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A “chained” CPI would save some money

Thursday, Dec 13, 2012

* Could a federal idea help fix the state’s pension mess? Maybe

The chained Consumer Price Index is viewed as a more accurate measure of how people substitute one item for another in the face of a price increase. The result would be lower COLAs over time. COLAs currently are determined using a formula that takes into account increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers, but some experts argue that a chained CPI, which takes into account modifications in purchasing habits as prices change, provides a clearer understanding of inflation.

Republicans are floating the chained CPI proposal as part of their fiscal cliff deal; during the past few years, Obama reportedly has expressed support for switching to a chained CPI, at least in private deficit reduction talks. It also was considered by the joint congressional committee on deficit reduction, and endorsed by Simpson-Bowles, Rivlin-Domenici, and other double-barreled deficit duos.

This is how a 2010 memo from the nonpartisan Congressional Budget Office explains it: “The chained CPI grows more slowly than the traditional CPI does: by an average of 0.3 percentage points per year over the past decade. As a result, using that measure to index benefit programs and tax provisions would reduce federal spending (especially on Social Security and federal pensions) and increase revenues.”

And this is how a February article from the Center on Budget and Policy Priorities puts the issue into context: “Many of the federal government’s retirement, disability and income-support programs — including Social Security, federal civilian and military retirement, railroad retirement, [Supplemental Security Income], and veterans’ compensation and pensions — pay annual COLAs that are linked to the CPI.” The line was included under a subheading that read “Using Chained CPI Would Affect a Number of Programs and Save Significant Amounts.”

[Hat tip: Mom]

What do you think?

* Meanwhile, Gov. Pat Quinn has a new pension reform video. This one’s not bad. It features Quinn staffer Sean Vinck, who does some standup comedy in his free time. Rate it

* Related and a roundup…

* Franklin County Family Files Lawsuit Against H Group: The lawsuit says at one point, the woman was removed from the H Group because her parents felt the agency and its workers weren’t doing enough to protect her. But she returned to the facility after the defendants insisted L.T. was “being a complete gentleman” and that they had nothing to worry about because Doe was being “watched closely.”

* Iroquois County taxes hiked 29 percent: The hike in taxes was driven almost entirely to boost payments on employee retirement programs, according to board member Dale Schultz, of Clifton, the tax committee chairman.

* Illinois’ foreclosure rate in November third-highest in U.S.

* Report: Mental health care at juvenile center lacking: Only eight of 17 mental health positions were filled at the Illinois Youth Center-Kewanee, the state’s designated facility for delinquent young people with the worst mental disturbances, when the John Howard Association visited in September. As a result, Kewanee residents get only half as much treatment as all detainees at another, general-population facility.

* Region’s lawmakers disappointed by court ruling: “By closing these facilities the governor’s making the overcrowding problem more of a problem, a serious problem,” Phelps said. “We’re not going to quit fighting. I want to make sure we do everything we can to make sure those facilities stay open. But if they do have to close… my first and main objective would be to make sure we find positions for all those employees that are going to be affected by the closures.”

* Governor: Let legal process play out on prisons

* Editorial: Quinn shouldn’t appeal ruling on raises

* VIDEO: Chicago Federation of Labor Pres. Jorge Ramirez supporting O’Hare workers

* Kelly Kraft leads first meeting as head of sports authority

- Posted by Rich Miller        


56 Comments
  1. - Michelle Flaherty - Thursday, Dec 13, 12 @ 11:12 am:

    “in his free time”
    C’mon, the Quinn admin is a joke 24-7.


  2. - Just a Guy - Thursday, Dec 13, 12 @ 11:15 am:

    I would say the stats are somewhat misleading. Is paying the salary of a teacher considered education spending? If so, then why isn’t that teacher’s retirement cost also considered education spending? Half of the pension payment goes to TRS…


  3. - Obamas Puppy - Thursday, Dec 13, 12 @ 11:20 am:

    When anyone uses children as props it disgusts me and this is even more vile in that it is from our Governor. I guess providing pension benefits to teacher who for whatever reason have choosen to stay in Illinois does not benfit children. This Governor clearly does not understand recruiting and retaining the best educators goes hand in hand with providing a financial incentive to provide quality education to these very children.

    One final note this is especially ironic since Mr. Vinck was a lobbyist for Quinn. Pat Quinn is a disgrace in ways that Rod never dreamed of. Maybe he can run for dog catcher of Cook County once he loses in ‘14.


