48 Comments - Anonymous - Thursday, Oct 10, 13 @ 10:44 am: === During a short question-and-answer period, Rauner said Gov. Pat Quinn “has completely failed” in pension reform. He said freezing the current pension system would protect those entitled to the benefits. Reform would come from prosecuting corruption and moving into a more defined contribution plan, he said. === He needs to provide more details or else this can be dismissed as pure nonsense. - ZC - Thursday, Oct 10, 13 @ 10:46 am: Just checking, but if they all meet as a group, that’s an open meeting under Illinois law, right? The Reuters article could at least mention that. Whereas if they meet in small groups, they can talk to each other more frankly, about all the different considerations, without it being on the front page of every paper and blog that covers these matters. They didn’t hash out the compromises that led to the US Constitution on the sidewalk with a pressgang surrounding them, either, and they wouldn’t have. Too much initial pressure for every one to posture to their base and lock themselves into positions that they can’t easily move away from later. Kind of like what we’re seeing in DC right now. - Pepe Silvia - Thursday, Oct 10, 13 @ 10:47 am: The Republicans only want DC plans included for one reason, campaign contributions from big business groups set to profit from DC plans. DC plans will not help solve the pension issue, it will only make the finances worse in the short-medium terms. The plan leaked to the media over a month ago would save $140B over 30 years! Assuming it is upheld in the courts, how is that not sustainable? $140B is huge. This issue is not a dire as the media and right wing groups would lead you to believe. Rauner is completely clueless on this issue and has no idea what he is saying. He would fail miserably in working the majority caucuses due to his slanted/un-compromising position. - wordslinger - Thursday, Oct 10, 13 @ 10:48 am: –Reform would come from prosecuting corruption and moving into a more defined contribution plan, he said.– More gibberish from “it ain’t rocket science” Duck Dodgers. - otoh - Thursday, Oct 10, 13 @ 10:51 am: I’m missing something that’s got to be obvious: what’s the advantage of cutting employee contributions 1%? How does that increase pension funding? - Norseman - Thursday, Oct 10, 13 @ 10:52 am: === He needs to provide more details or else this can be dismissed as pure nonsense. === Rauner doesn’t provide details. It would complicate things. That’s why Rauner needs to be dismissed. I’d like to know what Brady’s definition of “sustainable” is? I suspect he means that it doesn’t stick it to public workers enough and we want more sacrifice so we can give corporate welfare to our one-percent buddies. Steve Schnorf came out with another idea that should be considered in the mix. See his comments near the end of yesterday’s “Question” post: https://capitolfax.com/2013/10/09/question-of-the-day-1688/#comments - Chris - Thursday, Oct 10, 13 @ 10:53 am: “But others don’t like the fact that most of the savings don’t occur until the last decade of the pay-down.” But that’s when most of the costs accrue, too. Sure, it’d be nice if they could reform the pensions in such a way that the state can zero out current contributions, while preserving a ‘constitutional’ level of pensions, but we have to live in the real world–if years 21-30 will be 50%+ of projected cots, then that’s when 50%+ of the savings have to come from, too. *THAT* ain’t rocket science. - CircularFiringSquad - Thursday, Oct 10, 13 @ 10:57 am: “Prosecuting corruption” Does this mean CousinBrucey will tell us how many other Stu Levines he hired in Illinois and elsewhere to help get public pension fund cash for his hedge fund scams? - Nearly Normal - Thursday, Oct 10, 13 @ 11:05 am: Forgive me but how is reducing the amount paid in by active members help the pension systems? I understand the proposal includes a one percent cut in the amount contributed by the active members. - Robert the Bruce - Thursday, Oct 10, 13 @ 11:06 am: Way out of leftfield, yes, I know she’s not part of the legislature. Would the committee be making more progress, and have greater likelihood of their ultimate recommendation being passed, if JBT was on the committee? Let her do the heavy lifting/compromise suggesting; those on both sides know she is popular, making it a tad more difficult to go against whatever she advocates. Add Jesse White if there’s concern with R-D balance. - Dirt Diver - Thursday, Oct 10, 13 @ 11:10 am: =I’m missing something that’s got to be obvious: what’s the advantage of cutting employee contributions 1%? How does that increase pension funding?