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Brady backs off minimum wage cut, wants workers to fund own retirements

Tuesday, Jun 29, 2010 - Posted by Rich Miller

* After taking heat from Gov. Pat Quinn this week for advocating a one dollar per hour cut in the minimum wage while being a “millionaire who didn’t pay his taxes,” state Sen. Bill Brady backed off today

[Brady] suggested that the state minimum be frozen until the federal rate rises to Illinois’ level.

“Let’s just say the federal wage should be allowed to catch up with the Illinois rate,” and then the two should move in tandem, he said.

Brady also reiterated his plan to put state workers into 401(K) plans, but with a new twist

Asked how he would pay the costs of converting to “employee-owned pensions,” as he suggested in his speech, Mr. Brady said the state should switch to a 401(k) system that would be totally funded by workers, not the government.

As long as Illinois pays pensions, political corruption is inevitable, as political insiders try to maneuver for advantage, Mr. Brady said. But that could be avoided if the state just paid a good wage and let employees save for retirement themselves, he continued.


  1. - Wumpus - Tuesday, Jun 29, 10 @ 3:16 pm:

    No need to have an elevated minimum wage. Not a popular arguement, but he was right.

    As for the 401k, he could add a 3-5% Employer matching as many companies do/did.

  2. - Small Town Liberal - Tuesday, Jun 29, 10 @ 3:18 pm:

    There’s a word I’m looking for, what is it…flip flop maybe? Gassing puppies, 10% across the board cuts, not releasing income taxes, minimum wage changes, is Bill going to stick with anything?

  3. - Cincinnatus - Tuesday, Jun 29, 10 @ 3:18 pm:

    Brady’s plan is sensible if he comes up with an equitable transfer of employees to the new plan (cut-off ages, pay-outs of existing obligations, etc.). Employees will also need to enroll in Social Security. At the same time, employee contributions to medical insurance should be reviewed and adjusted to bring them in line with private employee contributions. Heck, let’s go for the full nut, get rid of automatic pay increases and base increases on state finances and employee merit.

  4. - sal-says - Tuesday, Jun 29, 10 @ 3:19 pm:

    “As long as Illinois pays pensions, political corruption is inevitable, as political insiders try to maneuver for advantage, Mr. Brady said. But that could be avoided if the state just paid a good wage and let employees save for retirement themselves, he continued.”

    WHAT ???

  5. - jonbtuba - Tuesday, Jun 29, 10 @ 3:22 pm:

    No employer contributions? NONE? No one will get a solid retirement account going under Brady’s plan, especially if they have teacher-level salaries.

  6. - Retired Myself - Tuesday, Jun 29, 10 @ 3:25 pm:

    Brady is missing a point here, if the State has employees on a 401K then the State would have to send 6.2% to Social Security which is more than the State contributes to a State employees pension now. That is why most(about 70 %) of State employees are not in SS now. If the State was suppose to contribute about 4 % to employees pension now ( and haven’t for most of 20 years) do you really think they would match a 3 - 5 % to a 401K.

  7. - Judgment Day Is On The Way - Tuesday, Jun 29, 10 @ 3:27 pm:

    “There’s a word I’m looking for, what is it…flip flop maybe? Gassing puppies, 10% across the board cuts, not releasing income taxes, minimum wage changes, is Bill going to stick with anything?”

    STL, at least Brady’s putting ideas out there. You might find them stupid or incoherent, and he may change positions, but unlike current leadership who excel at switching bridge positions on a sinking ship and , Brady’s at least putting stuff out there.

  8. - MrJM - Tuesday, Jun 29, 10 @ 3:29 pm:

    If a minimum wage employee contributed 4% to a 401K, would that minimum wage employee pay less in federal income taxes than Bill Brady, the GOP’s millionaire candidate for governor?

