* Unlike House Speaker Michael Madigan, Senate President John Cullerton will send a delegate to the We Are One Ilinois’ pension “summit” this month. But Cullerton had some harsh words for those who believe that tax hikes are the answer to the pension problems…
“This notion of having to have no sacrifice from the pensioneers and have us just raise taxes and then spend it on them …,” Cullerton said. “What if we had $2 billion in new revenue? Why not do a capital bill? Why not spend more money on human services or pay old bills?”
[Cullerton] also singled out Henry Bayer, executive director of the American Federation of State, County and Municipal Employees, for blaming lawmakers for underfunding pensions.
“He forgets about the fact he was negotiating what some would say were generous contracts eating up the money instead of putting it in the pension fund,” Cullerton said.
The relationship between legislative leaders and public employee unions is strained, Cullerton said, “because the unions are opposed to any changes in the law that’s going to go anywhere toward solving the problem.”
State Rep. Joe Sosnowski (R-Belvidere) on Monday introduced a constitutional amendment, House Joint Constitutional Amendment 11, that would strike a 38-word paragraph of the Illinois Constitution that prohibits the reduction of public employee pension benefits.
A key stumbling block in the search for any viable legislative formula to restrain the costs of Illinois public pension costs is the language in the Illinois Constitution that states that public pension benefits “shall not be diminished or impaired.”
Madigan and Cullerton finally sounding sensical and almost, almost likable. Now if they would just get off the cost-shift, or if they force the cost shift, at least allow local districts the right to fairly bargain the benefits, we’d really be somewhere.
The Senate President conveniently fails to mention that everyone in Illinois be fitted from the loans the pension plans made to the general fund. All enjoyed services while not being required to pay for those services through higher taxes. Well now it is time to pay. And yes higher taxes are needed, or an extension of the sales tax to services.
Even if the constitutional amendment were approved by the voters it would likely only apply to public workers who are not yet retired because of the constitutional provisions that prevent the passage of ex-post-facto measures.
Wouldn’t making up for the skipped pension payments be “paying old bills?” I’m sure all the employees who worked for those pensions as part of their compensation are just spoiled children who want to hog all the toys. Thanks for posting. It motivated me to double check whether I am in Cullerton’s district (yep, close to the border but within).
The unions are the only group to offer anything — $350 million a year in higher contributions — which is the opposite of “no sacrifice”.
Also, the cost of a wage increase for state employees like child protection workers, nurses, caregivers or correctional officers is about two-tenths of one percent of GRF.
As the President himself often says, Illinois has the nation’s smallest state workforce per capita. Fair wages for the smallest workforce aren’t the problem.
The choice doesn’t have to be cutting needed programs or taking money from retired public employees. Lawmakers could choose instead to cut wasteful spending on corporate tax breaks, higher employee contributions in exchange for a funding guarantee, refinance the debt or other ideas that are fair and constitutional.
Interesting though that he supposedly said it is possible to achieve the effects of a graduated tax without changing the Constitution. That could be achieved by increasing breaks available to lower income taxpayers while raising tax rates. Do you think he wants to raise tax rates again?
Does Mr. President want me to truly believe that had AFSCME negotiated smaller contracts the General Assembly would have put the “savings” into the pensions. If I’m going to fall for a whopper, I’d prefer to try and buy that bridge in New York.
And Cullerton’s right. The Institute on Taxation and Economic Policy, an organization that campaigns against regressive taxation and in favor of boosting taxes on the rich, just released their fourth comprehensive comparison of all state tax rates; unfortunately the figures for this latest study, for some reason, do not include Illinois’ 5% income tax rate.
Add the two percent boost to taxes to the ITEP numbers, and the findings of ITEP become painfully obvious; most Illinoisans have become VERY heavily taxed. The only part of the Illinois tax base that, by any reasonable standard, can take another tax increase, is income beyond approximately your 200,000th dollar of the year. That, of course, under Illinois law, means a constitutional amendment, and that won’t be forthcoming in the current political climate. Even more basic forms of tax reform, such as broadening the sales tax base while lowering the rates, aren’t even being mentioned in Springfield.