= Decreasing employee contributions is the “consideration”/quid pro quo for members in exchange for reduced benefits. Legislature cuts their benefits, but at the same time reduces their contribution. This is the justification to reduce benefits. - Anon. - Thursday, Oct 10, 13 @ 11:12 am: ==The Republicans only want DC plans included for one reason, campaign contributions from big business groups set to profit from DC plans. == The business profits from retirement plans go to the companies that invest the plan funds and (if administrative tasks are outsourced) to those who administer the funds and payouts, etc. I don’t see how changing to defined contribution rather than defined payment would generate more profits for these businesses. - Anon - Thursday, Oct 10, 13 @ 11:12 am: The G.A. members probably think the open meeting act does not apply to them. After all, they think the Illinois constitution section on public pension means nothing, then the open meetings act can also be disregarded. After all, their entire focus is pension benefit reduction which is unconstitutional. - Dirt Diver - Thursday, Oct 10, 13 @ 11:14 am: =Forgive me but how is reducing the amount paid in by active members help the pension systems? I understand the proposal includes a one percent cut in the amount contributed by the active members.= It doesn’t help the systems, but it does help aid the legislature’s argument that this proposal doesn’t violate the pension benefit impairment clause. The thought is such reduction in contribution allows for a reduction in benefits. I don’t agree with this line of reasoning though. - Anon - Thursday, Oct 10, 13 @ 11:21 am: The “100 billion” shortfall is being met with plans that “save” 140 billion or more by cutting retiree payments. This brings up a question, what did they have in mind for the extra 40 billion. Why would the cut MORE then their shortfall? It looks like they are going to steal an additional 40 billion from the pension systems. - Pepe Silvia - Thursday, Oct 10, 13 @ 11:21 am: =The business profits from retirement plans go to the companies that invest the plan funds and (if administrative tasks are outsourced) to those who administer the funds and payouts, etc. I don’t see how changing to defined contribution rather than defined payment would generate more profits for these businesses.= That’s because you need to be educated on this subject. Businesses like TIAA-CREF (very politically active) currently have little to no involvement in retirement funds managed by the state retirement systems. If the other systems (SURS has a DC plan currently) were to create a DC plan, then TIAA-CREF, Fidelity, and others would stand to receive a huge windfall as the portolio’s would be managed by such companies, who would charge much higher investment fees than the investment firms selected by the retirement systems. Investment fees would at least double as such fees associated with DC plans are considerably higher than the fees of DB plans. Oh and by the way, DB plans consistenly out perform DC plans as it relates to investment performance. So essentially, members would pay more for lower returns. - Federalist - Thursday, Oct 10, 13 @ 11:33 am: Are those already retired affected? Does anybody know? The gibberish we get from the MSM is woefully lacking in any type of detail. The MSM seems totally unable to ask any questions beyond what a 5th grader would for his school newspaper. If I am wrong on this please inform me so that I can get a copy of that reporting. And if the retirees also have their COLA cut, how does a 1% reduction in the contribution help them? What is their ‘consideration’? Are they going to go back and figure a 1% contribution would mean for all the retirees salaried years and then adjust it by what the respective pension systems earned over the years on that 1% and then give a giant payout? This is really total incompetence and stupidity or we are not being informed properly about the details. I suspect the former. - Anon - Thursday, Oct 10, 13 @ 11:34 am: @Pepe Silvia, The private companies getting involved in state pensions remind me of the push awhile back when they were pushing to privatize social security. The companies said people should be able to invest their social security in to private investments, and “we stand ready to assist them in making those choices” (for ongoing commissions and fees of course). - Johnny Q. Suburban - Thursday, Oct 10, 13 @ 11:38 am: Rauner is interested in “protecting” those “entitled” to benefits? Okay, guys, who did an interview pretending to be Bruce Rauner? - reformer - Thursday, Oct 10, 13 @ 11:43 am: == Prosecuting pension corruption == This is the latest example of that tired GOP mantra about balancing budgets by eliminating “waste, fraud and abuse.” It never