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Bipartisan, labor-backed pension bill introduced

Tuesday, Feb 19, 2013

* This Illinois Federation of Teachers e-mail from IFT President Dan Montgomery is being forwarded around all over the place

Late last week, State Senators Linda Holmes (D-Aurora) and Pam Althoff (R-McHenry) filed Senate Bill 2404, legislation that includes key components advocated by the IFT and We Are One Illinois labor coalition. In large part, this fair, constitutional bill provides a path to paying down the pension debt that, as you know, neither workers nor our modest retirement benefits are responsible for causing.

We support this legislation, which addresses three of our key priorities:

1. Guaranteed Funding. You’ve always paid toward your retirement. The state has not. Decades of skipped and shorted payments have created a $90 billion debt and a serious crisis. This bill secures an ironclad promise that lawmakers must make the annual pension and debt payment every year. And, SB2404 establishes the right for the state retirement systems - or individuals - to bring court action if they don’t.

2. Creating a Pension Stabilization Fund. Beyond paying the annual costs, the state must also pay down the massive debt. In past years, Springfield leaders used creative borrowing schemes to make payments, which only created more debt through bonds that had to be paid off first by law. SB2404 would create a constitutionally protected fund to directly pay down the debt with resources already in the Illinois budget.

3. Shared Sacrifice. While public workers are not to blame for Illinois’ pension problem, we are willing to be part of the solution. With an ironclad funding guarantee to ensure employer underfunding can never happen again and the dedicated revenue source described above, active members would contribute an additional 2 percent of salary, phased in over the next two years. This will generate more than $3 billion over the next decade.

In the weeks ahead, organized labor aims to add more co-sponsors to this bipartisan legislation. We believe there is an appetite to support an initiative with the union coalition’s backing.

The bill is here.

Notice that there’s no explicit mention of a tax hike in this proposal. There’s just a requirement that all the money be paid. So, without other reforms, there would absolutely have to be either a big tax increase or more budget cuts, or both. Then again, it’s the first time that organized labor has actually supported a bill on this topic. It’s something.

Discuss.

- Posted by Rich Miller        


78 Comments
  1. - Dan Bureaucrat - Tuesday, Feb 19, 13 @ 12:42 pm:

    I wonder if they can find someone willing to support a tax hike.

    There was that one governor…the one on the other side of that burnt bridge.


  2. - Anonymous - Tuesday, Feb 19, 13 @ 12:44 pm:

    No more tax increases. Illinoisans simply can’t afford it. We just got hit with the federal tax increase on January.


  3. - Formerly Known As... - Tuesday, Feb 19, 13 @ 12:48 pm:

    On first read, it appears to help get things in order without reducing benefits to existing members. Interesting proposition.


  4. - RNUG - Tuesday, Feb 19, 13 @ 12:56 pm:

    Quick read … nice clean bill, first proposal that will clearly pass the consitutional test AND guarentee the payments get made in to the systems.

    Now where all the money comes from is whole other issue …


  5. - SirLankselot - Tuesday, Feb 19, 13 @ 12:57 pm:

    The pension issue is something I don’t fully understand, so this question might seem naive: Why not for all future hires the state enrolls them into a 401(k)? The state can’t borrow against a 401(k) since it is an individual’s account, right? I know there is most likely a political or policy problem that prevents this from happening. I have a 401(k) with matching contributions from my employer, and I think it’s quite nifty.


  6. - cassandra - Tuesday, Feb 19, 13 @ 1:02 pm:

    My initial reaction is that it’s a big wad of piffle.

    It’s not possible to make a legislature do something, anything in perpetuity. It can always change its mind.


  7. - Mason born - Tuesday, Feb 19, 13 @ 1:16 pm:

    Cassandra Great point someone please tell me how you bind the hands of future legislators?

    Rnug there are three problems with that. Bear in mind i think that is the solution but it won’t come up. 1. the State needs Employees to continue contributing because they are using contributions from current employees to pay for retirees. Aka Ponzi scheme. 2. AFSCME has made a point of telling all it’s employees that only a pension is safe. I heard it again over the weekend. Apparently AFSCME thinks it is wiser to trust the politicians than the employees themselves. As an aside I think the AFSCME people like having it as apush button for members. 3. this also works as a handcuff for workers 401k’s are portable decide you can do better elsewhere your 401k contnues to grow a pension becomes locked in and gains nothing. The state is setting itself up for a shortage of good professionals. Engineers, Lawyers, etc. I was speaking to some friends the other day basically after 10 yrs as a state engineer you gain nothing by staying except the pension benefits and the “free Healthcare at 20″ (which they got rid of). However at the same time every year the professionals become more and more appealing to the private sector.


