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* Reuters posted a story late yesterday about a new warning from another ratings agency…
Moody’s Investors Services said on Wednesday that most state, local government and public authorities that issue debt in the municipal bond market are “well insulated from shock,” but added that some could be vulnerable to risk during major market volatility.
“Most municipal issuers are somewhat weaker than they were prior to the last major market disruption,” said Moody’s Managing Director Timothy Blake in a statement. “This is why some may face significant stress if hostile market conditions emerge.”
The ratings agency said it doesn’t expect widespread defaults or downgrades of more than a notch. It pointed out that most state and local governments use debt to fund capital projects, which could be put off for a while if access to credit was impaired. However….
State and local governments that issue debt to fund operating deficits or rely on short-term notes for seasonal cash flow needs may have greater exposure to risk, Moody’s said.
These issuers, such as California and Illinois, would be vulnerable if a slowing economy pushed their budgets off balance, leaving them fewer internal sources of funding, or if they could not function without borrowing cash.
Illinois regularly uses short-term notes for cash flow, and the governor’s initial borrowing plan to pay off overdue state bills also included money for operating expenses. That has since been pared back, but the plan has been blocked in the General Assembly.
* I asked the governor’s budget office for a response…
We continue to monitor the situation in the financial markets, but it is yet to be determined how market volatility will impact state economies.
Our focus remains on growing jobs and continuing to put our financial house in order by reducing spending, enacting Medicaid, worker’s compensation and pension reforms, as well as raising revenues to address the decades of fiscal mismanagement in our state.
Discuss.
* Meanwhile…
llinois taxpayers face at least $85 billion in unfunded pension liabilities. But Gov. Pat Quinn seemed to rule out a pension reform proposal pending in the General Assembly on Wednesday.
“Their proposal laid an egg this past year,” he said.
It was the governor’s clearest statement yet that he opposes the pension reform bill sponsored by House Republican Leader Tom Cross, which would not change any retirement credits that have already been earned by current state employees. […]
This year’s tax increase that raised about six to seven billion dollars for the most part all went to this year’s pension obligation,” Cross said. “It’s the elephant in the room.”
Why do we need to address this? Because, that $85 billion figure we cited as the unfunded liability for pensions in Illinois — well, it’s predicated on a really wild and wacky assumption that our investments will earn an average 8.5 percent every year for the next 40 years.
Good luck with that after what world stock markets have just done.
posted by Rich Miller
Thursday, Aug 11, 11 @ 9:41 am
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Comment by just sayin' Thursday, Aug 11, 11 @ 9:45 am
Flannery seems to completely miss reality. The pension legislation isn’t on Quinn’s desk because Cross’ members won’t vote for it.
Comment by Michelle Flaherty Thursday, Aug 11, 11 @ 10:00 am
I am glad Fox Chicago basis their economic projections on 1 week of market experience. The funds exceeded 20% returns last year, and just an FYI, TRS and GARS are the only ones using an 8.5% assumed rate of return.
Comment by Anonymous Thursday, Aug 11, 11 @ 10:03 am
Maybe Leader Cross should give up politics and get into the investment field since he seems to to know what the market is going to do for the next 40 years. Oh by the way, the systems have returned 8.5% in investments ove the past 40 years.
Comment by Obamas Puppy Thursday, Aug 11, 11 @ 10:03 am
No problem. Magic beans!
Comment by Anonymous Thursday, Aug 11, 11 @ 10:11 am
Translation: You do work with the state of Illinois? Payments are going to come even slower.
Comment by zatoichi Thursday, Aug 11, 11 @ 10:11 am
Let us for a minute forget the issues related to pension reform. There are those that are for the legislation and those against. Both sides have their reasons some based on facts and some based on fears. Let me give you one fact as we go into the next fiscal year. This fiscal year the state pension payment was $4.2 billion. Next year’s pension payment is estimated at $4.9 billion. (Source: COGFA, “A report on the Financial Condition of the IL State Retirement Systems, pg. 91). Let’s begin the discussion as to where the state of Illinois will cut $700 million. In roughly 6 years the pension payment will be larger than what we put into education. Now you understand why this issue has been called the “Elephant in the Room”.
