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* My Crain’s Chicago Business column…
Believe it or not, legislators usually try to reflect their constituents’ core values. If the folks back home are convinced that their representatives have strayed too far from those values, those representatives are in danger of losing their jobs.
Some politicians are so popular that they can get away with anything. But few elected officials want to risk sparking up an opponent. Even though they’d likely win, they’d have to actually work during an election year. Politicians are like everybody else. Not many enjoy doing extra work for the same salary.
But sometimes a problem becomes so large that politicians finally have no choice but to stick their necks out.
This is one of those times.
The 2011 income tax hike was reviled. But the truth is it had to be done. The state had skipped and skimmed on pension contributions for so many decades that it needed to start making payments or risk a fiscal catastrophe.
Those payments aren’t small. They amount to several billion dollars a year. Without that tax hike, the state essentially would have had to gut the entire government.
But in an attempt to free up some money for vital services, pension benefits were cut. As you know, the Illinois Supreme Court recently rejected those cuts, in a strongly worded opinion.
Part of the “temporary” income tax hike expired in January, creating a $6.16 billion hole in the budget that begins July 1. Pension benefits can’t be cut to fill even part of that chasm.
Legislators and the governor are scrambling to come up with a solution.
Click here to read the rest before commenting, please. Thanks!
Also, subscribers have crosstabs and the complete polling questions.
posted by Rich Miller
Monday, May 18, 15 @ 9:59 am
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I see more demonizing of public employees ahead. This plays into Rauner’s playbook.
Comment by Liberty Monday, May 18, 15 @ 10:12 am
Excellent column, Rich. And yes, if given a choice between peas and lima beans most kids will choose ‘none of the above’. But that isn’t an option here. Maybe we need a poll that doesn’t let the responders give ‘none of the above’ as an answer. Which of these would you revile the least might be a good opening statement.
Comment by Not quite a majority Monday, May 18, 15 @ 10:20 am
There is nothing intrinsic within the pension system that is wrong, it is simply that the proper payments have not been made to the system. The key issue is the pension debt that has resulted form many years of underfunding. The one common theme that all healthy pension systems have, is that they have been properly funded. In Illinois, instead of properly funding the pension system, we have spent those pension dollars masking the structural deficit that has not been addressed. We need to shape the pension debate going forward with how do we pay the debt! We have addressed reduced pension benefits by creating a legal tier 2 system for all new hires after Jan. 1 of 2011.
All we heard from our elected officials was that we need to break the stalemate and get a pension bill to the ISC so we know what is legal. Well the ISC made it crystal clear for anyone who is willing to listen that all benefits from date of hire and any improvements are constitutionally protected and must be paid. The pension system is not the problem, it is the DEBT. I am hoping that the ISC ruling will start to allow the political solution to start lining up with the real solution which is to pay the debt by refinancing it and fix our tax system which does not keep pace with the rising cost of government.
Comment by facts are stubborn things Monday, May 18, 15 @ 10:21 am
Read the column yesterday. Goes right to the heart of the problem.
In terms of going forward, I’m going to share a slightly edited version of what I wrote in an email yesterday:
I think we’re starting to see the light at the end of the tunnel. Now it’s just a matter of the General Assembly coming up with a face (and seat) saving way to raise taxes. Hopefully Speaker Madigan and President Cullerton will manage to cobble together enough votes that they can override Gov. Rauner if he attempts to veto or amend it. If not, then I see us going through one more cycle of pass a bill, sue, and have it found unconstitutional, with the court then ordering the GA to made the pension payments, either according to current law (the Edgar ramp) or according to something like the pension fund auditors’ or COGFA’s actuarial calculations.
Comment by RNUG Monday, May 18, 15 @ 10:22 am
If Rauner is going to “allow” certain Republicans to vote No on his RTW bill (if it is ever written and called) why all the political theater? Just what is he trying to accomplish?