  4. - shore - Thursday, Dec 13, 12 @ 11:28 am:

    Whatever quinn is paying his pr team is way way way way way too much. I know it’s springfield and not the major leagues like chicago and especially dc, but this has been california penal league level stuff. There are pr, advertising, and marketing people in chicago that find ways every day to convince billions of people to eat cheeseburgers that will kill them, booze that will destroy their livers, and diet products that won’t help them lose weight. they can find a few them that are more competent than this to sell whatever message he thinks he can stay on for .01 seconds before he drifts to something else.


  5. - Elo Kiddies - Thursday, Dec 13, 12 @ 11:29 am:

    The chained CPI is a way of cutting payments to retirees. It does not measure the value of a consistent basket of goods or the value of a stable standard of living but rather how people make do when they get less. As a result, it’s a disingenuous way of shorting old people on their food money.

    When the feds made the switch over a decade ago, they retained the old measure of CPI by another name, so that bonds tied to the rate wouldn’t be affected.


  6. - Boone's is Back - Thursday, Dec 13, 12 @ 11:32 am:

    Is it just me or has Vinck’s time in the Gov’s office turned him into mini-PQ?


  7. - The Elderly Man You Used to Love - Thursday, Dec 13, 12 @ 11:39 am:

    For the love of Pete, please stop trying to involve kids in the pension reform discussion. It’s getting kinda creepy…


  8. - Skeptic - Thursday, Dec 13, 12 @ 11:40 am:

    shore: Thanks for the backhand slap at Springfield, but … um … Quinn is from Chicago.


  9. - Anon - Thursday, Dec 13, 12 @ 11:40 am:

    Chained CPI - reflects that when the price of steak goes up, you buy hamburger. When the price of heating oil goes up, you turn down the thermostat. Since increases happen year after year, the chained CPI leads people on fixed incomes to live less and less well.


  10. - Just Observing - Thursday, Dec 13, 12 @ 11:45 am:

    If these kids are so concerned they should take action instead of sitting around a table whining. There is nothing to stop them from hiring a lobbyist or starting a super PAC.


  11. - The Shadow - Thursday, Dec 13, 12 @ 11:48 am:

    @ Just Observing

    I’m not sure your screen name suits you.
    Base on my observation skills, I believe the end of the video says they are going to hire a lobbyist and that is what part 2 is about.

    I don’t know- could be just me.


  12. - titan - Thursday, Dec 13, 12 @ 11:49 am:

    The Illinois pension systems use a fixed 3% COLA, doesn’t they? I didn’t think they were CPI based.


  13. - Sunshine - Thursday, Dec 13, 12 @ 11:52 am:

    Chained Cpi…? Let’s see, I have 5 cookies in one box and 10 cookies in another, but if I count them as 10 in one box and five in another, I’m somehow better off and have more cookies?

    Creative deception at its finest. Just gotta love political think tanks. Though we have less, we really have more.

    I feel so much better off!


  14. - horseracer - Thursday, Dec 13, 12 @ 11:55 am:

    Just observing — Yeah those lousy children. So greedy. Always looking out for #1.

    Hope they can find a good lobbyist. Takers.


  15. - Irish - Thursday, Dec 13, 12 @ 11:56 am:

    They missed the pop-up screens that gave the yearly pension cost vs cost of education for the years of 198x - 2010. Those screens would have shown quite a different picture, because there weren’t any pension payments made or very few.

    So once again Quinn the Gadfly does not tell the whole story and makes figures show what he wants them to show instead of being honest and forthright. And uses little kids as his pawns.

    What’s next? Videos of the disabled and one of Quinn’s many many spokespersons blaming their plight on government workers?

    If there is no money and we are as destitute then Pat should stop hiring multiple Deputy Directors in the agencies he says have no money. We have more Deputy Directors in my agency than most field locations have staff.


  16. - Robert the Bruce - Thursday, Dec 13, 12 @ 12:00 pm:

    Love the chained CPI - Rich’s mom for governor!

    I’d imagine that the state would have to wait for the feds to call the chained CPI the new CPI before proceeding, lest the unions be able to argue in court that this reduced CPI is a reduced benefit.


  17. - RNUG - Thursday, Dec 13, 12 @ 12:02 pm:

    The assumption behind the chained CPI are only valid if there is a cheaper substitute. It’s one thing to move down from steak to hamburger and then to dog food, but where do you go after that? Same for prescriptions; after you go from name brand to generic to taking half doses, what do you do next? The logic breaks down when there are no cheaper substitutes.