Short story; the state has to get its house in order first before even tackling sales tax reform, and it has to get sales tax reform done before even thinking about the constitutional amendment that would be required for income tax reform, and only income tax reform would clear the way for any overall increase in taxes. That sounds to me like a decades-long process, and pensions won’t wait that long.
Best defense is a good offense. How’d the pension funds get into trouble? Who benefitted from artificially low taxes all these years because of pension money diverted away from public workers (also taxpayers) and to citizens? Who agreed to those “generous” contracts?
Well, with headlines like “Lawmakers push to spend $900 million,” it’s hard for ordinary residents to believe that the state is in a fiscal crisis requiring either increased taxation or the dinging of middle class state retirees.
Democrats may not need to be hat in hand in the next election cycle, since the Republican party has practically vanished in Illinois.
A quandary for AFSCME. Where are they gonna go? It’s not like the remaining Republicans can push through the tax hike(s) AFSCME wants, even if they were so inclined, which they aren’t. AFSCME is stuck with the Democrats.
At least Cullerton is man enough to have a representative at the We Are One sponsored summit next week, unlike the obnoxious response from his counterpart in the House. How will anything get done if there’s no negotiating which I thought meant both sides coming together. Also, isn’t there something in our constitution that allows for changes to be made in pension protections if contract principles are followed? Is Madigan that entrenched in his position of letting the courts decide the constitutionality of pension reform by ramming his version down the throats of 500,000 people? What a great political strategy that is!
SIU PROF nails it above - literally everyone in the entire state benefited from additional services, roads, etc. during all those years that the state failed to pay its pension obligations and instead spent the money in other ways. Now that means everyone should chip in to help solve the problem - whether it is through higher taxes, a progressive tax, or sales tax reform, combined with likely some benefit reduction as well. Not sure why this isn’t a more common talking point by the unions. Simply blaming the unions for being greedy doesn’t make any sense and won’t get anyone on your side, as Jim Edgar has repeatedly said recently.
- Pot calling kettle - Tuesday, Feb 5, 13 @ 11:51 am:
==Cullerton said. “What if we had $2 billion in new revenue? Why not do a capital bill? Why not spend more money on human services or pay old bills?”==
Because that’s what the GA has been doing for many decades. That’s why we have a pension funding issue. Every time there was new revenue the money was spent on pretty much anything but pensions.
What Nickypii said. Broadening the tax base is critical.
But it also has to be joined with lowering the rates.
Here’s an example; Minnesota, which already has a significantly broader sales tax base than Illinois, wants to broaden it much further, while lowering the overall rate. End result, more services get taxed, more shopping is done locally, fewer goods get purchased out of state online. The city of Duluth’s one percent local option tax alone stands to net an overall increase of $8 million a year in revenue from these changes.
Cullerton, Madigan, Nekritz, et al want the conversation/negotiation to conform to the concepts contained in their proposed legislation. The unions aren’t playing in that sand box. They won’t entertain reductions in earned benefits.
Bottom line - reduction in earned benefits isn’t legal and increasing taxes (eliminate loopholes, tax retirement benefits, sales tax base, etc.) is untenable.
Cullerton bill (the one that didn’t pass in May) is the closest to being legal - future benefit reduction across the board and tieing already earned benefit reduction to post retirement health insurance.
Over the past couple of weeks the leadership has engaged in an amazing attempt to redirect blame. But it is counterproductive to invest any more time in the blame game. Also, it is counterproductive to spend time on unconstitutional proposals, as the constitution is clear and it is doubtful the bond raters will be satisfied with legislation that is going to be thrown out by the courts.
I would like to know how close Illinois would be to a balanced budget with full pension contributions and with no further erosion of non-pension spending if something like the following is done:
Transfer normal costs as proposed, structure the annual payments to take into account the dollars freed when pension bonds are paid off (as Fortner proposed), transfer retiree health care costs to retirees who can afford them, extend the temporary income tax perhaps 10-12 years (or some alternative which produces equivalent revenue), include income from proposed gambling expansion, and make historically reasonable assumptions about state revenue growth.
