A long, long way to go
Monday, Oct 20, 2014 - Posted by Rich Miller
* Sun-Times…
From the 2007-08 fiscal year to 2014-15, state spending on K-12 education in Illinois fell 9.3 percent, or $222 per student, after adjusting for inflation, according to a study by the Center on Budget and Policy Priorities, a left-of-center Washington think tank.
That puts Illinois in the bottom half of all states, though far from the bottom of the list. That distinction goes to Oklahoma, where state funding for K-12 education dropped 23.3 percent over the same period. The median change for the 47 states in the study was negative 3.2 percent.
The study looked at states’ major funding formulas, which make up a large proportion of total funding in most states. In Illinois, this formula accounted for half of all state funding for K-12 education.
As states have cut back on education funding, cities and local school districts have had to make up the slack through increased taxes or make severe cuts. Across the U.S., 260,000 education jobs have been lost since August 2008, according to the study.
Yep. State education funding crashed in FY09 here and elsewhere. A temporary infusion of federal cash helped ease the pain caused by the Great Recession, but this state, like many others, has yet to recover.
It’s been particularly difficult to get back on track in Illinois because this state, unlike just about any other, picks up the employer share of teacher pension payments. And since Gov. Quinn decided that the state was going to make full payments, everything else has been, um, squeezed out.
That was just one reason why pension reform was pushed so hard here. But it doesn’t look like it’s gonna work.
* And speaking of pension costs, this is from a Tribune editorial about a recent Civic Federation report…
• This year Illinois’ general funds will receive $4.5 billion from Washington, much of it for Medicaid. So-called state-source revenues will total $30.6 billion. Of that total — essentially the taxes you pay to Springfield — total pension costs will consume 1 of every 4 dollars, or 24.7 percent. If you wonder why Illinois has so little money for other priorities …
• Worse, taxpayers’ pension contributions “are expected to increase sharply in fiscal year 2016″ from the current year, 2015. Why? Because the state’s largest pension funds are cutting their too-bullish expected return on investments.
The Civic Federation report estimates an $800 million increase. I’d estimated the hike at about a billion some time ago.
The biggest problem that Bruce Rauner has completely nailed is that Illinois isn’t getting out of this mess until it vastly increases private sector growth. Whether he can do it or not is yet to be seen… if he wins, that is.
- Nonplussed - Monday, Oct 20, 14 @ 3:54 pm:
And when Quinn proposed reducing the number of school districts in Illinois, which is very high, or regional superintendents, to cut overhead…..
- Team Sleep - Monday, Oct 20, 14 @ 3:54 pm:
I totally forgot to type this last week, but it seems relevant given this post.
I listen to a local talk station during lunch. On my way back from running errands, I heard a report from a conference/availability by Voices for Illinois President Gieseke. He remarked that the issue is not the amount of funding but how the funding is spent and whether the oversight is done in a fair manner.
I found Mr. Gieseke’s comments fascinating.
- Wordslinger - Monday, Oct 20, 14 @ 4:02 pm:
The Tribbies need to get over it. They and Ty had their fun trying to hose pensioners, but it’s over.
The Supremes surely have signaled that the constitution means what it clearly says and will uphold the conservative principle that you pay back the money you borrow.
That principle hasn’t been in Tribbies business plan for many years, but states can’t screw their employees, investors and vendors and hide in bankruptcy when they’re irresponsible and stupid.
- Anonymous - Monday, Oct 20, 14 @ 4:09 pm:
Everyone will SAY that Education is the key to a good life and it’s critically important(at least for their own children…..don’t know about it for others’). Darn teachers. Why can’t we just get them to work their miracles for free? Paying for all this is just too expensive for this critically important service.
- Obamas Puppy - Monday, Oct 20, 14 @ 4:15 pm:
—too-bullish expected return on investments—
This line of c___ these systems are built for 35-40 year horizons and the returns are over 10%. Since when did Civic Committee and the Trib become stock analysts too?
- facts are stubborn things - Monday, Oct 20, 14 @ 4:15 pm:
interesting….figure it out. Robing pensions has kept taxes low for years. I have a plan — keep the income tax a 5% and make the pension payments.
- Sir Reel - Monday, Oct 20, 14 @ 4:15 pm:
I consider the “employer share” of teacher pension payments to be “education funding.” Do the various statements on the State share of education funding increasing/decreasing include annual pension payments?
As pointed out, Quinn has made the pension payments every year and their true impact on the State budget is finally apparent. Too bad few other Illinois Governors and General Assemblies didn’t make them.