Re. Ed Sullivan
Comment by Rep. Ed Sullivan Thursday, Aug 11, 11 @ 10:30 am
Tom Cross needs to get off the golf links and the members of his GOP caucus, including Mr. Sullivan, need to stop sitting around rooting for our state to tank in the selfish desperate hope of scoring political gain.
Voters can see which side is serious and which side is playing cynical games. We see why voters kept the Democrats in control and why the Rs have nothing to offer except a sour grapes lawsuit challenging the remap.
Voters will always choose even very flawed leadership over no leaderhip. State Republicans never seem to get it.
Comment by just sayin' Thursday, Aug 11, 11 @ 10:43 am
Well if the State had fully funded the pension systems under Thompson, Edgar, etc. we wouldn’t be in this mess. So, let those who created this mess solve it - cut the pensions of elected officials down to nothing.
Comment by Dead Head Thursday, Aug 11, 11 @ 10:49 am
===So, let those who created this mess solve it - cut the pensions of elected officials down to nothing.===
Yeah, OK. That’ll “solve” a tiny fraction of the problem. And if it’s declared constitutional, you’ll be next.
Comment by Rich Miller Thursday, Aug 11, 11 @ 10:51 am
If you review the systems rates of return going back a few years (I looked at some going back as far as 2004), except for the devasting 08-09 year, the ones I looked at pretty consistently returned over 10% each year.
08-09, as well as 01-03, were really bad for the pension plans.
But the actuarial valuations always bother me - these are only estimates, and can be manipulated by changing the inputs. For instance, they all seem to use an assumed inflation rate of 3% a year. Inflation has been around zero for a few years now, and below 3% for quite some time. I wonder what changing that assumption to something more realistic, like 1%, would do to the estimate?
The more I look at the actuarial tables, the more I feel like the assumptions are flawed - the actuarial accrued liability at SURS, for instance (and this is the total liability, not the underfunded amount) more than doubled over the past 10 years ($14.9 billion to $30.1 billion). Total payroll during that time went up only 41% ($2.4 billion to $3.4 billion).
The actuarial value of plan assets went down from 2009 to 2010 (about $300 million). The balance sheet for the plan, on the other hand, shows an increase in total assets of $1 billion from 2009 to 2010.
Something seems off with the actuarial estimates. Why would a system with $2.4 billion in payroll costs in 2001 which shows a total long-term pension liability of $14.9 billion at that time see it’s total long-term liability grow by more than 100% when total payroll only increases by 41%? Not including the outlier year of 2004, actual state contributions to SURS have grown by an average of 17.6% per year since 2001.
Employee contributions have only grown by an average of 2.5% per year since 2001, but total contributions (not including the 2004 outlier) still have grown at a rate of 9.5% per year. The total liability has grown at a rate of 8.2% per year, though. Actual payroll has only gone up 3.9% per year over the past 10 years. (all that is in regards to SURS - I don’t have the time to look at all of ‘em).
Something seems really off in the actuarial calculations. Maybe there’s a reason for the liability to grow so much faster than actual payroll, and to grow so quickly that the state can’t keep up with its required contribution, but it seems unlikely to me. Maybe someone out there in springfield or DC should start looking into how actuaries are actually calculating these pension liabilities. It seems like something’s just off.
Comment by jerry 101 Thursday, Aug 11, 11 @ 11:05 am
I am certainly no mathematical genius nor am I an expert on pensions, but, why does the system need to be funded at %85? Does that mean that SERS must operate under the assumption that it is possible %85 of their actively employed participants could all decide to retire at once?
Plus, I hate rhetoric like Ed Sullivan’s “In roughly 6 years the pension payment will be larger than what we put into education.” What does that have to do with the validity of the pension payment? And, the GA isn’t exactly known for their generosity to education funding.
Comment by lincolnlover Thursday, Aug 11, 11 @ 11:07 am
Just saying,
“… need to stop sitting around rooting for our state to tank in the selfish desperate hope of scoring political gain.”
This comment is rather amusing on many fronts. First, House Republicans worked together with House Democrats to pass a budget that begins to turn the ship around. Obviously there is a ways to go. So knowing this, your comment doesn’t make much sense. Your comment is also amusing in that I have heard some commentary that we shouldn’t be working with the Democrats to help fix the many problems in this state. As my earlier post stated the pension issue is a real problem. House Republicans at the very least have brought the discussion to the table. I am not sure how what we have been doing indicates we are standing around rooting for our state to tank.
