* I have yet to hear anyone say that the pension reform bill is definitely moving forward to a floor vote this week. And even if it does, and even it it passes, barring a miracle, there’s little to no chance of Senate passage by Thursday.
So, keep that in mind as you read the stories…
An Illinois House committee has approved a measure to change pension costs and benefits for state employees.
The bill heads to the full House where its fate is uncertain. It would create three different “tiers” of pension benefits and costs. One of those is a 401k-style “defined contribution” plan.
Supporters say the state needs to change its pension plans because it can’t afford them. Unions strongly disagree with the changes being proposed.
* But a provision designed to calm the nerves of current employees will also end up costing the state a lot more cash than the original bill. Read carefully…
Unlike the version of the bill considered in the spring, Tier 1 employee pension contributions would not be re-calculated every three years to determine the actual cost of Tier 1 pensions as Tier 1 members die or migrate to other tiers. Unions had protested that the payments would become so cumbersome as to eventually make Tier 1 unaffordable.
The current version of SB512 allows a review of employee contribution rates in 2015 and allows them to be raised by 2 percentage points. After that, no further increases would be permitted.
But that would mean employees in Tier 1 would receive a larger contribution from the state than employees in other tiers, noted Rep. Kevin McCarthy, D-Orland Park, the pension committee chairman. It will also reduce savings – estimated by supporters to be in the the tens of billions of dollars – supporters believe the state will achieve under the bill.
Biss asked an actuary from the Civic Committee of the Commercial Club of Chicago, a group of the city’s top business leaders pushing the legislation, whether she had calculated how much it would cost the state if no Tier 1 members migrated to another tier of benefits. She had not, leading Biss to wonder why the legislation had to be acted upon this week.
The proposal still saves the state money, just not as much.
* AFSCME’s Henry Bayer and House GOP Leader Tom Cross got into it a bit at the hearing…
“This bill is a bill that masquerades as pension reform and should have been introduced on Halloween,” Bayer said.
Cross, who said several times that he agreed with Bayer, said organized labor never presented a substantive alternative proposal.
“It started in January of this year, Henry,” Cross said. “We’ve had 11 months, and no one’s offered one thing to me.”
Bayer interrupted: “People said, ‘Why weren’t you at the negotiating table?’ I said, ‘Where’s the table?’”
“You were in my office a month ago,” Cross replied.
* Item of note…
In a recognition of the bill’s political sensitivity, state Rep. Karen May (D-Highland Park) voted for the measure during the committee roll call, but changed her vote to “no” after realizing the bill had enough votes to pass.
* And the SJ-R once again editorializes in favor of the proposal…
We’ve heard the overheated rhetoric from both sides of this issue. We’re not out to demonize teachers, firefighters or any other public employees. They have a right to be concerned and they deserve a fair deal. But all public employees need to realize what the numbers show. At some point, there will be no money to distribute to retirees under the current structure.
They also need to look at their situation in the context of the American work force as a whole. Many private sector employees have seen defined-benefit pensions end. Many employers no longer match employee contributions to their 401(k) plans. In Illinois, these are the workers who saw their income tax increase by two-thirds.
And the lawmakers who have the power to do something about this situation?
They need to stop quaking with fear of lost union endorsements and take responsibility for correcting years of irresponsibility.
* In related pension news…
In other action, the [House Personnel & Pensions Committee] approved a bill that would rescind a 2007 law that allowed lobbyists Steven Preckwinkle and David Piccioli of the Illinois Federation of Teachers to get in line for sizable state teacher pensions. They merely had to work a single day as substitute teachers. They had no prior teaching experience, prompting sponsoring Rep. Jack Franks, D-Marengo, to call their arrangement “obscene.”
“The bill is so blatantly unconstitutional on its face that Mr. Preckwinkle and Mr. Piccioli think it merits no other comment,” said David Ormsby, the lobbyists’ spokesman.
In the Senate, lawmakers introduced a separate proposal that would boot the two lobbyists from the teachers pension system but also sought to stop a series of pension abuses by leaders from a variety of Chicago-area labor unions.
It’s interesting that so many legislators say they can’t support the big pension reform bill because of its doubtful constitutional validity, but can support clearly unconstitutional legislation that does almost nothing except attract media attention.
I’m not going to defend what Preckwinkle and Piccioli did, but I’m also not gonna continue hanging them in the public square.
- Its Just Me - Wednesday, Nov 9, 11 @ 9:17 am:
Rich, I was thinking the exact same thing last night as you. Voting against the big bill and using he constitution as an excuse, and then voting for the “abuse” bill says a lot about that particular group of legislators. You should do a follow up later on who falls into that category.