Comment by NewWestSuburbanGOP'er Monday, May 18, 15 @ 10:24 am
If memory serves, the lapse of the temporary income tax increase added about 2 billion to the gap. There’s still that other 4 billion.
Comment by JackD Monday, May 18, 15 @ 10:25 am
Why has there never been a proposal of asking state employees (and teachers) to contribute an extra 1% into the pension funds? As a state employee, I would gladly throw more into the pot to keep what I have, as long as there was a guarantee that the state would keep making their full payments also. That, along with the inevitable tax increase and re-amortizing of the debt should help solve the issue.
Comment by Rusty618 Monday, May 18, 15 @ 10:27 am
Pushing off costs into the future isn’t popular, though I’m surprised by their reaction because delaying payments is the easiest short-term thing to do.
In 2014, voters chose to elect a governor willing to make painful cuts. They discovered that the cuts were too painful and foolish to boot. Now, six months later, they’ve evolved away from that towards the next easy solution - restructuring the debt, but without any tax increases to pay for any of it. Six months from now, voters will probably evolve away from that towards a realization that a tax increase will be necessary, even after cuts and a restructuring.
Comment by VanillaMan Monday, May 18, 15 @ 10:28 am
I believe that the current contract negotiations are going to be very very tough, because that is a legal way for state government to hold down costs of all kinds. The negotiations need to be fair and legal, but tough is fair game. Perhaps higher pension contributions could be extracted under legal contract principles in exchange for other labor issues. I see the contract negotiations as about the only lever left for Gov. Rauner to effect the pension system for current employees. This lever needs to be legal and fair, but can and is reasonable for him to use to a point.
Comment by facts are stubborn things Monday, May 18, 15 @ 10:29 am
RNUG,
I have stated on this forum for a long time, that the pension issue is a legal and moral problem that is playing out politically. I agree that a huge pivot(as a result of the ISC ruling)is starting to be seen that hopefully will start to align the real legal and solutions to the pension debt and the political ones. I am still not convinced that the can will not be kicked just a little further down the road before we get there but I think we are starting (as you stated) to see the reality and the politics starting to come together.
Comment by facts are stubborn things Monday, May 18, 15 @ 10:34 am
Good column Rich.
The writing on the wall shows that we’re going another year without an effort to legally address the pension crowding concern. Hopefully, they GA and Gov. don’t fall back into the old habit of shorting pension funding.
Sadly, we’re going to see a proposed constitutional amendment to authorize the state to cut current employee and possibly retiree benefits. The surprising poll results won’t deter Rauner from that path. He and his ilk will use their largesse to try and pass the amendment.
Comment by Norseman Monday, May 18, 15 @ 10:40 am
To get right, it’s going to take many GOP votes and a commitment from the governor to sign.
That’s going to be awfully tough, given the campaign Rauner ran.
The governor might want to spend a chunk of change from his many funds to blame it all on the Supremes. Wouldn’t be truthful, but it would be expedient. I suspect the governor could choke that down.
Comment by Wordslinger Monday, May 18, 15 @ 10:43 am
JackD, your memory served wrong.
Comment by Rich Miller Monday, May 18, 15 @ 10:43 am
This won’t happen, but I would like to see a press conference called with Gov. Rauner, Speaker Madigan, Pres. Cullerton, and the GOP leadership. In this presser they would explain in very simple terms how the pension debt was created and that we have failed to address the structural deficit and instead spent pension dollars racking up a huge debt. Now the bill is due and the ISC has ruled that we can not reduce benefits to pay for it. The only legal solution is to raise taxes and control spending and we are all hear today to say it has been a shared failer of both parties to honestly address our fiscal issues, but that ends today. they would then lay out grand bargain of spending controls and cuts with tax increases both on the rate and services. They would be firm that the issue is not the pension system but the debt of that system which we are refinancing over a 40 year period in manageable payments. They would remind citizens that a tier 2 system was created in 2011 that has legally addressed pensions going forward. Sorry, I just wanted to lay out a long shot but this is Illinois.
