126 Comments - Dan Johnson - Tuesday, Dec 3, 13 @ 5:36 am: I don’t know if there are any Rauner Republicans in the House or Senate, but I’d like to see the Rauner plan (such as it is) actually filed somewhere to see (a) how blatantly unconstitutional it would be and (b) what the numbers would look like. I know it wouldn’t get fully scored, but at least we could ballpark it. And the Wall Street Journal - Dan Proft strategy of strengthening the Republican brand by (a) voting against COLA rollbacks (b) blaming the Democratic majority for not rolling back COLAs and (c) pretending to voters a year from now that there’s a better *and* constitutional option that only they have the courage to implement is….ridiculous. It’s based on an uninformed swing voter. And there aren’t that many in an off-year election after years of sustained attention on the issue with a roll call vote (from today) to point to. - gesquire - Tuesday, Dec 3, 13 @ 5:48 am: Mike I have a $18 watch. That’s all I can afford on my state pension. - Billy - Tuesday, Dec 3, 13 @ 6:05 am: An attempt by the politicians to try and disregard the Illinois constitution. Heaven help Illinois if the politicians are able to get this garbage upheld by the Supreme Court! - Quinn T. Sential - Tuesday, Dec 3, 13 @ 6:12 am: Are you pulling an all nighter? - Cassandra - Tuesday, Dec 3, 13 @ 6:29 am: I think Rauner is a sideshow at this point. We’ve known where he stands since he stood up. And he can never be elected governor. This bill really does kick ordinary working folks in the teeth. as the S-T said, while drawing the wrong conclusions of course. That is the most important aspect of it. Democrats despite their endless common man rhetoric are proposing to pass a bill which will minimally affect wealthy pensioners but will expose ordinary ones–that is, the great majority–to the ravages of inflation. All to get some cash for next year’s budget and avoid having to plump for a continuation of the tax increase? And the Republicans are going along with the Democrats because…? They want to see them win next year? It’s Alice in Wonderland time. - RNUG - Tuesday, Dec 3, 13 @ 6:30 am: I wrote this the other night while reading the draft copy of the bill. It is still applicable to the final language. Since I’m going to be gone today and miss the action, I’m going to leave these as my thoughts on the bill. Maybe the GA members who haven’t read the actual bill can at least read my synopsis of it before voting. Random Thoughts This is pretty much SB0001 recycled with a couple of pretty ribbons and bows. I stand by my previous analysis this past Friday with some clarifications and expansions. When I did the quick analysis of the bullet points, I forgot a couple of the poison pills that were in SB0001. Anyway, here are my random thoughts from reading the draft pension bill: 1) The bill’s preamble starts off with claim of the need to exercise “police powers” without actually using that term. It just implies / says that since the State has previously changed employment terms, cut spending, and raised taxes, it now has no other choice than to violate the pension clause. 2) I was right about the funding guarantee only being between the State and the pension fund(s). It just gives a State created entity the right to sue the State. There is NO individual right or recourse for a retiree or group of retirees to bring any action forcing funding. IMO absolutely ZERO individual consideration. Also, the funding guarantee expires when the pension funds are fully (100%) funded, so future employees / retirees may have this same fight all over again in about 35 – 50 years. 3) As I read through the bill and hit the various dates, I get the feeling the drafters don’t expect it to take effect immediately but instead expect it to take effect June 2014 or January 2015. 4) The “pension funding is subordinate to bond repayment” language is back and EXPLICITLY guarantees the State and, any entities created by the State, will pay both EXISTING and ANY FUTURE bonds first ahead of pension funding. This is the language the bond ranking agencies and the bankers want to be SURE they get paid regardless. Makes the funding guarantee almost worthless because the State could theoretically load up on additional bonds to the point where they could not pay the required level of pension funding and/or other state services. 5) Defined contribution plan has a few little quirks in the language. The employee will be required to continue the same level of contribution as in the defined benefits plan (currently 4% or 8% for most employees); the State will put a minimum of 3% up to the normal (implied defined benefit) pension contribution cost BUT has the right to change the actual rate every year. Also requires a minimum of 5 years of participation (vest @ 5 years) or the State (employer) contributions are forfeited. The State MAY choose to offer a Defined Disability Benefit plan to participants of the Defined Contribution but the cost of such plan is deducted from the member’s portion of the defined contribution. Just like a private retirement / investment, the State is going to stick the administrative costs of the plan on the participants. Only Tier 1 employees can participate, and the choice is irrevocable (no going back to the defined benefits plan). It sounds like it won’t be available before January 2015, assuming it meets IRS approval. If the State TERMINATES the defined contribution plan, participants revert to the Defined Benefits plan as if they had never left it and the State will RECLAIM any employer contributions in excess of what might have been contributed under the Defined Benefits plan. — Gut opinion/ flash analysis: this doesn’t sound like a very good deal. If anyone considers it, they should pay a independent professional financial planner for advice first. 6) The AAI (COLA) is based on the number of creditable service years used to calculate the pension. This does address the concern a number of people (myself included) had concerning the various types of purchased service time. Don’t know if that was there originally or is language inserted in response to concerns expressed, but either way it is a good provision and keeps things consistent with the pension calculation. 7) Retirees who start to receive a pension after July 1, 2014 will experience AAI (COLA) holiday(s) based on their age at the time the act takes effect. This provision also seems to be hinting that eligible people should retire and start collecting prior to that date, and specifically before the end of 2013 due to the timing of the AAI. If this passes, I would expect senior employee flight like in 2002; wonder if the State can process that many resignations in two weeks? 