    Looked at strictly from a state level, it would have basically no effect on the pension problem. All current SERS retirees and Tier 1 employees are entitled to a 3% COLA. Which CPI you use doesn’t change any Tier 1 calculations. As the State hires employees under Tier 2, it will have some effect but as long as Tier 2 employees are a small minority, the effect will be, relatively speaking, small.

    Most the other State programs (mostly welfare) that are tied to a CPI one way or another are federally funded … so that won’t really free up any ’state’ money to fund the pensions.

    On the flip side, IF the state were to start taxing pension income, a using the chained CPI on Social Security would result in less future state tax revenue because the income base would be lower.


  18. - Formerly Known As... - Thursday, Dec 13, 12 @ 12:04 pm:

    Anything is better than Squeezy.

    It’s good to at least see Quinn continue pushing the issue in his own special way. It represents improvement over his typical modus operandi.

    And did anyone else literally hear a rimshot while reading Michelle’s comment? She gets my Golden Horseshoe for “Comment of the Day” - at least thus far.

    Of course, one never counts out wordslinger, Oswego Willy, et. al until the clock strikes midnight. Or later - should they freeze the Madigan and Big Jim style.


  19. - cassandra - Thursday, Dec 13, 12 @ 12:07 pm:

    What is Phelps talking about. I thought it was already well established that no corrections employees would lose jobs in the correctional system as a result of these prison closures. Shouldn’t he be aware of this. Or is he trying to take credit?


  20. - Robert the Bruce - Thursday, Dec 13, 12 @ 12:08 pm:

    ==All current SERS retirees and Tier 1 employees are entitled to a 3% COLA. Which CPI you use doesn’t change any Tier 1 calculations==
    So I’ll guess that the chained CPI wouldn’t help as much with pension liability but instead would hurt mostly poor folks (TANF or Medicaid recipients)?


  21. - Just Observing - Thursday, Dec 13, 12 @ 12:13 pm:

    === I’m not sure your screen name suits you.
    Base on my observation skills, I believe the end of the video says they are going to hire a lobbyist and that is what part 2 is about. ===

    I’m observing — didn’t say my observations are accurate.


  22. - Michelle Flaherty - Thursday, Dec 13, 12 @ 12:15 pm:

    Shore, if Quinn hired professionals they would tell him that his approach has been wrong. Pat Quinn doesn’t want to hear that.


  23. - Formerly Known As... - Thursday, Dec 13, 12 @ 12:18 pm:

    *edit*
    “Or later - should Rich freeze the clock Madigan and Big Jim style.”

    In re: to Illinois foreclosures posting the 11th straight year-over-year monthly increase, how is the aid that’s been coming our way in recent months not making a greater impact?

    That $1.2 billion should be working its way to homeowners by now.

    “Under the $25 billion national agreement, Illinois will receive nearly $1.2 billion in benefits and assistance for homeowners whose loans were serviced by one of the five participating mortgage servicers.”
    http://portal.hud.gov/hudportal/HUD?src=/states/illinois/stories/2012-06-11

    Meanwhile, 9 months later, it appears Attorney General Madigan is still busy reviewing proposals for the $20 million her office intends to distribute.

    “Madigan announced in April she would commit to distribute $20 million of the funds recovered in the settlement to legal aid services. The Attorney General’s office is continuing to analyze grant proposals toward that goal.”

    Perhaps leadership can speed things up a bit?

    Cold weather and foreclosures don’t mesh very well.


  24. - Rich Miller - Thursday, Dec 13, 12 @ 12:31 pm:

    ===The Illinois pension systems use a fixed 3% COLA, doesn’t they? I didn’t think they were CPI based. ===

    Yes, but you could put a cap on increases, then anything under that would be based on “chained CPI.”


  25. - Roadiepig - Thursday, Dec 13, 12 @ 12:36 pm:

    One day Quinn has a presser where he puts” over a dozen” college students in from of the camera to say pensions are keeping them from getting the free state scholarship money. The next day Quinn releases a video with grade schoolers ?his favorite age group) being bored by a flack who tells them the pensions are stealing their state school aid. He really doesn’t have a level he won’t stoop to to make the CCC and their ilk happy does he?


  26. - Norseman - Thursday, Dec 13, 12 @ 12:37 pm:

    The best I could give it is a C-. It still drags. I take it that the main play for this will be on his website. Nobody is going to that website unless they have skin in the game. It will not be an opinion changer.

    To other points made by folks, he’s using kids because everyone loves kids and want them to be healthy and properly educated. Basically, its the kids or the big bad public employees.

    Of course the numbers are misleading. He wants folks to side with him, not have the full story.