    – MrJM

  9. - Small Town Liberal - Tuesday, Jun 29, 10 @ 3:31 pm:

    - Brady’s at least putting stuff out there. -

    Oh yeah? Where’s his budget proposal then? And does it count as an idea when he refuses to acknowledge that he ever said something, even when its documented on video?

  10. - haverford - Tuesday, Jun 29, 10 @ 3:35 pm:

    So, would all these suddenly pensionless employees be getting a pay bump to accomidate their lost future benefits? Brady says ‘a good wage’, but - given his approach to the min wage- excuse us if we’re a little dubious.

  11. - Niles Township - Tuesday, Jun 29, 10 @ 3:36 pm:

    Quinn wins another week…let’s take a look:

    Brady calls for a wage cut for our lowest wage workers.
    Brady shows up at the Swedish day parade feigning ignorance of the pride parade.
    Brady flip-flops on calling for a wage cut

    Elections are won week by week. Quinn just won this one.

  12. - Irish - Tuesday, Jun 29, 10 @ 3:41 pm:

    Mr Brady, let’s look at how many rank and file state employees have been indicted or have conspired with others involved in corruption in the State.

    Now let’s see how many politicians have done the same. And let’s include Agency heads, appointees, and those on commissions and boards.

    Looking at the numbers of each do you really think that changing the pension system of the rank & file is going to stop corruption? I think you got too close to the exhaust pipe when you were working for Project Rescue.

  13. - Vole - Tuesday, Jun 29, 10 @ 3:42 pm:

    What does Brady propose to solve the current pension crisis that is projected to go bust in about 10 years? And won’t the current system go bust even earlier if state employees and the state government do not continue to fund it? Wouldn’t the state need to continue to fund the current system for much longer even if a 401K type plan was started for new hires? Wouldn’t the state then be operating two systems concurrently?

  14. - Rich Miller - Tuesday, Jun 29, 10 @ 3:45 pm:

    You’re correct, Vole. But the state payments would drop drastically if he was talking about current employees.

  15. - He Makes Ryan Look Like a Saint - Tuesday, Jun 29, 10 @ 3:46 pm:

    I would be happy to take the 401 k…..Have Mr. Brady pay me what I SHOULD have in the account (including missed payments and compounded interest) and I will keep it in a 401K.

    My next question would be where is the state gonna commit Robbery from to help balance the budget since you won’t have the pension systems to steal from?

    Mr. Brady… I suggest you look at the Legislative Retirement System, that is the real scam.

  16. - SAP - Tuesday, Jun 29, 10 @ 3:50 pm:

    If the State wound down one of the pension systems in order to shift employees into a self-funded plan, then, as part of the wind-down, the State would have to fund all outstanding liabilities of the fund (because new contributions would no longer be forthcoming). Can anybody tell me where all those billions would come from? If our political leaders, and I use that term loosely, want to solve the pension problem, sticking with the defined benefit plan gives them more time to fix (or ignore) the problem.

  17. - Berkeley Bear - Tuesday, Jun 29, 10 @ 3:55 pm:

    When you get hired by the state universities right now you have to pick between a classic pension account and a “portable” option. In either event it is funded primarily by your salary but treated as a pension for purposes of SS withholding (i.e. several percentage points of base salary are put in the account but you don’t have SS withholding). The portable option is the preferred option and can be rolled into a 401(K) once you leave the state’s employ. So a whole lot of state employees are already self-funding their retirements in 401(K) style vehicles. Not sure Brady knows that based on his comments.

    Regardless of the vehicle, the invitation to corruption is still going to be there given the amount of money to be made from managing the 401(K)s of tens of thousands of people.

  18. - Lester Holt's Mustache - Tuesday, Jun 29, 10 @ 3:59 pm:

    If Brady is referring to current employees, will Bomke, Poe, and Brauer have to oppose this? Most state employees are still republicans, you know.

