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* Richard Ingram, the executive director of the Illinois Teachers’ Retirement System, had an interesting take on what the Chicago Democratic leaders’ pension “cost-shifting” plan could do…
Mr. Ingram said such a change might give TRS more power to compel pension fund payments than it has now. It can’t pursue legal action against the state, but it could against school districts if they fail to make required contributions. Part of the reason the pension fund is underfunded is due to the state missing payments in the past.
Hadn’t thought of that, but he’s probably right. The IMRF has a similar power over municipalities.
* Meanwhile, the cost-shifting plan continues to cause problems for Downstate Democrats…
Republican state Senate candidate Bill Albracht said his opponent, state Sen. Mike Jacobs, D-East Moline, will follow party orders and support a plan that could lead to big property tax increases to cover teacher pension costs.
Sen. Jacobs, however, said the claim was “baseless.”
At a news conference in Moline, Mr. Albracht said his District 36 opponent would support a plan backed by Democratic leadership in Springfield to shift the cost of pensions to local school districts, which has met with widespread opposition from lawmakers outside Chicago.
“If he thinks I’m for that, he’s crazy,” Sen. Jacobs said.
Mr. Albracht was joined in Moline by Illinois Senate Republican leader Christine Radogno to warn against the cost-shift plan.
“They plan to do this in the lame duck session,” Sen. Radogno said.
posted by Rich Miller
Wednesday, Oct 3, 12 @ 11:34 am
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Hmmm…IMRF is 84% funded. Makes a big difference when the employer pays what they owe all the time.
Comment by archimedes Wednesday, Oct 3, 12 @ 11:43 am
Maybe Ingram should read the caselaw. The Illinois Supreme Court did not rule that the teacher’s suit failed because it was against the State (e.g. separation of powers or sovereign immunity). It failed because the pension code did not create an enforceable contractual right to funding. It would be hard to believe that this holding would somehow not apply to a suit against a municipality.
“We therefore find neither a vested contractual nor constitutional right for beneficiaries to enforce the level of state contributions previously mandated by Public Act 86-273. The framers of the Illinois Constitution were careful to craft in the pension protection clause an amendment that would create a contractual right to benefits, while not freezing the politically sensitive area of pension financing. In addition, the funding provisions contained in the Pension Code do not evince a legislative intent to create vested contractual rights in favor of beneficiaries. Without either a constitutional or contractual right to enforce the funding levels contained in Public Act 86-273, plaintiffs’ fiduciary duty and section 1983 claims similarly fail. As we find that plaintiffs, counterplaintiffs, and intervenor have failed to state a cause of action on these grounds, we need not address whether the requested relief is barred by the doctrine of separation of powers.” People v. Sklowdowski, 182 Ill.2d 220 (1998).
Comment by wert Wednesday, Oct 3, 12 @ 11:52 am
Of course the Democrats will push the pension cost shift to property owners, in the lame duck session. This will allow them to use state funds, to fund programs in Chicago, while raising taxes outside the city. Another tax increase, two years after the largest state income tax increase, and another reason for business and people to move out of state!
Comment by Billy Wednesday, Oct 3, 12 @ 12:27 pm
I still don’t understand how the shifting of costs will “raise” property taxes. Most school districts take the maximum legal levy increase evey year already. How will property taxes rise because of the shift? What am I missing?
Comment by Anonymous Wednesday, Oct 3, 12 @ 12:40 pm
local school districts will be “held harmless” in a scenarion where they get first dibs on money from the gaming bill..
Comment by PQ's Primary Opponent Wednesday, Oct 3, 12 @ 12:48 pm
Ingram is a one-man circular firing squad.
Incredible.
Comment by Arthur Andersen Wednesday, Oct 3, 12 @ 1:27 pm
It’s not hard to understand how property taxes will be raised.
When a significant amount of dollars starts to flow toward the pensions, it will be money formerly spent on the kids. There will then be an outcry for a referendum.
And the State will fritter away the savings on new programs.
The result will be more money out of the taxpayers pockets for no new benefit.
Comment by Plutocrat03 Wednesday, Oct 3, 12 @ 1:28 pm
“I still don’t understand how the shifting of costs will “raise” property taxes. Most school districts take the maximum legal levy increase every year already. How will property taxes rise because of the shift? What am I missing?”