  27. - Newsclown - Thursday, Dec 13, 12 @ 12:40 pm:

    The video looks like it was shot in a coal mine. The production values were pretty low. But worse, they spent so long telegraphing the punchline - that the budget and pensions are complicated and arcane and that the kids were bored, - they lost the adult audience too.

    Actors say never share a stage with pets or kids. They suck all the attention away from what you’re trying to do. I think that was true in this case. You watch the kids but you really don’t read the graphics or pay attention to the narrative. These kids were also volunteers and not paid actors who can really perform lines. Its truly hard to make out what they are reading off the cue card or whatever.

    In fact, the visual subtext actually being communicated is kind of an insulting one: the kids actually represent the taxpayers, who don’t understand and are bored by this stuff. On the plus side, they didn’t appropriate any copyrighted cartoon characters in this one.

    I don’t think they are using an ad agency for any of this. I think someone in the governor’s office is writing it and it’s just getting rubber-stamped all the way down the line. It’s too long getting to a point and lacks a finished quality. You kinda see what they were trying for, but it’s not executing well. They perhaps should have started with part 2: hiring a lobbyist, and skipped this preamble.


  28. - Amuzing Myself - Thursday, Dec 13, 12 @ 1:01 pm:

    Wow. That’s two minutes I’ll never get back. These two videos make a pretty good case all by themselves to get rid of Quinn. He’s clearly in WAY over his head. Absolutely embarrassing. Time for a grown-up…


  29. - Arthur Andersen - Thursday, Dec 13, 12 @ 1:09 pm:

    The location of the video shoot looks like a Gov’s office conference room but I could be wrong.
    Not to spoil the surprise, but I’ve heard that in Part 2, Squeezy comes in, scares away the kids, eats all the cookies, and lifts the lobbyist’s wallet.


  30. - Archimedes - Thursday, Dec 13, 12 @ 1:48 pm:

    I rate the clip a 4 out 5 for entertainment. A 4 out of 5 in effectiveness for the simple message it tries to get across. And a 2 out of 5 for truth.
    $5.1 billion pension payment - but $1.6 billion is for the pension and $3.5 billion is to pay off the debt from not making pension payments in the past.
    Comparing $16,450 per employee to $2,269 per student makes it seem we are spending 8 times more on the pension. But State budget for General State Aid = $4.3 billion and $5.1 billion for pensions. Apples and oranges.
    The chained CPI can make sense and may be a more reasonable measure of cost of living. Reducing the current 3% to the 2.5% average CPI reduces the unfunded liability by 4.5%, going to 2.2% for the C-CPI-U reduces it by a total of 7.1%. HB6258 reduces Unfunded Liability 17.4% with the change to the flat $750 cap pension increase each year.
    Point is, changing the COLA from 3% to more reasonable C-CPI-U is chump change compared to how much reduction the GA seems to be looking for. With HB6258 it seems like every idea got thrown into the pot, regardless of how legal it might be, and without thought to the actuarial value.


  31. - Jimbo - Thursday, Dec 13, 12 @ 1:52 pm:

    The number they use isn’t an “education” number. It is “early childhood education” which is state funded preschool. Sheesh! Dishonest much?


  32. - Rusty - Thursday, Dec 13, 12 @ 2:09 pm:

    Sean Vinck must really be a comedian because this video is a joke! Really, trying to play the pension issue with kids? How much is Quinn paying them?
    One of the graphics should say “In 2002 Illinois should have been putting XXX Million into the pension funds, but instead,they were spending XXX billion on pork projects in the legislators districts so they could get re-elected and earn huge pensions that are much better than what the regular state employees get”.


  33. - Anonymous - Thursday, Dec 13, 12 @ 2:13 pm:

    Can we put the chain on Squeezey?


  34. - anon for a reason - Thursday, Dec 13, 12 @ 2:18 pm:

    Have you noticed, excepting Quinn, our other elected officials are becoming quiet on the pensions.
    Me thinks the blowback from teachers and the comparisons with private sector pension theft is getting under their skin.
    Quinn seems clueless.


  35. - Small Town Liberal - Thursday, Dec 13, 12 @ 2:26 pm:

    - Quinn seems clueless. -

    That, or he seems to think it’s an issue that needs to be addressed.

    I also think the 21 House members who proposed a plan last week would disagree with your first sentence. I believe Madigan, Cullerton and Cross all made statements about the proposal as well.

    To everyone who keeps repeating that the state should have been putting in their contributions all along: Everyone knows this. Unless you have a time machine handy this does not help with a solution.


  36. - Norseman - Thursday, Dec 13, 12 @ 2:54 pm:

    “To everyone who keeps repeating that the state should have been putting in their contributions all along: Everyone knows this. Unless you have a time machine handy this does not help with a solution.”