  8. - Mason born - Tuesday, Feb 19, 13 @ 1:17 pm:

    Sorry Rnug meant that to Sir Lanks


  9. - RNUG - Tuesday, Feb 19, 13 @ 1:23 pm:

    SirLankselot,

    Oversimplifing things some …

    Understand that changing to a 401K like plan is a change from the current defined benefits plan to a defined contributions plan and it can not legaly be forced on existing employees.

    Technically, under IRS rules government employees can’t have 401K plans. They can have 457 plans (such as the optional Deferred Compensation Plan) which are similar to 401K’s, but there are a few differences … the major one being you can withdraw from a 457 plan any time after you have left government service regardless of your age. So, in theory, you could have a 30 year old former government employee taking out his retirement savings with no penalty, just paying normal taxes on it … which may not be the most desirable end result (from society’s viewpoint) if it is supposed to be their retirement money. Another problem with such a plan is it does not encourage longivity / career path at the State because, unlike the current system, you could take all the money and run. In the current system, if you withdraw money before actual retirement, you can only take your contributions and not the state “match” or “earnings”. The STate actually benefits today from the people who do not stay and withdraw their money.

    There are a couple of other problems with that approach. Depending on viewpoint, the biggest problem / advantage to it is the state will be forced to contribute that money immediately. And depending on IRS interpertation, it may not be “better than SS”, so the State may end up having to also pay the employer 6.2% into SS for promarily teachers, another cost the State does nto have now.

    Plus, the existing system will still have to be funded … and without new money in from new employees, it will be in worse shape than it is today. The State can’t just buyout / convert existing employees because the money isn’t there … which is the problem to begin with.

    Yes, in the long run a 457 plan might be better … but the cost to get there short term are much higher than just keepign the existing system and mostly properly funding it.


  10. - RNUG - Tuesday, Feb 19, 13 @ 1:26 pm:

    Mason born,

    no prob. Sometimes I type too fast also …


  11. - SirLankselot - Tuesday, Feb 19, 13 @ 1:34 pm:

    Thanks RNUG and Mason! That definitely helps.


  12. - truthteller - Tuesday, Feb 19, 13 @ 1:35 pm:

    The failure of 401-k’s to provide retirement security is well documented. Thanks to the conversion to 401-k’s private sector workers are increasingly facing the prospect of a substantial drop in life style when they retire.
    Defined benefit plans provide superior benefits at a lower cost.
    Also, many Illinois public employees are not eligible for social security benefits. If they have no defined benefit, they have no assured retirement income.
    401-k’s are great for Wall. St., but not much good for most everyone else


  13. - Mason born - Tuesday, Feb 19, 13 @ 1:36 pm:

    Rnug type to fast heck you should see me trying to fix my spelling. I should probably give my secretary a raise.


  14. - Joe M - Tuesday, Feb 19, 13 @ 1:40 pm:

    SirLankselot,

    The key to your comments is “with matching contributions from my employer” A typical good private employer will pay 6.2% of each employees paycheck into Social Security - and maybe match another 4% into a 401(K) - for a total employer contribution of 10.2%

    If the State of Illinois as employer would have been paying that much into the pension systems each year, the pension systems would be in fairly good shape. But some years the State as employer contributed nothing - not even the equivalent of the 6.2% they would have had to contribute into Social Security. (80% of the state pension folks are not part of Social Security)

    No retirement system will work if the employers don’t make their contributions.

    Illinois already passed a law with lower pension benefits for new hires after January 1, 2011. But the benefits are so low for some of the lower salaried employees that they really get stung by that law. So some of the more recent legislation being proposed contains a “cash balance” system for those hired after January 1, 2011 and new employees that is somewhat similar to a 401(k)

    But any plan for new employees doesn’t show much savings to the State for decades when those new workers retire. In fact, such plans as cash balances and 401(k)s could actually hurt the States’ current finances because they would have to actually make those contributions.


  15. - Ahoy! - Tuesday, Feb 19, 13 @ 1:46 pm:

    –Defined benefit plans provide superior benefits at a lower cost.–

    You might be right that they are better befits, but I’ve never heard at a lower cost. Can you provide any information to back this up?


  16. - Makandadawg - Tuesday, Feb 19, 13 @ 1:50 pm:

    Real pensions take real money. It does not have to be taxes. The State Universities have been ready for a year to contribute more into SURS. We pay real money to our state legislators, time for them to do real work and get this done.