Several things would likely happen. First off, back in 2006 (if memory serves me correctly), there was legislation passed which basically provided for few, if any max. rate limits on the different tax levy funds used by schools for property taxes - *IF* you were a ‘Tax Capped’ school district. For example, the Education fund (Fund 002) for a Unit school district went from a $2.84 per $100 max. rate to a $4.00 max. rate.
Now, with valuations still increasing at the time, no big deal. But over the last 4 years with values decreasing, it’s a very big deal. Here’s why - under PTELL (Tax Cap), if the values go down, a capped tax district still gets an extension based upon the highest level of the prior 3 years.
So (for Tax Cap tax districts only), the result is as people’s value of real estate decreases, their taxes stay at least the same, because as the valuation drops, the tax rates increase.
That’s why as the value of properties decreased, your overall tax bill didn’t (IF you are in a Tax Cap county).
Nice, huh….
Ok, second item is that because you have just ’shifted’ the TRS retirement burden to the locals, you are going to ‘hollow out’ each school district budget. Money is going to be pulled from both Education (fund 002) and Transportation (fund 004) and other funds to go into what will have to be the (new) equivalent of ‘IMRF’ (fund 005). So less money goes for actual eduction purposes, and more goes to fund teacher’s pension and retirement benefits.
It’s likely if this happens, you will see the true ‘education’ portion of school district budgets go to ‘zero’ percent increases (if not outright cuts) for multiple years, with all increases in terms of real dollars going to fund increased teacher pension and retirement costs.
But just remember, “It’s for the children…”.
Oops. Not really. “Never Mind”.
Here’s what it is likely to come down to: Massive numbers of statewide referendums for school districts desperate to get increased funding.
And that’s a direct hit on local property taxes.
And likely a lot more teacher work stoppages.
Now, IMO, the biggest question will be on who gets to set all the retirement benefit packages. IMRF has control over the basic benefit packages. If the legislature makes a change, the locals have to fund it.
As a result, the IL legislature has tended to stay ‘relatively’ hands off on IMRF benefits, because the Springfield pol’s have to come back home sometime and when they have gotten involved with playing games with IMRF in the past, those local government folks bit back - and you don’t need to go out and antagonize your friends.
Will this likely increase local property taxes? Almost has to - you shift the burden to local districts with taking the money out of existing funding sources. The end result will be push for more funding, which means local property taxes.
The real question that needs to be asked is one that everyone is avoiding: “How is it going to play out when a school district here in IL files for Bankruptcy?”
Comment by Judgment Day Wednesday, Oct 3, 12 @ 1:29 pm
===“How is it going to play out when a school district here in IL files for Bankruptcy?” ===
It won’t play out at all because they can’t legally file for bankruptcy here.
Comment by Rich Miller Wednesday, Oct 3, 12 @ 1:36 pm
I know the state is in a fiscal mess. And I know people are tired of the fingerpointing.
However, this move irritates me greatly. The GA and past administrations failed to meet their obligations. So now the missed payments and borrowed money are due and leave no extra money in the kitty for politicians to hand out or use to promote themselves. So they have been scrambling to figure out how to replenish the kitty. They tried a tax increase, that wasn’t enough. They can’t take money out of dedicated funds they have all been swept.
Their solution is to cut benefits and salary of state workers. They also want to lay the underfunded pensions on the doorstep of the local districts. In other words they are looking to the people who have been doing their part to pony up so they can take the money they save and put it in the kitty. They are washing their hands of the problem and dumping it on others. Do you think they will actually take the money they save and use it to get the state on better footing? Don’t bet on it. You can’t cut a ribbon on a balanced budget. They want their legacy to be made of brick and mortar. They do not want it to be that they pulled the state out of the hole. That is not long lasting. People can’t put their hands on that and see some politicians name on it.
And as far as the empty gesture of doing away with pensions for future lawmakers, how does that hurt the current lawmakers. How can you cut things that aren’t there? Where is the savings on that? And how long do you think it will take once a number of new faces show up in the GA that they then pass a law to reinstate the pensions. It will happen a lot quicker than the state workers regaining any cuts they will sustain.