- Way Northsider - Wednesday, Nov 9, 11 @ 9:27 am:
Was hoping to find out the scoop on the Schoenberg retirement.
- Its Just Me - Wednesday, Nov 9, 11 @ 9:30 am:
Upon further reflection it occurred to me that if the “abuse” law withstood a court challenge, there would be precedence for some other pretty big changes.
- Been There - Wednesday, Nov 9, 11 @ 9:31 am:
===It’s interesting that so many legislators say they can’t support the big pension reform bill because of its doubtful constitutional validity, but can support clearly unconstitutional legislation that does almost nothing except attract media attention.===
A lobbyist, who is also a constitutional expert, told me a few years back; “we pass unconstitutional bills down here all the time. But most of them won’t have the deep pockets it would take to challenge it in court.”
My guess is the union will tie up any major pension reform for years as unconstitutional. Will they go to bat for a select few and spend the money on lawyers? I don’t know.
- Rich Miller - Wednesday, Nov 9, 11 @ 9:35 am:
WN, if you subscribed, you’d have all the scoop details.
- just sayin' - Wednesday, Nov 9, 11 @ 9:55 am:
Tom Cross is just going through the motions to collect campaign cash for HRO from gullible business/wealthy people.
Meanwhile Cross and the rest of the Republicans are doing absolutely nothing to educate or try to win support from Illinois voters for pension reform. Doing zip to win hearts and minds.
Then when it doesn’t pass they can go back to the same gullible donors and ask for more.
Didn’t they used to call these “fetcher bills?” As in push a bill we’re really not serious about in order to fetch donors and contributions. The counter is have someone submit a bad bill and fetch money on a promise to stop it.
- Lance Stevens - Wednesday, Nov 9, 11 @ 10:04 am:
just sayin…Cross and the Republicans have the support of most everyone in the State who’s not in a union.. are you that isolated?
- PublicServant - Wednesday, Nov 9, 11 @ 10:08 am:
That’s just plain not true Lance.
- Cassiopeia - Wednesday, Nov 9, 11 @ 10:10 am:
The unions need to come up with alternative proposals for realistic funding of the pension systems. To do otherwise contributes nothing to finding a sustainable alternative to the current system. If there is no real reform there may well be enough support from the taxpayers during the next Governor’s term to change the constitution once the costs become unbearable.
The current union position will hurt their members in the long run.
- PublicServant - Wednesday, Nov 9, 11 @ 10:14 am:
Several alternatives were brought forward at the IGPA State Summit on pensions in October.
http://igpa.uillinois.edu/state-summit-2011/report
- JH - Wednesday, Nov 9, 11 @ 10:16 am:
You don’ have to hang the two in the public square just recommend they do the right thing and remove themselves from the grossly unfair pension calculation they engaged in
- Decaf Coffee Party - Wednesday, Nov 9, 11 @ 10:17 am:
Which is sad, LS. The people who created the pension crisis by not paying into the fund as they were supposed to now appear to be some sort of crusading heroes on the side of taxpayers and editorial boards while the people who paid every dime they owed into the system are portrayed as some sort of greedy people dipping into the pockets of taxpayers.
I suspect we all get what we deserve when we elect these folks, and a group of corporate CEOs gets to determine law in Illinois.
Does anyone else find it ironic that in the same session pension “reform” for rank-and-file workers is such a hot item legislators are trying t find ways to give big corporations hunreds of millions in tax breaks?
- just sayin' - Wednesday, Nov 9, 11 @ 10:18 am:
Lance you’re in fantasy land. While it could have become a reality that Cross would have widespread support, most voters don’t even know there is anything to support.
As is typical of IL Repubs, Cross is too afraid to stick his neck out and really make this a focus. Everything is half a%* and nothing gets done. All sides lose and no one is happy.
Couldn’t be more different from Wisconsin for example where the Republicans have gone all in and really fought for an agenda. Repubs here are too afraid to fight for anything beyond their own selves.
- Chris - Wednesday, Nov 9, 11 @ 10:22 am:
“That’s just plain not true Lance.”
He did leave out family members of union members.
I don’t know anyone not in a union, or entitled to a public pension, who is opposed to pension “reform”–maybe not the current proposal, but some change. “Most everyone” in the state? Maybe not. But likely a majority of those without (at least) a familial vested interest in retaining current pension rules? I’d bet on it.
- Bulbous 1 - Wednesday, Nov 9, 11 @ 10:26 am:
Why can’t I opt out of all of it and manage my own retirement? Give me my current lump sum and let me roll it into something I can control and manage. Then I won’t be a “burden” on the tax payers in the coming years.