    True, but neither does vilifying public employees or blaming them for the problem solve anything either. Nor does pursuing unconstitutional impairment of their benefits help. What it will take is a combination of a number of options involving program cuts and revenue enhancements that will require discipline on the part of our policy leaders. Discipline that I don’t expect to see unless forced by the courts.


  37. - RetiredStateEmployee - Thursday, Dec 13, 12 @ 3:18 pm:

    It’s pretty well known that the current CPI calculation is already corrupted as far as being an actual measure of “real” inflation, that experienced by most of us. To use a more watered down version would only punish the public more, not just retirees. Is anybody making any money at all on their money in the bank? We are all losing out.


  38. - dupage dan - Thursday, Dec 13, 12 @ 3:46 pm:

    STL, I agree that a time machine is the only way to put the toothpaste back into the tube. As a state employe, tho, I also agree with Norseman - vilifying us is not an appropriate lead up to a solution as well.

    As a matter of curiosity, what solution do you think would be fairest? What solution do you think will pass Constitutional muster?


  39. - RNUG - Thursday, Dec 13, 12 @ 4:00 pm:

    Historically, according to the fed’s own numbers, inflation / CPI has ran 3.23% from 1914 to current and 2.9% from 1970 to current.


  40. - Small Town Liberal - Thursday, Dec 13, 12 @ 4:08 pm:

    - As a matter of curiosity, what solution do you think would be fairest? What solution do you think will pass Constitutional muster? -

    Fairest? Whatever hurts the employees the least.

    I think last week’s proposal is a good start. I also think revenue should be enhanced through a graduated income tax, and loopholes should be closed wherever possible.

    I believe the cost shift is a good idea to hold school districts more accountable for increasing pension costs.

    I don’t know if it’s possible, but I’d like to see a mechanism that forced the state to make the payments going forward.

    Personally I think the whole 100% fully funded liability is a ridiculous requirement, but I realize there isn’t a lot the state can do about bond rating agencies.

    Constitutional? I have no idea what will pass muster, I’m not a lawyer or even close.

    I don’t want to see employees suffer because of the state’s mismanagement, and neither does the Governor.

    However, this problem can’t be ignored any longer, and it’s a big problem. I can’t help but think whatever eventually comes through the GA is probably going to cost employees a little extra.


  41. - RNUG - Thursday, Dec 13, 12 @ 4:54 pm:

    - What solution do you think will pass Constitutional muster? -

    Not all these are serious from the political sense, but they should meet the constitutional test.

    Assumption: the 5% income tax rate becomes permanent … probably a safe bet

    Change the 1995 ramp, both timeline and goal

    Adopt the proposed approach of using soon to be freed up pension bond payment revenue to slowly pay down the pension shortfall

    Ignore the bond houses and shoot for a 70% - 75% funded ratio

    Shift the “normal pension cost” of TRS / SURS (community college portion) to their local taxing districts; but you need to understand the “savings” will be small the first few years as it phases in

    Expand the current tax base to services (potentially as much as $9B)

    Expand the current 5% income tax to all retirement income, including pensions, social security, and various treasury bonds currently exempt (estimated $1.2B)

    Raise the current income tax rate. Each additional 1% is estimated about $2.3B

    As others have pointed out, a graduated income tax would do something … but that requires a constitutional change so I put the likelyhood of this change lower than a straight tax hike

    Charging current employees a higher contribution rate …

    Change rule of 85 for 1.67 formula SERS participants to require a minimum age of 60; not huge savings because it would only affect part of SERS and the additional years of service, hence larger pensions starting a bit later, might offset the savings

    Sell off unused / underutilized State assets and put all the proceeds in the pension funds

    Instead of naming State buildings after politicans, sell off naming rights for a fixed period (10, 20 yrs?) to the highest bidder

    Ditto for highways

    Heck, why stop there? This is Illinois; formalize the selling of legislative votes and put all the money in the pension funds

    For not violent offenders, sell ‘get out of jail free’ cards

    (OK, the last two were mostly but not completely, snark)


  42. - western illinois - Thursday, Dec 13, 12 @ 5:32 pm:

    Too add to RNUG
    The Casino Money
    Change pot posession to a civil fine -a big one


  43. - RNUG - Thursday, Dec 13, 12 @ 5:56 pm:

    One more snarky addition:

    For $95B cash on the barrelhead, sell Chicago / Cook county the right to opt out of concealed carry


  44. - Six Degrees of Separation - Thursday, Dec 13, 12 @ 7:55 pm:

    Constitutional? I have no idea what will pass muster, I’m not a lawyer or even close.