  17. - rusty618 - Tuesday, Feb 19, 13 @ 1:52 pm:

    Sounds like a great start to the problem. I’m sure the current annual pension can be met without a tax increase, but it’s the huge deficit that the state got into by not making the payments that is the problem. As far as a 401K like the federal government now used for their employees, I’m not too convinced that the state would be matching the contribution (5%, like the feds?), considering their track record.


  18. - Ghost - Tuesday, Feb 19, 13 @ 1:59 pm:

    Rich, instead of a tax hike you could just redirect the pension bond payments when those are paid off to pay down the debt as whats his name proposed.


  19. - Mason born - Tuesday, Feb 19, 13 @ 2:00 pm:

    Joe
    Curious where you get your 80% don’t pay Social Security. DOC employees pay Social Security (checked with my Brother) so do IDOT employees. In point of Fact i think all members of SERS pay Social Security. As for a pension being cheaper that pretty much requires you to not pay benefits for 20 to 30 yrs. So if the state wants to hike retirement age to 75 (average female lifespan 79.1) you’d be right. But the 401 or 457 plan the state has payed it’s obligation at the time of contribution and it doesn’t matter to the employer wether retiree lives 2 yrs or 2 thousand.
    Truthteller
    Are you really going to tell me that your benefits are safer with IL politicians then with your decisions on how to manage your money? Wow coffee hurts when it comes out of the nose. I have a 401k i have very carefully managed it bet mine is safer than an Il pension. So lets look at this il pension used to include free healthcare after 20 does it now? How about your contributions? you see in mine i OWN all the money i put in and my company put in. In your case you own NONE of it you have to request the state give back to you what you put in. Finally is the money there that the state could pay all it’s benefits out as of this second?


  20. - lincolnlover - Tuesday, Feb 19, 13 @ 2:02 pm:

    The whole problem comes down to this: the state did not pay the bill they owed for decades. If they had, there would be no problem now. So, the solution to this problem MUST include the state being forced to pay, at least from now on, and a plan to catch up on what they are behind on. Otherwise, “reforming” the pension system (aka screwing the employees) won’t make a dent in the debt.


  21. - Nickypiii - Tuesday, Feb 19, 13 @ 2:09 pm:

    This is a step in the right direction. I wonder what does Lou Lang has in store for tomorrow? Could this be the beginning of a Mike Madigan full court press? However, revenue to pay for the mandatory required state contribution is still a problem. Any chance the legislature might expand the sales tax base to services? Lowering the state portion of the sales tax rate after expanding the base might make it easier to sell to the voters of Illinois.


  22. - Reality Check - Tuesday, Feb 19, 13 @ 2:19 pm:

    @Ahoy, see the National Institute on Retirement Security, “A Better Bang for the Buck: The Economic Efficiencies of Pensions” at http://www.nirsonline.org/index.php?option=com_content&task=view&id=121&Itemid=48


  23. - OneMan - Tuesday, Feb 19, 13 @ 2:22 pm:

    I think anything that counts on futures legislators to do the ‘right thing’ is going to be a bit of a failure.


  24. - titan - Tuesday, Feb 19, 13 @ 2:26 pm:

    When the couple of parties sued the state a while back, and the courts ruled that they couldn’t force the state to currently fund the systems - didn’t the courts essentially say that the state would owe the money when due in any event?

    If so, what is the consideration for the extra 2% to be paid? The unions might be able to bind their people as a matter of collective bargaining law, but what of the non-union people?


  25. - frustrated GOP - Tuesday, Feb 19, 13 @ 2:29 pm:

    No more tax increases. Illinoisans simply can’t afford it. We just got hit with the federal tax increase on January.

    Our income tax is below our neighbor states, we don’t tax pension income, we don’t over tax non-resident property taxes like Indiana, Mich. and Wisc. Apparently you are of the income that can afford, with all do respect, since the rest of us didn’t get hit by the Medicare increase for those over $250,000 or the Federal tax over $500,000.
    Reality is both Washington and Springfield have over spent and under collected for over a decade at significant levels. There aren’t many realistic options that doesn’t require an increase in revenue (taxes) Sorry, we can’t cut our way out of this and econ. growth won’t be enough to grow out of it either.

    It’s math stupid.