8) Pensionable earnings cap is pretty much set to the current SS & Tier 2 cap of $105K. Unlike the earlier bill, there is a grandfather clause of sorts that it will grandfather whatever the maximum actually earned prior to bill enactment / contract expiration if that is greater than the calculated cap. However, the 1/2 CPI-U adjustment means the cap will quickly drop below the inflation rate. This cap means instead of IL being able to hire some of the best and brightest, they will instead end up hiring the dumb and dumber. 9) If I’m reading it right (and I think I am), for some UoI firefighters, there is no longer the full year plus wait for the AAI. If it is less than a year since retirement, it is applied on a pro-rated basis using the new formula. Wonder whose vote required that little change? 10) In the (I think) GARS section, there is a bit of language twist on the AAI that seems to imply that if they fall into the year plus months on the initial AAI, that they get a percentage equal to the sum of the current year and the skipped year … a bit of a sweetener the other groups don’t get. Apparently designed to reward legislators who leave office in January and currently lose the equivalent of one year’s COLA because of the timing. 11) The language declaring all pension issues are not subject to bargaining is interesting. It EXPLICITLY says bargaining, not collective bargaining, in the initial sentences. It also states it overrides any other law. Taken literally as phrased, you could INFER that this language is intended to OVERRIDE all contract law, not just collective bargaining. Language later in the same paragraph / section explicitly refers to collective bargaining so it might imply that is the meaning in the previous sentences, but that is not what it literally says. Is that an intentional slip of the language intended to remove pension contract rights, hence negating the pension clause? Little things like that provide grist for lawyers. 12) Some, but not all, of the provisions are severable. The AAI change, the funding guarantee and the bond payment prioritization are tied together and non-severable. Most the other provisions are individually severable. IMO, this bill will be bad for all the state retirees and it will be especially bad for the retired MC staff who do receive higher pensions. On a personal basis, if this passes, between $340K and $410K will be stolen from my pension over my life expectancy. I’ll survive that theft and I expect a lot of my contemporaries will also, but will the IL businesses where we might have spent that money survive? - No Longer A Lurker - Tuesday, Dec 3, 13 @ 6:44 am: Rung, thanks for your analysis, it is appreciated by me and I’m sure many that hang around here. Rich, thanks for opening the shop early this morning. By the way how strong is that pot of coffee you are brewing? - CircularFiringSquad - Tuesday, Dec 3, 13 @ 6:46 am: Hard to imagine how fat a check RNUG must have dragged in in order to claim the $340K loss. Must have been a key decision maker or a lite lifting U prof who plans to live to. 110 Meanwhile lower salary retirees probably maintain compunded annual raises. - Rod - Tuesday, Dec 3, 13 @ 6:52 am: While the impetus of the General Assembly will be on passing the pension reform bill as a matter of public policy based on its likely constitutionality, I have real reservations in relation to section 20 of the bill (pages 13-16). It appears that savings for FY 14-15 are artificially created by an obscured payment cap into the pension stabilization fund. Also I am very concerned that no where in section 20 is there any provision for another major economic downturn between 20014 and 2045. We all known economic downturns in capitalist economic systems are at least impart run in cycles based on many factors, but they will inevitably bring about a drop in state revenues. The bill seems to assume no such economic collapse will take place over a period of 31 years. That seems absurd. - wordslinger - Tuesday, Dec 3, 13 @ 6:58 am: The WSJ opinion writers are a laugh riot. “The cuckolded GOP?” What’s been going on down there in Springfield, anyway, lol? - Former Merit Comp Slave - Tuesday, Dec 3, 13 @ 7:09 am: I said it before and I’ll say it again……I’m personally not convinced Madigan is fighting all that hard for this bill which makes me wonder if the dems can say “we tried to pass pension reform but those pesky Republicans wouldn’t put up the votes”. I’m convinced that if Madigan wants it, it will get done. I guess time will tell today. And thanks RNUG as always for your thoughts, very well done. - Oswego Willy - Tuesday, Dec 3, 13 @ 7:22 am: ===“I think he wants to blow up the issue and have nothing happen so that he’ll keep his campaign issue that he’s the outsider with the $18 watch who can change everything in state govenrment.” === lol. Yeah, that Bruce Rauner. He will be able to take on Madigan alright, alright. Sounds as though Speaker Madigan sees things a bit more like I see them, and less like Bruce Rauner is trying to sell them. December 3rd, 2013 … the day Bruce Rauner starts th slow implosion(?) - MrJM - Tuesday, Dec 3, 13 @ 7:34 am: I agree that Baron Carhartt is now a mere sideshow — but a sideshow with a multi-million-dollar budget can still be a heck of a draw. –MrJM - jeffing in Chicago - Tuesday, Dec 3, 13 @ 7:38 am: RNUG I greatly appreciate your dive into the details. From a macro perspective the money being taken out of your pension is money that would come out of my pocket so the effect to overall economy will be the same. Working on what is right is the hard part. Regarding pension funding 80-90& funding is appropriate if you are setting up a pay as you go system. Today’s workers funding retirees and future workers there to make up any future shortfalls. 100% funding allows termination of program for future employees. - Archimedes - Tuesday, Dec 3, 13 @ 7:41 am: Thanks for all of this info, Rich. Contrary to the Trib statement - there are other alternatives that were available, such as SB2404. Seeing as 1/2 of the $160 billion savings is based on changes other than benefits cuts (thanks to the TRS analysis Rich published) - what would the savings from SB2404 be with the same “none benefit cut” factors be? i.e. If this bill saves $160 billion, and $80 billion is from benefit cuts - and SB2404 saved $40 billion with just benefit cuts - does that mean SB2404 plus the same non-benefit cut changes in this bill would actually save $120 billion? - circularfiringsquad - Tuesday, Dec 3, 13 @ 7:48 am: Forgot to mention how exciting it is to have an early Capt. Fax shift especially for an issue that impacts the elderly. This way they can spew all the misinformation before it slip their mind and they head out for the canasta league. BTW does a campaign, FarmerBrucey for example, need to “plode” before it “implodes”? It is a lot like that tree falling in the woods - Johnnie F. - Tuesday, Dec 3, 13 @ 7:49 am: Really WLS??