Eye On Illinois: Tier 2 reforms among many issues left undecided in May

Will Tier 2 pension changes be the defining political fight of 2025?

I posed that question Dec. 18, exactly six months ago. And now, with a bit more than half the year remaining, we’re firmly in “reply hazy, try again” territory.

For a while it seemed the title might land with attempts to regulate homeschool families. Then as the legislative session concluded a lot of focus went to city and suburban transit agencies. The Chicago Bears and their stadium demands surface every couple of weeks like a large sea mammal coming up for air. But like the pension problem, a lack of resolution for all those topics means none can yet be branded definitive.

Last week Capitol News Illinois examined the fate of the Tier 2 issue, which begin with acknowledging how little has changed.

Tier 2 applies to state employees hired since Jan. 1, 2011. Those workers must stay on the job until age 67 to retire with full benefits; for Tier 1 employees the youngest age is 55. Tier 2 also promises a smaller pension benefit based on cost of living formulas and new formulas.

“Reforms filed in late May in Senate Bill 1937 would have accomplished several of the unions’ goals had they passed,” according to CNI’s Ben Szalinski. “Cost of living adjustments would increase 3% annually, and people would have been able to retire as early as age 62 if they had maxed out on their pension. … Many police officers and firefighters would be able to retire at 52 rather than 55 following 20 years of service under the proposal.”

Aside from those ideas is the more pressing reality that some employees could be in line for benefits that don’t reach the level the same workers would have earned if they’d instead enrolled in Social Security. Failing to at least match those minimums violates what’s known as the Safe Harbor principle. SB 1937 called for increasing the earnings limit for workers enrolled from 2011 through Jan. 1, 2027, so it equals a given year’s Social Security wage base.

Like many Statehouse issues, the gap here isn’t between Republicans and Democrats but clearly between Democrats who want to solve Safe Harbor – and the GOP would likely be on board given potential financial exposure to the state – and those who like the politics of giving unions more of what they want.

To that end, the fiscal 2026 budget includes $75 million for a Tier 2 reserve fund to be used in the event of a Safe Harbor violation. That could arguably be the only reform needed. A fight for the remaining proposals might still become Springfield’s biggest 2025 battleground.

• Scott T. Holland writes about state government issues for Shaw Local News Network. He can be reached at sholland@shawmedia.com.