- Leave a Light on George - Tuesday, Feb 5, 13 @ 12:25 pm:
=What Nickypii said. Broadening the tax base is critical.=
Start subjecting pensions to the state income tax.
I’m not sure Cullerton’s “choice” as defined in SB0001 Part B is anywhere near equal consideration. I just double-checked it again a couple of minutes ago. All the bill does is guarentee the RIGHT TO BUY HEALTH INSURANCE under the State group plan at whatever price CMS determines with some undetermined and changeable level of State support.
And Cullerton still has to get past the current lawsuit over the health insurance. If the State loses that lawsuit, there is no choice because both benefits are protected.
==clarification please, HJCA 11 would apply to current workers, but not those retired before it’s passed? How does all this work?==
Article I, Section 16, of the Constitution says, “No . . . law impairing the obligation of
contracts . . . shall be passed.” The federal constitution also prohibits state laws impairing the obligation of contracts. These clauses mean Illinois can’t renege on its contracts by passing a law doing or allowing the reneging. The contractual pension rights existing when HJRCA 11 takes effect will remain in existence.
The same holds true for passing HB 1 or any of the other so-called reforms.
So cullerton wants to rig income tax rates and exemptions to simulate a graduated income tax. Lapeille had a similar proposal years ago. If it is unconstitutional to achieve an end directly, it is likewise unconstitutional to achieve it thru gimmickry. Another cute, but futile exercise, if he decides to pursue it.
Most or all of the temporary income tax increase is likely to be with us indefinitely, unless replaced by some alternative source of revenue.
The question is how elected officials will avoid blame. Will rejection of unconstitutional pension legislation serve to place blame on the courts? Or will the recent comments by bond rating agencies about the state being unable to meet financial responsibilities without extending the temporary increase be used to deflect blame.
It seems best to say the “bond rating agencies made us do it” and get it over with as part of a comprehensive approach (pensions, gambling …) to getting the State’s finances in order.
I think Billy is talking about spending any more of his money in this state. The taxation of income might happen, but if you move elsewhere, the state of Illinois won’t get anything else from you.
- Cook County Commoner - Tuesday, Feb 5, 13 @ 1:38 pm:
The GA did its job too well when it injected the pension anti-impairment clause into the state constitution. The gov employee unions have no incentive to come to the table. And with elected Illinois judges (in spite of an irreconcilable conflict of interest because of their pension entitlements) to rule on any pension diminishment, it seems a litigation result is pre-ordained in favor of the unions, retirees and employees. The expedient “kick the can” approach is no longer available because the debt rating houses have Illinois in the bullseye. And raising taxes, especially the property taxes, is a non-starter.
Seems a federal bailout is the only alternative.
Did anyone think another tax hike was on the table? ===
Makes you wonder why he is saying this at this time. AFSCME makes for an easy target to demonize. We state employees feel like we are lambs being led to slaughter. The union isn’t helping matters with some of the rhetoric - the state sees blood in the water.
Commoner, the impairment clause was included in the proposed constitution developed during a convention and put before the voters and adopted.
- RetiredStateEmployee - Tuesday, Feb 5, 13 @ 2:33 pm:
For our elected officials to gain some credibility, how about passing some bills to eliminate state programs that we can’t afford instead of proposing new spending. Personally, I think that demonizing state employees and retirees has been somewhat successful in misdirecting the attention to the immediate problem of the unpaid bills backlog and the fact that they can’t create a budget that doesn’t spend more than the state brings in. On second thought, will never happen, sorry.
Lambs to the slaughter? Have any of them been laid off since Quinn took office. No. And few in the decades before that. Once an Illinois state employee, the chances are excellent that you have a lifetime job with primo health benefits and that rarity in today’s America, a defined benefit pension.
Despite all the dramatics from our elected officials, these basics are very unlikely to change, especially those which are constitutionally protected, although they may cost somewhat more for the beneficiaries.