Rep. Ed Sullivan
Comment by Rep. Ed Sullivan Thursday, Aug 11, 11 @ 11:24 am
Rep Sullivan is one of the more direct and honest members in the House. I am more interested in plans and solutions, however, than in perceptions of impending doom. Problem statements are a dime a dozen, real workable solutions are rare gems.
Comment by walkinfool Thursday, Aug 11, 11 @ 11:30 am
Had the General Assembly reformed GARS in January we would be finding out exactly what the constitutional protection means. Instead the Civic Committee demanded comprehensive reform thinking that the court would look at the gravity of the problem and perhaps ignore their judicial oath. That is a ridiculous belief. Reform GARS, get your ruling, then reform everyone else to the extent allowed by the court (if any). Save yourself the political headache…..Duh
Comment by Anonymous Thursday, Aug 11, 11 @ 11:30 am
Lincolnlover,
My post is not rhetoric but fact. Why is it pertinent to the pension discussion? We have a law that mandates the payment. Could the GA change the law? Sure, it has been done before. Until then, with the facts before us, we must come up with $700 million to make the payment and in roughly 6 years the pension payment will be more than what we put into education. So let’s go back to my original post, what should the General Assembly cut to make the pension payment?
Rep. Ed Sullivan
Comment by Rep. Ed Sullivan Thursday, Aug 11, 11 @ 11:35 am
Walkinfool,
Thank you for your points. I agree we need a workable solution. The discussion was started regarding pension reform in a bill that I am a chief co-sponsor. Let’s see what evolves between now and January. My point in getting involved on the blog today is simply to point out that there are real consequences in doing nothing. To that point everyone agrees.
Rep. Ed Sullivan
Comment by Rep. Ed Sullivan Thursday, Aug 11, 11 @ 11:40 am
Jerry,
The 3% inflation assumption is probably because of the annual 3% COLA built in to most state pensions. Over the past 30 - 40 years, the actual federal inflation rate has been anywhere from 0% (maybe even slightly negative) to over 18% (remember the early 80’s?) so 3% is probably solid long term number. It’s hard to directly compare some of the older numbers because the way the fed measures inflation has changed.
As others have pointed out, long term the pension system returns have run over 8%. So that is also a reasonable assumption. The problem is the occasional dip, like now, and the fairly consistent underfunding. The underfunding is not new; as has been pointed out on this blog numerous times, the State has muddled through these same types of problems for between 60 and 150 years (depending on exactly how you want to trace / measure it).
The problem, quit simply, is lack of political will to fix it. When Quinn was selling the last tax increase, he implied (or maybe the citizens just inferred) that the tax increase would fix things … what was unheard was the “for this year” part of the statement. Also, some of the increase was for other things, not just plugging the “pension” hole.
Since you can only cut things a certain amount, the only realistic long term solution I see is another tax increase (1) dedicated to the pension funds along with (2) not cutting the current funding (we don’t need another lottery / education three card shuffle). But it ain’t going to happen because the legislature would have to admit they messed up / mislead the public on the previous “fix” …
Rep. Ed,
I expect my legislators to work across the aisle for the good of State. At the same time, I expect reasonable compromise from both sides …
Comment by Retired Non-Union Guy Thursday, Aug 11, 11 @ 11:46 am
We have had a law that mandates payment for quite some time. We have also had a General Assembly that had decided to ignore the laws when it feels like it and that is why there is a “pension problem”. That’s not rhetoric, that’s a fact.
Comment by lincolnlover Thursday, Aug 11, 11 @ 12:04 pm
People always somehow manage to swing the blame to the Republicans. Not only have the Democrats been in complete control of this state for many years and have redistricted themselves into remaining in charge for the foreseeable future, but several good faith attempts made by the Republicans were met with scorn and derision by many of the same posters that blame the Republicans, They say Republicans should work across the aisle. Bah. Also remember how Quinn reacted to the Senate plans issued at the beginning of the year.
Rep. Sullivan is still trying to work with Democrats. He, and many other Republicans, have been trying to get people serious about this problem for a long time. The hyper-partisan GA Democrats have turned their back on them. And Incompetence Prime Quinn panders, and chases every squirrel he sees.