happens, even when the GOP wins, because they exaggerate just how much fraud and abuse exists. Besides, it takes no courage to assure people that serious financial challenges can be fixed painlessly, with no additional taxes and no one except crooks taking a hit. - foster brooks - Thursday, Oct 10, 13 @ 11:58 am: All this smoke created about pension “reduction” was stoked by sidley autins analysis of the pension clause in the il constitution. I’ll bet anything that if AFSCME hired sildley Austin this conversation would slant the other way. - Joe M - Thursday, Oct 10, 13 @ 12:09 pm: == I’m missing something that’s got to be obvious: what’s the advantage of cutting employee contributions 1%? How does that increase pension funding? == Otah, the Illinois Constitution describes pensions as a contractual relationship whose benefits cannot be diminished or impaired. Under contract law, if one party wants to change a contract by diminishing something for the other party, the first party has to offer a “consideration” that offsets that diminishment. So the conference committee is considering giving employees the consideration of contributing 1% less towards their pension, to offset the diminishment in COLAS, etc. For those already retired, or those even remotely close to retirement, I don’t see how such a proposal can be a consideration for those groups. However, I’m not sure that the pension committee/General Assembly/Governor negotiating with themselves, and not the state employees and retirees fits the spirit of contract law negotiations. And as as been mentioned in comments on this site a number of times, “It’s not a contractual choice if you don’t have the option to keep what you already have” - Cook County Commoner - Thursday, Oct 10, 13 @ 12:24 pm: I think it’s time we all realized that any meaningful changes to Illinois state and local government pensions in the near term are a pipe dream. The government employee unions in Illinois wield NRA-like power. Until local governments start filing for bankruptcy in numbers, the issue will linger on until the tier of employees and retirees entitled to defined benefit retirements are gone. When the bankrupties begin is anyone’s guess. The market pundits predict choppy markets well out into next year, so some sort of miraculous market returns for the pension plans are likely. The rating agencies won’t play ball with municipal debt like they did with the companies that bundled garbage mortgages into bonds but still received AAA ratings. That scam is over. So, bond ratings in many instances will continue to deteriorate, increasing debt service costs. And I understand that the pension plans must lower their estimated rates of return in the near future to more realistic levels, which will increase their under-funding and increase government payments. This will certainly strain the coffers. Three to five years seems like a good guess for things to really start to deteriorate. And this may coincide with a ruling from the SCOTUS on the pending municipal bankruptcies involving statutory and constitutional protections of pensions similar to Illinois. For those who want to stick around for the show, careful selection of Illinois bonds as investments may prove profitable as decent bond issuances get tarred with the bad simply because they issue from Illinois or one of its local governments. The yields will approach junk rating and often benefit from no federal or state taxation on the yield. - PublicServant - Thursday, Oct 10, 13 @ 12:26 pm: ===So the conference committee is considering giving employees the consideration of contributing 1% less towards their pension, to offset the diminishment in COLAS, etc.=== I agree with everything you’ve said Joe, but want to emphasize that a 1% reduction in contribution level for current employees does not come anywhere near offsetting the proposed diminishments. Saying “I’ll let you save a dollar from now until you retire, IF after retirement you take $20 less in the first year, and the amount of diminishment will increase every year thereafter until, well, you die, either through starvation, stress or other means. Oh, and by the way, we use the term ‘if’ euphamistically since you don’t get to say no”. - PublicServant - Thursday, Oct 10, 13 @ 12:30 pm: ===The government employee unions in Illinois wield NRA-like power.