By Joanne von Alroth
SPRINGFIELD, Ill., Feb 28 (Reuters) - The Illinois House of Representatives on Thursday dealt a setback to efforts to fix the worst-funded state pension system in the United States, defeating several proposals to make substantial changes that would affect public sector workers.
Democratic House Speaker Michael Madigan had put forward four ideas that financial analysts said would go a long way toward resolving the problem, but lawmakers rejected them as being too extreme.
None of the proposals received more than 5 favorable votes from the 118 members of the House, and minority Republicans boycotted the vote, calling the process a charade.
It was not clear why the Speaker had presented proposals that had so little support. Madigan was not immediately available to comment on the votes.
Some lawmakers had speculated that it was a tactical move to determine where members stood as part of what is expected to be a protracted process of assembling comprehensive reforms. The legislature is scheduled to wrap up its work by May 31.
"It sets a marker for where we're willing to go," said Democratic Elaine Nekritz, who has been a leader in trying to fashion a compromise pension plan. "We're not willing to go beyond (the failed proposals) for sure," she said.
The proposals would have completely eliminated cost-of-living increases for retired workers or eliminated them until the pension system was 80 percent funded compared with 39 percent funded now. They would also have raised the retirement age to 67 for pension eligibility and required public sector workers to contribute 5 percent more to the cost of their pensions.
A separate plan put forward by Nekritz and Republican House leader Tom Cross, which has received the most support so far in the process, would include most of those elements but would not be as harsh. It would freeze cost-of-living increases for six years and require state workers to contribute 2 percent more toward the cost of pensions.
Madigan is widely considered the most powerful politician in Illinois, having been speaker for nearly 30 years. He is also chairman of the state Democratic party.
He has been slow, however, to push for a pension fix that would bolster the state's sagging finances and satisfy credit rating agencies, which have been slashing Illinois' ratings party because of inaction on reforms to address a $96.8 billion unfunded pension liability.
He recently increased pressure on unions to accept more far-reaching reforms, sending them a letter saying they had failed to present serious proposals to fix the system.
Public sector unions, which provide substantial political and financial support to the state's Democratic party, have criticized proposals that would limit or cut benefits to retired workers. They have also warned that they will use strong protections for pension benefits in the Illinois Constitution to fight changes.
After the votes on Thursday, a coalition of Illinois unions issued a statement praising the defeat of the measures.
"The House forcefully rejected unfair, unconstitutional pension cuts today. Lawmakers should build on this momentum to abandon tired approaches and work with us," the union coalition "We Are One" said.
Labor unions have offered to increase their contribution to the cost of pensions by 2 percent, but they have rejected an increase in the retirement age or elimination of cost-of-living increases for retired workers.