Budget shenanigans abound
Friday, Mar 27, 2009 - Posted by Rich Miller
* Keep in mind when reading this story about Blagojevich lies and incompetence that Gov. Quinn still has the same budget folks on board who touted this supposedly money-saving idea last year…
Former Gov. Rod Blagojevich said closing Pontiac Correctional Center would save taxpayers about $4 million.
But a review of the costs associated with his failed plan to shutter the maximum-security lock-up shows that taxpayers have shelled out at least $4.1 million to pay for something that never happened. […]
The $4.1 million price-tag is based mainly on what the state paid or is under contract to pay in order to prepare Thomson Correctional Center to accept inmates from Pontiac.
The estimate does not account for some of the transportation costs related to the transfer of inmates throughout the state’s sprawling prison system that was under way before Gov. Pat Quinn scuttled Blagojevich’s plan.
According to state purchasing documents and interviews with state officials, it has cost an estimated $2.6 million to hire and house 208 additional correctional officers, all of whom now apparently will be farmed out to other prisons.
* Meanwhile, the CTA wants to pull a Filan and skip a big pension payment…
The Chicago Transit Authority is floating a plan to close a $155-million budget hole without raising fares, cutting service or boosting the size of its public subsidy.
But the proposal faces a very tough sales job in Springfield, where lawmakers would have to agree to allow the CTA to at least temporarily reduce contributions to its employee pension plan.
Details…
But the key to the plan is $40 million Ms. Brown would like to save by reducing mandatory CTA contributions to its pension fund.
Under a deal worked out last year in Springfield, the CTA restructured the plan, with workers agreeing to cut their benefits and the CTA agreeing to refinance it with a large bond issue.
The bonds were issued and proceeds turned over to the fund, which according to Ms. Brown now has a relatively healthy 84% ratio of assets to potential liabilities. But the agency still has to pay $132 million a year in debt service on the bonds and $58 million a year in annual pension contributions.
Ms. Brown says that’s not all needed, and wants to reduce the $58 million payment to about $18 million, at least for now.
Speaker Madigan apparently isn’t enthused, but this is exactly what Gov. Quinn wants to do with state pension plans, which have a far lower assets to liability ratio than the CTA’s pension fund does.
* The SJ-R thinks Quinn’s budget is too hard on state workers and says a Chicago casino is a better alternative…
Quinn told us Thursday that his budget’s critics must offer alternatives and not “chirp on the sidelines.” We continue to believe a downtown Chicago casino is a viable revenue-generating vehicle. While crafting a gambling bill is difficult because of the myriad interests that have to be satisfied, we’re not sure it’s any harder than coming to a deal on these changes with public employee unions.
The Springfield newspaper, which often bashes Chicago politics, is now willing to give the city a casino?
* And the Ag Director wants fee hikes…
llinois’ budget mess has reached the point that the director of the Illinois Department of Agriculture said Thursday it can no longer rely on the state’s general-revenue checkbook to pay for farm programs.
Tom Jennings wants to eventually make the agency self-supporting, and he has proposed starting with fee increases expected to bring in $2.9 million annually. The proposal includes raising more than two dozen fees ranging from fuel-pump inspections to costlier state fair admissions and charges for previously free services.
OK, but what happens when the governor (whomever it might be) inevitably raids the department’s special funds?
- Anon - Friday, Mar 27, 09 @ 10:26 am:
Jim Edgar and his crew tried to make the State Fair self supporting. How’d that work out?
- How Ironic - Friday, Mar 27, 09 @ 10:34 am:
@Anon,
The State Fair will in all likelyhood never be self-sufficient. And the Dept. of Ag isn’t suggesting as much. They could never charge enough to pay for it.
However, their other programs can become sufficient. Meat inspections, weights and measures, and pesticide control can become sufficent if they can charge appropriate fees to cover the service.
In effect, but under-charging for service, the Dept of Ag (State of Il) is subsidizing these commercial companies.
Why not charge them what the service actually costs, and take the service off the public money?
Nothing wrong with that.
- wordslinger - Friday, Mar 27, 09 @ 10:44 am:
The Chicago casino seems to fix every problem known to man. At some point, you’re just taking another slice of the relatively static discretionary income pie. What folks would be dropping at the casinos they wouldn’t be spending at restaurants, movies, stores, etc.
If we want to bring some new money in through gambling, put slots and video poker in at O’Hare. Sixty-nine million pass through every year from all over the world and country. Let them leaves some Sacagaweas behind during their inevitable delays.
- Truthful James - Friday, Mar 27, 09 @ 10:51 am:
The calculation of the pension revenue stream with the payout of future benefits works on several assumptions. Among them are life expectancy, retirement age, expected inflation, and the distribution formula.