…You need to change your call letters to W-I-P-I. - Dan - Tuesday, Dec 3, 13 @ 7:53 am: For long-term University employees (SURS), changes in Money Purchase option will be a big hit. To illustrate, under the formula you multiply years of service X 2.2. I had 20 years X 2.2 = 44% of my highest 4 years. But under the money purchase option, I received 49%. I knew that this was a great deal for me. Without it, I probably would have worked another 2 years and received 48.4%. This doesn’t even include the AAI (cola) I received from my SURS pension at a time when universities were not giving raises. In short, the money purchase option increased the pension I received. - hisgirlfriday - Tuesday, Dec 3, 13 @ 7:58 am: Re: Newspapers editorializing in favor of kicking working people in the teeth I’ve long felt like much of the bloodlust coming from the Trib and Sun-Times in getting a pound of flesh out of the state workers has to do with how battered the newspaper industry has been in the last 5-10 years. Every single person writing these editorials has either dealt with the uncertainty of a bankrupt employer or works alongside people or used to work alongside people who dealt with that uncertainty. They may have had their retirement benefits slashed and there was nothing they could do about it. I think there’s a lot of envy at the retirement and job security that state pensioners have enjoyed to this point and a feeling that it’s time for public workers to feel some of the turmoil and uncertainty that the newspapermen and women have experienced of late (with them thinking because they have felt in the private sector that the public sector should too). I don’t necessarily agree with writers letting these things cloud their writing, but I can understand psychologically how it could happen. I think if the journalism industry was thriving, the newspapers would be outraged at the idea of workers getting their pensions cut so the state can hand out tax breaks to private companies. As it is, the vibe is much more “brother can you spare a dime?” resignation, than comforting the afflicted and afflicting the comfortable. - Fed up - Tuesday, Dec 3, 13 @ 8:07 am: The state has some large revenue gains coming in the near future. The fracking bill will be a windfall for the state leading to large revenue increases, the Internet sales tax bills have been deemed legal and will lead to substantial revenue increases and gambling expansion is still in the pipeline which will increase revenue. Interesting that Madigan wants to claim the state is broke knowing full well I creased revenue is close at hand. - Anonymous - Tuesday, Dec 3, 13 @ 8:15 am: On the same day they may kick “ordinary working people…in the teeth”, the Legs may raise taxes to give money to a corporation the made $1 billion in profit last year. That’s the alternate universe, Rep Sullivan. - Sue - Tuesday, Dec 3, 13 @ 8:16 am: why is it “kicking working people in the teeth” to restructure the COLA which has been rewarding retirees with a 3 percent annual compounded increase for the last decade when inflation averaged less then 2 percent? Retirees have been enjoying larger annual increases then active working public employees for at least the last ten years- How long do we want to continue to starve public services before fixing the problem? - Joe from Joliet - Tuesday, Dec 3, 13 @ 8:21 am: 8:15 was my 2 cents worth. - Just Observing - Tuesday, Dec 3, 13 @ 8:21 am: For those trying to access the WSJ editorial w/o a subscription, this link seems to work: http://online.wsj.com/news/articles/SB10001424052702303670804579233901035185122 - RNUG - Tuesday, Dec 3, 13 @ 8:26 am: Sue @ 8:16 am: The 3% AAI is the same number, plus or minus 0.1%, as the average CPI since the fed started measuring it and over the last 40+ years. We just happen to be in a low inflation period (artificially created by “qualitative easing”) at the moment, but if history is any guide, inflation will return. Then that 3% AAI will be nothing compared to the 9%, 11%, 14% and more than was last seen in the 1980’s. This proposal chops the effective rate of the AAI way back. In my case, all the way back to just over 1%. If you feel the fixed 3% is unfair, then you should be pushing for state retirees to receive the same COLA as SS … the actual CPI with NO CAP. I, and probably most the other retirees, would be likely to agree to that change. - RNUG - Tuesday, Dec 3, 13 @ 8:29 am: Adding … and a full CPI with no cap would mostly likely be deemed legal and adequate consideration. But it doesn’t get the massive level of savings that the outright theft in SB0001 strives for. - Sue - Tuesday, Dec 3, 13 @ 8:29 am: RNUG- no one can deny that since going back to 9/11 - the FED has more or less kept interest rates and inflation at below 2 percent- There is no inflation on the horizon so retirees will have had nearly 15 years of 3 percent annual compounded increases- retirees who retired since 2001 may be making more today then had they continued working - Wensicia - Tuesday, Dec 3, 13 @ 8:32 am: Once the pension reform bill becomes law, it’s over whether parts of the law are found to be unconstitutional or not. Rauner needs to come up with a new spiel for his campaign; beating the pension horse won’t gain him votes moving forward. - RNUG - Tuesday, Dec 3, 13 @ 8:39 am: Sue @ 8:29 am: Not likely because most the people who left in 2002 had only 30 or 35 years of service. Personal example - I retired in 2002 under the SERS ERI with just shy of 36 years of service. Since I was 1.67 formula, that resulted in a pension of right under 60% of my final average compensation or about 54% of my last year’s salary. Today, after 10 years of the AAI, my pension is about 70% of my last year’s salary. Not exactly getting rich off the AAI. - veritas - Tuesday, Dec 3, 13 @ 8:45 am: Teachers hate the bill due to its draconian cuts in promised benefits. Rauner hates the bill because its passing fixes a problem on which he wants to campaign. Tea party repubs hate the bill because they didn’t propose it. Cullerton hates the bill (you know he does) because he knows it won’t pass constitutional muster. Prediction - it passes overwhelmingly. - Peoria Pete - Tuesday, Dec 3, 13 @ 8:46 am: I see that Jan Schakowsky issued a statement against the bill yesterday. http://schakowsky.house.gov/press-releases/statement-in-opposition-to-the-illinois-pension-proposal/ - econ prof - Tuesday, Dec 3, 13 @ 8:52 am: Going along with this will be the final nail in the coffin for the Illinois Republican