=== If they did, we wouldn’t be having this discussion. And I’d like to borrow your crystal ball, and have a few swigs of whatever it is you’re drinking, bud. - wordslinger - Thursday, Oct 10, 13 @ 12:38 pm: CCC, Illinois municipal governments are creatures of the state. Under state law, they cannot declare bankruptcy without state approval. Some units of local government have been placed under state supervision in the past. I wouldn’t expect that wave of bankruptcies anytime soon. - Bobbysox - Thursday, Oct 10, 13 @ 12:39 pm: The actuarial study is proof for the court case that whatever meager considerations are given to actives and retirees, the net effect is a diminishment to the whopping tune of $138 billion dollars. I am sure Oscar would love to have a bone thrown to him; however, not if it meant in return he would receive less food for the rest of his life. - Arthur Andersen - Thursday, Oct 10, 13 @ 1:05 pm: CCC, those changes to assumed rates of return are unlikely to be adopted in Illinois or anywhere else. They were proposed by a trade association after heavy lobbying from the fine folks at Moody’s, S & P , and the other stooge. Another point of clarification-the $140 billion in estimated savings is the total amount less the State will have to pay annually over the next 30 years. That’s unrelated to the unfunded liability. This plan reduces that amount by $19.6 billion. If you are still confused you may be at the wrong place. - Langhorne - Thursday, Oct 10, 13 @ 2:23 pm: Maybe i missed the episode of the outsiders where bruce gives a coherent, workable, description of ANY proposal he espouses. This would include answers to two good followup questions. Thats it–statement and two followups. A simple oral exam. Not arguing before the supreme court. Pretty much the minimum for high school debate. Bruce can pick his own topic, so no surprises. Is that too much to ask of someone who wants to be hired to run a $34 bil undertaking? - RNUG - Thursday, Oct 10, 13 @ 2:31 pm: It was an interesting bit of selective reporting misstatement (by omission) in the Alton Daily article about Judy. The paper said the AAI (COLA) would be tied to the CPI (true) but it forgot to mention it would be only 1/2 of the CPI and would be capped at 4%. As I’ve said before, as a retiree, I would be open to tieing the AAI to the full CPI with no floor and no cap. - RNUG - Thursday, Oct 10, 13 @ 2:40 pm: While we’re talking about various “consideration” for the retirees ot accept a different AAI arrangement, I have one I’d like to see. With apologies to Steve Schnorf (this is not personal), I would like to see my pensionable salary recalulated to reflect the 4% raise plus compounding I would have received if the State had not picked up the employee pension contribution (hence lowering pensionable salary and saving the State quite a bit) for a number of years in exchange for not providing a COLA raise. As Steve himself has commented, it wasn’t fair to the employees when the State reneged on that deal in yet another budget crisis. - RNUG - Thursday, Oct 10, 13 @ 2:46 pm: And since Norseman pointed to Steve Schnorf’s innovative re-fi plan, I’ll just add be sure to read the cautions I posted a bit later on as suggestions to tighten up the idea. - Rich Miller - Thursday, Oct 10, 13 @ 2:50 pm: RNUG, Schnorf was over at my house last night, sitting around a campfire with a couple of beverages and Barton the (former) Intern. We talked about Steve’s idea. The main problem is that NY would almost surely hate it, and we could get really smacked hard, perhaps into junk bond territory, which would be an unmitigated disaster. In theory, it makes sense. In practice, I’m not so sure. - West Side the Best Side - Thursday, Oct 10, 13 @ 2:59 pm: Even if reducing employee contibution to the pension by 1% was viewed as consideration for a reduction to the COLA, the employee contribution is the most secure source of money coming into the pension system. No one can guarantee a specific rate of return on investments. The state will still take “pension holidays,” taking into account the past history of ignoring required funding. Employees have no choice, it comes right out of the paycheck. - RNUG - Thursday, Oct 10, 13 @ 3:08 pm: Rich, I would have contributed some beer to that discussion … Seriously, while I agree the idea has some logic, it also has some pitfalls … including the dislike of the financiers, so I agree it probably wouldn’t fly. But it was definitely thinking outside the box. Now if you figured out a way to do it while letting the bankers slice off a guarenteed percentage for themselves … then you might have a winner. - Rusty618 - Thursday, Oct 10, 13 @ 3:16 pm: =As I’ve said before, as a retiree, I would be open to tieing the AAI to the full CPI with no floor and no cap.