SPRINGFIELD -- Gov. Pat Quinn said Wednesday his proposal to change the retirement age for all state workers to 67 would be phased in to avoid massive retirements of state workers, university employees and teachers.

SPRINGFIELD -- Gov. Pat Quinn said Wednesday his proposal to change the retirement age for all state workers to 67 would be phased in to avoid massive retirements of state workers, university employees and teachers.


“We don’t want a rush to the door of current employees,” Quinn told The State Journal-Register editorial board.


But the governor did not offer details on how the plan would be phased in.


The governor’s plan would affect public employees hired before Jan. 1, 2011. Under current law, the earliest age those employees can retire and receive full benefits varies.


Teachers, state employees, lawmakers and judges can retire as early as age 55 if they meet the minimum service requirements, which vary depending on which system they are in. University employees can retire at age 60. Some state employees, including state police officers, are on an alternative pension formula and can retire at age 50 with 25 years of service and receive full benefits.


Budget director Jerry Stermer acknowledged during the editorial board meeting that when the new retirement age would go into effect is vital to state workers, many of whom who have planned their financial lives around the current pension system. Stermer has led talks with lawmakers from the four legislative caucuses on how to deal with the state’s $83 billion in pension debt.


Envisions ‘phase-in’


If legislators pass the governor’s proposal, some state workers who are nearing retirement age are likely to retire before the new age and cost-of-living provisions kick in. Under the governor’s plan, COLAs would be reduced from automatic, compounded 3 percent annual increases to the lesser of half the consumer price index or 3 percent. The new COLAs would not use compounded interest.


Quinn has said the changes would not apply to already retired public employees.


More than 4,000 workers already have applied to retire during this fiscal year, which is up 40 percent from last year, according to the State Employees Retirement System.


“Your question is so important for literally thousands of people,” Stermer said. “Between actives, inactives and already-retireds in the five state systems, we’re talking about 750,000 Illinoisans. That’s a lot of people.”


The details still are being worked out by the pension working group, Stermer said.


“The governor is really throwing this to them to make sure that we thread the needle in such a way as to achieve the stabilization and, as he said, have a decent retirement for folks,” he said. “Social Security has had to move up its retirement age, and they did it very gradually. I envision a gradual phase-in that doesn’t cause people to rush to the door. There’s no need to rush to the door.”


The state’s public employee unions vigorously oppose the plan, which they say is unconstitutional and leaves it to workers to deal with financial problems created by the state’s underfunding of the system.


Quinn also proposes to raise employee contribution rates by 3 percentage points.


‘Herculean challenges’


The Democratic governor and his aides offered a further glimpse of his pension plan, which is sweeping but short on details:


* The savings from the proposal, estimated at roughly $65 billion over the next 30 years, would not be banked immediately. Quinn could not estimate the pension payments needed each year to bring the system to full funding by 2042.


“We don’t want to have a new law that front-loads the savings,” Stermer said.


* Quinn told the (Arlington Heights) Daily Herald’s editorial board on Wednesday that shifting responsibility for teacher and university pension payments to school districts, universities and colleges isn’t an “essential” part of the plan. Republican leaders have embraced Quinn’s plan, with the exception of the cost shift, which they say will result in local property tax increases.


But Quinn said Wednesday that he does not want his proposal broken into two bills -- one with the financial and structural changes to the Teachers Retirement System, State Employees Retirement System, State Universities Retirement System, Judges Retirement System and General Assembly Retirement System and another shifting responsibility for TRS and SURS.


“I’d rather not do that,” Quinn said. He said he believes the underlying changes he proposed will ultimately save the school districts more money than if responsibility simply was shifted under the current system.


* In order to create more of an ironclad guarantee that future legislators and governors won’t short the pension systems, Stermer said the pension systems would be put in “second place” behind the state’s bondholders, who are all but guaranteed repayment under current state law when Illinois borrows money from them.


State law already provides that money for the state pensions be paid automatically. But legislators have simply amended the law by majority vote to skip the payment.


“That’s a key point,” Quinn said. Bond payments “have sort of the first call. We have to put the pension payment in a similar category.”


* Quinn hopes that the legislation will have an effective date of Jan. 1, 2013, so that the inevitable court challenge can begin.


Quinn also reiterated his threat to keep lawmakers in session past their scheduled May 31 adjournment date to deal with the state’s enormous financial commitments to pensions and Medicaid. The governor said he feared a double downgrade by the bond rating agencies, which would hinder the state’s ability to borrow money for future capital projects, if the two issues are not dealt with.


Chris Wetterich can be reached at (217) 788-1523.