Comment by facts are stubborn things Monday, May 18, 15 @ 10:46 am
Of course no one “likes” any viable option that would actually work to reduce future pension liabilities. Every single one will have both strong advocates opposed, and specific logical and moral reasons for rejection.
Overall, however, legislators must take the hard votes for the long term health of the state. That’s why we elect representatives, and have mostly avoided direct public voting for taxes and similar issues since the founding of the Republic.
Very much like the income tax increase vote.
Comment by walker Monday, May 18, 15 @ 10:46 am
JackD, the value of the tax cut for the full fiscal year is about $6 billion, five from the personal, and about another billion from the corporate.
Comment by Juice Monday, May 18, 15 @ 10:47 am
Facts….
“You assert that there is “nothing inherently wrong with the pension system”. Many would argue that when you have a system that promoses a 30-50 times return on the employee’s investment, there is an “inherent” problem. That is why so many intelligently run companies ended their pensions years ago. But a deal is a deal….no matter how bad it is for the State.
Comment by A realistic taxpayer Monday, May 18, 15 @ 10:48 am
Guessing the tax increase is more acceptable than some will admit. I would have a hard time telling a pollster or politician that I supported a tax increase and give them comfort in doing it, even if I thought it was sensible. Always easier to support when other concessions or reforms are suggested with it. Guessing I am not alone and the numbers that would not throw out a legislator for voting a tax increase are a little higher than reported for that very reason. Or maybe I am alone on this….
Comment by Shemp Monday, May 18, 15 @ 10:50 am
Great column. Sometimes we blame legislators for budgets that don’t add up, when they are unfortunately reflecting the will of the people (”don’t cut anything I use and don’t raise my taxes!”)
Comment by Robert the Bruce Monday, May 18, 15 @ 10:50 am
I suppose many legislators look at Pat Quinn’s defeat, which could be interpreted at least partially as a result of the income tax increase, and get nervous. Especially since, the longer we go, the more it seems like it’s a new increase.
Actually, I think there were other important reasons for Quinn’s defeat-but that was yesterday.
I predict another cycle of pension reform and court review, as described by RNUG above. Many corporations froze their pensions starting in the 90’s, so it’s a logical next step for a governor from the corporate world. And I suppose there won’t be much pushback from the general electorate, since many fewer private sector employees have pensions any more-makes them seem kind of exotic to the average voter.
Comment by Cassandra Monday, May 18, 15 @ 10:51 am
Voting “present”.
Very UNhelpful. First democrats. Now republicans. Any wonder why Illinois is a laughing stock and a bad joke?
Comment by A realistic citizen Monday, May 18, 15 @ 10:52 am
== Why has there never been a proposal of asking state employees (and teachers) to contribute an extra 1% into the pension funds? As a state employee, I would gladly throw more into the pot to keep what I have, as long as there was a guarantee that the state would keep making their full payments also. ==
Because there is no legal way for the current General Assembly to obligate future General Assemblies to make the full payments. So why would you pay extra for nothing?
And, as a factual correction, the State is making payments according to the 1995 ramp, which is LESS THAN the full actuarial payment.
Comment by RNUG Monday, May 18, 15 @ 10:53 am
Although unpopular politically, the pension shift for downstate teachers makes sense for a lot of reasons. It incentivizes local school districts to better manage their budgets. I never could understand why the state pays the “employer portion” of the pension costs because they are not the employer. Granted this is not an immediate-its a long-term fix.
Comment by Soccertease Monday, May 18, 15 @ 10:53 am
The pension system has been underfunded and underfunded hard for decades. Chicago’s bond rating is junk and looking for a floor. The Supreme Court has unanimously ruled the State cannot shirk nor hide from its responsibilities to the pension systems. In strategic terms, Democrats control the Legislature by big majorities and Speaker Madigan is conducting his orchestra. The IPI is about to wet their pants and even the Governor has said his pension plan may not be constitutional. In other words, its a huge s**t sandwich and we’re all gonna have to take a bit.