Party. If they were smart, they would force the Dems to pass this without a single bi-partisan vote. From a political perspective, what do they have to lose? That would be giving them way too much credit however. - East Central Illinois - Tuesday, Dec 3, 13 @ 8:58 am: To RNUG . . . Thank you for your very insightful comments; they are deeply appreciated! Thanks to Rich and Capitol Fax for being “the news” on this issue since day 1 and keeping literally “up to the minute” reporting on it. Now if the legislators would just vote it DOWN!!!! - Just Observing - Tuesday, Dec 3, 13 @ 9:00 am: === From a political perspective, what do they [GOP] have to lose? === Votes. It can be used against them for doing nothing to fix the pension mess. Whether or not its a valid criticism or whether or not it would stick, there is the chance that someone can use it against them in a primary or general. - 47th Ward - Tuesday, Dec 3, 13 @ 9:01 am: Stick to econ professor, because your political advice is exactly the kind of thinking that put the ILGOPs into almost permanent minority party status. - Downstater - Tuesday, Dec 3, 13 @ 9:07 am: Not one Republican should vote for this pension bill. Let the Democrats clean up this financial mess they created and the 67% tax increase to boot. - Think About It - Tuesday, Dec 3, 13 @ 9:08 am: Bruce Rauner needs to put substance to his speeches. He constantly talks about the four things he will do, but doesn’t have the courage to put the plans out for viewing. If you can’t take the heat, don’t walk into the kitchen. - walkinfool - Tuesday, Dec 3, 13 @ 9:09 am: RNUG great comments. One quibble on your #4: I’m not sure that one can say a guarantee is “worthless” because there could be an extremely difficult and unlikely workaround. It might not be perfectly ironclad, but little is. - Marty - Tuesday, Dec 3, 13 @ 9:10 am: Thanks Rich and RNUG for your efforts. You both usually seem to be saying what I’m thinking. Question, are the judges still out of this? Seems like I saw a reference to their plan someplace. Comment, did Madigan just give us some help with it’s ‘not a COLA’ it’s an ‘annual raise’ comment? Seems to me that a set raise in the Pension Code is a more defensible ‘benefit’ protected by the Pension Clause. - RNUG - Tuesday, Dec 3, 13 @ 9:15 am: walkinfool @ 9:09 am: I just identified one workaround. Commenters have identified others. The guarantee has some possible worth to the 5 pension funds. But if it is not a right I can individually exercise, then it is worthless to me and every other retiree. - Cook County Commoner - Tuesday, Dec 3, 13 @ 9:17 am: I think Ralph Martire had it right on Chicago Tonight. The bill, as available at the time, is unconstitutional. And if the legislature passes it, it will wind through the courts, which will hand the state a bill with interest for any payments withheld. My question is has anyone run a realistic scenario on additional taxes and service cuts which will be required to fund pensions? It appears internet sales are taxable and there is some fracking money coming, but is that enough? Passing the law may put a leash on the bond raters, for now. But what happens if the Illinois Supremes negate the law? This could be sooner rather than later because little if any discovery will be required. Here’s the new law. Here’s the state constitution. Here’s the case law. Now rule. - Grandson of Man - Tuesday, Dec 3, 13 @ 9:18 am: Thank you also, RNUG and Rich, for doing such a great job keeping us informed and at the forefront of the news. “$18 watch who can change everything in state government” Ouch! Rauner is schooled by Prof. Madigan. - walkinfool - Tuesday, Dec 3, 13 @ 9:20 am: Looks like Madigan knows Rauner. Cannot say the opposite. - Oswego Willy - Tuesday, Dec 3, 13 @ 9:22 am: - walkinfool -, Great line, well said. - RNUG - Tuesday, Dec 3, 13 @ 9:24 am: Cook County Commoner @ 9:17 am: Unfortunately, the answer is “it depends” It depends on: how quickly the state wants to pay off the pension funding shortfall how quickly the state wants to pay off the roughly $9B in backlogged bills carried over every year how much the state hands out in additional corporate tax breaks for jobs how much the state decides to restore to the educational funding that has been cut the last several years how much the state gets stuck for on the expanded Medicaid participation due to the ACA for the people who were previously eligible but had not signed up how many new or expanded programs the state decides to implement … I could go on but you get the idea. The bottom line is the current State revenue structure is inadequate to meet the needs of the State. Billions more are needed … - Justa Joe - Tuesday, Dec 3, 13 @ 9:24 am: Thanks to RNUG for the comments. I would point out also that the formula for calculating the pension amount to which a COLA is applied, with the multiplication of two fixed numbers, is a built-in, compounded, annual diminishment for ALL retirees - those with lower pensions included. - Samurai - Tuesday, Dec 3, 13 @ 9:26 am: The Rauner view on all things economic, including pension reform, work comp reform, [fill blank] reform, is best considered through Rauner’s private equity buddy and donor Ken Griffin’s stated philosophy on the role of the mega rich in the political process: “I think [the mega rich] actually have an insufficient influence. Those who have enjoyed the benefits of our system more than ever now owe a duty to protect the system that has created the greatest nation on this planet.” Interpretation: Protect the system that has made us so outrageously wealthy…. http://en.wikipedia.org/wiki/Kenneth_C._Griffin - Grandson of Man - Tuesday, Dec 3, 13 @ 9:29 am: “Let the Democrats clean up this financial mess they created” It takes two to tango, and this mess was long in the making. If Republicans vote no on this plan, they will also be wearing the jacket. If this plan doesn’t pass, what makes anyone think that a more radical plan will pass? If you are a conservative and want to see pension reform, this plan is probably your best bet. Even Fahner recognizes this. Rauner has irretrievably painted himself as an extremist. He seems like he is succumbing to a desperation to score political points, since he is being angled out by Democrats and even conservatives. - Walter Mitty - Tuesday, Dec 3, 13 @ 9:39 am: Madigan get’s a great zing… And we continue to lose…I hope after 40 year’s on my job, I can hold my head high as I eat the Alpo… Because in 20 year’s when this bill is due… I only pray that the money I HAVE to put in will still be there. For many year’s I never counted on the pension to remain for me. I am appreciative of all the intelligent conversation over the year’s on here. But, I can