  19. - Reality Is - Tuesday, Jun 29, 10 @ 4:01 pm:

    SAP is correct. To switch current employees over they would have to come up with the tens of billions of dollars that they owe us now to start the new program. Plus, somewhat arguably, it would require a change to the state constitution.

  20. - lincolnlover - Tuesday, Jun 29, 10 @ 4:03 pm:

    Doesn’t matter what Brady wants or says. The democrats, and thus, Madigan will still be in control of the GA. Good luck Billy.

  21. - Cook County Commoner - Tuesday, Jun 29, 10 @ 4:09 pm:

    The state and local government pension plans probably have passed the point of no return insofar as extra-judicial and meaningful reform of pensions for current employees and retirees and their dependents. It seems that the political contributions and political activity of the vested interests will govern the polls on this issue, unless other voters make an unprecedented clamor for reform. The likely outcome will be more kicking the can down the road until insolvency is reached. Can we realistically expect any better from the state legislature and local government?

  22. - Cincinnatus - Tuesday, Jun 29, 10 @ 4:39 pm:

    We may be making history! It will be interesting to see how a state handles insolvency, since US Bankruptcy Code does not address a state (Ch.9 is for municipalities).

  23. - DC - Tuesday, Jun 29, 10 @ 4:48 pm:

    The headline should be, “Brady calls for increased spending on pensions,” because if you have to put every teacher into Social Security, the state’s cost will go UP. He has never actually reserched this subject or provided any numbers to back up his hollow claims. Nice hair, nice suit, no substance… remind you of anyone?

  24. - thunder1 - Tuesday, Jun 29, 10 @ 4:56 pm:

    I’ve heard enough, I’m so disgusted with politicians. Create new revenue. Like, legalize Fireworks. New businesses, new factories, employment and create a new tax to sell them. Stop crossing state lines to purchase them. Would be new revenue. What is the problem with them not looking into this? Have one pension system in the state gov that covers everyone the same. and I mean every state employee, teacher, politican, judge

  25. - VanillaMan - Tuesday, Jun 29, 10 @ 4:57 pm:

    I guess Brady was doing one of those Giannoulais “half-jokes” about lowering the state minumum wage, right?

    Brady needs to shut up a whole lot more than he currently is.

  26. - cassandra - Tuesday, Jun 29, 10 @ 5:05 pm:

    The pension vs. 401k debate is a national one, not a local one and it affects not only government employees but all employees, public and private. Right now, public employees are in the clover, pension-wise, living off the rest of us. But we’re all in this together, and if your pension is dependent on the political goodwill of a huge contingent of retirees who are living in poverty or near-poverty, and constantly exposed to the volatility of the stock market, well, do the math. Public employees should not be complacent.

  27. - Cindy Lou - Tuesday, Jun 29, 10 @ 5:07 pm:

    –”Brady needs to shut up a whole lot more than he currently is. “–

    I’d rather he just keep on rattling. Gives the voter a better idea of just what the governor wanna be thinks/believes. Rattle away, Sen. Brady.

  28. - wordslinger - Tuesday, Jun 29, 10 @ 5:26 pm:

    Brady: “You like that? I’ve got another idea to cut the deficit and encourage business. How about everyone work for nothing? As a businessman, I know I’d like that. That’s leadership. That’s what we need in Springfield.”

  29. - Cheryl44 - Tuesday, Jun 29, 10 @ 5:30 pm:

    That’s interesting Berkeley Bear. I assumed state university employees enrolled in TIAA-Cref. I’m at a private university and that’s what we get. It’s a 403b, I think. I put in 6%, the university puts in 4%. I’m fully vested and it’s portable–I came here from a different private university and it just came with me, no need to roll it over into a different account.

  30. - Don't Worry, Be Happy - Tuesday, Jun 29, 10 @ 5:45 pm:

    I’m so pleased to hear that Sen. Brady is going to voluntarily give back all of the pension contributions made by the State on his behalf, and will instead pay into a 401(k) out of his own pocket.