  26. - Arthur Andersen - Tuesday, Feb 19, 13 @ 2:30 pm:

    Ahoy, try the Google.
    One answer is that it’s cheaper to run a defined benefit plan than a defined contribution plan. DBs have less record keeping and overhead expense, not to mention the DC profit margin.


  27. - frustrated GOP - Tuesday, Feb 19, 13 @ 2:32 pm:

    Sorry, please disregard Stupid, didn’t mean it as some might read it.


  28. - Arthur Andersen - Tuesday, Feb 19, 13 @ 2:42 pm:

    I would agree with RNUG that this version is pretty clean, straightforward, and likely to pass constitutional scrootinaztion.
    The “ironclad guarantee” is much improved over previous versions.
    Will be interesting to see how the strategic decision by We Are One to not address revenue (yes, I know the contributions are going up which solves not much of the problem) plays out down the road.


  29. - Old and in the Way - Tuesday, Feb 19, 13 @ 2:48 pm:

    Mason Born

    The figure is about 83% who do not pay into SS. The groups you mention are not large in relation to the total number. Consider them the 17%. These are the states own figures. And this was intentional since it saved the state big money by not having to make the SS employer contribution.


  30. - Mason born - Tuesday, Feb 19, 13 @ 2:54 pm:

    OLD
    Color me Curious and not being a smart Butt. But who is the 83% are there that many teachers and professors? looking at ITAP it seems that DOC, HHS, and CMS are the main suppliers.


  31. - Reality Check - Tuesday, Feb 19, 13 @ 2:54 pm:

    @Mason, teachers (participants in TRS, the largest state-funded retirement system) and university employees (SURS) are not eligible for Social Security.

    There is also a small number of older SERS participants who are not Social Security-eligible either.


  32. - Old and in the Way - Tuesday, Feb 19, 13 @ 2:58 pm:

    TRS is over half of all state pensioners alone. Then SURS and the Judges are also exempt. Add to that a number of other exempts and you get 83%. BTW that is not my figure its the state’s.


  33. - Old and in the Way - Tuesday, Feb 19, 13 @ 2:59 pm:

    What legislation is Lou Lang introducing tomorrow at 9 AM? Is this the same bill?


  34. - mid-level - Tuesday, Feb 19, 13 @ 3:03 pm:

    I think pension costs start to flatten out after this next fiscal year’s budget. Look at the governor’s office own projections…

    http://www.state.il.us/budget/Financial%20Reports/3%20Year%202013%20FINAL.pdf

    The increase in pension costs shown between 2013 and 2014 is large at $937 million. But look at their projected increase between 2014 and 2015. It’s down to $194 million. Not an insubstantial amount, but not growing by a billion a year.


  35. - cod - Tuesday, Feb 19, 13 @ 3:03 pm:

    This bill seems much more fair to both active employees and retirees, unlike the Madigan/Cullerton/Quinn proposals which try to solve the State’s underfunding of pensions by cutting existing pensions by 30-40%.

    Every other municipal and government employee should be very worried about the precedent such “reform” would set. Every community in the state is financially stressed by the Great Recession, and could then simply reneg on pension obligations to solve their fiscal problems.


  36. - Old and in the Way - Tuesday, Feb 19, 13 @ 3:07 pm:

    - Makandadawg - Tuesday, Feb 19, 13 @ 1:50 pm:

    Real pensions take real money. It does not have to be taxes. The State Universities have been ready for a year to contribute more into SURS.

    Really? And what will the universities pay with? Are you aware that the state is behind on its payment to the universities. The last I heard was that UIUC. Was owed over $600 million from the current appropriation. SIU and WIU require a VP approval for any expenditure over $500! Where is this magic money coming from?


  37. - Old and in the Way - Tuesday, Feb 19, 13 @ 3:11 pm:

    cod

    Point well taken. However, IMRF (Illinois Municipal Retirement Fund) is currently about 85% funded. An example of what regular contributions will do!


  38. - Meaningless - Tuesday, Feb 19, 13 @ 3:13 pm:

    It’s frustrating to note that as soon as a reasonable piece of legislation gets introduced to help fix the pension systems, all the anti-tax propaganda flares up. The people of Illinois have received significant benefits over the past decades at a relative low cost due to the politicians reckless spending and failure to adequately contribute to the pension funds. I believe Illinois ranks 15th nationally in per capita income and even with a recent (temporary) increase in the state income tax, Illinois compares very favorably with many other states. There is alot of wealth in Illinois. It’s time for Illinois to adopt a graduated income tax, tax more services, reamortize the pension ramp, close corporate tax loopholes, and create an Illinois that is economically stable and works for everyone, especially the middle class.