And no, Ann Margret is not coming
Comment by Tommydanger Monday, May 18, 15 @ 10:55 am
That’s take a bite!
Comment by Tommydanger Monday, May 18, 15 @ 10:56 am
Getting tired of hearing the old “50 times more than the employee put in” refrain. For once and for all - the State puts in half, the employee puts in half, and the interest income during the employee’s work life (on the two parts) equals the annuity to pay the pension benefit.
It isn’t working out that way - because the State didn’t put in their half, the pension funds didn’t earn interest (on what wasn’t put in) and now the State has to make up for that.
Comment by archimedes Monday, May 18, 15 @ 10:59 am
The politics of this is tough. The bailout will require taxes from the private sector workers, who may just wake up and ask “Where’s mine.” They will see increased taxes in a tough economy flowing directly to government workers, with no improvement in their situation. How the pols will walk this tightrope remains to be seen. The safe road for the pols is to once again kick the can and hope some miraculous recovery occurs in the economy. Some doomed legislation to buy another two years in the courts could give them cover. But arguing for increased taxation based on the law and fairness to buoy someone else’s pension won’t fly with someone who has no pension and is unemployed or underemployed and prospects are dimming.
Comment by Cook County Commoner Monday, May 18, 15 @ 11:01 am
Your column clearly shows that legislation in this instance can’t be fully guided by public opinion polls. The legislators have an obligation to actually legislate. They then need to take the time to explain to their constituents why they made the decisions they made and why it may be contrary to popular opinion.
Comment by illinifan Monday, May 18, 15 @ 11:03 am
CCC - I think potential cuts to schools and public safety may influence more north side Chicago families than a property tax hike or an income tax hike. How do you ask someone to pay suburban taxes without providing suburban services?
Comment by Montgomery Burns Monday, May 18, 15 @ 11:05 am
But if you want to be a state legislator as long as you possibly can (or move to the state senate or higher), you probably can’t count on being rewarded (by the electorate) for taking the high road. You’ll take the safe road. And that could be another kick of the can.
Comment by Cassandra Monday, May 18, 15 @ 11:07 am
We skipped the column, but we are sure it was sheer genius.
Skip that presser too. Wall Street Journal recently opined LESS THAN 40% of the hole comes from under payment. That means over 60% comes from the Cheney Bush Depression, Free Lunch End of Career Spikes and “faulty actuarial assumptions”(that’s WSJ speak for BVR’s bagman Stu Levine takin’ too big a cut)
First step — end free lunch. Cut TRS loose. Let the great educators leaders pay their own pensions.
Whole problem gets much smaller.
Comment by Anonin' Monday, May 18, 15 @ 11:08 am
Good Column Rich.
Regardless of public opinion, now and then we have to do the right thing. It’s time to face this issue front on. Minnesota and California gone a long way towards solving their fiscal problems with a solution that included an increase in the state income tax. In fact both states are now running a budget surplus, something we haven’t seen for awhile. (http://www.latimes.com/local/political/la-me-ln-california-revenue-flexibility-20150407-story.html http://www.mprnews.org/story/2015/02/27/budget-forecast).
Only seven states have a flat tax. Illinois is one of them. Of those states Illinois’ rate is 5th lowest with only Indiana and Pennsylvania with lower income tax rates. Minnesota and California have a graduated income tax including a “millionaires tax” in California. (http://www.taxadmin.org/fta/rate/ind_inc.pdf)
If Illinois stays with the flat rate and increases it to the minimum of Minnesota’s graduated rate of 5.35%, using the Illinois median income rate of $57,000 (Source: Census Bureau) we’d pay on average an extra $76/month by my less than sophisticated calculations.
The question is this: What kind of state do we want to be?
Rather than more handwringing, teacher layoffs, Moody downgrades, or cuts to autism services, I for one am ready to pony up $76/month.
It’s the right thing to do, and I for one will only vote for my current representatives if they do the right thing.