  31. - Arthur Andersen - Tuesday, Jun 29, 10 @ 6:28 pm:

    I’m sure this is a wonky detail lost on Big Picture Bill, but a public pension plan without employee contributions (and arguably employer) is likely in violation of the Federal Tax Code. Since the new employees aren’t contributing per se, the loss of tax exemption on their contributions may mean nothing to them, but the loss of non-taxable status for the investments of the fund is a huge hit to the State. SURS, TRS, and once in a blue moon ISBI would pay hundreds of millions of dollars in Federal Taxes on the annual earnings of the funds. (AA took the liberty of adjusting his proposal to make it reasonably constitutional, though no change in coherence for the proposal, or AA, is claimed.)

  32. - Liandro - Tuesday, Jun 29, 10 @ 7:38 pm:

    I’m sorry to see Bill back off from the minimum wage discussion…but I agree it is wiser, from a political perspective, to just freeze it. People just don’t understand the economics of minimum wage, and tend to get all worked up over it. It just makes our state that much worse off that we aren’t having this discussion, though. It would have been nice to see some one explain to the people how much better it would be for everyone if our minimum wage wasn’t so high. =/

    @Small Town Liberal:
    Please. He aired out an idea, reactionarys knocked it, and he adjusted to political realities. If politicians can’t air out ideas form time to time, don’t expect the state to change for the better any time with any quickness. Why don’t you let some ideas get discussed, and knocked down if necessary, without getting all partisan reactionary? Isn’t it a bit wiser to reserve the “flip-flop” accusation for someone who holds a long-standing position, THEN flips it? Brady was talking ideas…and Quinn should be throwing some out too.

    What on earth does someone’s position on minimum wage have to do with one’s position on overall wages? Do you even understand how a minimum wage works, and who it targets? You do realize that minimum wage potentially takes AWAY from the sort of individuals who pay into 401K’s, right?

    Wow. Don’t really know where to start. Minimum wage is for super-basic entry level jobs. Are you confusing the concept of a “living wage” with the concept of a “minimum wage”? Real question, btw, not snark.

    There are a lot of people getting “nothing” right now, and raising the minimum wage doesn’t do anything to solve that. It actually makes the problem worse. And as I’ve already pointed out multiple times before, raising the minimum wage lessens the money left in payroll percentages to spend on living wage employees. So far, all you’ve done is snark on this wage thing without explaining in the slightest why raising the minimum wage right now is a smart thing.


    I’m still waiting for anyone at all to explain why raising the minimum wage during a recession is in any way a good idea. I put out a rather detailed comment on exactly why it is bad economics, but so far all I’ve seen pro-wage controls is snark and empty statements of what I can only describe as hollow moralizing.

  33. - steve schnorf - Tuesday, Jun 29, 10 @ 7:59 pm:

    Rich, I’m not sure you are right. IF (very big if) we were making the full payment (normal plus catch-up) then the payment would go down, because normal cost would go down considerably. But since right now we aren’t even paying catch-up (my estimate maybe $5.75B, and this year we are only paying $3.6?) then the payment would continue to grow for a long time.

  34. - really?? - Tuesday, Jun 29, 10 @ 9:01 pm:

    Why won’t either candidate suggest cutting sick days in half (6 instead of 12), and eliminate vacation carry over-use it in the year earned or lose it and reducing number of personal days? And not letting accumulated sick time count to the pension? Would this not reduce future payouts?

  35. - Wumpus - Tuesday, Jun 29, 10 @ 9:12 pm:

    Niles, a draw at best. I still recall the fiasco with the early prison releases being publicized this week

  36. - Berkeley Bear - Tuesday, Jun 29, 10 @ 9:39 pm:

    Cheryl, we can voluntarily pay into a 403(B), too. But the SURS contributions are mandatory, mainly because of the whole pension/SS withholding issues.