  39. - Grandson of Man - Tuesday, Feb 19, 13 @ 3:16 pm:

    It would be nice to get flat pension debt re-amortization into this bill.


  40. - rusty618 - Tuesday, Feb 19, 13 @ 3:26 pm:

    Well said, Meaningless! So what are you doing the next 4 years, starting in 2014?


  41. - Mason born - Tuesday, Feb 19, 13 @ 3:29 pm:

    Huh i admit i didn’t know that. thanks OLD and RC. Maybe the whole state transfering costs back to districts is a bigger aspect then i thought. Thanks fellas.


  42. - Tsavo - Tuesday, Feb 19, 13 @ 3:31 pm:

    Interesting this bill is introduced a few days after the State of the Union address.

    And I am open to additional reforms from both parties, so long as they don’t violate the guarantee of a secure retirement. Our government shouldn’t make promises we cannot keep, but we must keep the promises we’ve already made.

    (APPLAUSE)

    Read more: http://www.foxnews.com/politics/2013/02/12/transcript-obama-state-union-speech/#ixzz2LNnLBnfD


  43. - Nickypiii - Tuesday, Feb 19, 13 @ 3:39 pm:

    Don’t forget the State cannot go bankrupt. Municipalities can and might have to in order to reel in their police and fire pension costs.


  44. - Fred's Mustache - Tuesday, Feb 19, 13 @ 3:41 pm:

    === Are you really going to tell me that your benefits are safer with IL politicians then with your decisions on how to manage your money? Wow coffee hurts when it comes out of the nose. I have a 401k i have very carefully managed it bet mine is safer than an Il pension.===

    I would say for the average person, yes, their retirement is safer in their pension than in a 401(k). If your 401(k) is that conservatively invested that it is considered “safe”, then you are probably not making much of a return on your investment.

    If you are investing in equities, then your retirement is subject to serious market risk. I would like to think that the average state employee does not have the financial sophistication to actively manage their own portfolios in a fashion that can compete with the returns of a pension plan. Heck, even professional protfolio managers can’t do it!


  45. - Old and in the Way - Tuesday, Feb 19, 13 @ 3:42 pm:

    Mason Born

    The pension shift is a tax increase make no mistake about it. While you are deliberating the impact consider this, about half of the 800 plus Illinois school districts are already paying their teachers contributions into TRS! I would guess that about 90% pay their Superintendents contribution. When quizzed about this how many local taxpayers are aware of this? Crazy but true! Time to reconsider taxes in Illinois at the state and local level. GRADUATED INCOME TAX! Lower property taxes.


  46. - Joe M - Tuesday, Feb 19, 13 @ 3:43 pm:

    There was some questions about members of the state pension systems paying into social security.

    Teachers contribute 9.4 percent to their pensions, state university employees pay 8 percent, judges pay 11 percent and legislators pay 11.5 percent. State employees pay 4 percent if they also contribute to the Social Security system and 8 percent if they do not.

    So just some of the SERS employees pay into Social Security. And I’ve seem figures in newspaper articles and various organization’s web sites that state the overall total from the five pension systems paying into Social Security is about 17 to 20%


  47. - Rich Miller - Tuesday, Feb 19, 13 @ 3:43 pm:

    ===The pension shift is a tax increase make no mistake about it.===

    At a half a point of payroll a year?

    Please.


  48. - Joe M - Tuesday, Feb 19, 13 @ 3:49 pm:

    This is meant tongue in cheek. From Urban Dictionary definitions of 401(k), especially after the market downturn that started in 2008

    401(k)

    A scam used by the wealthy to rip off the working class.

    “The market dropped so much that all last years contributions to my 401k have been wiped out. I’ll bet the clowns that managed it made sure their big money clients didn’t lose anything.”

    401KO’d

    When something drastic happens in your life that causes you to take a serious financial loss. Economic downturn on a personal level.

    Dude 1: “Hey, we going to pool our money for those season tickets?”

    Dude 2: “I can’t man, I took a paycut and totally got 401KO’d.”


  49. - wordslinger - Tuesday, Feb 19, 13 @ 3:52 pm:

    –Interesting this bill is introduced a few days after the State of the Union address. –

    Do you see some connection?