- Why Is He Still Hiding Under the Table? - Wednesday, Nov 9, 11 @ 10:29 am:
Tom Cross has been given a golden opportunity to pass a pension reform bill and he can’t even get his own members on board 30? He should produce all of his caucus. To blame Madigan for not having the votes is shameful and lackluster leadership. Call the bill.
- Spring - Wednesday, Nov 9, 11 @ 10:29 am:
How many legislators announcing they’re not running for re-election & retiring should be an indicator if this will pass, my guess is it passes and madigan steps down
- Chris - Wednesday, Nov 9, 11 @ 10:30 am:
“Why can’t I opt out of all of it and manage my own retirement? Give me my current lump sum[.]”
How do you propose determining the lump sum? Just the total of your contributions (plus whatever may have been contributed by the govt on your behalf)? Or a PV of your expected benefit, or … what?
- steve schnorf - Wednesday, Nov 9, 11 @ 10:38 am:
does the SJR read the papers? I just read that 75% of the companies that had dropped 401k matches have restored them. And, btw, the tax increases raised about $7B: it’s plain untrue to say that almost all of that is going to pay pension payments
- Lance Stevens - Wednesday, Nov 9, 11 @ 10:41 am:
ok, let me re-phrase…most everyone who actually cares about the financial well being of the state and who is not in a union, wants pension reform..
- wonderland - Wednesday, Nov 9, 11 @ 10:47 am:
I guess I’m just a dumb public employee. How does any of this legislation reduce the supposed 85 billion dollar underfunding of the pension plans? It’s all smoke and mirrors, and a way to continue the trashing of public employees
- Union - Wednesday, Nov 9, 11 @ 10:53 am:
Ok let’s see how this works. The teachers pay into their pensions 9.4% and the state skips their payments from time to time. The teachers DO NOT pay into Social Security. The State raises income tax from 3% to 5%, BUT Obama cuts Social Security payments from 6.2% to 4.4% so most workers do NOT have their pay roll taxes go up except people like teachers, and it went up by 2%.
Now Cross makes a plan for pensions with 3 options. Stay where you are and pay more, like 4% more or so. The state will still have to pay into it but there is no statute forcing the state to make their payments so they can still skip them.
You can go into a second plan and just get less money (unconstitutional?)and the state still needs to pay into it, except there is no statute forcing them to make their payments.
Or you can have a third option, go into a 401K style plan and see what you can do on your own and the state will match your contributions in some way. Except again, there is no statute making the state pay anything so they can still skip payments.
The problem that caused this mess was the state skipping payments. All 3 options offered by Cross gives the problem (the state not being forced to pay their portion) as the solution to the problem. All 3 solutions do not force the state to pay their share.
Did Cross vote for the plan in 1995 that would get the pensions fully funded by 2040? What happened to that plan? Why don’t we fully fund them in 100 years from now? Oh wait the State skipped some of their pension payments.
How is this reform?
Rich you published an article from the 1950s saying teacher pensions were underfunded (I think the percent given was in the 20% funded range. What did they state do then or after to fix the problem?
Finally, why aren’t the best and the brightest going into teaching? Well when you pay 9.4% of your salary into an unfunded pension plan instead of 6.2% (but for now 4.2%) into social security, then they state raises your income tax 2%, and then the state wants to take 4% more from your salary to make up for the states lack of payments into the system, and then the state doesn’t make its payments to school districts so school are cutting salaries on top of it all…..who can afford to go into teaching?
- Grandson of Man - Wednesday, Nov 9, 11 @ 11:02 am:
To digress a bit from Union’s points but hopefully stay in the same vein, why would someone want to relocate to a state like Wisconsin that cut its education funding by nearly $1 billion? Who of any quality will teach the kids, and how will that build the regional economy?
- east central - Wednesday, Nov 9, 11 @ 11:04 am:
The rate revisions every three years in the original SB-512 seemed especially unfair. Employees with low wages who generally never receive more than modest increases in annual wages would end up subsidizing the pensions of persons with high salaries (administrators, professionals, faculty) who tend to be able to negotiate occasional large increases including end-of-career sweeteners; everyone would be in the same pool. Within SURS this would be tough on secretaries, clerks and building service workers who are ineligible for Social Security and some of whom have wages so low that they are close to qualifying for food stamps. Without SS, Tier 1 is the only means for them to have an assured basic income in retirement. It is horrible enough that low wage earners would be asked to take effectively a 7+% pay cut the first year under SB-512. To have a likelihood that the 7+% would increase every 3 years, especially to subsidize the pool for the benefit of high pension individuals, would make it even worse.