The present value of the expected future benefits (the liability) is then measured against the present value of the assets to provide such benefits.
Changing any thing, changes the shortfall. For instance, lowering retirement age eligibility increases the shortfall and makes it necessary to increase the current contribution. Lowering the years of service does it as well. And so on. Basing the benefit on the terminal year’s salary as opposed to the average of the final three year’s salary creates a larger shortfall, unless as was done in the school systems the final years have received an abnormal bump up to magnify the pension amount. The school system gives a freebie to the benefiting teacher or administrator, burdening the pension system.
All of the above factors can be modified for new hires and lower what is described as a shortfall.
- DC - Friday, Mar 27, 09 @ 11:05 am:
James, Senate Bill 27 changed the benefit and made it based on the final 4 years of salary and capped that increase. That bill passed in 2005-2006. That significantly lowered the normal cost of the pension systems and eventually, the current pension systems will cost the state less than Social Security costs employers in the private sector. The major “shortfall” has been caused by the state’s failure to make required payments over the past couple of decades.
- Truthful James - Friday, Mar 27, 09 @ 11:16 am:
BFD, sir DC, that was a small slap on the wrist for the school districts who continue to use the reward system which they themselves have no responsibility to pay. Let everyone else pay.
- Bill - Friday, Mar 27, 09 @ 11:33 am:
Untruthful James,
School districts that exceed the limits on increases during the pension calculation period are responsible for paying the pension system the actuarial costs of the increase for the life of the annuitant and spouse. That, in many cases, could cost the district hundreds of thousands of dollars. Needless to say, the school districts are very careful not to exceed the end of career cap. The problem, as usual, is that the state spent the projected savings from pension reform to balance the budget in ‘05-’06. That money is gone. If the GA and Quinn are allowed to get away with this type of theft again the money that they won’t realize for 30 years will be spent today. Then what? Reducing benefits for current state employees and even new employees will do nothing to solve the current debt problem if they are allowed to waste the money today.
Buying into these stupid, dishonest, and immoral Filan schemes are what got the state into this mess in the first place.
- Quinn T. Sential - Friday, Mar 27, 09 @ 12:06 pm:
Allowing the CTA to skip its required pension payments would be a criminal offense. They have previously demonstrated their inability to manage the pension obligation by effectively doing just that; skipping or substantially reducing the required contributions to keep the funding levels actuarially sound.
While I am adamantly opposed to the state doing the same thing, the big difference between the two is that the decision makers at the state level are elected officials, while those at the CTA are merely union and management appointees.
When the state bailed out the CTA pension plan last year, one of the caveats was that their every move be subject to scrutiny by the Auditor General. It would be interesting to hear what he has to say on the matter, but you can almost bet that if a deal is cut to allow that to occur, he will not be invited to the Committee meeting to testify on the matter.
Government agencies have stolen from their pension plans to over-spend on their operations for far too long. Any scheme to skip or reduce pension obligations is only going to result in impoverishing the next generation that has to pick up the tab.
It’s time for all of them to be honest, acknowledge the liabilities that they have created and live up to their responsibilities to fund them. When they have to cut out other government services as a result, then let them be honest about that as well and explain why, and then convince voters to support the tax increases to restore the benefits or services that they deem to be important enough to pay for in that way.
Any incumbent; of either party, who supports ripping off the pension funds because they will not answer for how they have operated in the past should be soundly defeated for re-election!
- Truthful James - Friday, Mar 27, 09 @ 1:19 pm:
Just My Bill
You are correct. I was incomplete in what I said. The end of service rewards are still an abomination any way you out it. The law change which controlled them merely validated the right of the districts to commit perhaps a lesser sin, but a sin nevertheless. During the four year period they are allowed to enrich a class of people at the expense of the taxpayers of the District and the State pension funds. It distorts the pay schedules of the rest of the employees. Pension maximization is in my view not a legitimate function of the School District let alone any taxing body that does not contribure a post retirement fair share.
You will recall that pension fund levies are separated out on the tax bill and are not tax capped
- DC - Friday, Mar 27, 09 @ 1:24 pm:
James, that last post contains absolutely no substance or “truth”. BFD.. great comeback.. What actuary gave you that quote? What does “reward system” refer too? That’s gone. Districts are penalized severely if they go over the caps. “Let everyone else pay?” Teachers already pay 9.4 percent of their salary into the system. The second highest rate in the country.