  50. - Ahoy! - Tuesday, Feb 19, 13 @ 3:54 pm:

    Reality Check, thank you for the link, the article was helpful, although I’m a little skeptical of a report from an organization whose Board members work for pension systems that says… wait for it… pensions are cheaper than 401 K’s. I believe their methodology was a little skewed. Their methodology had pension beneficiaries only receiving 58% of their income and it was unclear whether or not their year 2.8% increases were compounded or simple. Additionally they assumed 8% returns for pension systems and a sliding scale downward of returns for defined contribution plans from 7% down to 5%. If you rig the numbers, you get the results you want.

    Either way, since I’m not going to poor over Google for studies, I’ll go ahead and agree that that dollar for dollar a DB and a better deal than a DC if all things are equal in a perfect world.

    The thing is a defined benefit is a better deal for employees while a defined contribution is better for the employer because it allows flexibility. Also, I’ll admit that my views are probably skewed because as a younger person I’ve witnessed companies going through bankruptcies due to pension plans they promised and didn’t deliver on, workers in the private sector have benefits promised to them and then taken away and now my State’s government facing a financial crisis due it’s pension promises that they have overpromised and not adequately contributed to. So, as a person who’s going to be spending my working life paying higher taxes and having reduced government programs (including reduced education funding for my children) you’re welcome.

    Arthur Anderson, I tried that Google thing, found information that said benefit plans were cheaper, found information that said contribution plans were cheaper. Funny how that Google works.


  51. - Tsavo - Tuesday, Feb 19, 13 @ 3:57 pm:

    Yes, this is one of the few bills introduced which does not revoke benefits for those already retired.

    Especially the phrase, we must keep the promises we’ve already made.


  52. - Old and in the Way - Tuesday, Feb 19, 13 @ 3:58 pm:

    With all due respect Rich you don’t know how much it is because nothing has been passed yet. Consider the Speakers support for this and then tell me he will settle for a half a point! I suspect that once it is in place it will grow, particularly if there is no initial impact on property taxes. They are looking for a way out and the shift is just too convenient to be overlooked!


  53. - Under Paid - Tuesday, Feb 19, 13 @ 4:01 pm:

    I would agree that this version of a reform bill is likely to pass the constitutional tests. The plan will also pay only a small portion of the current, and growing, pension debt. With that said, I think this is probably about as much money as the unions will be willing to give to help solve the debt problem.

    The Illinois Federation of Teachers to provides no answer, however, as to where the rest of the money will come from. Several people have said that they want ‘no more taxes’. That implies that they want to cut spending, the only viable option left. If spending cuts are implimented would the IFT accept a major cut, say 25% or 30% or whatever it takes, in school funding? Would the other unions and backers of other state expenditures be willing to take major funding cuts so the unions members have their pensions receive ‘Guaranteed Funding’ and the tax payers get no tax increases? In short, who, in addition to the unions who have now made their offer, is willing to step up to the plate and pay an extra $100B over the next few years to fund the pension debt?


  54. - titan - Tuesday, Feb 19, 13 @ 4:02 pm:

    @ Old and In the Way - those school districts that “pay the employee portion” negotiated that with their unions.

    It doesn’t really change anything as far as the district is concerned (all of the money going to the teachers as pay comes from the district - is is just a matter of accounting - does the district “pay” it directly to the state or “pay” it to teachers, but withhold it from their checks and pay it directly to the state?)


  55. - LincolnLounger - Tuesday, Feb 19, 13 @ 4:07 pm:

    Why not a service tax? Illinois voters have proven they won’t punish those responsible.


  56. - Old and in the Way - Tuesday, Feb 19, 13 @ 4:12 pm:

    The issue isn’t the origin of the money, it’s all local. However, there are other implications as you suggest, union contracts etc as well as income taxes. My point is that this gets very complex when you start talking about a shift in the pension contributions. How well the local taxpayers understand the implications remains to be seen and it will surely become a factor.


  57. - Nickypiii - Tuesday, Feb 19, 13 @ 4:13 pm:

    I agree with Rich. Budgeting for the gradual cost shift should be easy for every school district. teachers, administrators, etc. should be paying their own contribution to their pensions. Districts should be giving that resposibility back to the employees anyway through future contracts.


  58. - Old and in the Way - Tuesday, Feb 19, 13 @ 4:13 pm:

    Does anyone know anything about the Lou Lang pension announcement t scheduled tomorrow AM?


  59. - Anonymous - Tuesday, Feb 19, 13 @ 4:16 pm:

    Maybe a portion of teacher union dues could go towards the pension deal rather than to the union so Illinoisans aren’t stuck with the tab.


  60. - Arthur Andersen - Tuesday, Feb 19, 13 @ 4:52 pm:

    Anonymous, why penalize the unions?