do simple Math. What is going in, can’t sustain what does and need to go out. Not with this bill. I am just sad for the future. No winners only losers. - anonymouse - Tuesday, Dec 3, 13 @ 9:46 am: Thank you Rich & RNUG. You guys are very much appreciated! - too obvious - Tuesday, Dec 3, 13 @ 9:51 am: Thank God for Mike Madigan. The adult in the room. Republicans can carp about Madigan all they want, but the fact is there would be no pension reform without Madigan. As we saw last time with SB1, a majority of House Repubs are too wimpy to go against their union bosses. - Laissez Faire - Tuesday, Dec 3, 13 @ 9:56 am: Re: Constitutionality Is a progressive tax constitutional? Will the constitution prevent Democrats from promoting a progressive tax? - Pot calling kettle - Tuesday, Dec 3, 13 @ 9:58 am: Interesting comments during the Conf Committee hearing. The CC members are dismissing concerns about Social Security coming in in “20 years” and that cost being passed on to property tax payers as not a concern because it is so far in the future. Yet pension reform is an “emergency” because the pension systems will be broke in about 20 years… - Mac McIntyre - Tuesday, Dec 3, 13 @ 10:03 am: Home rule communities are NOT pre-empted by this lame bill. Abuse is grandfathered. Home Rule communities will continue to abuse tools such as TIF to drain the revenue from schools while the municipal collective bargaining units continue the same pension system that is bankrupting Illinois. - Andrew Szakmary - Tuesday, Dec 3, 13 @ 10:04 am: As far as I can tell, there is not and never has been any reference in the Illinois Pension Code to a Cost of Living Adjustment or COLA. The provision that will be modified if this bill passes is the 3% Automatic Annual Increase (AAI), which has always been a fixed number that has never been tied to the rate of inflation, and which employees have specifically contributed to during their working years. - Quiet Sage - Tuesday, Dec 3, 13 @ 10:05 am: This is the most important vote the General Assembly has taken in years and years. The fallout will be immense–from the different factions of the business community, unions, political parties, the bond raters, the local and national press, and the private and public sector employees and their families who will determine future elections. This issue reaches the core of the growing inequality in America today, and the responses, or lack of responses, or negative responses, from those in power. From now on, the history of the General Assembly will be divided into “before the pension vote’ and “after the pension vote.” - dave - Tuesday, Dec 3, 13 @ 10:12 am: **Is a progressive tax constitutional? Will the constitution prevent Democrats from promoting a progressive tax?** Sigh… if you knew what you were talking about, you would know that those pushing a progressive income tax are pushing for a constitutional amendment in order to make it constitutional. You are free to push for a constitutional amendment on the pension clause if you’d like. - Michael Westen - Tuesday, Dec 3, 13 @ 10:13 am: Gee Rep. Sullivan, “an alternate universe?” “Republicans against pension reform?” Almost as hard to believe as Republican legislators voting for gay marriage. - Formerly Known As... - Tuesday, Dec 3, 13 @ 10:13 am: @RNUG and Rich, thank you both. === Makes the funding guarantee almost worthless === === collective bargaining === ^^^ good examples of why it’s so important to read RNUG. By the way, when will the protestors arrive to begin chanting and camping out a la Scott Walker? Or is it OK for Illinois to do this sort of thing because it’s a blue state? - Ithink - Tuesday, Dec 3, 13 @ 10:15 am: Readong through the bill last night, I noticed the defined contribution option varied by system. The teachers get a minimum match of 0%. Unbelievable. - Taser - Tuesday, Dec 3, 13 @ 10:17 am: The Michigan bankruptcy judge just ruled that Detroit is “insolvent.” - Soccermom - Tuesday, Dec 3, 13 @ 10:19 am: “Cuckolded”? Does that mean that the voters are cheating on the GOP by voting for Dems? Or did they think that word means impotent? Or was this auto-translated by Google from another language? - Chicago Publius - Tuesday, Dec 3, 13 @ 10:19 am: Opponents of SB 1 should hammer home the fact that the so-called “funding guarantee” cannot legally function as “consideraton” for the COLA theft, for at least 3 reasons: First, “consideration” requires offer & acceptance — it can’t be imposed unilaterally. Second, the “funding guarantee” is illusory: as has already been demonstrated time after time in the past, any statute can always be revised to eliminate whatever commitments it entails; moreover, under the constitutional principle of separation of powers, the courts will NEVER order the General Assembly to appropriate this money. Third, the benefit of the “funding gurantee” is nothing new - it’s already provided for in the Illinois Constitution. “I promised to pay you $300 to paint my house; now that you’ve painted it, I REALLY promoise to pay you $300, if you paint my garage as well.” - Formerly Known As... - Tuesday, Dec 3, 13 @ 10:20 am: From the twitter feed: “@KwameRaoul thanks conference cmte for sacrificing their summer to work on #pensions; says 9 of 10 members approved their report” So which member did not approve the report? - Formerly Known As... - Tuesday, Dec 3, 13 @ 10:23 am: @Taser - I noticed that too. There are some significant differences, however, in the protections and guarantees concerning pensions between Michigan & Illinois. That may not wind up having much bearing on the Illinois cases at all, especially considering the lengthy case history Illinois already has concerning this very issue. - hisgirlfriday - Tuesday, Dec 3, 13 @ 10:26 am: What’s with Rauner throwing around that “abuse” word again? A week ago he’s claiming the CPS abuses children and now he’s claiming that the GA is abusing taxpayers. I don’t think that word means what he thinks it means. Stick to the “government union bosses” talking point pablum. - facts are stubborn things - Tuesday, Dec 3, 13 @ 10:26 am: Holmes - SAP - Tuesday, Dec 3, 13 @ 10:26 am: A couple commenters have mentioned that there could be increased revenue from taxation of internet sales. Unfortunately, the IL Supreme Court overturned the Main Street Fairness Act, aka the Amazon Tax. So Illinois cannot collect sales tax from out of state internet retailers. - Formerly Known As... - Tuesday, Dec 3, 13 @ 10:27 am: To clarify: Article IX, Section 24 of Michigan’s constitution does read that pensions must be protected. The difference between the Michigan clause and the Illinois clause is that the Michigan clause protects past benefits, while the Illinois clause protects both past and