Here we go again
Thursday, Mar 27, 2014 - Posted by Rich Miller
* Tribune…
Quinn sought to portray his fiscal blueprint as part of an effort to end a cycle of budget game-playing by his predecessors that left state finances in shambles. He said part of his strategy was the controversial pension overhaul law last year that he argued would dramatically cut retirement costs and let more tax revenue flow to schools, health care and other services.
Rauner contends that Quinn’s pension alterations are too timid and will save the state far less than the governor contends. That argument may have gotten a boost Wednesday when the state’s bipartisan fiscal forecasting agency revised downward by several billion dollars its long-term savings projection for the pension overhaul.
* That snippet may have been based on this Bruce Rauner campaign press release…
On the same day of Pat Quinn’s budget address in which he broke his promise to keep the 67% personal income tax temporary, the Commission on Government Forecasting and Accountability released an analysis of the so-called pension reform law that shows it will save $22.6 billion less than was promised when the legislation was passed.
* This isn’t much different than the same stupid canard I dealt with in the subscriber section back in January. Here’s what I wrote back then. Substitute $15 billion with $22.7 billion and adjust everything else and you’ll get the same sort of results…
ONE OF THE DUMBEST ARGUMENTS EVER There’s been much screaming and hollering about how new calculations show that the pension reform law is projected to save $15 billion less than originally advertised last fall when the bill passed.
The complaints are based mainly on a recent Chicago Tribune article entitled “Illinois pension law saves $15 billion less than first thought.” The ultra-conservative Illinois Policy Institute, Bruce Rauner and other pension bill opponents have used the story as ammunition to claim that the law is based on a tissue of lies.
But the premise of that article was completely off base because it looked at the wrong number. The only truly valuable number is what taxpayers will end up shoveling into the pension system. Like everything else, it’s all about the final bottom line.
OK, we’re gonna get into a little math here, but it’s really easy so stay with me a minute.
The basic thing to remember here is that calculations originally showed last fall that pension reforms meant taxpayers would owe the pension systems $220 billion over 30 years. A recalculation with updated numbers, however, showed the total taxpayer obligation is now at $205 billion. That’s really good news, but it’s being irresponsibly spun as bad news.
The original estimates were based on Fiscal Year 2012 data. Without the new pension law, the data showed that taxpayers were on the hook for $380 billion in pension payments over 30 years. The reform law reduced that obligation estimate to $220 billion, which was a 42.1 percent reduction in what the government would have to give the pension funds.
When the numbers were updated to include Fiscal Year 2013 data (which included some pretty high investment returns), the new research found that taxpayers were now on the hook for $350 billion over the next 30 years without the reforms. The reform law would result in a 41.4 percent reduction to just $205 billion.
So, what about that $15 billion difference touted by the opponents? Where does it come from?
It’s not that hard to figure out and here’s an easy little example if you’re still scratching your head.
Let’s say you’re looking for a new watch. You find one at Macy’s that’s originally priced at $109 and is on sale at 40 percent off. You’d save $43.60 for a final price of $65.40. That’s still more expensive than Rauner’s watch, but not a bad deal at all.
But then you go next door to Bergner’s and you see the exact same watch listed at $100 and it’s also on sale for 40 percent off. You’d save $40 with the 40 percent sale, but your final bottom line price would be $60, compared to $65.40 at Macy’s,
It doesn’t take Einstein to figure out the better bottom line deal here. Yeah, your 40 percent “savings” are higher with the more expensive Macy’s watch, but the bottom line price you pay is significantly lower at Bergner’s.
The Policy Institute and Rauner would have you believe that Bergner’s is somehow ripping you off because the sale’s 40 percent reduction amount is lower than Macy’s. But that’s just plainly ridiculous. Who thinks like that?
Discuss.
- PublicServant - Thursday, Mar 27, 14 @ 9:16 am:
===67% personal income tax===
LOL. What’s a word here, or a word there in the grand scheme of things?…
- I B Strapped - Thursday, Mar 27, 14 @ 9:22 am:
It’s all Mox Nix anyway when the ISC Jams Madigans scheme and Rauner goes to Plan B next year.
- wordslinger - Thursday, Mar 27, 14 @ 9:28 am:
The Tribbies should stay away from “numbers” stories. Like Barbie said, “math is hard.”
- Bill White - Thursday, Mar 27, 14 @ 9:32 am:
=== The Policy Institute and Rauner would have you believe that Bergner’s is somehow ripping you off because the sale’s 40 percent reduction amount is lower than Macy’s. But that’s just plainly ridiculous. ===
In terms of intellectual honesty, this belongs in the same category as counting people who move out of state (and therefore do not receive IL funded Medicaid) as example of Medicaid fraud because the old names and addresses were never purged from the database.
- Grandson of Man - Thursday, Mar 27, 14 @ 9:35 am:
The key is the strong investment returns in 2013 that lowered the overall taxpayer liability. The entire pension debt model shifted downward in cost, which is good.
What the IPI and their allies are doing is using reverse psychology. A 67% income tax increase sounds horrible, even though the tax was raised from 3-5%, which still makes us competitive with most tax states. It seems to be the same thing with the $22.6 billion.
- langhorne - Thursday, Mar 27, 14 @ 9:36 am:
once a campaign gets a headline and/or story they like, it lives on forever. no matter how discredited. even if it is from the bone gap gazette.
- Political Neophyte - Thursday, Mar 27, 14 @ 9:57 am:
Who thinks like that? The Policy Institute thinks like that.