    Let’s not stop there-how about a surcharge on every kid in school, you know, like a book fee, only for pensions.

    Shakes. My. Head.


  61. - T.O. - Tuesday, Feb 19, 13 @ 5:22 pm:

    If I remember right, about 70 billion of the 95+ billion pension deficit was attributed to the TRS. If the state can cut it’s liability to 20-25 billion over four years through the cost shift and gets a 2% increase in employee contributions it would be a giant leap forward.


  62. - Frank - Tuesday, Feb 19, 13 @ 5:31 pm:

    No pension fix will make the funds solvent without one of these two elements: a big tax increase or a significant COLA reduction for retirees. Nothing else works…the numbers just don’t add up.

    The Nekritz-Biss bill called for caping COLA on the first 25k of pension income. Maybe negotiations can center on moving that cap up and replacing the projected savings with some kind of tax increase…but I doubt it the votes are there for a tax boost.


  63. - Liberty_First - Tuesday, Feb 19, 13 @ 6:18 pm:

    I wouldn’t be so sure this meets the constitutional burden or prior pension court rulings. Check out the Miller case from the Pension Law Handbook: “The appellate court likened Miller to Kraus vs. Board of Trustees of the Police Pension Fund and Felt vs. Board of Trustees of the Judges’ Retirement System in that the plaintiffs stood to gain a higher benefit under the law that existed when they entered the system than under a subsequent legislative enactment.”


  64. - RNUG - Tuesday, Feb 19, 13 @ 6:37 pm:

    Liberty_First

    Near as I can tell, the only questionable part is the additional contributions by the employees. The unions have pretty much already agreed to that, partly I believe out of public relations sentiment so it appears the unions are contributing to the solution.

    If you want to look at it in contract terms, to boil IFT and subsequent decisions down to their basic point, the State has to pay the pensions when due but does not have to fund the pensions in advance. For their own reasons, almost every interested group would like to see the pensions funded in advance.

    The crux boils down to this: is the pension funding guarentee a new benefit and is it worth the extra 2%? For what it is worth, I think the answers are yes and maybe.


  65. - RNUG - Tuesday, Feb 19, 13 @ 6:38 pm:

    Frank,

    In simple terms, the COLA has already been ruled protected …


  66. - Just The Way It Is One - Tuesday, Feb 19, 13 @ 6:50 pm:

    It IS about time. And both (i.e. cuts AND tax increase) would be (sadly but realistically) necessary. Wonder how PQ, JCullerton, and MJM will react to this version…?


  67. - RNUG - Tuesday, Feb 19, 13 @ 7:14 pm:

    Mason Born,

    re: secretaries

    Speaking from experience … always take care of them … but don’t necessarily marry your secretary.

    re: spelling

    I’ve been a both paid and unpaid editor & writer over the years, plus had to do a lot of writing for various research / analysis jobs I’ve held. I’ve noticed as computerized word processing systems have become more prevalent, my spelling / typing has gotten worse. Correlation may not be causation but it sure seems like it …


  68. - East Central Illinois - Tuesday, Feb 19, 13 @ 7:19 pm:

    In school districts that are subject to PTELL, they would NOT be able to pass this on in the form of property taxes, even if they decided to do so. PTELL severely cripples a school district in trying to obtain property tax revenue. The pension shift down to the school districts, at any percentage figure, is NOT the answer; unless it would be outside of PTELL.


  69. - Anonymous - Tuesday, Feb 19, 13 @ 7:24 pm:

    RNUG
    The crux boils down to this: is the pension funding guarentee a new benefit and is it worth the extra 2%

    My question also, hasn’t it already been established in court that if the State defaults on a pension payment they can be sued to make the payment good? How is guaranteeing the pension payments a consideration for the additional 2% employees would be required to pay? Doesn’t “consideration” need to be if not equal, at least adequate? Paying 2% more in with no additional benefit doesn’t sound like consideration to me.


  70. - RNUG - Tuesday, Feb 19, 13 @ 7:28 pm:

    Anonymous

    It’s splitting hairs but the guarentee is for the overall funding payments into the trust funds, not individual pension payments out of the trust funds.