future benefits. Anyone interested can learn more here: http://www.manhattan-institute.org/html/ib_25.htm#.Up4Fo8SXOAY - facts are stubborn things - Tuesday, Dec 3, 13 @ 10:30 am: This bill is nothing more then a platform for all to cast their votes to be on record for the election. If it passes, then some will run on that and others will run that they tried to stop it. Once the SC rules, the state will be in worse shape (assuming this bill passes) and then the GA will have political cover to come back and try and pass a legal bill. We are watching a fiscal and legal problem having to be worked out in a political way. We will all get to the same destination (pension reform that is legal and fair) but only after we take a few more turns and twists in the road. - Cassandra - Tuesday, Dec 3, 13 @ 10:31 am: I think one issue that is different in Detroit is whether federal (bankruptcy) law supersedes state (constitutional) law. There will be more litigation. This is so not over. Generally, I think, federal does supersede state but maybe there are other perspectives. - Ready To Get Out (soon) - Tuesday, Dec 3, 13 @ 10:31 am: Thanks to RNUG @6:30 for the analysis. I can reinforce your calculations as my pension “reform” appears to be around a $250,000 reduction in the first 20 years of retirement, should I last that long! I’m not sure how that is not a diminishment? Also for clarification of another commenter on the past CPI. Looking at a small (decade) subset doesn’t hold in an argument about the facts. I guess it’s human nature to use only the details that support your argument. And you might be onto something, tying our pension COLA to the SS index. One advantage would be to take it out of state legislative hands. I could probably support that. - Cook County Commoner - Tuesday, Dec 3, 13 @ 10:34 am: The Bankruptcy Court in Detroit is currently reading off its decision. Appears It will allow Detroit to enter bankruptcy. Due to similarities between the Michigan and Illinois constitutions concerning public pension protection, there certainly will be rulings from SCOTUS in the coming years concerning the ability of local governments to avoid public pension obligations in Chapter 9 Bankruptcy. - Taser - Tuesday, Dec 3, 13 @ 10:36 am: Detroit is eligible for bankruptcy: http://www.detroitnews.com/article/20131203/METRO01/312030049/ - ISP Retired - Tuesday, Dec 3, 13 @ 10:38 am: Madigan just said that the pensions are too rich to go forward. Spoken by a true hypocrite, the man who will get a pension of over 150%. - Norseman - Tuesday, Dec 3, 13 @ 10:39 am: Alternative universe is where you blatantly ignore the plain language of the constitution. This is a sad day for the State of Illinois and good day for the one-percenters. - foster brooks - Tuesday, Dec 3, 13 @ 10:40 am: Bill Brady said if this bill is not enough they can always come back for more - Just Observing - Tuesday, Dec 3, 13 @ 10:40 am: === A couple commenters have mentioned that there could be increased revenue from taxation of internet sales. Unfortunately, the IL Supreme Court overturned the Main Street Fairness Act, aka the Amazon Tax. So Illinois cannot collect sales tax from out of state internet retailers. === The “Amazon Tax” dealt with affiliates and is not, to my best understanding, the Mainstreet Fairness Act. The Mainstreet Fairness Act is a proposed federal bill to allow taxing interstate internet sales. Similar, but two different issues. - wordslinger - Tuesday, Dec 3, 13 @ 10:40 am: –Stick to the “government union bosses” talking point pablum.– I wonder if Farmer Bruce appreciates the irony of his being on the side of the “government union bosses” in this case. As far as all the Detroit references: what’s the relevance to this issue? - Dan - Tuesday, Dec 3, 13 @ 10:41 am: Taser & Formerly Known As, States cannot go bankrupt (separation of powers) whereas municipalities can. I am not a lawyer, so correct me if I am wrong. Hence, Chicago could go bankrupt, but not the state of IL. - Tom Joad - Tuesday, Dec 3, 13 @ 10:42 am: If the pension bill does not go into effect until next June, the Supreme Court could expidite their review of the bill by a direct appeal to the Supreme Court. - kimocat - Tuesday, Dec 3, 13 @ 10:46 am: too obvious — “Thank God for Mike Madigan.” Are you kidding? There wouldn’t be any “crisis” today if it wasn’t for Mike Madigan. - Taser - Tuesday, Dec 3, 13 @ 10:46 am: Dan, that is correct, municipalities (and other governmental entities) can declare bankruptcy but not States. I believe an argument will be made at some point that the pension systems - not the State of Illinois - will declare bankruptcy. - Grandson of Man - Tuesday, Dec 3, 13 @ 10:48 am: “Detroit is eligible for bankruptcy” I just read something on how poorly the Pentagon is audited, and how billions of dollars are unaccounted for. This apparently causes no outrage in those who don’t want to help save Detroit and protect the pensions of those who’ve earned them. It’s okay to make the defense industry wealthy on tax dollars that can’t even be measured, but when it comes to public workers, whose work is apparent, and whose salaries and benefits are transparent, they can eat Alpo, as another commenter mentioned. - Formerly Known As... - Tuesday, Dec 3, 13 @ 10:49 am: @Dan - sometimes we miss the forest for the trees. I was so focused on the constitutional issues at hand, that I saw only the “trees” as the news was rolling out. Thank you for pointing out an obvious, key fact that I overlooked before my second cup of coffee. ^ puts on dunce cap - langhorne - Tuesday, Dec 3, 13 @ 10:49 am: its hard to be a leader, bruce, if you have no followers. put everyone into a 401(k, cut out the colas, etc. you have anyone sponsoring that for you? didnt think so. the pension bill train is leaving the station, and you aint on it. the next train coming through will be the budget, and the temporary income tax. so, get your platitudes ready. spend a bunch more money, and up your burn rate, only about a hundred days to go. dont gidwitz on us. dont be upset the biz guys went against you, fahner wants a dose of reality, and the cat prez probably wont be doing any photo ops w you anytime soon. people who hear your message love you. have a nice day. - langhorne - Tuesday, Dec 3, 13 @ 10:50 am: rauner interview after the bill passes: “it was an up day” - Barton - Tuesday, Dec 3, 13 @ 10:54 am: In doing the budget math, did the Committee consider the impact of the retirements that this bill will cause? Folks who want to start collecting pensions (and thus better protect against changes to future pensions) will start drawing on the system rather than contributing to the system. And we will have to pay that retiree’s replacement on the payroll. So we go from one salary/contributor to the pension system to one salary/contributor plus one person drawing down on the system. Where I learned math, the calculations would seem to put the state (budget plus pension fund obligations) in a worse position! - wordslinger - Tuesday, Dec 3, 13 @ 10:58 am: –I’ve long felt like much of the bloodlust coming from the Trib and Sun-Times in getting a pound of flesh out of the state workers has to do with how battered the newspaper industry has been in the last 5-10 years.