The only way the dumping of the teachers pensions will help is if it comes with an ironclad guarentee that the money saved by the state will be used to fully fund the payments the state owes the school districts and a guarantee that those payments will NEVER be late. It would have to be a signed contract…..wait that won’t work either.
Comment by Irish Wednesday, Oct 3, 12 @ 1:36 pm
Nice fix our governors and legislators have gotten us into, isn’t it? If TRS had been funded properly all these years, no one would be having this conversation. We all have our politicians to thank for this mess. When you screw your employees, your business starts hurting, doesn’t it?
Comment by geronimo Wednesday, Oct 3, 12 @ 1:37 pm
“It won’t play out at all because they can’t legally file for bankruptcy here.”
Well, somebody better be thinking of what to do when there’s insufficient funding to meet all the legal requirements school districts are burdened with.
Otherwise, you are down to the following alternatives:
1) Don’t meet the legal requirements, and everything that goes with that.
2) Lay off all your staff and lock the doors.
3) Stiff both staff and creditors.
4) Default on some or all of your bonds.
5) Borrow money from the State of IL to keep operating short term. Yeah, that will happen.
Comment by Judgment Day Wednesday, Oct 3, 12 @ 1:52 pm
Judgment Day:
6) Float a referendum for a tax increase.
Comment by Cheswick Wednesday, Oct 3, 12 @ 1:59 pm
Democrats might want to turn the tables.
If Republicans are gonna accuse Democrats of forcing an increase in property taxes, Democrats should accuse Republicans of wanting to raise income taxes.
To pad the pensions of bureaucrats in Chicago’s wealthiest suburbs.
It’s atleast as true as the GOP claim.
Comment by Yellow Dog Democrat Wednesday, Oct 3, 12 @ 2:12 pm
“Property taxes will go up due to the cost shift.” Assuming a referendum is on the ballot, taxpayers can still vote NO! Property taxes will not rise without a YES vote. School districts will, and should, drive harder bargins with the unions over teacher contracts. A novel approach would be to combine districts to eliminate overhead that doesn’t go directly to the school/children? Unnecessary administrators and other staff for each district headquarters can be eliminated to drive down the overall cost of education. These administrators make a lot more money than teachers and have bigger pension payouts after retirement. Don’t we have to many already? What happened to the state study to look into this?
Comment by Anonymous Wednesday, Oct 3, 12 @ 2:32 pm
Let’s stop stabbing ourselves and each other over this issue. It’s going to happen in some manageable form, and we all will manage it.
Comment by walkinfool Wednesday, Oct 3, 12 @ 2:39 pm
“Float a referendum for a tax increase.”
Yes, that’s technically an option, but you have to wait to a general election to get the referendum on the ballot, and if passed, only then can you amend your tax levy. Means that it’s on a November ballot and it passes (which is problematic), it’s still 7 months away before you see any real cash flowing in. Unless you are into immediately issuing TAW’s (Tax Anticipation Warrants).
If it’s a March/early April election, real estate tax distributions are still several months away, and you may have to file a lawsuit against the County to delay property tax extension so your tax levy can be amended to reflect the increase.
It’s an answer - sort of - but due to time considerations, it’s really not much of an answer - at least not a successful one. Particularly if you find your school district in a real short term cash crunch.
Comment by Judgment Day Wednesday, Oct 3, 12 @ 2:43 pm
The mascot for the GA should be Wimpy from the Popeye comic strip.
And the GA slogan should be: “I’ll gladly pay you Tuesday for a hamburger I will eat today”
Comment by Irish Wednesday, Oct 3, 12 @ 2:44 pm
If the tax shift is accompanied by pension changes that reduce the normal cost to something closer to what the tier 2 teachers are getting then the impact on the districts of a slowly phased in approach will be minimal. The schools should insist that the legislation mandate that every dollar saved by the state from the shift be put back into education funding.
Comment by Bluefish Wednesday, Oct 3, 12 @ 3:06 pm
Bluefish, what reasonable changes could be made to Tier I to get the cost down to Tier II?
I’m assuming you mean the real cost and not the inflated rate that is actually charged.