It’s time for the Democrats to step up and admit they are culpable for overspending (as were also the Republicans sometime in the distant past when they had some influence). It’s time for Democrats to admit they are responsible for state government being the way it is, and for the future path we take. Any way you slice and dice it, Democrats run things in this state. Perhaps the, “It’s my way or the highway,” approach they have taken in the past few years should stop and the DEMOCRATS should make a good faith attempt, walk across the aisle if you were, to work with Republican leadership and members like Rep. Sullivan, and others.
Comment by Cincinnatus Thursday, Aug 11, 11 @ 12:28 pm
For the record, Cincy, I hold one party just as accountable as the other.
Comment by lincolnlover Thursday, Aug 11, 11 @ 12:47 pm
Cinci, were you born in 2002?
“Sometime in the distant past.” That’s hilarious.
Comment by 47th Ward Thursday, Aug 11, 11 @ 12:50 pm
Rep Sullivan says, “First, House Republicans worked together with House Democrats to pass a budget that begins to turn the ship around.”
Really Mr. Sullivan? You mean the same budget that relies on the big state income tax increase that you House Republicans bash on the days when you aren’t patting yourselves on the back for the budget that relies on the big income tax increase? That one?
This is exactly what I mean. The House Republicans are a joke and every time one of them weighs in, every Republican voter in Illinois cringes in embarrassment.
Comment by just sayin' Thursday, Aug 11, 11 @ 12:51 pm
Just saying,
The Dems have been in complete control of the state for 6 plus years and the problems have gotten worse the debt has grown substantially. Madigan Blago/Quin, culler ton ,Jones have led the state to financial ruins. They have increased taxes and we are deeper in debt than last year. As much as you try to spin tithe GOP may be many things in Illinois but they are not to blame for the sad state of affairs. The real sad part is Blago is the only one in jail.
Comment by Fed up Thursday, Aug 11, 11 @ 12:52 pm
47th,
Nine years is a long time, plenty in fact, to either fix, break or make better a system. Which one happened?
Comment by Cincinnatus Thursday, Aug 11, 11 @ 12:55 pm
just saying’,
Well, the new taxes are here. You got ‘em. You won. Now what? Still won’t take any responsibility, will ya…
Comment by Cincinnatus Thursday, Aug 11, 11 @ 12:58 pm
You mean the same Blago that Tom Cross and other House Republicans cooperated with (long after Madigan abandoned the soon to be indicted gov) until the very end, trying to cut a massive gambling expansion deal that would give Blago billions more to spend? That Blago?
Comment by just sayin' Thursday, Aug 11, 11 @ 1:15 pm
Massive gambling expansion. “you mean the one sponsored by Dem Lou lang. Similar to the one passed just this year by the Dem controlled house and senate. With a truly massive tax increase that Quinn lied to the voters about just months earlier when he promised to veto any tax increase above the 4% level.
Comment by Fed up Thursday, Aug 11, 11 @ 1:24 pm
What I would like from Rep. Sullivan is a statement as to why he believes it is just and fair to change the pension rules mid-stream and why he believes it is ok to violate the Constitution that he swore to uphold, which clearly states that state employee pensions cannot be diminished. It is Rep. Sullivan’s - and everyone else in the General Assembly - job to figure out how to fit the square peg of pension funding into the round hole of available resources. I can think of many things the state spends money on that can be eliminated. There are many special line items that have been inserted into the budget over the years by legislators for pet projects. Eliminate them all. Legislators have no business doing this. Fund essential services first.
Comment by Demoralized Thursday, Aug 11, 11 @ 1:35 pm
Cincy:
Why do you continue to insist to play your little blame game? What does it accomplish other than to goad those on the other side trying to play their equally idiotic blame game?
