Thursday, May 17, 2012

Illinois Public Universities Presidents & Chancellors Letter to Governor Pat Quinn

Author: Illinois Public Universities Presidents a Chancellors
Title: Letter to Governor Pat Quinn
Date Published: May 3, 2012

The Honorable Pat Quinn
Governor of Illinois
Office of the Governor
207 State House
Springfield, IL 62706

Re: SURS Sector Pension Stabilization Package - Statement of Objectives

Dear Governor Quinn:

No problem weighs heavier on the State of Illinois than the current crisis surrounding funding for public employee pension programs. As the magnitude of this issue has unfolded, we, the presidents and chancellors of Illinois Public Universities, have indicated our willingness to contribute toward a resolution of this matter and our willingness to support reasonable measures that will maintain a viable public employee pension program. However, we remain convinced that any solution must protect the interests of the thousands of state university employees who for decades have unfailingly paid into the State Universities Retirement System (SURS). Human capital and intellectual resources are fundamental to the missions of our public universities and thus we wish to convey the following statement of objectives and principles, as we respond to your most recent proposal and also continue to work with you and leadership of the General Assembly toward a comprehensive stabilization plan for SURS

We firmly believe that any reform of the State University Retirement System (SURS) must provide public universities and colleges with the ability to retain and recruit talented faculty and staff by providing a credible promise of retirement security to our employees. It must also be financially sustainable for the State, the universities, the participant, and it must respect existing constitutional protection against the impairment of already-accrued pension benefits. Any stabilization proposal must find a fair and equitable way to share the burden of the reform among all the stakeholders--the participants, the universities, and the State.

In addition:

• State must implement a clear plan for the amortization of accrued unfunded liabilities and provide credible assurance that all payments going forward will be made as scheduled.

• To sustain the long-term financial health of universities, any transfer of Normal Cost to universities must be limited and achieved over a reasonable transition period. During the transition period, State should maintain appropriations to universities and university contributions for the CMS employee group health insurance plan at the FYl2 level. Any changes in these levels should be considered as university contributions toward normal cost of pensions.

• State should continue to make annual contributions to the pension system to fund the difference between actual Normal Cost and the combined university and employee contribution and not less than 6.2% of payroll. This is the amount the State would be required under federal law to pay in FICA taxes to support Social Security had the state not opted out of that system.

• All promised benefits to current participants should be maintained.

• Resetting the benchmark for determination of the Effective Rate of Interest (ERI) going forward, to a relatively conservative Government Bond index.

• Any reform must include reform of the current Tier II program for new employees. We suggest a "Hybrid" plan to replace the existing Tier II and Self Managed options for new employees. Key aspects should include a defined benefit program similar to social security benefits, a parallel defined contribution plan fully funded by university and employee contributions, a phased-in vesting schedule completed as of the 5th year of service and a compounded cost of living adjustment.

• Unfunded mandates for universities should be stabilized because these too require the obligation of limited university resources, and delays in payment of university appropriation vouchers must be improved.

As presidents and chancellors of the state's public universities, we urge serious review and consideration of this set of objectives and look forward to the opportunity of continuing working with you toward a durable, equitable, and long-term solution to the SURS funding issues.

Illinois Public University Presidents and Chancellors

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