CHICAGO (Reuters) - Illinois Republican Governor Bruce Rauner's proposal to reduce the state's public pensions should be thoroughly analyzed to determine its compliance with U.S. regulations and impact on workers and taxpayers, two Democratic state lawmakers said on Tuesday.
State Representative Elaine Nekritz and State Senator Daniel Biss, the Democrat-controlled legislature's point persons on pension issues, offered a resolution calling on two state retirement systems to undertake an actuarial analysis of Rauner's proposal, as well as seek a determination of whether the proposal complies with Internal Revenue Service regulations.
Those steps would have to be taken before the legislature would consider the proposal, according to the resolution.
"The road to pension hell is paved with rash actions," Biss told reporters in the state capitol in Springfield.
Rauner, who took office in January, wants to freeze benefits accrued by state workers starting July 1. After that date, the workers would be moved into a less generous, tier 2 pension plan in place for new workers hired since Jan. 1, 2011, or would have the option to buy out their pensions and move into a retirement plan similar to the popular 401(k) plan in the private sector.
The proposal would save the upcoming state budget $2.2 billion and would immediately reduce Illinois' huge $105 billion unfunded pension liability by $25 billion, according to the governor's "turnaround" plan. Illinois has the worst funded pension system and lowest credit ratings among the 50 states.
Biss said that counting on savings for fiscal 2016, which begins July 1, would be "an absolute fantasy."
The two lawmakers also cited concerns the tier 2 pension plan created for new workers may run afoul of IRS requirements governing pensions for workers not covered by the federal government-run Social Security retirement program.
"Illinois' current pension system is unaffordable and choking the state's budget, and the governor's plan enacts true pension reform for the financial future of Illinois," Rauner's office said in a statement, adding there was enough time to review and pass the proposal.
State officials are anxiously awaiting a ruling by the Illinois Supreme Court on the constitutionality of a 2013 law that relies on a fiscal emergency as a reason to reduce pension benefits for state workers hired prior to Jan. 1, 2011.
The high court could uphold a lower court ruling in November that concluded the state constitution does not allow any reduction in public pension benefits.