Comment by Demoralized Thursday, Aug 11, 11 @ 1:38 pm
Just saying,
I knew the blog was getting fairly interesting when I started to get a bunch of 217 area code calls while in a meeting. There is a reason why most elected officials do not try to have meaningful discussions on the blogosphere and you are it. Do you want House Republicans to work with the Speaker Madigan to solve the state’s problems or not? Yes we voted against the tax increase including me. Voting against the tax increase because we had different thoughts on how to solve the problem doesn’t now preclude us from trying to solve the many problems facing this state. Remember, the majority of this tax increase is scheduled to go away in a few years and this state is standing on a fairly sizable cliff if we do not work together to get our finances in shape. The Federal government has a bond rating from one agency of AA+ after the downgrade. The state sits at A+ (S&P), A (Fitch), and A1 (Moody’s). If we do nothing now can you imagine what our rating will be in a few years? So, you can attack me and House Republicans all you want or you can try to be helpful and offer some meaningful debate on how to solve the problems. Your call.
Rep. Ed Sullivan
Comment by Rep. Ed Sullivan Thursday, Aug 11, 11 @ 1:41 pm
Demoralized,
- Michelle Flaherty - Thursday, Aug 11, 11 @ 10:00 am:
- Obamas Puppy - Thursday, Aug 11, 11 @ 10:03 am:
- just sayin’ - Thursday, Aug 11, 11 @ 10:43 am:
- Dead Head - Thursday, Aug 11, 11 @ 10:49 am:
Read those posts. They all seem to ignore the basic fact that the Democrats have ruled this state for 10 years. They also ignore the fact that on several occasions, the Republicans offered counterproposals and reached out to help. All were rebuffed by the arrogant GA and the incompetent governor. Blame? Perhaps the Democrats need a good mirror…
Rep. Sullivan,
Please come to Dillard’s reception. I need to meet as many clear minded people in Springfield as I can to renew my faith in Illinois government.
Comment by Cincinnatus Thursday, Aug 11, 11 @ 1:58 pm
- Voting against the tax increase because we had different thoughts on how to solve the problem -
I appreciate your willingness to share your thoughts on this, Rep. Sullivan, but what were those different thoughts on how to solve the problem? I think you’re being a little disingenuous when you say that’s why you voted against a tax increase. I have a hard time believing that you weren’t pretty relieved that a tax increase passed without your help.
Comment by Small Town Liberal Thursday, Aug 11, 11 @ 2:00 pm
Attacking Sullivan because he’s proud that his caucus helped work out the budget is not fair. Period.
Comment by Rich Miller Thursday, Aug 11, 11 @ 2:01 pm
Demoralized,
My original post was exactly about how to in your words “fit the square peg of pension funding into the round hole of available resources.” If we maintain the status quo in regard to how our pensions operate we need to grow our resources by $700 million or cut our expenses by $700 million in the next round of budget talks. I am fairly certain a second round of tax increases is off the table. So we are back to my original post that asked the question of what the GA should cut.
The pension bill before the GA asks employees to pay for the actuarial value of the pension they will receive or choose to go into one of two other benefit tracks for future accrued benefits. Do you think employees should pay for enhancements to pensions that have occurred over time? If you call my office I certainly can give you detailed list of unfunded pension enhancements. So here is my statement for all my future opponents to use against me. I do not believe the GA can reduce the benefits an employee has accrued up until today. I do believe the pension rules can be changed for any benefit an employee may or may not accrue in the future. In the end any pension bill that passes the GA and signed by the governor will probably end up in the courts.
Rep. Ed Sullivan
Comment by Rep. Ed Sullivan Thursday, Aug 11, 11 @ 2:15 pm
I will say upfront that I don’t know what the actual ROR these various funds in question achieved over the past few years. But 8.5 sounds very high based on the 401Ks and IRAs of everybody I talk with on a regular basis and what has been printed in respected financial press. Many financial analysts suggest using a conservative 6% average ROR for long term investment planning purposes. Alexi sure as heck didn’t get anything close to 8% return on his college funds you may recall. What monster return are 10 year T-bills getting these days? Understandably people are concerned about their state pensions. But let’s see some reality based problem solving here that takes into account realistic figures and projections. We used to call it math.
Comment by Responsa Thursday, Aug 11, 11 @ 2:21 pm
Thanks Rich, if a legislator is afraid of fire they shouldn’t light matches. I enjoy a good conversation and do realize the anonymous nature of the blogosphere can distract from meaningful discourse.
Comment by Rep. Ed Sullivan Thursday, Aug 11, 11 @ 2:23 pm
Cincy, believe it or not, there was a state and a pension problem BEFORE the great Democratic uprising of a decade ago.