- IllinoisO'Malley - Monday, Oct 20, 14 @ 4:22 pm:
Cost Shift and District Consolidation…insane for the taxpayers of this state to be paying pensions for Supers making $250k to run 3 middle schools.
- Arizona Bob - Monday, Oct 20, 14 @ 4:31 pm:
@facts
=Robing pensions has kept taxes low for years.=
Nope.It’s enabled a corrupt Springfield and K-12 establishment to keep on spending based upon what’s in THEIR political self interests rather than the good of the people.
Quinn and the GA decided to spend over $50 million on that NRI boondoggle, and scads of other “grant” scams that are little more than payoffs to political supporters, rather than meet the needs of the people.
There are three things you can do in this situation; keep on perpetuating the pension benefits for new employees beyond what’s necessary to attract new employees, increase taxes, or cut excessive, unnecessary expenditures that do little to serve the people, like giving state aid to Hinsdale High school so that they can pay one third of their employees the max of $127K for 180 contact days.
- Demoralized - Monday, Oct 20, 14 @ 4:37 pm:
==keep on perpetuating the pension benefits for new employees beyond what’s necessary==
They took care of that a few years ago with the two tiered system.
- Fight Fair - Monday, Oct 20, 14 @ 4:40 pm:
Odd for CBPP to rank percentage changes rather than to simply rank spending per pupil. ISBE puts Illinois public schools spending from local/state/federal sources, for the 2012-13 school year, at $28.5 billion for 2.1 million students. (That works out to $13,850 per student, which ranks 22nd nationwide.)
Per-student spending was up 49.3% in 10 years.
See annual category totals on page 5 of http://www.isbe.net/reports/annual13/report.pdf
- Demoralized - Monday, Oct 20, 14 @ 4:41 pm:
@Arizona Bob:
By the way, spending on “scads” of grants for political purposes has gone on for a while. Quinn and Co. didn’t invent that. Not defending it, just pointing it out.
- Anyone Remember - Monday, Oct 20, 14 @ 5:06 pm:
To repeat something Rich said long ago, did not the Chicago Tribune in 1997 say Jim Edgar’s legislation that now results in 1 in 4 dollars being consumed by pension payments was one of his accomplishments? The editorial board of the Tribune has flipped on term limits - let’s see how they flip on this one.
- Old and In the Way - Monday, Oct 20, 14 @ 5:08 pm:
Arizona Bob
When it comes to comments and commentary on education we can always count on your lack of knowledge and insight! It’s easy from the cheap seats. In the end I just accept it for what it is…….a simple lack of education.
BTW Education funding, as a part of the total budget, has been declining for many years in Illinois. It’s not just pensions squeezing out education.
As for the Grants I actually agree with you but would add that George Ryan made Quinn look like a piker! The Build Illinois capital program bought everything from band uniforms to gazebos across Illinois. So much for a capital program! So much for infrastructure! No Quinn is just as guilty but his mistake was thinking too small
- Archimedes - Monday, Oct 20, 14 @ 5:15 pm:
Already been said, but with the Tier 2 for TRS we are slowly doing the Cost Shift right now. The Tier 2 employees are paying 9.4% of salary for a benefit that has a normal cost of 6.2% - so they are helping the State out with their pension debt.
By 2025, the employer normal cost for TRS will be $0 - so the State will no longer be contributing to TRS pensions, just paying off the debt. If SB1 is invalidated - it will be about 2030 or 2032 when the State will no longer be paying any normal cost.
- Rich Miller - Monday, Oct 20, 14 @ 5:23 pm:
Archimedes, I don’t see Tier 2 surviving judicial review. As soon as the first person is vested, there’s gonna be a big lawsuit. I think you can get it down to even-Steven, but not the current status quo.
- Yellow Dog Democrat - Monday, Oct 20, 14 @ 5:37 pm:
Rich is correct.
The Tier 2 plan is essentially a backdoor income tax, and not a constitutionally allowable one.
Not sure why no one has challenged it yet.
- Mighty M. Mouse - Monday, Oct 20, 14 @ 5:42 pm:
===The biggest problem that Bruce Rauner has completely nailed is that Illinois isn’t getting out of this mess until it vastly increases private sector growth. Whether he can do it or not is yet to be seen… if he wins, that is.===
In Illinois Issues, September, 2014 Brian Mackey wrote an article called, “Can a governor really create jobs?” http://illinoisissues.uis.edu/archives/2014/09/state.html
The article quotes Richard Dye, an economist with the University of Illinois’ Institute of Government and Public Affairs, as saying about gubernatorial politicians:
“Where they claim responsibility for jobs, or they claim that in the future they’re going to create jobs, that has to be viewed with great skepticism, at least in terms of the evidence,” says Richard Dye, an economist with the University of Illinois’ Institute of Government and Public Affairs. Like the sea, he says, “the economy rises and the economy falls. And it ain’t because of who’s riding the rowboat.”