    That’s part of the problem…many don’t know, many don’t WANT to know, and some do know but feign ignorance, or put proposals forward based on shaky analysis like Sidney Austin, rather than forthright analysis like Madiar.


  45. - Lotta Liaison - Thursday, Dec 13, 12 @ 8:25 pm:

    The video is funny, but it does nothing to advance pension reform.


  46. - Ruby - Thursday, Dec 13, 12 @ 8:28 pm:

    Even in the years when our state government took pension holidays, Illinois funding of education has ranked at or near the bottom of the fifty states. Our politicians have long ignored the research and been reluctant to fund needed preschool education which would reduce the school dropout rate and also reduce crime. Now they are trying to blame public pensions for the long standing under funding of public education by Illinois state government. This is clearly a case of blame shifting and deep denial of the truth.


  47. - RNUG - Thursday, Dec 13, 12 @ 8:33 pm:

    Here’s a semi-serious two-fer:

    Require all left over campaign funds from State level runs to be forfeited to the State for payment in to the pension funds.


  48. - Ruby - Thursday, Dec 13, 12 @ 8:52 pm:

    Keep in mind that expanding the current 5% income tax to all retirement income would also include IRA’s, 401k, 403b, and Keogh accounts when required distributions are taken out. It is still a good idea and one that would bring a large amount of revenue.


  49. - western illinois - Thursday, Dec 13, 12 @ 9:57 pm:

    http://www.ohturnpikeanalysis.com/#

    Here is another way. Ohio found a better way than indiana to leverage its tollroads…
    Illinois Broke because we want to be


  50. - Jechislo - Thursday, Dec 13, 12 @ 10:09 pm:

    Anyone guess as to how many retirees would relocate? To places like Tennessee that are recruiting retirees? If a State Farm retiree who currently lives in Illinois leaves Illinois and moves to a income tax-free state, his income would no longer be taxed. Maybe that would be the same for State of Illinois retirees. If so, a lot of them would be packing their bags.


  51. - RNUG - Thursday, Dec 13, 12 @ 10:19 pm:

    Ruby @ 8:52 pm:

    The estimates I have seen on taxing all retirement income are only $1.2B or so, which is a drop in the bucket when you are trying to pay back $95B quickly.


  52. - RNUG - Thursday, Dec 13, 12 @ 10:28 pm:

    Jechislo @ 10:09 pm:

    I’d guess maybe 10% or less. I suspect most the retirees that want to leave do so shortly after retirement. The ones that stay here usually do so because of family ties, such as caring for very elderly parents or grand kids. You don’t easily overcome those issues / ties; I know that’s why we’re still here … 90 yr old parents and preschool grandsons.

    Another consideration is the cost of living; once you get outside the Chicago burb’s, it is really cheap to live in Illinois compared to most of the desirable retirement states. A 5% income tax (effectively less with individual and homeowner deductions) wouldn’t make that much difference once you look at higher housing costs.


  53. - Six Degrees of Separation - Thursday, Dec 13, 12 @ 10:39 pm:

    RNUG -

    The $1.2 billion in potential retiree income tax shouldn’t be discounted as a substantial source. After all, IL doesn’t need the entire $95 billion “right now”. Agreed, it is far less than needed to ultimately plug the hole. I also agree that a mass exodus isn’t in the cards if a retiree income tax is enacted.


  54. - Six Degrees of Separation - Thursday, Dec 13, 12 @ 10:43 pm:

    Western IL - not sure that OH’s plan is any better than IN’s. OH appears to have raised far less $ than IN, while those bonds will be looming above the state regardless of the toll road’s meeting financial expectations. Advantages as well as disadvantages for both states’ approaches.


  55. - RNUG - Friday, Dec 14, 12 @ 7:14 am:

    Rich,

    Interesting COLA case at the Federal level:

    http://xfinity.comcast.net/articles/news-national/20121214/US.Federal.Judges_.Pay/?cid=hero_media


  56. - Archimedes - Friday, Dec 14, 12 @ 8:55 am:

    The Unfunded Liability for the five pension systems is $95 billion. The State should be paying $8.3 billion each year to fund it (given the current pension fund discount rates). For 2013-14, the State will pay $6.1 billion - about $1.7 billion for Normal Cost and $4.4 billion of the $8.3 billion toward teh Unfunded Liability. The remaining $3.9 billion will just add to the unfunded liability. So next year, it will be $99 billion. This is the Pension Ramp plan - which isn’t working too well.
    The GA is trying to change the pension system to lower that $8.3 billion annual payment - get it close to “what they can afford” - which has never been stated, but is probably something closer to $4.5 to $5 billion.
    How do you get the payment down to $5 billion? You would have to cut pensions by 35% to do it all using only employees and retirees. HB6258 probably gets most (or even more) of the way there - since the COLA for Tier 1 is practically eliminated (probably 20% right there), retirement age is raised, and wage base is lowered. The cost shift to schools and universities is worth $1.2 billion - but not until fully implemented and will take 16 to 18 years. The 2% additional cost to employees is worth $200 to $300 million. No one has priced all of this out - but it probably overshoots the needed reduction. So the sausage makers of the General Assembly will tweak the elements of HB6258.
    The COLA adjustment applied to already earned benefits is almost certainly against contract law (the protection afforded by the constitution). If the goal of the GA is to solve this within the constitutional protection given to pensions, they will have to provide consideration to reduce the COLA that has been earned (by retirees in particular).
    They can solve it outside the protection of the constitution (and contract law) by saying the changes are a necessary exercise of State police power - the changes made are proportional to the emrgency and there is no other realistic way to handle the emergency they face.


Sorry, comments for this post are now closed.


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        * Sony Xperia Z3 specs leak with 4K video capture
        * Sony’s latest lens-style camera leaks, reveals multi-lens support
        * ASUS Zenwatch to have voice control, cheaper price
        * Apple says iCloud flaw not at root of celebrity photo hack
        * Automate your Mac: The smart way to handle repetitive Mac chores
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        * LA USD Halts $1 Billion Plan to Give Every Student an iPad
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        * Season Review: 2014 Charlotte Knights
        * White Sox call up Josh Phegley, Marcus Semien, Jordan Danks, Scott...
        * Prospect Rodon not among White Sox callups
        * White Sox unburden themselves for September
        * White Sox Minor League Update: End of the regular season
        * Noesi looks to continue push toward season's end
        * Williams conveys important message to Little Leaguers


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        * State accepting patient applications for medica.....
        * Rauner criticizes Quinn on veterans..
        * Quinn, Rauner Should Get On Board With Region’s.....
        * Bruce Rauner spends more on wine than average I.....
        * School starts in Chicago with more safety guards..
        * California regulatory judges issue $1.4B fine a.....
        * Governor’s mansion question revived..
        * School starts in Chicago with more safety officers..
        * Can youth football be a safer game?..
        * Ill. Invests $102M On High-Speed Rail Line Upgr.....


        * Gubernatorial candidates discuss jobs, veterans
        * Suburban Chicago man sentenced for killing infant
        * Rauner criticizes Quinn on veterans
        * Illinois woman rescued after day stuck in mud
        * First medical marijuana tally expected next week
        * School starts in Chicago with more safety guards
        * Climatologist says August warmed up in Illinois
        * Quinn: Eating crackers on minimum wage challenge
        * Illinois prisons dealing with backup power issues
        * Fargo is site for national ag research center

        * Rauner criticizes Quinn on veterans
        * Quinn: Eating crackers on minimum wage challenge
        * Illinois prisons struggle with backup power issues
        * State starts accepting medical marijuana requests
        * Audit finds state lax in reviewing eligibility for children’s health insurance program
        * Does the governor need to live in the Executive Mansion?
        * Statehouse Insider: Hands off investments
        * State of unions: AFSCME wins some, loses some on outsourcing
        * State of unions: Domination of Illinois' workforce becomes campaign issue
        * State of unions: Lawmakers approved keeping some workers out of unions

        * A new, improved commuter bike for $325? Well, sort of
        * Hinshaw merger sets up law firm for more growth
        * Thoma Bravo to buy Compuware
        * Thoma Bravo makes its biggest deal yet
        * Medical marijuana applications start rolling in for Illinois


        * 30-year sentence for man who smothered baby, tossed him in garbage
        * New school year brings changes to Gresham
        * 30 years for man who smothered baby, tossed him in garbage
        * Convicted felon accused of fatally stabbing girlfriend 22 times
        * Quinn announces $102 million investment for high-speed rail
        * Quinn to live on minimum wage for a week
        * Moms, dads get kids ready for school
        * Chicago school year begins with more safety guards
        * Ex-cop convicted of protecting crooks is back on public payroll
        * Ald. Pope rehired city worker who quit after sex harassment allegations