– Absolutely, especially the Tribbies. The Sun-Times is like Rasputin, you can’t kill it, so those guys are used to working with a sword over their heads. But the Tribbies thought they were bullet-proof until Zell rolled in, wiped out their ESOP and began firing senior writers and editors. Now they’re owned by a bunch of grave-dancers who will keep firing and cutting until they can find a buyer to take the paper off their hands. For an issue in which ironies abound, here’s a hot one: controlling interest in Tribune Co. is wielded by Oaktree Capital Management. The biggest investors in Oaktree funds are public employee pension funds. - Taser - Tuesday, Dec 3, 13 @ 11:11 am: Detroit News: Detroit should have filed bankruptcy years ago and it was a foregone conclusion that the city was headed for a Chapter 9 filing, U.S. Bankruptcy Judge Steven Rhodes said That does not, however, mean the city’s bankruptcy petition was not filed in good faith, he said. “Was it a foregone conclusion? Of course it was,” Rhodes said. The city probably should have filed years earlier, he added. - Archimedes - Tuesday, Dec 3, 13 @ 11:19 am: Taser - the pension systems, such as TRS, are a component unit of the State of Illinois. The pension act also says all costs, payments, etc. are an obligation of the State. - Taser - Tuesday, Dec 3, 13 @ 11:28 am: Archimedes - I agree with you. However, I believe that will be the legal maneuver used to avoid a default on pension payments by the state if a pension system runs dry. If a bankruptcy judge does not agree with us, the court imposed solution may be worse than SB 1961…maybe this is what Rauner wants to do…investment bankers are very good at “turning around” bankrupt entities by shedding pension and other retiree obligations in bankruptcy court. This strategy made Mitt Romney a multimillionaire. - cod - Tuesday, Dec 3, 13 @ 11:41 am: RNUG, thanks for all the work summarizing the bill. This is a very valuable analysis. I do want to add that it seems you calculated your lifetime pension cut using the actuarial average, looking from the pension fund’s payout side. If you calculate your own specific individual loss, you should use the potential lifespan, usually 95 years, as any good personal financial manager would to cover that possibility. The lifetime impact of this bill’s pension diminishment will then be much higher, as compounded inflation accelerates. - hisgirlfriday - Tuesday, Dec 3, 13 @ 11:43 am: Romney is a piker compared to Rauner. According to their tax returns, Rauner made twice as much money as Romney in 2011. - 47th Ward - Tuesday, Dec 3, 13 @ 12:01 pm: ===controlling interest in Tribune Co. is wielded by Oaktree Capital Management. The biggest investors in Oaktree funds are public employee pension funds.=== *head explodes* You can’t make this stuff up. - Katiedid - Tuesday, Dec 3, 13 @ 12:06 pm: Municipalities in Illinois cannot currently declare bankruptcy. The state has to allow them to do so (through statute, I believe) and that hasn’t happened. I don’t know how difficult it is to allow them to do so (it’s not a question of a municipality just asking the state’s permission on a case-by-case basis, however). At least one municipality in IL recently tried to declare BK and was denied (Washington Park) because it’s not allowed here. Not to say it could never happen, but as things are today, it can’t. - cod - Tuesday, Dec 3, 13 @ 12:09 pm: ==controlling interest in Tribune Co. is wielded by Oaktree Capital Management. The biggest investors in Oaktree funds are public employee pension funds.=== What!!! How outrageous. That fact would be the shocker of the month. Normally. - Chicago Publius - Tuesday, Dec 3, 13 @ 12:09 pm: Under federal law, local governmental bodies can’t declare bankruptcy in the absence of a state statute that authorizes them to do so. Illinois has no such statute, so as of today, none of Illinois’ local governmental bodies can declare bankruptcy. - Anon. - Tuesday, Dec 3, 13 @ 12:11 pm: From the State Journal Register: “Change must be done,” [Speaker Madison] said, noting the state’s pension systems are “just too rich” to be afforded in the future.” I notice that the conference report does not eliminate the provision allowing GA members with more than 20 years and who are older than 55 to get their COLA every year they continue to serve. A member who is now 65 will still get the 3% compounded COLA for the 10 years since turning 55 included in his or her starting pension, and will get the reduced COLA in future years. Now that’s rich! - Katiedid - Tuesday, Dec 3, 13 @ 12:17 pm: Anon 12:11 - That provision was already removed for new people, starting a few years ago (2005, maybe?). - wordslinger - Tuesday, Dec 3, 13 @ 12:27 pm: For those Detroit fans out there, consider this paradox. The city is proceeding in bankruptcy. A likely outcome is pensioneers will take a serious haircut to their average $19,000 annual benefit. At the same time, Gov. Snyder and Generalissimo Orr are proceeding with a plan to issue $450 million in bonds to build the Red Wings a new stadium downtown. Detroit taxpayers will be responsible for $285 million of the bonds, to be serviced from property taxes diverted from a downtown entertainment district. Over 30 years, with the juice, Detroit taxpayers will be on the hook for $400 million. That’s for 41 regular season home dates a year, plus playoffs. The Red Wings are profitable. “Forbes” values the team at $470 million. The Red Wings are owned by Mike Ilitch, who “Forbes” estimates is worth $3.2 billion, largely derived from peddling inedible pizza (who eats that junk, anyway)? We live in interesting times. - Algonquin J. Calhoun - Tuesday, Dec 3, 13 @ 12:56 pm: I like Millionaire Mike’s other quote better: “Let them eat cake . . . “ - Little Rupert - Tuesday, Dec 3, 13 @ 1:25 pm: Someone should ask WSJ editor editor Paul Gigot if he likes the BBC. Let’s hope his answer refers to the British Broadcasting Corporation and not something from pornland. - ISP Retired - Tuesday, Dec 3, 13 @ 1:44 pm: Anon, 12:11p– Its not a COLA it is an increase of their pension they will get and have gotten, COLAs are on top of that.I think Jones wentout at 115 %, thats rich also. - Pot calling