First Cassandra…there have indeed been layoffs during the crisis of the 80s, 90s and early 2000. I had the unfortunate duty of telling people they were being laid off, so it does happen to state employees. I have also fired state employees so that is also possible. So this is definitely not lifetime work.
To Commoner…there is no federal rescue coming. Remember it has to get through a split Congress. Honestly do you think the House would help bail out Illinois the home state of the President. No way, no how. We have to figure it out on our own like grown ups.
To Billy and Anon there are not too many places to go where pensions are not taxed, so retirement options are limited.
There are nine states that exempt all federal, military, and in-state pensions as well as all Social Security benefits from income tax: Alabama, Hawaii, Illinois, Louisiana, Massachusetts, Michigan, Mississippi, New York, and Pennsylvania. Alabama, Hawaii, and Illinois also exempt income from certain types of private pensions.
- Ready To Get Out - Tuesday, Feb 5, 13 @ 3:22 pm:
Although some jurisdictions still hold the view that a pension granted by public authorities is not a contractual obligation but is a gratuity, a majority of jurisdictions take the view that public employees have certain contractual rights in a public pension where a pension is part of the terms of employment.
Thus, even without the pension protection of the Illinois Constitution, the U.S. Constitution banning states passing laws that impair contracts would seem to apply in Illinois.
The exception a state could argue, then would be that their pensions are not contracts, but gratuities. However, Illinois law bands public employees from accepting gifts or gratuities, so it would be hard in Illinois to argue that pensions are gratuities - and that the US. Constitution banning states from passing laws that break contracts doesn’t apply to Illinois.
“What if we had $2 billion in new revenue? Why not do a capital bill? Why not spend more money on human services ………”
Paraphrasing something a judge of the Seventh Circuit Court said recently, the Constitution says “what the government may not do to its citizens, rather than what it must do for them.” The State has legal commitments it must fund; it has only moral commitments for others. Assume for the moment that the court throws out the NBC bill along with his Hobson’s choice. Some folks are certain there will be no additional taxes. What then?
Ready to get out, thanks for adding to the list….they also have lower property taxes, and usually no ice but they have the “no see-ums” in the summer, crocs and boa constrictors…that is where Squeezy retired to.
==Once an Illinois state employee, the chances are excellent that you have a lifetime job with primo health benefits ==
Unless, of course you are a legislator. Then you go to work for one of the firms that contributed to your campaign fund.
Rep. Joe Sosnowski doesn’t get it. His proposed change would not let them back out of past obligations, it would only allow them to serially screw future employees as to future obligations.
It might well cost the government the future serivces of the competent portion of the staff. If the employees become purely subject to the whims of the GA, the good ones won’t work for government (they’ll make the bettr money outside of government that comes with having no long term security).
Cassandra: I retired from the state 1 November, 2011 because the legislature was debating how to take the retirement I had paid into for 35 years. At that time, the newest person in the section in which I worked had been on the payroll for 10 years AND several people had left since she was hired. We were working at about 60% staffing when I left. I doubt they have hired anyone since I left, either.
That was in an IT area; we should have been fully staffed and tasked with reducing manpower requirements throughout the organization. Though tasked with reducing requirements, we were understaffed and getting more so.
Understanding a problem deeply enough to arrive at a truly new solution takes time and a certain degree of serenity. Doing so while trying to maintain old code (which we had to do) and implement new incremental features to the old paradigm (which we had to do) without making the users do ANYTHING differently from the way they were accustomed (which we were forbidden to do) is difficult if not impossible, particularly while moving the application from an old no longer supported language platform to a new FAR less well understood language platform.
More productive people in IT (which is the high wage/retirement obligation portion of the organization) is the only way to reduce clerical staff requirements in the long run.
The elected portion of management refused to do that and allowed CMS to tie our hands in many ways at the same time, driving costs/time requirements UP.