Comment by Sangamo Sam Monday, May 18, 15 @ 11:15 am
@A realistic taxpayer - Monday, May 18, 15 @ 10:48 am:
=Facts….
“You assert that there is “nothing inherently wrong with the pension system”. Many would argue that when you have a system that promoses a 30-50 times return on the employee’s investment, there is an “inherent” problem. That is why so many intelligently run companies ended their pensions years ago. But a deal is a deal….no matter how bad it is for the State. =
When I stated there is nothing inherently wrong with the pension system, I was speaking to the fact that had it been properly funded we would not have an issue today — it is the debt of the pension system because proper actuarial payments were not made. Tier 2 addressed what I believe you are speaking to in that the states pension system was out of step with the private sector.
Comment by facts are stubborn things Monday, May 18, 15 @ 11:17 am
== First step — end free lunch. Cut TRS loose. Let the great educators leaders pay their own pensions. Whole problem gets much smaller. ==
Not really. The state is still on the hook for the teacher underfunding, which is about $65B of the $100B.
This is a DEBT PROBLEM.
Comment by RNUG Monday, May 18, 15 @ 11:18 am
Of course the public doesn’t like these solutions. We have a series of bad options that are now being discussed in several places. Unfortunately, the politicians have to be honest with voters about the grim realities of our situations (I include Chicago, CPS, etc. in this).
Unfortunately, that’s like asking the skunk not to stink and the cat not to kill the mouse. It’s not in their nature to share hard truths. And this is nothing against my politician friends. On those rare occasions when politicians are honest with voters, they’re rewarded by being demagogued by their opponents and voted out of office.
Rauner and Rahm both ran against tax increases and it was equally disingenuous for both. Now they’re reaping what they sewed and we’re all the worse off for it.
We know what needs to be done. But nobody wants to wear the jacket for it. And Rome continues to burn…
Comment by Chicago Cynic Monday, May 18, 15 @ 11:20 am
More on the “50 times what they put in”…
Archimedes is correct. To prove to yourself the pension system as conceived is sound, sit down with a financial calculator and calculate the final value of a series of payments consistent with payroll contributions over 30-35 years utilizing the historical rate of return of 6%-8%. Then annualize that amount out as a pension payment. You will be amazed.
The rest of the story is that some state retirees are also eligible for social security, if they were also paying into that system.
Also worth noting is that many others outside state employment can do similar through a Roth, IRA, or just regular savings/investing.
Comment by The Whole Truth Monday, May 18, 15 @ 11:21 am
People seem to forget, the public employees who are guaranteed those public pensions also pay taxes. So they will be affected more than those who don’t receive them by funding the pension through payroll deductions and paying more in taxes.
Comment by NewWestSuburbanGOP'er Monday, May 18, 15 @ 11:23 am
1) State employees are a small part of the pension problem. SERS is only about 20% of the unfunded liability. 2) TRS is where the BIG unfunded liability sits. BUT this ties into the school funding formula where CPS gets more & the others get less but the state pays for the pension contribution. Let the State re-amortize the existing unfunded liability AND shift all future liability to the local districts.
Extend the sales tax to services used mostly by the rich and businesses such as legal fees consulting fees and advertising revenues.
Comment by anon. Monday, May 18, 15 @ 11:25 am
Just what we all can look forward t- higher taxes and less services. If we are expected to pay Moreau- why not force reductions in compensation-that’s not unconstitutional and would lower pension liabilities. If politicians and the public sector unions want higher taxes- then we as the chumps expected to pay should expect the state to cut payroll costs and not just by layoffs which reduce service levels
Comment by Sue Monday, May 18, 15 @ 11:27 am
Pat Quinn had a plan. If the legislature would have taken the correct vote last year to make the tax increase permanent, we would not have this crisis.
Good column, but wish you would have written it last year, even if the legislature would have had to vote for a tax extension before an election.