  37. - Cincinnatus - Wednesday, Jun 30, 10 @ 8:48 am:

    One of the things most people overlook when discussing the pension v. 401k is that the 401k is MUCH easier to use when planning budgets than the pension system.

  38. - Anon - Wednesday, Jun 30, 10 @ 9:07 am:

    Brady’s plan must assume that state employees will continue working for the same salary and benefits and not ask for their state pension contributions to be immediately added to their salaries or other retirement vehicles (how about a Salary Bond instead of a Pension Bond?). A 401(k) plan might work but state employees need massive pay raises so their benefits roughly equal those of their colleagues (or at least those they are supervising) I think more than a few would rather have the cash upfront now in a 401(k) rather than relying on the state to continue to fund pensions and retiree health care over education, seniors and the disabled - especially when there simply is no equivalent of the state’s pension system in the private sector. If 401(k) contributions were significantly increased (i.e. not counting them as income) at the federal and state levels so that the 401(k) employees can squirrel away enough dollars to generate $40-80k a year in retirement with conservative (3-4% annual returns. And keep this in mind - the amount of savings needed to produce $40K in retirement income at 3% is roughly $1.4 million. If Brady’s plan allows for individuals to create these types of personal investments then maybe his plan could work. However, if he expects salaries to remain the same and have no additional tax benefits added for 401(k) employees and he can just chop retirement (and other) benefits by adding new employees or, much worse, replacing current employees with “cheaper” new 401(k) employees, I think he’s in for some very rough sledding.

  39. - Small Town Liberal - Wednesday, Jun 30, 10 @ 9:20 am:

    - People just don’t understand the economics of minimum wage, and tend to get all worked up over it. -

    You mean people like you who act like there have never been any serious arguments in favor of a minimum wage and try to belittle anyone who disagrees with you? Get over yourself pal, I’m sure your finance degree makes you feel good but it doesn’t make me want to kneel before you. This is a political blog, and Brady has been “airing out” ideas and backtracking this entire campaign. If they’re such good ideas maybe you should spend your time lobbying him to stick with them.

  40. - Liandro - Wednesday, Jun 30, 10 @ 3:01 pm:

    @Small Town Liberal:
    First, I have not questioned the need for a minimum wage. I have questioned why IL’s is above the federal minimum wage, and more specifically I have questioned why we have been raising it during a recession. Don’t misrepresent what I am saying.

    Second, nothing I have said was any worse than you calling any owner against the minimum wage hikes (a category I fall under) a “stiff”..and I’ll note that I responded simply by saying you had a point in some cases but that your sense of proportion was off given IL’s problems. Fairly mellow.

    Third, no where in your comment (again) did you explain why it is a good idea for IL to have been raising it’s minimum wage above the federal one these last couple years. So, instead of the “kneel before you” hyperbole, why don’t you actually respond to discussion points I have been raising or the questions I have been asking?

  41. - Teddyballgame - Wednesday, Jun 30, 10 @ 11:32 pm:

    I’m a Republican, at least I think so. I cannot, however, stand Brady. He seems so elitist and I can’t stand it. His comments always bolster his ignorance of he middle class. He wants to get rid of the ISBE, but he and his kids all went to private schools. He simply does not understand. I cannot get excited for this fall election and may vote for a democrat for he first time. At least Quinn understands.

  42. - belltrix - Thursday, Jul 1, 10 @ 8:10 am:

    Liandro, as I recall Blago raised the minium wage 5 years ago. The bill said IL mw would go up from 2007 -2010. I do not like when MW goes up as costs go up. On the other hand, I have workers making MW and I see them struggle to pay bills and go to the doctor.

  43. - belltrix - Thursday, Jul 1, 10 @ 8:13 am:

    Ok, it was WV, who put pensions back after the teachers’ 401ks were going to put them on public aid.
    Take this 401(k) and shove it
    Last week, West Virginia teachers got to vote on whether to remain in 401(k)-style retirement plans or return to generous state pensions.

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