Mackey points out, “Don’t tell that to Rauner, whose campaign slogan is ‘Bring Back Illinois.’ The Republican has consistently blamed Illinois’ economic woes on the state’s Democratic leadership . . .”
But economists disagree, as Mackey continues, “Dye says it’s possible for tax policy changes to sometimes — ‘not generally, but sometimes’ — have an effect on jobs. But there are many other factors that more directly affect a state’s employment: ‘the overall economic condition, the capital stock and education level of the state, the national economy, incentives by other states, and so on,’ Dye says. ‘All things that are beyond the governor’s control.’”
And now it seems that in 2014 Rauner himself disagrees with what HE said back in 2011! He was commenting on the financial meltdown of 2008 in response to the question, “[S]houldn’t we try and fix some of the problems that created the situation?”
Mackey observes that back in 2011 “Rauner said the government was making things worse. Then — and this is the key moment — he opined on the nature of large economies: ‘We’re talking about free markets. Markets are cyclical. Get over it. We’re not going to predict it. We’re not going to stop it. We’re not going to control it. That’s what it is.’”
“Rauner 2011 acknowledged that economic downturns are inevitable and opined that governments can do nothing to control them. Rauner 2014, however, seeks to blame Quinn for not taking the right steps to address Illinois’ economic woes. Rather than telling voters to “get over it,” he’s attempting to harness their anger to propel him into high office.”
The politicians all pander on this subject because the general public has no idea that it’s all blather and all either one of them can do is just have a very marginal impact, at best. The politicians all say they have solutions not because they have any genuine answers, but simply because they are constantly asked. What do else you expect them to say? “Vote for me. It won’t make very much difference to our state’s economy, but vote for me anyway, for other reasons.”
And give Rauner the little bit of credit he deserves. At least he WAS honest and truthful about the subject BEFORE he decided to run for governor. It seems that he’s honest and truthful when it suits him, or if he feels like it or is in the mood. Exactly what I want in a governor—NOT.
Blagojevich was a minor leaguer compared to Rauner. G-d help us if he wins. I pray we never find out.
- Yellow Dog Democrat - Monday, Oct 20, 14 @ 5:44 pm:
Rich:
Rauner wants to put us on the fast road to Kansas, and that experiment in trickledown economics has been a disaster.
A massive, and I mean massive public works bill funded by gambling expansion is his only hope really of giving the economy a shot in the arm, and even then he will have to raise taxes atleast temporarily.
- VanillaMan - Monday, Oct 20, 14 @ 5:44 pm:
tax retirement income at the same rate everyone else pays on their income.
- Mighty M. Mouse - Monday, Oct 20, 14 @ 5:46 pm:
Somehow the line got deleted where I wrote, “Read Mackey’s whole article. It’s very interesting and informative about not only what Rauner and Quinn say, but also what economists say is the real truth.”
- Yellow Dog Democrat - Monday, Oct 20, 14 @ 5:57 pm:
I am trying to be generous today, but the latest story from the Rauner-Times is a wee suspect.
The headline says education was cut 9 percent, and that will look great in a Rauner ad.
The problem is that when you read the actual story, you find the nine percent is only AFTER you adjust for inflation. Which means this real spending in actual dollars must have increased since 2007 since inflation has dropped the value of the dollar about 13 percent since then.
- Archimedes - Monday, Oct 20, 14 @ 6:33 pm:
Rich (and others) - probably a bigger impediment to Tier 2 is that in the near future, the benefit provided will be actuarially less than social security. The State (and school districts, etc.) do not currently pay social security (and those employees are ineligible for the benefit). But that option for the State is allowed by the Feds as long as the benefit is as rich as Social Security.
Since the benefit grows at a rate less than inflation while social security is indexed to inflation, the social security will eventually surpass it. Then we have another problem afoot.
Of course all of this was pointed out right after Tier 2 was passed in 2010 (in one day). Just like it was pointed out that a 1 cent tax increase would have paid our pension debt back in 1995 - instead we embarked on the pension ramp. That 1 cent is looking pretty good right about now…
- very fed up - Monday, Oct 20, 14 @ 6:34 pm:
For those who are calling Rauner regressive what would you call Quinn? In 6 years in office he has not raised the minimum wage once. He has watched property taxes skyrocket on the middleclass.