This is not an new issue owned by either of the parties. It was created and worsened by both of them. While I wouldn’t expect you to be up on your TRS actuarial reports from 1950, I’d hope you’d recall Rich’s blog post from April.
https://capitolfax.com/2011/04/26/this-problem-is-decades-old/
OK, so the Dems have controlled the state the last decade. Yeah, they changed the pension payment law to skip a payment or two and perhaps that wasn’t the wisest thing.
but it was the Republicans during their rule of the mid 90s that established the 50-year payment schedule and decided to intentionally underfund the first 15 years worth of payments, which made their budgets a lot easier to pass but also wasn’t exactly the most prudent fiscal course in retrospect.
And before the 1995 GOP pension law, the bigger picture of the pension funding problem was largely ignored by both parties during their various stints on control in the GA and mansion.
So the tax increase is mostly paying for the pension payments and Rep. Sullivan deserves credit for helping pass a somewhat balanced budget (just don’t ask a medicaid provider or a school district about payment cycles and pro-rating).
Enough of a history lesson, reality check?
Comment by Michelle Flaherty Thursday, Aug 11, 11 @ 2:40 pm
From my original post,
“It’s time for the Democrats to step up and admit they are culpable for overspending (as were also the Republicans sometime in the distant past when they had some influence).”
I admit that Republicans are part of the problem, see above.
I assert they are being boxed out of being part of the solution by the Democrats in this state. I further assert that several posters have tried to deflect blame onto the Republicans. One last assertion, you were the first Democrat (?) to own up to the problem, even though meekly, “OK, so the Dems have controlled the state the last decade. Yeah, they changed the pension payment law to skip a payment or two and perhaps that wasn’t the wisest thing.”
Democrats have been in control for ten years, and will probably be in control for the next ten. Shouldn’t the leadership on this problem start with them?
Comment by Cincinnatus Thursday, Aug 11, 11 @ 2:54 pm
The emotion attached to the pension debate is understandable. People made certain career choices based upon benefits they reasonably believed were guaranteed. Now sometimes after decades of service and on the eve of retirement, the Legislature treats the state employee like the boys treated Flounder in Animal House (”you ’screwed’ up–you trusted us!”). Why wouldn’t a state employee be upset? Having said that, and having assessed blame where it mostly belongs (the Legislature) there is still an undeniable problem that can’t be solved by simply according blame. Rep. Sullivan is entitled to a measure of respect on this blog. Anyone who runs, let alone wins and serves in public office these days, has my respect. An office holder who identifies himself and engages in dialouge on this blog has my respect and thanks.
Comment by Tommydanger Thursday, Aug 11, 11 @ 2:55 pm
Rep Sullivan:
I have no problem increasing my contribution to the pension system but the rates being discussed are outrageous. That is a substantial pay cut to endure. And, the fact that it can be adjusted in 3 years makes me even more nervous. How in the world can a person plan if they have no idea what the rate will be in the future. I’m frankly sick and tired of the abuse that public employees now have to endure because it’s the politically popular thing to do. I am not in a union so I get no other benefits from the state except my pension. I have seen no raises in years, endured 36 furlough days over the last two years and seen my healthcare contributions increase. At the very least if you increase my pension contribution I expect a salary increase to offset the cost (or at least some of it).
I will say I think it is pretty upstanding that you are engaging people on this blog. Sort of a “town hall” blog meeting. I think all of your colleagues should do the same.
Comment by Demoralized Thursday, Aug 11, 11 @ 4:02 pm
Cincy:
I still don’t think you and other posters who attempt to lay blame with one party or the other get it. Blame is irrelevant. Who cares now? I don’t understand why you continue to take the attitude that it is ok to simply step back and watch simply because one party controls the government. Everybody in the legislature needs to get their head out of their caboose and work together on a solution. I know that is unlikely because of the personalities involved but wouldn’t it be nice. Can’t we ever get past the blame game and actually work towards something?