- Union - Wednesday, Nov 9, 11 @ 11:21 am:
Hey Union-I wonder if you are aware that TEACH FOR AMERICA is now one of the largest employers in the country of recent college grads and in the last two years recruited huge numbers of teachers from the likes of Harvard, Michigan Yale, etc where it has no trouble finding the “best and the brightest”- changing pension programs would do nothing to adversely effect such people from going into teaching particulary when so many young and talented people have few options to find work- perhaps some of your Union colleagues should focus on reality as opposed to trying to maintain your antiquated pension programs at the expense of the students who are seeing education dollars drained away by the State’s pension contributions
- Chris - Wednesday, Nov 9, 11 @ 11:23 am:
“Employees with low wages who generally never receive more than modest increases in annual wages would end up subsidizing the pensions of persons with high salaries”
This is the optics problem for the whole system–the six-figure pensions “earned” by the select (relatively) few to be paid for by the majority of Illinoisans enetitled to nothgin more than SS. If there were some cap on the aggregate amount of public pension payable to any one person, there would be a much, much better public relations case.
However, the “leadership” of the unions (and, of course, the legislators and Guv, et al.) are among those *most* likely to be “earning” six-figure pensions, so they’re of the attitude of “I got mine, who cares about the working stiffs I ‘represent’”.
Put a $75k (or whatever) cap on pension payouts, index it to inflation in some fashion, and watch *most* of the hardest-to-defend-to-the-public pension “issues” disappear.
Never gonna happen, becuase those who control the process are essentially self-serving (I’d call it corrupt, even if technically legal, but don’t want to get into that diversionary argument).
- wordslinger - Wednesday, Nov 9, 11 @ 11:30 am:
–Why can’t I opt out of all of it and manage my own retirement? Give me my current lump sum and let me roll it into something I can control and manage. Then I won’t be a “burden” on the tax payers in the coming years. –
I’m sure the Civic Committee would take you up on that in a heartbeat. But be careful what you wish for.
Give it more of a think before you opt out of a defined benefits plan with constitutional protections for the vagaries of the casino.
- girlawyer - Wednesday, Nov 9, 11 @ 12:12 pm:
What Preckwinkle and Piccioli did was perfectly legal, right? And it was only possible because a bill was passed creating an absurd exception to the usual rules that require years of teaching to vest for retirement benefits. So why aren’t the legislators carrying on about the legislators who sponsored and passed that outrageous exception. Personally, I’m disgusted with the people who took advantage of it but the real villians here are the legislators who create these and other exceptions to the established rules that everyone else has to live by.
- lincolnlover - Wednesday, Nov 9, 11 @ 12:23 pm:
Why can’t we just raise the retirement age to 67 and do away with the Rule of 85 stuff? Seems like a no-brainer. And, if that is unconstitutional, why not amend the constitution?
- Union - Wednesday, Nov 9, 11 @ 12:47 pm:
Union you said “Hey Union-I wonder if you are aware that TEACH FOR AMERICA is now one of the largest employers in the country of recent college grads and in the last two years recruited huge numbers of teachers from the likes of Harvard, Michigan Yale, etc where it has no trouble finding the “best and the brightest”- changing pension programs would do nothing to adversely effect such people from going into teaching particulary when so many young and talented people have few options to find work- perhaps some of your Union colleagues should focus on reality as opposed to trying to maintain your antiquated pension programs at the expense of the students who are seeing education dollars drained away by the State’s pension contributions.”
Go to any school in the city or burbs and count up how many teachers are from those colleges and how many had an A or B average from those schools and then report back.
- titan - Wednesday, Nov 9, 11 @ 1:05 pm:
The perpetual revision of employee contributions under the propr proposal would simply be the way to totally destroy that tier - the state would continue to skip its paymnt obligations so as to cripple the systems, then force the employees to pay more to make up the state’s default [lather, rinse and repeat].
The only way that sort of thing would be (a) fair and (b) sustainable would be a shift of the full funding obligation to the employees along with a one time raise equal to the percentage that the state has up to now been obligated to pay in but chronically failed to pay. That is the only way to avoid the state’s continued misfeasance.
- Just the Facts - Wednesday, Nov 9, 11 @ 2:14 pm:
If they want to get serious about pension reform, they should pass legislation forbidding them from borrowing against it. They have ignored the statutory obligation to pay in for decades and now the teachers are the “bad guys” because they are having to pay back what they borrowed. That is why this is now an issue. Ignore the man behind the curtain.
- Rich Miller - Wednesday, Nov 9, 11 @ 2:19 pm:
They didn’t ignore laws, they changed them. Your solution for another law to prevent borrowing could also be changed.