= I was at a meeting last week that was attended by current and retired state employees from many Midwestern states. I was told by a retiree from MN that their COLA IS the full CPI. I would accept that also. - walkinfool - Thursday, Oct 10, 13 @ 3:21 pm: New GOP talking point: “Everybody knows we could save at least 10% of our pension costs by attacking fraud.” (”Or was that Medicaid?) - PensionResearcher - Thursday, Oct 10, 13 @ 3:50 pm: Cook County Commoner @ 12:24 pm stated, “And I understand that the pension plans must lower their estimated rates of return in the near future to more realistic levels, which will increase their under-funding and increase government payments.” That change is because of new rules by the Governmental Accounting Standards Board. Those rules, however, are for reporting purposes ONLY and have NO impact on governments’ required contributions. Required contributions are set by state statute. The new GASB rules are very, very misunderstood. - walkinfool - Thursday, Oct 10, 13 @ 3:52 pm: Wonder who fed that misleading information to Reuters? or was it just sloppy reporting? - Hit or Miss - Thursday, Oct 10, 13 @ 4:01 pm: “the state’s last chance to strike a deal this year is slipping away.” It looks probable to me that the ‘lame duck’ session in early Jan. 2015 is becoming the next probable date that a bill will be voted on by the GA. - Obamas Puppy - Thursday, Oct 10, 13 @ 4:13 pm: The great Raundini will create pension savings through the criminal court. Gee I wonder if he knew Stuart Levine and made some visits to the purple hotel? - sal-says - Thursday, Oct 10, 13 @ 4:15 pm: From: “It’s not good, but it’s not this bad” “* And as I’ve pointed out before, this could also be a real problem…Three of the panel’s four Republican members are running for higher office, including Senator Brady, who announced a run for governor soon after being named to the panel. All of the other members but one face reelection in 2014.” From ““They make trouble for themselves”” “Good politics can be good government.” Can be - but usually not from my view and experience. - Cassandra - Thursday, Oct 10, 13 @ 4:26 pm: So the Repubs are going to go from Pat Quinn “completely failing” on pension reform to bipartisan joy when he signs something they helped but hardly led on. Not in 2014, I think. And this is all about 2014 politics now. - Federalist - Thursday, Oct 10, 13 @ 5:22 pm: Many of us would be happy to sign on to a full CPI (like SS) for whatever rate that would be each year. The state has no intention of doing this. They want a “heads you lose, tails you lose” option for state employees. Pure and simple and anything else they will reject. They would not even accept a Chained CPI which has been floated for SS recipients and for which the outcries against it have been loud and clear. This is not about a logical plan, it is about saving money for other priorities the state has. Primarily, that includes an expansion of the welfare state and pork projects. - Anon 2 - Thursday, Oct 10, 13 @ 9:53 pm: The unfunded liability is around $100 billion. The $140billion is the amount of state tax dollars that would be saved from the 30 year financing plan to eliminate the $100b liability. We are on track to send more than $300 billion to the pension funds over the next thirty years if we do not reduce benefits. A level of contributions equal will to 25% of our state budget going to pensions for the next three decades. - Mama - Thursday, Oct 10, 13 @ 10:06 pm: Putting a 401(k) option in the pension reform makes no sense at all. If that happens there will be no one paying into the pension fund to keep it from collapsing for the older retirees. No money in equals no money out! - RNUG - Friday, Oct 11, 13 @ 6:10 am: Mama @ 10:06pm, You must have missed the Rolling Stone pension theft article Rich linked to last week. It’s not about fixing the pensions. It’s all about how can the bankers get a slice of that money for themselves … and a Defined Contribution Plan like a 401K administered by the bankers is one method. - PublicServant - Friday, Oct 11, 13 @ 7:19 am: Just got done reading the Matt Tabbi article RNUG. It’s outstanding. It goes a long way in explaining why the democrats like Madigan and Quinn are pushing this further theft from the pensioners. I think one of the many salient points in the Tabbi piece is “…we have an unfunded-pension-liability problem because we’ve been ripping retirees off for decades – but the solution being offered is to rip them off even more.” Another great point is ” With public budgets carefully scrutinized by everyone from the press to regulators, the black box of pension funds makes it the only public treasure left that’s easy to steal. Politicians quietly borrow millions from these funds by not paying their ARCs(Annual Required Contributions), and it’s that money, plus the savings from cuts made to worker benefits in the name of ‘emergency’ pension reform, that pays for an apparently endless regime of corporate tax breaks and handouts.” Sorry, comments for this post are now closed.