Comment by Demoralized Thursday, Aug 11, 11 @ 4:07 pm
Demoralized,
There is no doubt that non-union, state workers have taken it on the chin for some time. The pension bill before the GA only asks that the employee pay for the value of the benefits (Actuarial based). The GARS benefits are fairly substantial and therefore the bill asks that GARS employees go from something like 11.2% of pay to close to 24% of pay. This is a fairly large increase but I know that I need to pay for the true cost of the benefit. I can also choose to go to a Tier II track or the 401K track to reduce my costs and also my benefit. All I can say is that the issue of pension reform is not going to go away and this bill is the only one out there for discussion. The other side of the issue needs to come to the table with something more than ‘Raise revenues to cover the obligation’.
Rep. Ed Sullivan
Comment by Rep. Ed Sullivan Thursday, Aug 11, 11 @ 4:44 pm
Blaming the GOP for the troubles facing Illinois right now even tho the dems have been in control for about 10 years would be like Ozzie Guillen blaming Jerry Manuel for this years troubles.
I think blaming the GOP for Illinois’ troubles is a kind of hobby for many here. Some people restore old cars, some people golf, some people can’t accept reality.
Comment by dupage dan Thursday, Aug 11, 11 @ 5:03 pm
===The other side of the issue needs to come to the table with something more than ‘Raise revenues to cover the obligation’===
Unless I’m reading this wrong (a distinct possibility), what the bill does is exactly that: it raises revenues to cover the obligation.
What’s different is that this bill raises revenues only from the beneficiary, not the employer, which is we taxpayers. So as a GARS member, you’re going from 11.2% to almost 24%, which is a pay cut of more than 12%.
So the question this bill asks is whether to give state employees a large pay cut. I think that might poll well with the voting public (especially cutting legislator pay), but less so with state employees obviously, who will see their take-home income decline. But unless I’m wrong, a hefty pay cut for state employees is precisely the question at hand.
By the way, thanks for joining this discussion today. I really appreciate you taking the time to discuss an important issue here. I don’t necessarily agree with you, but my respect for you is greater today for your willingness to engage a bunch of anonymous know-it-alls like me.
Comment by 47th Ward Thursday, Aug 11, 11 @ 5:05 pm
47th Ward,
Yes the bill raises revenues from the source that receives the benefit. Missing from the discussion that I am trying to bring forth is that the bill asks employees, including me, to pay for the actual value of the benefit going forward. Someone much smarter than me that has probably taken many tests in actuarial science gave us the cost of the benefit translated into a percentage of pay. Heck the judges have the greatest benefit and their percentage would go to something like 34%. (I apologize as I am working from memory on these figures.) As for the comment about ‘raising revenues to cover the benefit” I was specifically referring to those that want to again raise taxes on people that do not receive the benefit.
Rep. Ed Sullivan
Comment by Rep. Ed Sullivan Thursday, Aug 11, 11 @ 5:47 pm
Thanks Rep. Sullivan,
It could be argued that all of us benefit from good state employees. And we are their employer afterall. Smarter people than I am can spin this in other ways, but I still think the simplest explanation is that this bill is a pay cut for state employees who enroll in the pension plan(s).
Have you considered splitting the increased costs between the employer and the employees? If the actual costs are what they are, then instead of a $700 million hole, we’ve cut it to $350 million and it feels a bit fairer.
Thanks again for your help understanding this.
Comment by 47th Ward Thursday, Aug 11, 11 @ 6:58 pm
One of the most thoughtful discussions on here in a while. Good!
C and others. Please stop trying to place blame. There is plenty of it to go around. Anyone foolish enough to say that this is a D caused problem or an R caused problem is probably too lightweight to be paid serious attention on here.
Representative Sullivan, thanks for sticking in here. I have a question for you. The pension funding assumption as long as I’ve been around here has been that it is a cost to be approximately equally born by employee and employer. Why does your current proposal stray so far from that model? Am I correct in assuming that the plan’s proposed state contribution is calculated primarily as a minimum amount necessary to avoid federal intervention in the case of non-SS participants?
It seems to me that it would be much harder for employees to complain about a proposal that steered back toward 50-50 funding.
Comment by steve schnorf Thursday, Aug 11, 11 @ 7:04 pm
Re Wild and wacky 8.5% return on investment:
The SURS Board achieved a 23% return on investment in 2009, and a 15% return in 2010. So 8.5% is certainly conceivable.