Instead of pushing for a graduated income tax he passed an extremely regressive income tax hike which grabs little from the wealthy who make most of their income from investments.
The pension payments will continue to grow every year until he will ask the middle class yet again for a “temporary” tax hike.
- MikeMacD - Monday, Oct 20, 14 @ 6:45 pm:
===Instead of pushing for a graduated income tax…===
Article IX REVENUE
SECTION 3. LIMITATIONS ON INCOME TAXATION
(a) A tax on or measured by income shall be at a non-graduated rate.
Constitution of the State of Illinois
- very fed up - Monday, Oct 20, 14 @ 6:53 pm:
Yes that is what the constitution reads currently. Poll after poll shows if put on the ballot this would pass with overwhelming support.
Instead of kicking the middle class when already struggling show leadership and get it on the ballot. Publically call out members of the general assembly who stand un the way. With effective leadership this would of been accomplished in the last 6 years.
- Rich Miller - Monday, Oct 20, 14 @ 6:56 pm:
=== Publically call out members of the general assembly who stand un the way===
All you’d do is make them retrench even more. Have you ever met Jack Franks?
- very fed up - Monday, Oct 20, 14 @ 7:05 pm:
It wont be easy but elected officials tend to care about job preservation above all else. If democratic members are forced to publically defend raiding the middle class while protecting the wealthy to the point of blocking votes on it will make reelection difficult.
The sun times recently ran a study showing Illinois to have among the most regressive tax structures in the nation. With effective leadershipthis would be a slam dunk.
- James Knell - Monday, Oct 20, 14 @ 7:08 pm:
Governors have no “magic growth beans”. Wisconsin’s Scott Walker showed that by coming no where close to his promised 250,000 new jobs even when he cut state & municipal employee’s take home pay by 20%. Illinois is is paying it’s bills a lot quicker than in 2010, and if we don’t go on a Republican Magic Fairy Dust bender of tax cuts and sweet-heart deals for the super rich, we can have a slightly better tomorrow.
- JS Mill - Monday, Oct 20, 14 @ 8:01 pm:
The pension “problem” is a problem created solely by governors and legislators. Lobbyists and unions may have offered some tantalizing contributions but none of them cast a single vote. Until Scott Walker showed up, the state picked up the entire teacher share of the pension, teachers now contribute 5% so Illinois was not alone. The thing that gets me the most is that the states credit rating was low before the “crisis” began and the funding percentage was no worse than it was 44 years ago when the constitution was established. It is actually better now than it was then (about 46%) because Quinn has actually made a point to pay some bills.
Tier 2 is no answer and most legislators know it has to be fixed for the reasons several people have pointed out. Martire has addressed this issue with a simple solution for more than a decade. The fix can still work, tax retirement income over $75,000, re-amortize the debt, keep the 5%, consider a 1% tax on services (least palatable and most regressive component for many). The biggest problem for any solution would be to get the legislature to stop spending and to stop creating new programs. Once again the ILGA is it’s own worst enemy because a solution would require collective self control. We have not witnessed that in my lifetime.
- James Knell - Monday, Oct 20, 14 @ 8:13 pm:
JS Mills, it is important to note that salaries were lower because unions had prioritized benefits instead of salaries. This has turned out to be a huge blunder because that fact is so easily left out. Other than that, I don’t really disagree with anything else you wrote.
- Federalist - Monday, Oct 20, 14 @ 9:57 pm:
If retirement income is to be taxed then the additional amount individuals pay in income tax and property tax should be used as a credit against the amount of that retirement tax.
Why penalize those retirees who pay additional taxes and stay in Illinois. Illinois does not need an exodus of people, even those hated older
people.
- Norseman - Monday, Oct 20, 14 @ 10:28 pm:
Rich & YDD, under what legal basis does Tier 2 get challenged? (Just asking.) I’ve previously heard Archimedes point about the problem relating to Social Security, which was said to be a future financial hit from the feds. However, I don’t recall any discussion of other causes of action that could be used to overturn the Tier 2 requirements. The pension clause doesn’t apply because the Tier 2 requirements only affected new employees.
- Norseman - Monday, Oct 20, 14 @ 10:34 pm:
=== tax retirement income over $75,000 ===
How does this not run afoul of the constitutional prohibition on graduated income tax? Exempting a class of people from paying income taxes is one thing. Exempting lower income persons within that class strikes me as a violation of the graduated tax provision.