        * Home Depot investigating possible data breach
        * Young man critically injured after being hit by train in Lake Zurich
        * Garrett Popcorn sued over 'Chicago Mix'
        * High school placed on lockdown after reports of shots fired
        * Man charged with trying to meet Stickney girl, 12, for sex
        * Lawyer: Federal agents investigating shootings by Chicago cops
        * No bail for man accused of Northwest Side fatal stabbing
        * Today's the deadline to transfer old CTA fare card balances
        * Prosecutors: Man plotted obstruction after slaying off-duty cop
        * Man sentenced to 30 years for dumping baby's body in trash


        * Decatur's Kirkland - From Beethoven To The Beatles
        * Big Predators In Illinois Inspire New Law
        * WUIS/SJ-R Business Report: Casey's Expansion; Parsons In Court; Farmland Prices Fall
        * Opposition Research Key Part Of Political Dark Arts
        * Digging up political dirt? That's their job
        * State Starts Accepting Medical Marijuana Requests
        * Newborn Found Alive In Jacksonville Trash Bin
        * DNR Releases Fracking Rules
        * Listen to State Week - August 29, 2014
        * 'Belleville' The Movie Is NOT A Documentary


        * Rauner criticizes Quinn on veterans
        * Quinn: Eating crackers on minimum wage challenge
        * Illinois prisons struggle with backup power issues
        * State starts accepting medical marijuana requests
        * Couple’s wedding gifts help the community
        * Angela Bertoni: How to raise awareness of domestic violence in October
        * Catherine Rampell: Tech firms’ poor record of diversity
        * Audit finds state lax in reviewing eligibility for children’s health insurance program
        * Does the governor need to live in the Executive Mansion?
        * Our Opinion: Driving into floodwater a deadly practice


        * Police: Highland High teen dies in high-speed Corvette crash
        * Police: Highland High School teen dies in high-speed Corvette crash
        * Clutterbugs to host fall shopping expo
        * SIU enrollment increases for first time in 10 years
        * MJ's minute: Sept. 2, 2014
        * Is it no longer safe to recline your airplane seat?
        * School Daze: the first day - or week - can be a challenge
        * Boil order issued for part of Carbondale
        * Popcorn Days walk/run and fun run
        * UI Volleyball vs North Carolina


        * Barbecue hogs the spotlight at Rock 'n Ribs in Lake Zurich
        * West Chicago Park District ready to show off 70,000-square-foot, $15.5M indoor rec center
        * Zion man sentenced to 30 years in prison for killing 5-month-old baby
        * Rodon won't be joining White Sox -- for now
        * Kane County Cougars announce big projects for 2015

        * Feds fine Jesse Jackson Jr.'s campaign com...
        * IRS enforcement agent numbers could drop t...
        * Jesse Jackson Jr. political fund fined nea...
        * Jackson Jr.'s political fund fined nearly ...
        * 'Celebrity Crime Files' Season Three, With...
        * Welcome to the state's Bult Field - Chicag...
        * US Rep. Lipinski accepting service academy...
        * Dem Explains Why He Voted 'Present' on DAC...
        * Immigration dominates Lipinski's town hall...
        * US Rep. Lipinski accepting service academy...

        * Amtrak demands probe of CN freight trains...
        * Construction Industry Continues to Raise C......
        * Construction Industry Continues to Raise C......
        * Who Leaked Nude Photos Of Jennifer Lawrenc......
        * Who Leaked Nude Photos Of Jennifer Lawrenc......

        * Rauner criticizes Quinn on veterans...
        * Construction Industry Continues to Raise C......
        * Ex-HP chief to speak at Downers Grove orga......

        * O'Brien: Yes We Tan. Obama Concedes to ISIS in "Taupe and Change" suit
        * Rauner Rolls Out Veterans Coalition
        * Hultgren talks health care with community leaders
        * Quinn plays up minimum wage diet to appeal to voters
        * Patriot group organizes 60 day prayer list for November elections
        * Foster: Oberweis' flip-flop on immigration cost him my vote
        * Illinois climatologist: August was warmer than July
        * GOP challenger Brannigan goes after U.S. Rep. Lipinski for anti-privacy vote
        * Equality Illinois, Planned Parenthood says "Doris wants your vCard"
        * Muslims in Dearborn, Michigan and Britain condemn ISIS; Illinois Muslims silent


        * When it comes to jobs and hiring, Pat Quinn is veteran unfriendly
        * Pat Quinn’s Blagojevich-style Hiring Hurts Veterans
        * Rauner Rolls Out Veterans Coalition
        * ICYMI: Capitol Fax: “A Very Good Point”
        * Like All Illinoisans, Veterans Are Hurting Under Pat Quinn




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