Comment by OldIllini Thursday, Aug 11, 11 @ 7:31 pm
I don’t think it’s “attacking” Ed Sullivan (a guy we pay with our tax dollars and who works for us), to ask that if he’s going to blog on our dime about how wonderful it is that he worked with the Dems to get a budget, that he at least not turn around and attack the tax increase which provided the extra revenue that made that same budget possible. He can’t have it both ways.
All I ask is that a government employees like Ed Sullivan stop attacking our intelligence while working on the taxpayers’ dime, that’s all.
Comment by just sayin' Thursday, Aug 11, 11 @ 7:40 pm
Rep. Sullivan for NEW BLOOD Minority Leader…time for Mr. Cross to pass the batton!!
Comment by railrat Thursday, Aug 11, 11 @ 8:26 pm
Who cares what Moody’s thinks? S&P and Fitch, too.
I say that as someone who from past experience has tremendous respect for the knowledge and analysis that the worker bees at the agencies do. Brilliant people.
But ratings are made up the ladder and they’re political. It’s who you know and what’s in it for you and your friends that makes things work.
The landscape is littered with bankrupt corporations that had investment grade ratings higher than munis that never were late on a payment, ever.
Back in the day, my old boss did an interview in The Bond Buyer with John Mitchell (yes, that John Mitchell) after he got out of the can. Mitchell bad ben the biggest bond lawyer on Wall Street.
He told stories about changing ratings for clients over three martini lunches, and implied strongly that it cost more than just picking up the tab.
Let’s get real on the rating agencies. After the subprime mortgage-backed securities, their credibility is deader than Dillinger.
Comment by wordslinger Thursday, Aug 11, 11 @ 10:44 pm
===Who cares what Moody’s thinks? S&P and Fitch, too.===
On a federal level, you may be right. On the state level, however, they have a serious impact on bond prices.
Comment by Rich Miller Friday, Aug 12, 11 @ 6:00 am
Schnorf,
I think I know the complete answer to your question but have asked people smarter than me to be sure. Check back later and I should have something posted.
Rep. Ed Sullivan
Comment by Rep. Ed Sullivan Friday, Aug 12, 11 @ 7:35 am
Just Sayin’,
I will make a pact with you. I will stop blogging on “your dime” if you can guarantee I will not have to work outside of the hours of 9-5 with no weekends. Do you think you can have a talk with the Speaker for me?
I would argue that I am working while on a blog. In every profession a person needs to have pertinent information to make reasoned decisions. Elected officials need to have pertinent information and understand the pulse of those that elected them. My freshman year in college my buddies used to ridicule me because I had 3 newspapers delivered to my dorm. Today we have a new means of information. Granted you need a bigger filter at times.
Rep. Sullivan
Comment by Rep. Ed Sullivan Friday, Aug 12, 11 @ 7:47 am
Ed, I assume then that we’ll never hear you ever again attack the income tax increase. And further that when you hear your fellow Republicans trying to score political points by attacking the tax increase, that you’ll call them out and tell them to cease.
Because again, you can’t have it both ways. You can’t praise yourself for a budget deal and then attack the tax increase that was a key part of the budget deal, especially when you House Republicans didn’t even submit a balanced budget of your own. All you did was complain about the Democrats, until you think the time is right to share the credit for any good you can find in the Dems’ budget.
I assume we’re agreed. Otherwise everything you’ve posted here is just blatant politics on our dime.
Comment by just sayin' Friday, Aug 12, 11 @ 12:38 pm
Schnorf,
I obviously did not get the information to answer your question. Leave it to you to ask the one question that if answered wrong by me can inflame the discussion. I will try on again.
Rep. Ed Sullivan
Comment by Rep. Ed Sullivan Saturday, Aug 13, 11 @ 8:42 am
Just Sayin’,
I am not sure if there is another Ed Sullivan blogging in a parallel dimension that you are following but at no time did I attack the tax increase in this string. The closest I came to attacking the tax increase is to say I voted against it and that if we do not get things turned around we will be standing on a cliff when it expires, meaning right back to where we started. If I am fortunate enough to win my next election and the GA has not corrected the budget problem I certainly will have to say something about the tax increase as it relates to deficits in a few years. The increase was sold as temporary. As we stand here today the Governor is back tracking as to whether the tax increase will be temporary.
Rep. Ed Sullivan
Comment by Rep. Ed Sullivan Saturday, Aug 13, 11 @ 8:52 am