Comment by Arthur Andersen Wednesday, Oct 3, 12 @ 3:51 pm
archimedes
Before the Collapse of 2008 IMRF had been 100% funded. It has a payback plan to return it to 100% funding.
http://www.imrf.org/pubs/100_percent_funding_goal/fact_sheet_2012.pdf
At points in the past before the collapse, it was more than 100% funded.
==As of December 31, 2007, IMRF’s overall funded status was 96.1 percent on an actuarial basis and 100.0 percent on a market basis.==
http://www.imrf.org/pubs/100_percent_funding_goal/100_prcnt_fndng_in_dif_mkt.htm
Comment by Anyone Remember? Wednesday, Oct 3, 12 @ 4:35 pm
Yes Rich is correct on the bankrupcy issue. The southern IL village of Washington Park filed for Chapter 9 bankruptcy protection in July, 2009, citing assets of less than $50,000 and debt of more than $1 million. U.S. Bankruptcy Judge Pamela Peppers threw out the filing in December 2010 after finding there was no state law enabling a municipality to declare bankruptcy. The filing was made under chapter 9. I do agree with Judgment Day at some point Illinois will need a governmental bankrupcy provision.
Comment by Rod Wednesday, Oct 3, 12 @ 5:10 pm
Ingram should stop the speechifying and read the ILCS. TRS is currently able to collect amounts owed from districts by filing offsets with the Comptroller against their State payments.
Comment by Arthur Andersen Wednesday, Oct 3, 12 @ 5:22 pm
Kudos to the new Exec Director for having the courage to state the obvious- without benefit cuts for existing retirees and active teachers- TRS will be unable to pay benefits sooner then everyone has been saying- The legislature should act on the invitiation to modify the COLA requirements and when or if the dispute ends up in Court- the defendants can introduce the statements coming from TRS as evidence - Ingrahm wouldn’t be suggesting the state do some illegal would he? Under State law, the agency subject to the legislation is given substantial weight when it comes to determining what is legal and Ingrahm has gone on the record saying COLA modification is possible
Comment by Sue Wednesday, Oct 3, 12 @ 5:50 pm
I just saw an ad on c 31 Peoria featuring Sen Koehler sweraing he will never ever do this at all.
He is a downstate democrat and felt the need for a response ad on this and I have never even seen an ad from his opponent so this isuue must be having and impact
Comment by western illinois Wednesday, Oct 3, 12 @ 5:56 pm
Saw it again Sen Koehler has UAW falg behind him and says he stood up to “this govoner” any pension reform must be fair No cost shift….
i dont see the votes for the democrats only plan….
Comment by western illinois Wednesday, Oct 3, 12 @ 6:15 pm
Ingram does not speak for his board. This isn’t the first time he has shot off his big mouth to the dismay of most of the TRS board. It is amazing that they can’t get their employee to shut up. He apparently has never bothered to read the Illinois Constitution.
Comment by Bill Wednesday, Oct 3, 12 @ 6:57 pm
Anonymous @ 2:32 pm:
Actually, sometimes a NO vote doesn’t matter. I’ve seen local school districts reclassify expenses most of us would consider routine maintanence as being life risk issues, and then issuing life safety bonds that bypass the tax caps. Heck, when taxpayers have turned down construction, I’ve even seen new schools built that way in direct contravention of the voter’s wishes by declaring the old schools unsafe.
As Rich always says, money is fungible. I’m betting the local districts will figure a partial way around the tax caps.
Comment by RNUG Wednesday, Oct 3, 12 @ 7:16 pm
Bill, is the TRS Board scared of the guy or what? He’s proving to be a huge embarrassment, especially for the IEA bloc on the Board. Cinda Klickna must be dying.
Comment by Horace Mann Wednesday, Oct 3, 12 @ 10:22 pm
So let me get this straight, the SGOPs didn’t vote for the state budget because the $210 million cut to education wasn’t deep enough, but now the SGOP leader goes to downstate districts and says its the Democrats who will cause property tax increases.
If a couple hundred mil more was axed from state support of schools, exactly what does think that would do to local property taxes?
Comment by Michelle Flaherty Wednesday, Oct 3, 12 @ 11:10 pm
This albracht guy is crazy
Comment by Mr Magoo Thursday, Oct 4, 12 @ 10:57 am