- steve schnorf - Wednesday, Nov 9, 11 @ 2:33 pm:
Generally, no General Assembly can bind a future General Assembly
- Why Is He Still Hiding Under the Table? - Wednesday, Nov 9, 11 @ 4:02 pm:
Has Tom Cross called the Pension Reform bill for a vote yet? Or is he still blaming Madigan. I’m sure Madigan will let him call it.
- Anonymous - Wednesday, Nov 9, 11 @ 5:04 pm:
The State workers pay for their own pension! buttom line! We put our life on the line and now you want to attack us because from the Governor on down, no one knows how to add! but of course what was a thinking different rules for all of you that sit up there in Spgfld!
- Anonymous - Wednesday, Nov 9, 11 @ 8:21 pm:
I tell you how they can save money. Cut the pension for the elected leaders and make it equal to state employee’s by the number of years they serve
- Retired Non-Union Guy - Wednesday, Nov 9, 11 @ 9:00 pm:
Anonymous @ 8:21 pm,
Nice thought but in State budget terms, it’s a cup of coffee at McD’s …
- Kevin Highland - Wednesday, Nov 9, 11 @ 10:59 pm:
“And the lawmakers who have the power to do something about this situation?
They need to stop quaking with fear of lost union endorsements and take responsibility for correcting years of irresponsibility. ”
and in taking responsibility for their actions they need to fix the problem with out screwing the employees who have done nothing wrong.
- mamaS - Thursday, Nov 10, 11 @ 12:25 am:
…How does any of this legislation reduce the supposed 85 billion dollar underfunding of the pension plans? …
^^^
It does not. It simply keeps it from getting worse. to Fix it requires reform to existing and already earned pensions (like a cap). To do That the legislature needs to give us a choice - raise taxes so we can pay for what was promised - or amend the constitution to remove the line about no changes to pension and replace with something that limits taxpayer liability, recomputes pensions to what is affordable.
- mamaS - Thursday, Nov 10, 11 @ 12:37 am:
Did Cross vote for the plan in 1995 that would get the pensions fully funded by 2040? What happened to that plan?
^^^
Wrong assumptions.
Salary spiking means pensions are must higher than predicted. and return on investment (assumed to be 8 or 8.5% have not even been close. In fact negative in 2008 2009 according to the TRS actuarial reports.
The state has been contributing far more than employees (like double) and according to the plan the state’s portion will continue to grow.
Would the union folks knock on their neighbors doors and demand money? If not, why do they insist that the government do it on their behalf?
- PublicServant - Thursday, Nov 10, 11 @ 6:49 am:
@mamaS-I’m not in a union. I accepted the state’s offer each year of a current salary and deferred compensation in the form of a defined benefit pension. I, because of that contractual, and constitutionally protected pension, agreed (note the past tense there as in sunk costs) to continue to work for the state during several years of 0% raises, and at a salary less that I could have gotten in the private sector. If you think you can just toss out US contract law, and the constitution of the sovereign state of Illinois because you can’t elect representatives who wouldn’t steal pension funds to pay for other state programs, keeping your taxes lower all these years that the theft has been occurring, you’re going to pay the price not me. And, if an illegal and unconstitutional bill actually survives the legislative process, I’ll see you and your neighbors in court, just like any other party to a contract who you attempted to welch on would.
- PublicServant - Thursday, Nov 10, 11 @ 7:40 am:
All you hardnoses out there that want a fight, you’ll get one. On the other hand, if you want to sit down, discuss the issue, replace the rhetoric and lies that have dominated the current debate with mutually agreed upon and independently supported facts, and arrive at an agreed-upon, fair and equitable solution, then you’ve got a partner.
- Union - Thursday, Nov 10, 11 @ 7:58 am:
MamaS said “Did Cross vote for the plan in 1995 that would get the pensions fully funded by 2040? What happened to that plan?
^^^
Wrong assumptions.
Salary spiking means pensions are must higher than predicted. and return on investment (assumed to be 8 or 8.5% have not even been close. In fact negative in 2008 2009 according to the TRS actuarial reports.
The state has been contributing far more than employees (like double) and according to the plan the state’s portion will continue to grow.
Would the union folks knock on their neighbors doors and demand money? If not, why do they insist that the government do it on their behalf?”
You forget to mention when the state skipped payments in the 2000s and several times before since the 1980s.
IMRF is fully funded because they get the money from the employees and the city and counties get a bill they must pay. Money not put in since the 80s causes the funds to lose a LOT of money do to lack of compound interest on the money that could have been earned if the made all their payments on time.