* Surprise, surprise. Eden Martin, who maxed out to Bruce Rauner’s campaign in May (back when caps were in place), agrees with Bruce Rauner that the pension reform proposal just isn’t harsh enough.
But there are some real whoppers in the former Civic Committee president’s latest Sun-Times column, and they’re worth a look. For instance…
Second, the amount of “savings” attributed to the reforms is exaggerated. The current unfunded liability is about $100 billion. The proposed deal would reportedly reduce that by about $14 billion, which is less than had been projected under House Speaker Michael Madigan’s earlier reform proposal.
Advocates say that in future decades the “savings” will amount to perhaps $160 billion. But those “savings” are speculative and over-stated. What would $1 billion of savings — realized in, for example, 2040 — be worth today? Only about $125 million — roughly 1/8th — using the state’s pension discount rate.
Oh, come on, man.
Taxpayers are presently on the hook for about $380 billion in pension system payments over the next 30 years. The proposal on the table right now claims to slash those payments by $160 billion.
You can argue with the actuarial projections, but Martin’s thesis relies on a complete red herring.
Similarly, private-sector plans rarely grant anything like compounding 3 percent cost-of-living adjustments, regardless of inflation. Yet the pension deal would preserve these COLAs for major chunks of the pensions of retirees.
And why, when the funds are so badly underfunded already, reduce employee contributions going forward?
Tinkering with the retirement age, fine-tuning the COLA mechanism, and reducing employee contributions — these appear to be an attempt to dress up the deal to make it look like a “compromise” with labor: bundles of offsetting give-ups and gains. Yet the unions have flatly rejected any such compromise and are preparing to go to court. So what’s the point of weakening the reforms — or taking on a new state funding commitment? […]
Third, what would be the likely impact of the deal on the state’s budget? Will the state’s required annual pension contributions compel cancellation of the scheduled roll-back in the state’s income tax? Or perhaps even require an increase? How much, and when? The number-crunchers surely know the answer, but they’re not talking. Why sign on to a huge deal like this without knowing the likely consequences?
The intellectual dishonesty in that piece is so blatant. Where to begin?
The idea, as Martin well knows, is to try and make the pension reforms constitutional enough that the Illinois Supreme Court can somehow figure a way to approve them. Martin would obviously prefer that legislators push for even deeper benefit cuts and not even try for a hint of constitutionality. What’s the point in doing that?
Also, notice how he not so subtly repeats Rauner’s claim that the bill on the table would lead to a tax increase. Rauner blames it on the state funding guarantee, which most people believe is a good thing, but could be worked around.
* As with everything, whatever a legislature passes can always be undone. Heck, even strict, plain language constitutional requirements can be upended, as the pension bill itself clearly shows.
I posted this over the weekend, but it’s worth a repost now that comments are open…
[Rep. Elaine Nekritz] said that’s not the case and noted the bill’s so-called pension payment guarantee has wiggle room. If the state fails to make a pension payment, a retirement system could file action in the Illinois Supreme Court to compel the state to make the required payment. But if the state faces a crisis, it could simply vote to change what the required payment would be, she noted, effectively working around that guarantee.
Nekritz noted that flexibility does cause her some concern, despite her support of the deal.
Rauner’s scare tactic about how a vote for the pension bill is a vote for a tax hike is just that.
The political reality is he doesn’t want this issue to disappear. So, perhaps Bill Brady ought to be more forceful when calling him out…
“Pension reform is an issue of fiscal responsibility and the future of Illinois, not a political strategy,” said Bloomington’s Brady, who sits on a special House and Senate panel that forged a framework before the leaders put on the finishing touches.
…Adding… Sen. Brady actually was more forceful. I didn’t see his full statement, which included these shots…
The spokesman for Bruce Rauner, one of my opponents, talks about “insiders” keeping the public in the dark on the details of the bill. There is nothing in this legislation that has not been discussed and debated publicly, including during pension reform debates on other proposals last spring. If Mr.
Rauner were to talk about “insiders”, maybe he could talk about his connections Stuart Levine and Ed Rendell and his pension business.
Mr. Rauner also opposes a state funding guarantee. That’s the same excuse governors and legislators have used in the past, but just look where the lack of such protections has taken us.