Comment by Austin Blvd Monday, May 18, 15 @ 11:31 am
MB-School and public safety cuts in Chicago’s north side may be the only way to go to increase taxes. But it’s politically dangerous. First apply the pressure (ie., cuts), and then the pols can deliver the relief (ie., more taxes). And share the lesson with all of Illinois. This could save a lot of politicians’ seats and the pensions. Sadly, truth and mea culpa from the political class possibly could work, but it’s not going to happen.
Comment by Cook County Commoner Monday, May 18, 15 @ 11:32 am
CCC - IMHO, high profile cuts to education and public safety that are used to fund pension debt racked up by earlier generations will generate more ill will than a tax hike (and other new revenues) and, most likely, lead to a lot of “For Sale” signs among families with kids. I do agree with you, sadly, that “truth and mea culpa from the political class possibly could work, but it’s not going to happen.” You’re spot on here.
Comment by Montgomery Burns Monday, May 18, 15 @ 11:54 am
Illinois does not now have and has never had a “PUBLIC PENSION” problem. Illinois has for decades had a “DEBT” problem. Illinois legislators and governors, unwilling to fess up to the problems they have willfully created, rather have shifted the blame to employees and retirees.
The news media (either through ignorance or laziness) have been unable to identify and report the the difference between the actual cost of pensions and the past debt to the pension systems. This failure of the media has resulted in the demonization of Illinois’ workers and retirees.
In view of the fact that most Illinois public employees and teachers have been excluded from Social Security, the State’s systems were well designed and, IF THE STATE HAD FUNDED THEIR SHARE, would have worked pretty well and been a good bargain for taxpayers, employees and retirees.
To see “what could have been”, and also see how the math works out, take a look at:
http://illinoispublicpensions.com/
The model on the above site, replicates the SURS tier I system.
John Terwilliger
Comment by JohnTwig Monday, May 18, 15 @ 11:57 am
While I understand the cut education / public safety to generate pressure, Illinois has played that game so long that it may be seen right through. I know that is my first thought anytime reductions are proposed at both the federal and state level.
I think this time the pols may have to tell the truth … but I also expect them to blame the IL SC.
Comment by RNUG Monday, May 18, 15 @ 11:57 am
==[T]here is no mathematical way out of this absolute mess without higher taxes.==
That’s the easer of the two statements Rauner can make. The other is “For years, we (as a state) kept providing services to you at a discount and missed out on compound interest. The bill is due.”
Comment by Jocko Monday, May 18, 15 @ 12:02 pm
Jocko - “The other is “For years, we (as a state) kept providing services to you at a discount and missed out on compound interest. The bill is due.”
I don’t think that this is very easy explanation at all because it would require elected officials to have to explain why one generation needs to foot the bill for earlier generations. Especially, if that politician has served for a long time or is a member of the paying generation rather than the discounted generation[s].
Comment by Darnell McAlister Monday, May 18, 15 @ 12:08 pm
After reading the comments at the end of the Crain’s article I was amazed at the amount of anger and misinformation I saw. Scary, so I came back here to hide out…
Comment by Mouthy Monday, May 18, 15 @ 12:22 pm
For decades Illinois spent $$ on state services and made promises of future benefits while maintaining a very low tax rate. Granted the property tax rate homeowners living outside of CHICAGO MADE UP TO SOME EXTENT FOR THE LOW INCOME TAX RATE. it is now time to pay up but in exchange it would be nice to see all levels of government participate through an across the board pay cut of ten percent
Comment by Sue Monday, May 18, 15 @ 12:24 pm
“There is nothing intrinsic within the pension system that is wrong…”. Actually a so-called COLA of 3.0%,when actual price inflation is running at less than 2% is flat wrong and a ripoff of state taxpayers. Over time, the effect of compound interest makes this a truly unsolvable problem.
Comment by Catrike Monday, May 18, 15 @ 12:26 pm
== After reading the comments at the end of the Crain’s article I was amazed at the amount of anger and misinformation I saw. ==
That is why the General Assembly has kept kicking the can down the road all these years.
