payments will be made on time (such as through a clause that state contributions to the system must have priority);
    • In addition, the State should continue to make its contributions to the system at a level at least equal to the level of what it would be paying to Social Security (6.2% of pay) along with its contributions to health care;
    • Any transfer of normal costs to universities must be nominal, and phased in gradually;
    • Any reform must include improvements to the current Tier II program for new employees, as suggested in the IGPA position paper referenced above (this could include a hybrid plan combining some elements of defined benefits and an employee self-managed plan), and this revised program should also be available to Tier I employees;
    • Any change in participant contributions must involve consultations with those affected.

    The USC is ready to participate in further discussions in order to seek a constructive resolution to these issues.

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  5. Nick: If I had the impression that the USC took action to support the IGPA plan, that could be because this is what Joyce’s September 2012 report to our senate says you did. I quoted Joyce’s brief report attached to our senate agenda in order to be clear: “University leaders, including the USC, have expressed their support for the Institute of Government and Public Affairs proposal on pensions.”

    There are two possibilities here: It could be that the report is wrong and USC never did support the IGPA’s specific proposals, only the general principles distributed last spring. In that case President Easter endorsed the proposals without USC support. He is entitled to that because as you know, all consultation is strictly advisory. Or it could be that the report is right. The group did support the IGPA proposals but has now changed its mind and will not support the 2 % reduction in pay and the reduction in future retirement income (the COLA cuts). In any case, if the President’s public support of these cuts and transfer of the pension burden to the university reflects his consultation with USC over the past year that might return us to your own question: Is that good representation of faculty interests? A union would be part of the lobbying that has fought cuts in benefits owed to us by the state and would be a part of any future negotiations regarding our benefits.

  6. Thanks Jim,

    USC’s 2012 position on pension reform was strong and I am proud of it. That’s why I copied it for you here,

    USC has taken no position on the latest IGPA proposal. Please don’t mix the two.

    I also think that union advocates need to be careful about complaining about “2% reductions in pay.”

  7. Jim, I am glad to clear up your confusion.
    The document you are referring to, which is my report to the Senate of the August 2012 USC meeting, contains a brief reference to USC’s previous support of the IGPA proposal. That support, which took the form of the April 27, 2012 statement Nick reproduces in full in his post above, references the 2012 IGPA proposal (not the current one). It expresses certain principles that must be respected in any proposal it will support. I think most reasonable people would agree that the Conference firmly defends faculty interests in the April 2012 statement. That was certainly the Conference’s intention.
    As you know, IGPA has since revised its proposal. My report on the most recent USC meeting, which is included in the agenda of the upcoming Senate meeting, makes clear that the Conference has taken no stand on the current IGPA proposal. For your convenience, I am copying the relevant paragraph here:

    “2. The Conference deliberated about whether to endorse the April 9, 2013 letter signed by the public university presidents and chancellors supporting the revised IGPA 6-point pension plan. Last year, the Conference wrote a letter outlining basic principles for acceptable pension reform, and endorsed the spring 2012 version of the IGPA proposal (attached as addendum). Because the matter required more careful thought and further information about the revised IGPA proposal, we postponed this decision. (The revised IGPA proposal may be found here: http://igpa.uillinois.edu/pensions).”

  8. Joyce and Nick,

    I’m keeping up the best I can here, but between you two are keeping me pretty busy! Joyce, I have now see your April USC 2013 report, which we just received from the senate office, and I see it confirms that the USC has NOT endorsed the specifics in the IGPA proposal. I am glad too see that but sorry to see President Easter HAS endorsed the proposal, including the 2 % reduction of pay that will be required to increase our contributions to the system. This is not an attack, just a disagreement with his position, and I believe it is a disagreement is in the interests of our faculty. I’d like always to be careful, Nick, but I am not sure exactly what else to call it when 2% of our salary would be deducted to cover the increased contribution required because the state did not meet their obligations to us.

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