The State of Illinois needs to reduce the hours of effort required to produce a labor saving application. Instead, the State of Illinois has chosen to increase the hours required (through CMS interference in internal matters) and, therefor, the expense of doing so while reducing the available developer-hours to accomplish the task by not maintaining IT staffing levels as people leave.
The State of Illinois has chosen to defeat itself rather than solve the problems inherent in shrinking revenue and growing service requirements…
Increase IT staff levels at departments OTHER THAN CMS, reduce clerical staffing levels AND reduce welfare/medicaid (where half the money went), THEN tell me I need to take reduced benefits in the retirement for which I made the required contributions twice a month for 35 years.
titan, exactly. Seeing this in writing as a proposed bill is enough for me to leave State employment.
I’m a CPA making $61k for the State (Tier 1). The pension is the ONLY reason I haven’t left already. If the State reduces pension benefits, all the professionals like me will leave. From what I’ve seen, the folks that will be left can’t accurately transcribe a tax ID number from a computer screen to a piece of paper (oh yeah, and they earn more too due to longevity). Those folks won’t be going anywhere because they can’t do better than the State, so that’s what you’ll be left with.
Good luck with that!
- Ready To Get Out - Tuesday, Feb 5, 13 @ 4:49 pm:
illinifan — and those “big blows” that test how well everything is tied down!
“Seems a federal bailout is the only alternative.”
Oh, my side is aching from laughing. No, its time for a 4% across the board cut in all non pension appropriation bills (a billion dollars in annual savings), a 10 cent per gallon gas tax increase (half a billion dollars), and a tax on recreational marijuana (half a billion dollars). After you pay off the vendor bill backlog all of the $2 billion per year goes to pension funds. In time (a very long time) the problem is solved. No constitutional issues, and folks would gladly pay a small gas tax increase in exchange for no hassle pot smoking.
- Ready To Get Out - Tuesday, Feb 5, 13 @ 5:00 pm:
Some great points that I have experienced in my agency too. Also in IT, I have seen our headcount down 600% in the past 10 years, including another in the past month. But we’re still expected to keep everything running and develop new projects. We recently had to stop all new development, all while CMS increases headcount and people I work with have been told they are approved for unlimited overtime.
As my handle says, I am ready to get out any day. Sitting and watching what the legislature does, as I’m sure a lot of others are doing.
Anyone, I’m simply saying what I’m saying. AfSCME proposed increased tax revenue as part of their solution package. As Rich says, Ain’t. Gonna. Happen. It’s one of the Hail Marys that keeps getting thrown up here and other places as a way to avoid additional employee/retiree (and others) pain. Ain’t. Gonna. Happen.
As a matter of fact, while writing this I’ve just realized that solving the pension issue has gotta get done before there can be any serious work on the broader tax issue. If it looks like helping pay the pension debt off is any way connected to solving the problem of the expiring tax increase, it could be sheer poison.
There may be no political appetite for tax structure reform AKA graduated taxation (like 37 other better performing states use), but it IS the only solution. The pension money was used because there wasn’t enough revenue to have all the wants and still fulfill the state’s obligation to funding pensions. We’ve had a tax problem, apparently, for decades. Not a new problem. Of course no one wants to pay more. A graduated tax would give tax RELIEF to 94% of residents. No one’s talking about across the board tax increases, as in the “temporary” 5% here. Restructuring. There has to be some wisdom in what other states are doing, as they’re not on the bottom of the heap.
If the state taxes retirement income, most people will stay in Illinois for this is where their grown children, grandchildren, and other family members and friends live. And if money is the reason for moving, it is actually rather expensive to move after you retire, and then to travel back and forth to see family and friends.
“Bigtwich - So you are saying it will be the same for current retirees ?”
If they passed a constitutional amendment, it would be what the new section said. There could be an “impairment of contracts” argument but that phrase does not quite mean what it sounds like and I do not know if it applies to states. If it does you could sue in the court of claims and get paid when the legislature appropriated the money.
Steve, I’m sure your point about the income tax extension is among the concerns of Cullerton and Madigan. They are also want to show blood for the rating agencies and they want to free up more money to appease their caucus’ major constituency groups.
