Gov. Rod Blagojevich has proposed cutting pensions for state universities, to the point that some fear the University’s pension system may become unable to pay out benefits to school employees.

Blagojevich’s state budget proposal, released last month, stands to cut retirement benefits for Illinois public university employees other than current 30-year tenured professors, starting next fiscal year.

“It would adversely affect both current and future University (of Illinois) employees. It would lower the pension benefits of approximately 60 percent of retirees, who are current employees,” said Hank Scheff, director of Employee Benefits for AFSCME local 3700.

Under the proposal, members in SURS, the State Universities Retirement System, would lose between $4.4 billion and $9.3 billion in benefits, according to Jim Hacking, the director of SURS relations.

SURS provides pension benefits for employees at all public universities in Illinois.

New University employees, from professors to secretaries to janitors, would be affected the most by the cuts, Scheff said.

Inflation rate adjustments for new employee pensions would be capped at 3 percent for retirement benefits in excess of $24,000, Hacking said. Because pensions wouldn’t be adjusted to match inflation, employees would bring home less in real money every year.

The retirement age for new hires would also be raised from 60 to 65, he said.

Scheff and Hacking agreed that these changes could potentially hinder recruitment of new University employees, Scheff said.

The pension program is already facing a $35 billion to $43 billion deficit, Scheff said. Blagojevich’s proposal would worsen the situation, he said.

Blagojevich’s office did not return repeated phone calls seeking comment.

If the proposal passes, state funding would decline by $140.5 million per year, leading the University to provide less generous benefits, Hacking said.

As state funding decreases and a larger percent of the pension fund comes from the University, the program could become insolvent, he said.

“There’s a lot of risk with what’s being proposed,” Hacking said. “The funding ratio (between state and University funding) would decline until 2045 to 17.7 percent… Once it goes below 30 percent, we become insolvent. It would be difficult making payroll. Considering our economy has been in a slump for the past few years, SURS could become insolvent even earlier than predicted.”

Hacking said the proposed cuts violate the Illinois Constitution, which states that pension benefits “shall not be diminished or impaired.”

“There’s a significant diminishment so it’s unconstitutional,” Hacking said. If the proposal passes, “It’s going to require SURS participants to challenge the constitutionality of this provision in the courts,” he said.

The University is carefully studying the proposal to cut pensions, said Thomas Hardy, University spokesman.

Hardy said that while the University is concerned about the proposal, he emphasized that no specific legislation to cut pensions has been introduced in the State Legislature.

“The proposal is enormously complicated and very impactful on the University and its employees,” Hardy said. “We are consulting with SURS. It requires close scrutiny and that is what the President and the University are doing.”

Although the state is suffering a fiscal crisis, cutting retirement pensions will not solve the problem, Scheff said.

“Employees have already earned this money and the state has to pay for benefits. It’s going to be paid by future taxpayers,” he said. “Future taxpayers will not have a pension because they will be paying for the pensions of previous generations.”