- rays of hope - Friday, Mar 27, 09 @ 2:02 pm:
cudos for the Director of Agriculture in Illinois for vowing to make his agency self supporting. The governor should consider requiring that EVERY state agency in Illinois submit a plan to be self sufficient within XX time frame….and this should be sustainable self sufficiency…ie not just laying off people and cutting all services. Each agency could review all of its services and the value of those services and to whom…..and charging citizens and business shouldnt be the only answer to each agencies revenue…. these services could be supported by donations or grants from large corporations, not for profit foundations, or the federal government. All directors should roll up their sleeves and be committed to finding ways at least breaking even. If a state agency’s work is not valuable enough to support its service or to obtain a grant or support from somewhere outside the taxpayer….maybe that agency is really not needed. Maybe self sufficiency is impossible for all agencies, but it would be an excellent excersize and reveal much about level, types, and value of the services from each agency.
- jerry 101 - Friday, Mar 27, 09 @ 3:03 pm:
unfortunately, the portion of the RTA funding bill that was supposed to go to the CTA’s pension plans was the hike in the Chicago Real Estate Transfer Tax.
Just as Real Estate Transfers were getting ready to crash as the bubble finally burst.
Add the damage to the pension fund from investments going sour, and it’s hurting bad. The CTA’s problematic pension plan is the result of years of being massively underfunded, combined with Kruesi’s failure as a manager.
Let the CTA skip payments this year, but from this point forward, they have to put in 120% of their actuarially determined contribution.
At some point, the CTA’s going to have to pay this piper. Hopefully the new guy can do at least as good a job as Huberman, because we need it.
- Ghost - Friday, Mar 27, 09 @ 3:14 pm:
Of course the SJ-R supports a casino in Chicago. It generates revenue and leaves all the neagtive social impacts to the windy city….
- How Ironic - Friday, Mar 27, 09 @ 3:35 pm:
@ Rays of Hope
Making “Every State Agency Self Sufficient” is NOT a realistic goal. There is no way, I mean NO WAY that DCFS, HFS, or Corrections/DJJ can or will EVER be self sufficent. What are you going to do? Charge a fee for welfare? Tax inmates (many who are ingigent)?
Those are not revenue producing agencies. They never will be. You can’t charge Medicade patients for service….they are on it because they can’t afford anything else.
Or State Police. Can you imagine the public outcry if they had to write enough tickets to meet payroll? It would be asinine to suggest any system close to self-sufficency for those types of agencies.
Contrary to public opinoin, the Government isn’t “A Corporation”. I about barf everytime someone proclaims that we need to run the Gov like private industry. What?, Like AIG, CITI, and Lehman Bros? How’s that working out for us right now?
The Gov exists to provide services that cannot practically be run in a for-profit mode. Many state programs cannot.
I’ll get off my soapbox now. Thanks.
- Six Degrees of Separation - Friday, Mar 27, 09 @ 3:56 pm:
Can you imagine the public outcry if they had to write enough tickets to meet payroll?
If a trooper writes 10 speeding tickets a day, he/she is bringing in $180k gross revenue. Counting multiple violations in a traffic stop, and allowing for court time, etc., this figure seems reasonable. Of course, the desk jobs, management, crime lab, etc. are not profit centers, unless you allow for the court fees and fines paid on larger cases where the ISP is involved. Still not a huge overall drain on the state budget compared to other agencies who have no profit center. And the societal costs that are saved by having a good police force are immeasurable.
- Six Degrees of Separation - Friday, Mar 27, 09 @ 4:00 pm:
EVERY state agency in Illinois submit a plan to be self sufficient within XX time frame
This sounds like an Amtrak funding debate during the Reagan administration.
- How Ironic - Friday, Mar 27, 09 @ 4:26 pm:
@SDS
So I suppose then making ISP self sufficent means that we ONLY have them writing tickets. Have an emergency? Too bad, trooper is busy paying for operations.
The Police ARE NOT a revenue generating agency. Nor should they be.
- Six Degrees of Separation - Friday, Mar 27, 09 @ 4:35 pm:
How Ironic-
We are not disagreeing here; and I used the term “profit center” as an economic term to describe the dynamics of internal finance, not to suggest agencies are, or should be, in a for-profit mode. Some agencies (like ISP and Sec of State) are more “self-funding” than others because of the user fees, fines and other income they generate, while some are very dependent on general tax revenues to perform the services that are deemed necessary by those who have charge of the state. And a few, like the Illinois Tollway, are totally break-even, at least on paper.
- How Ironic - Friday, Mar 27, 09 @ 4:47 pm:
@SDS
I agree with you as well. But it does drive me batty that people want “All State Agencies” to be self sufficent.
And then complain endlessly about “fees, surcharges, taxes” etc. You can’t have it 2 ways. And like I pointed out earlier, there are functions of the Gov, that are/cannot generate revenue. They just can’t.
- Loyal Whig - Saturday, Mar 28, 09 @ 1:21 am:
The current pension system is unsustainable. Dems will not allow reforms. Deferring pension contributions seems to be the easy fix. The bill will come do. Eventually, it will implode. No reforms until that happens.