While I understand these points, I think it stinks to use state employees and retirees as political pawns to deal with a mess caused by the Governor and General Assembly. My hope and belief is that the courts will find these political ploys to be unconstitutional. Then, the GA can start working on legal fixes to improving state finances. With respect to pension funding, they can address the ramp law and look at Martire’s and Fortner’s proposals.
Increase active contributions on future earnings, cap pensionable salary at SS maximum,end all early retirement options, compute COLA based on chained CPI with a ceiling,increase retiree health insurance premiums a little, offer new employees a choice of cash balancee or tier 2, use Fortner plan after bond repayment, re-amortize debt over 40-50 years, make income tax increase permanent, tax services, close some loopholes, get the courts to go along and we’re done for awhile.
I tried posting this before, but there must be a glitch. Here is an interesting new PPP poll, showing Illinois voters strongly support public pensions and AFSCME’s plan to pay 2% more into pensions and close corporate loopholes.
Cutting my COLA…Not. Gonna. Happen. See ya in court. This thread, along with the other times Rich has allowed a forum on the pension issue, solves nothing. The politicians can pass whatever they want. I don’t care what your position is. I agree with Madigan, the time for talking (to the pols) is over. Babble all you want. Your proposed solutions are unacceptable to me after working for the state for 32+ years under the current pension law. You will not take it away from my family, having made financial decisions with the certainty that it would be there given the rule of law in this country, without having the courts rule on your “law’s” constitutionality in both the state and federal courts. Pols are good at twisting the facts. That won’t stand in court. Theft is theft. Do your worst. I won’t be your fall guy without a fight. As I said, see ya in court.
Just read the poll results. By a margin of 58%- 31% poll takers oppose cutting retirement benefits for state retirees? I guess all the money and efforts by the CCC, Chicago Tribune, et al still hasn’t convinced people that the retirees are to blame for the pension underfunding.
== There could be an “impairment of contracts” argument but that phrase does not quite mean what it sounds like and I do not know if it applies to states. ==
Article 1, Section 10, of the federal constitution says, “No State shall . . .pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.” It does apply to states, and it does mean what it says — a state cannot renege on a contract by passing a law saying otherwise. States trying to “reform” their pensions have found this out to their detriment several times already.
- Just The Way It Is One - Tuesday, Feb 5, 13 @ 8:19 pm:
Very interesting proposal by Rep. Sosnowski which should be analyzed thoroughly–even IF it only covers future Pensionsers. If the Il. Pension System was a person, he’d be one badly beaten-up dude, and his only hope would be to “stop the bleeding!” After all, nobody would want him to DIE because all SORTS of people would be detrimentally affected then!
Oh and by the way Rich, don’t propagate the myth that “Public Pension Costs” are the cause of the crisis. IT’S A DEBT CRISIS. The pensions just happen to be the bank. You don’t blame the bank when you’ve borrowed too much, but then again, don’t believe me…Believe the courts!
Maybe I’m stating the obvious (or maybe not). Taking Bill’s list item by item, here’s my guess on the items based on past history:
Increase active contributions on future earnings - unions offered to do so
cap pensionable salary at SS maximum - think there was already a court ruling against limiting salary re calculating pensions for existing employees
end all early retirement options - can refrain from offering new ones like 2002 ERI but things like “Rule of 85″ and “Life Safety at x years” are probably protected based on previous court logic of “rules in place at time of hiring apply”
compute COLA based on chained CPI with a ceiling - believe COLA previously been found protected for current employees
increase retiree health insurance premiums a little - unknown, in court
offer new employees a choice of cash balance or tier 2 - legit
use Fortner plan after bond repayment - legit
re-amortize debt over 40-50 years - legit
make income tax increase permanent - legit
tax services - legit … in fact, this item by itself would pretty much solve the State’s revenue problem until the GA managed to spend that much extra money
close some loopholes - legit
get the courts to go along (implied all items) - based on previous rulings, some of the items may not muster
One item left out of Bill’s list was the “normal cost” shift which appears to be legit