- train111 - Thursday, Mar 27, 14 @ 10:10 am:
Who thinks this way? Campaign consultants writing 30 second adds for TV.
Which is easier to sell a campaign on–Anti-tax, anti-spend, anti-everything hysteria or cold boring facts?
Most overpaid consultants are going to run away with the first rather than trying to explain the second.
- dupage dan - Thursday, Mar 27, 14 @ 10:13 am:
Nice explanation - helps those of us (me) who don’t have the inclination to work that out.
However, why does it matter? Does anyone really think the state gov’t is gonna keep to that schedule? We were all ramped up with Edgars program, how long did that last? The gov’t is gonna wait till this settles down a bit - hopefully, in a few years, folks memories will be a little fuzzy, and the politicians can go back to their previous behavior.
- Palm Tree - Thursday, Mar 27, 14 @ 10:21 am:
Who thinks this way?
People who are trying to craft an argument to justify their No vote on the most comprehensive pension reform package in Illinois history. A package that credit rating agencies have praised. A package that if found constitutional reduces total taxpayer costs on pensions by almost half.
People who initially supported the bill but were told by their financial benefactor to vote No.
Now they are looking for cover for that No vote. People like Representative McSweeney.
- Yellow Dog Democrat - Thursday, Mar 27, 14 @ 10:54 am:
More embarrassing reporting from the Tribune…Abdon has a lot of work to do.
- Timmeh - Thursday, Mar 27, 14 @ 10:58 am:
For someone whose company ran the pension funds, it seems like Rauner doesn’t understand the numbers. Or is willingly distorting them. Either way, that’s not what you want from an “outsider businessman” running for governor.
- MrJM - Thursday, Mar 27, 14 @ 11:09 am:
Oh, this has nothing to do with “thinking”…
– MrJM
- 47th Ward - Thursday, Mar 27, 14 @ 12:55 pm:
Overheard in the Tribune Tower:
The numbers all go to eleven. Look, right across the board, eleven, eleven, eleven and…
Oh, I see. And most amps go up to ten?
Exactly.
Does that mean it’s louder? Is it any louder?
Well, it’s one louder, isn’t it? It’s not ten. You see, most blokes, you know, will be playing at ten. You’re on ten here, all the way up, all the way up, all the way up, you’re on ten on your guitar. Where can you go from there? Where?
I don’t know.
Nowhere. Exactly. What we do is, if we need that extra push over the cliff, you know what we do?
Put it up to eleven?
Eleven. Exactly. One louder.
Why don’t you just make ten louder and make ten be the top number and make that a little louder?
These go to eleven.
- sue - Thursday, Mar 27, 14 @ 1:02 pm:
Many(including myself) would have no problem leaving the personal tax rate at 5 percent if it had solved the State’s fiscal issues-BUT IT DOESN’T seem to have worked-employment remains stagnant, credit ratings have been slashed; bills remain unpaid and pensions are still grossly underfunded- The problem doesn’t seem to be revenues but spending- Quinn had the benefit of increased tax revenues for 4 years and rather then reduce the State’s deficit- he found a number of programs to expand- Assuming the rate remains at 5- it would be nice to see the legislature bring the spending down to the level where revenues equal outlays
- Rich Miller - Thursday, Mar 27, 14 @ 1:03 pm:
===Quinn had the benefit of increased tax revenues for 4 years and rather then reduce the State’s deficit- he found a number of programs to expand===
Which were?
- titan - Thursday, Mar 27, 14 @ 1:22 pm:
Who thinks like that?
A very large portion of the general population are functionally innumerate. They can be made to think like that.
- Demoralized - Thursday, Mar 27, 14 @ 1:44 pm:
@sue:
Look forward to your list of cuts that would need to happen if the tax increase expired. The revenue didn’t go to a bunch of new spending. It went to basically maintain and hopefully help keep the ship from completely sinking. Discretionary spending has been cut and cut and cut. They’ve passed legislation to deal with the pension (whether it’s constitutional or not is another question), which is a huge cost driver. I’d be interested to see what additional brilliant ideas you would have to make up for the shortfall if the tax is allowed to expire.
- DuPage - Thursday, Mar 27, 14 @ 1:45 pm:
If it saves so little then it won’t be missed when the ILSC throws it out!
- jerry 101 - Thursday, Mar 27, 14 @ 1:56 pm:
Holy stinkbombs Batman! I’m paying a 67% income tax rate in Illinois?!?! Dad gum it!!
Bruce Rauner. Businessman. Bad at math.
- wordslinger - Thursday, Mar 27, 14 @ 2:19 pm:
–Bruce Rauner. Businessman. Bad at math–
Give him a break. He’s just conflicted.
“…and, frankly, sometimes I disagree with myself.”
Best. Quote. Ever.
http://chicago.cbslocal.com/2014/03/21/rauner-enlists-bipartisan-support-in-seeking-new-solutions-for-illinois/
- Driveby - Thursday, Mar 27, 14 @ 3:39 pm:
I always though that the unfunded liability was the thing to look at. I’ll have to read here more often for a more enlightened viewpoint like this.
- Donkey Dem - Thursday, Mar 27, 14 @ 3:54 pm:
Cut the Nursing Home’s Mental Health, and the Poor. That’s the why to balance the budget. And Oh, give the unions whatever they want.
- RNUG - Thursday, Mar 27, 14 @ 6:27 pm:
- wordslinger - Thursday, Mar 27, 14 @ 2:19 pm:
I pointed that quote out to my wife when I read it in the paper the other day. Probably the most honest thing the man has said …