And why I occasionally go on a rant at the unions for not spending the money to properly educate the public …
Comment by RNUG Monday, May 18, 15 @ 12:29 pm
== Actually a so-called COLA of 3.0%,when actual price inflation is running at less than 2% is flat wrong and a ripoff of state taxpayers. ==
Except for recently, you do realize the long term average (20 or more years and overall since the measurement staryed) for the cost of living as tracked by the Feds is between 2.9% and 3.2% depending on the periods chosen? The 3% AAI is not out of line.
Comment by RNUG Monday, May 18, 15 @ 12:33 pm
The 3% is NOT a COLA. It was bought and paid for out of every single check by employees. The 3% is an annual adjustment to the payout of an annuity. If you own an annuity, you would understand this. And, incidentally, the 3%, when looked at over time since the 70’s has mirrored the true COLA distributed by Social Security. 3% might sound nice now, but when inflation was at 12, 15, 16%, public employees might have said they were getting ripped off.
Comment by AnonymousOne Monday, May 18, 15 @ 12:35 pm
I think RNUG would also agree that the rate-of-return promised by the pension funds is hardly unreasonable.
For the S&P 500, the average annual returns over a 25 year period are 9.61%.
If the employer had merely made their contributions, the system would be more than flush with cash.
Rich - Thanks for publishing these poll results. There is a light at the end of the tunnel, let’s just hope it isn’t the headlamp of an oncoming train.
Comment by Juvenal Monday, May 18, 15 @ 1:27 pm
Anon one - I don’t think you can purchase an annuity in the private sector with a 3% annual, compounding increase. Does anyone have an annuity calculator link they can share? It would be interesting to see the value of a $50,000 per year annuity for someone retiring at 65.
Comment by Darnell McAlister Monday, May 18, 15 @ 1:29 pm
- AnonymousOne - Monday, May 18, 15 @ 12:35 pm:
The 3% is NOT a COLA. It was bought and paid for out of every single check by employees. The 3% is an annual adjustment to the payout of an annuity. If you own an annuity, you would understand this. And, incidentally, the 3%, when looked at over time since the 70’s has mirrored the true COLA distributed by Social Security. 3% might sound nice now, but when inflation was at 12, 15, 16%, public employees might have said they were getting ripped off.
Wanted to repost this again so that those people that seem to not understand how an annuity and automatic annual increase will have a better understanding. Thanks AnonymousOne
Comment by forwhatitsworth Monday, May 18, 15 @ 1:52 pm
There must be a way to educate the public. Many political leaders and business leaders as well as the mainstream media have misled the public into believing Illinois has a pension problem when it is in reality a debt problem. Debt to the retirement systems has existed for 100 years! While the amount of the unfunded liability is greater, the percentage the pension systems are funded is almost exactly the same as the percentage funded in 1970 at the time the pension clause was included in the Constitution.
But equally important, the public does not understand that about 60% of this debt is because payments were not made into TRS–the system that is making pension payments to their teachers, and their parents’ teachers, and their grandparents’ teachers. And further they do not understand that teachers do not pay into Social Security, or that teachers who receive a TRS pension generally can not receive a spousal benefit from Social Security, and that the TRS system was probably cheaper for the state than Social Security plus the equivalent of a 401(k) type plan.
I am sure everyone who reads this blog understands these points, but how do we get the general public to understand these points? When I talk to people, they act like I do not know what I am talking about.
And I do not think this problem can be solved until the public really understands the issues.
Comment by Retiree Monday, May 18, 15 @ 2:14 pm
Pension benefits are richer than they should be, being able to retire before age 55 with 75-80% of salary is a over generous. That said under funding is a bigger problem.
Any information on Madigan sponsoring the Cook County Pension bill last week?
Comment by Anonymous Monday, May 18, 15 @ 2:25 pm
@Anonymous,
“Being able to retire before age 55″
As far as I know the only ones that can do that are the state police and ‘corrections’ workers.
Exceptions? Perhaps. Anyone want to clarify.