kettle - Tuesday, Dec 3, 13 @ 1:58 pm: On the floor, the Speaker frames the problem in terms of too large annual expense. However, how much of that expense is the annual cost compared to the cost of paying down the built-up debt? - Anon. - Tuesday, Dec 3, 13 @ 2:34 pm: ISP Retired and Katiedid — Section 119.1(a) of the GAR act is the COLA, (b) says a member who is over 55 and has 20 years in gets the COLA in (a) added to his or her pension each year he or she continues in office. The 2011 legislation amended (b) to say it doesn’t apply to newbies. Under the conference report, the COLA is reduced the same as for other retirees, but (b) continues to give the reduced COLA to unretired members to increase the pension they will start receiving when they do retire. - persecuted - Tuesday, Dec 3, 13 @ 2:45 pm: All I had to read was RNUG’s “random thoughts” #4 regarding bonds; all else is moot. - Anonymous - Tuesday, Dec 3, 13 @ 2:47 pm: Federal Judge in Detroit, just today, ruled that Detroit can file for bankruptcy, thereby stripping Constitutional pension protections for city retirees. It will be appealed, but could this ruling have an impact in Illinois? - dupage dan - Tuesday, Dec 3, 13 @ 2:58 pm: Anonymous @ 2:54 pm, You haven’t been reading this stream, have you? One. More. Time. States CAN NOT DECLARE BANKRUPCY. - dupage dan - Tuesday, Dec 3, 13 @ 3:01 pm: That would be anonymous @ 2:47 pm. - Katiedid - Tuesday, Dec 3, 13 @ 3:35 pm: Anon. @ 2:34: You are correct that (b-5) changes the COLA for new people who started after 1/1/2011 (that was Tier Two). The second section of paragraph (b) that you cite, however, says that it doesn’t apply to anyone who first becomes a member of the system after “the effective date of this amendatory Act of the 93rd General Assembly.” That became law on 8/8/2003. Anyone who joined since then doesn’t have that extra COLA bump. There’s probably an argument to be made about whether it should be changed for even those who started before that date, but people who joined GARS in the last 10 years haven’t gotten it. - Demoralized - Tuesday, Dec 3, 13 @ 3:52 pm: Can we please stop talking about Detroit as if it has some relevance here. - railrat - Tuesday, Dec 3, 13 @ 4:24 pm: 2nd down on the 47 inside a dome in OT, a “unique game” so lets try a field goal !!! oops - Anonymous - Tuesday, Dec 3, 13 @ 5:06 pm: Get ready, we’re not going to pay the band - Flash - Tuesday, Dec 3, 13 @ 6:59 pm: I’m a tier one scheduled to retire June 2015. Would it be to my benefit to retire June 2014. When do new rules go into effect? What would my status be with colas and compounded colas. Would I be grandfathered in with old rules or new rules. I will have 33 years in in June 2014 and have 2.2. Any advice - Flash - Tuesday, Dec 3, 13 @ 7:02 pm: Oh I forgot to add…..I am 65, - Flash - Tuesday, Dec 3, 13 @ 7:06 pm: Any advice appreciated! - Ruby - Tuesday, Dec 3, 13 @ 7:10 pm: To Flash @ 7:02 At age 65 you are likely to have the same rules as other tier I retirees. Get advice from your union before considering an earlier retirement. I think you will be money ahead if you stay until 2015 if you have 34 years and the 2.2. Good luck! - Stuff happens - Tuesday, Dec 3, 13 @ 7:25 pm: Now, at the University level at least, they’ll have to raise tuition to sweeten the pot and prevent brain drain. Maybe a matching 403b? Trickle down, indeed. - Ruby - Tuesday, Dec 3, 13 @ 8:29 pm: Maybe a matching 403b? This is a good idea for a university or a competitive public school trying to attract and keep talented people. - Mama - Tuesday, Dec 3, 13 @ 8:51 pm: Rich & Rnug I appreciate the two of you breaking down SB1 and explaining it to this dumb ass! I owe y’all a beer or two.. even three. - RNUG - Tuesday, Dec 3, 13 @ 10:21 pm: cod, Yes, I did because there is a pretty consistent history om male mortality in my family. Also, I didn’t calculate it out to age 95 because it would probably have given me a heart attack / TIA … plus no one would believe just how high that number is. - Friedman - Wednesday, Dec 4, 13 @ 8:14 am: They need to target the fat cats and double dipping unionites at the top and this would cease to be a problem. Get rid of defined benefits as well. - Jimbo - Wednesday, Dec 4, 13 @ 8:30 am: Friedman, That comes nowhere close to fixing things. The only way to “fix” the broken system is to generate revenue to pay what is owed, but taxpayers don’t like to pay for services they already received. They could alos probably get away with asking employees to pay more as well for some consideration. Reducing benefits in any way is blatantly unconstitutional. Additionally, if you get rid of defined benefits the State will be on the hook for whatever 403b match is offered (~3%) AND the employer SS contribution. That could be around 10.5% of salary, which costs more than the current system. - Jimbo - Wednesday, Dec 4, 13 @ 8:34 am: I know not all employees are exempt from SS, but an awful lot are. Tier II is also set to provide less benies than SS for some soon, and at that time it will cease to be a qualified plan. The state will then be on the hook to fund the plan and SS. How does the back SS get paid? Everything since the date of hire for Tier II employees would be unfathomable. - Ruby - Wednesday, Dec 4, 13 @ 1:58 pm: Flash @ 7:02 Regarding the question about retiring one year earlier, here is information from IRTA: “Members who retired between the ages of 55 and 60 prior to the effective date of the bill and are not scheduled to collect accumulated COLA increases until age 61 will receive all accumulated COLA increases, but those COLA increases will be calculated under the new law. As long as a member’s pension is less than their threshold, when the member is eligible for a COLA it will be 3 percent compounded, which means calculated from the member’s current pension. For example, if the member’s threshold is $30,000, then in every year that the member’s pension is below $30,000, the annual COLA will be 3 percent compounded. So with an initial pension of $25,000, the member’s first COLA would raise his/her pension to $25,750; to $26,522 with the second COLA and $27,317 with the third COLA. Once a member’s pension equals or exceeds their threshold, the COLA calculation changes. The COLA in every year then becomes 3 percent of the member’s current threshold amount.” For example: A member already retired with a current pension of $48,216: UNDER THE CURRENT COLA 1st COLA — $49,662 5th COLA — $57,572 10th COLA — $66,742 15th COLA — $77,373 20th COLA — $89,696 25th COLA — $103,982 UNDER THE PROPOSED COLA 1st COLA — $49,145 5th COLA — $54,265 10th COLA — $60,272 15th COLA — $67,321 20th COLA — $75,592 25th COLA — $85,297 Sorry, comments for this post are now closed.