  71. - The Ghost in the Darkness - Tuesday, Feb 19, 13 @ 7:28 pm:

    There is never going to be an easy answer to the pension problem in Illinois. Because we can’t continue to spend more than is taken in. Try that in your household. The state has taken pension holidays for so many years we can’t count. They thought they were making so much in the markets that it would sustain them. Market drop, and boom goes the pensions. The first place that we need to start is the General Assembly. No part time employee should get such a lucrative retirement. The want to be public servants then pay them a reasonable salary and no pension. Why do people who get paid 67,000 a year spend hundreds of thousand for that job unless there is a lot of corruption. That is in both parties.


  72. - Arthur Andersen - Tuesday, Feb 19, 13 @ 7:49 pm:

    Ghost in the Darkness, Boo!
    Your rhetoric is lovely but your grip upon reality is tenuous. The State does have budget and pension problems. Big ones. The State has NOT taken “pension holidays for so many years.” The State contributions were as the law specified and never met the description of a holiday, which means skipped.
    You could eliminate the salaries and the entire liability of the GARS and not have scratched a pimple on the elephant’s butt of this unfunded liability.
    And of this corruption you seem to know all about-be a good citizen and call these people, as they must have missed it.
    US Attorney Northern District of IL (312) 353-5300


  73. - cod - Tuesday, Feb 19, 13 @ 8:03 pm:

    I grind my teeth every time someone mentions the $95B liability, but doesnt mention that this is the sum total taken over the next 33 years.

    If you take any portion of the state budget and calculate its liability through 2045, it is a staggering amount. Overall, all the state budget items together have a yet-to-be-funded liability of $1,700,000,000,000. Thats $1,700 billion.

    The pension liability over the same period is less than 6% of the state’s total overall unfunded liability!!

    Pension benefits are, in actuality, a part of the cost of education, just as SS and 401-Ks are for the private sector.


  74. - wishbone - Tuesday, Feb 19, 13 @ 8:49 pm:

    Look, the state doesn’t have a budget problem. How do I know. This is what it is spending its money on.
    “The Peck House — one of Geneva’s oldest structures — will be getting a face lift.
    After securing a $95,000 grant from the state of Illinois, the Geneva Park District plans to rebuild the front porch on the Italianate-style home, said Trish Burns, the manager of Peck Farm Park.”
    Geneva, a fairly rich western suburb gets $95k to fix a porch. Way to go Governor Q.


  75. - geronimo - Tuesday, Feb 19, 13 @ 8:58 pm:

    Presenting the $95B pension liability as if it were due this year is what feeds the beast of resentment toward those in the pension systems—those who have been victimized. But it sure does work, doesn’t it? The solid solutions that would inflict little pain–one of which is reamoritizing the pension ramp–are not on the table for consideration. Logical answers are not serving the right people apparently.Illinois has had a revenue problem for many many decades as is evidenced by the need to divert money away from the pension funds for use on the general public, thereby giving taxpayers a break.There sure does need to be some explanation for why we can’t seem to find money for Education (and satellite needs) and other public services. In a relatively wealthy state we can’t provide for our citizens. Why are other,healthier states taxing services and generating revenue through a graduated tax structure? And why do some hyperventilate when those options are mentioned?


  76. - cod - Tuesday, Feb 19, 13 @ 9:49 pm:

    The whole thing raises worrisome questions. I do wonder who the political forces are behind Madigan/Cullerton/Quinn that have so dishonestly defined the debate with distortion tactics like the $95B number. Is it a big business cabal? It certainly cant be the teachers unions.

    How is it that the politicians are willing to renege on contracted and constitutionally protected pensions for teachers?

    How can these seemingly reasonable leaders be willing to put forward such morally corrupt proposals, that will in the end become their legacy and place in history?


  77. - Jimbo - Wednesday, Feb 20, 13 @ 8:53 am:

    I used to think the reason that Ty and the boys were banging the drums on pension reform so hard is that they were worried their taxes could go up in the future if nothing was done. Now I wonder if it isn’t about stripping pensions from the last people who have them. It is a race to the bottom. Right now people are asking the question Ty wants them to ask, “Why should they have a pension when I don’t?” I think the powers that be understand that people could just as well ask, “Why don’t I have a pension like they do?”


  78. - Ed - Thursday, Feb 21, 13 @ 10:42 am:

    While people HATE taxes, they LOVE the services that are provided!! Those services require workers, which require adequate compensation. God
    knows you definitely will not get rich working for the State. In fact, when you compare salaries for
    IT, technical, and managerial positions, State employees make at least 10% less than their
    private counterparts, and in some cases, that
    difference is 25%+. So, the benefits are the
    only reason a significant number of people work
    for the State. Without those benefits, the State will have a very difficult time hiring people, thus the services won’t be nearly as good.


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