Comment by Federalist Monday, May 18, 15 @ 2:38 pm
Does anyone know what is going on with union contract negotiations? Why wouldn’t the state insist on salary cuts, lay offs, and reduced benefits. That in addition to severe cuts in state services would make a tax increase much more palatable.
Comment by southwest Monday, May 18, 15 @ 2:48 pm
Rule of 85, plus City of Chicago workers
Comment by Anonymous Monday, May 18, 15 @ 2:48 pm
== I am sure everyone who reads this blog understands these points, but how do we get the general public to understand these points? ==
The unions have to conduct a Public Relations campaign until it is understood … regardless of the financial cost. If they have to raise additional funds, either through voluntary contributions or higher dues, so be it.
Comment by RNUG Monday, May 18, 15 @ 3:14 pm
===Pension benefits are richer than they should be, being able to retire before age 55 with 75-80% of salary is a over generous===
A Tier I SERS employee tops out at 75% after 45 years of service. By your scenario they’d had to have been hired in the third grade.
Comment by Sangamo Sam Monday, May 18, 15 @ 3:49 pm
I read the article this weekend and agree–this is the time to raise taxes.
The individual income tax was very low, for decades. We’ve got to start paying better for state-funded services so that we stop or limit the long-term fiscal irresponsibility that brought us to this point.
I too want to help families dealing with autism, the poor and help pay for so many services and benefits that are very humane. Our greatness is not only our economic and military strength, but our compassion and heart.
I read that the federal government is pulling in substantial revenue, and the deficit has been shrinking. This is due to increased tax revenue from economic growth. Ending the Bush tax cuts for the top incomes is not hurting us but is helping us. California and Minnesota are also benefiting greatly from tax increases, as some have repeatedly pointed out.
Politicians will be politicians and will fear upsetting their constituents. However, there is a strong opposite incentive for many of them also–the catastrophe that will happen if taxes are not raised.
Comment by Grandson of Man Monday, May 18, 15 @ 3:57 pm
=== “Being able to retire before age 55″
As far as I know the only ones that can do that are the state police and ‘corrections’ workers. ===
Yeah, um: and the governor and his friends.
When we pay competitive compensation and benefits to attract and retain CEOs, that’s capitalism.
When we pay competitive compensation and benefits to attract and retain teachers, it is a socialist abomination.
Comment by Juvenal Monday, May 18, 15 @ 4:00 pm
But the average citizen doesn’t belong to a union, and a significant percentage of citizens probably don’t have warm thoughts about them-if they have any thoughts at all. They don’t have pensions either. Isn’t private sector union membership below 7 percent nationally now.
The public employee unions, I think, have this quandary: better to keep a low profile in this fight (threats of shutdowns, for example, might not go over well) or be visible and publish a lot of ads touting unions and tax increases? Neither is a sure path to victory (victory being higher taxes from someplace, I guess), when you are looking at taxing property (Chicago), retiree income, regular earned income, services, corporations, or some combination thereof. Lots of feathers to ruffle. In Illinois, hardly a model of good governance in recent decades. Most citizens, I imagine, have picked up on that part.
Comment by Cassandra Monday, May 18, 15 @ 4:02 pm
== But the average citizen doesn’t belong to a union ==
Not anymore, which might be part of the problem.
Still multiple reasons for proper publicity:
a) Unions need to remind people why unions came into existence during the age of the robber barons.
b) Teachers are still viewed favorably and everyone knows one. The public needs to understand the pension is part of their pay.
c) (OK, this may be iffier.) Police are still viewed positively by some people; same as b.
Comment by RNUG Monday, May 18, 15 @ 4:11 pm
== The public employee unions, I think, have this quandary … ==
That’s why, as part of a PR campaign, unions should not walk out or go on strike; they should make Rauner lock them out.
I’m not advocating the unions roll-over in contract negotiations. They should play hard ball but structure it so THEY appear to be the reasonable party at the table; better to get a bit less this time and appear to be the victim.
Comment by RNUG Monday, May 18, 15 @ 4:14 pm