* Marc Levine has an op-ed in Crain’s…
Gov. Pat Quinn should be commended for his detailed proposal addressing Illinois’ pension crisis. Unfortunately, the proposal’s fine print prevents real reform and even lays the groundwork for substantially higher property taxes for all of us.
Mr. Quinn’s plan starts out strong, identifying logical reforms to address cost-of-living adjustments, retirement age and employee contributions. He then negates his own reforms, however, by offering all workers the option to avoid the changes if they agree to other, minor benefit adjustments the state needs to implement, anyway. The reason for this central flaw is Senate Democrats’ ongoing canard that any benefit changes are prohibited by the state constitution unless agreed to by union bosses.
So the only way the governor’s plan works is if workers voluntarily and irrationally elect to reduce their own benefits. Good luck with that.
The plan omits other vital reforms as well. More than 60 percent of pension liabilities are owed to current retirees. By leaving those benefits untouched, the plan is limited to tinkering on the edges. Most disappointing is that the plan does not include a 401(k) component and therefore continues to rely on the antiquated and unstable defined benefit structure for all teachers and workers.
* Levine is identified in the piece as “a senior pension adviser to House Minority Leader Tom Cross.” I asked Cross’ spokesperson today whether her boss agrees with his “senior pension adviser.” Her response…
He is an advisor to Tom on pension issues, we don’t agree with him on all of his points in his piece, but he is right on COLAs, increased contributions, and the pension cost shift.
* Let’s look at some of Levine’s proposals that Leader Cross apparently disagrees with. And it’s a good thing that Cross did distance himself from this stuff, because he’d be flooded with angry complaints if he actually agreed with him…
if they agree to other, minor benefit adjustments the state needs to implement, anyway
“Minor benefit changes”? Um, dude, telling state workers that their pensions won’t reflect any future pay increases is not a “minor” benefit adjustment. Also, taking away all of their government subsidy for their health insurance ain’t exactly “minor,” either.
ongoing canard that any benefit changes are prohibited by the state constitution unless agreed to by union bosses.
Actually, no. Nobody has ever said that. Newspapers have reported it, but they were unclear on the concept. These are individual, not collective, contract rights.
So the only way the governor’s plan works is if workers voluntarily and irrationally elect to reduce their own benefits
The can either elect to reduce their own benefits or get their benefits reduced drastically if they have to pay hundreds of dollars a month for health insurance and don’t get to count future pay increases.
More than 60 percent of pension liabilities are owed to current retirees. By leaving those benefits untouched, the plan is limited to tinkering on the edges.
Marc, have you even skimmed the state Constitution?…
SECTION 5. PENSION AND RETIREMENT RIGHTS
Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.
And, finally…
Most disappointing is that the plan does not include a 401(k) component
So, you want the state to start paying into Social Security now?
* By the way, Levine’s not identified in the piece as such, but he is also the Illinois Policy Institute’s Senior Fellow for Pension and Investment Policy.
- PublicServant - Thursday, May 3, 12 @ 2:58 pm:
Well Rich, I guess I’m a little shell-shocked now as a state retiree, but I guess we’ll see what bills get passed, signed into law, and survive the certain court challenges. We’ll also see who’s left in the GA after the November elections.
As for Cross’ “Pension Advisor”, why am I not surprised it’s an IPI “non-partisan” libertarian whacko.
- Bob - Thursday, May 3, 12 @ 3:05 pm:
Lets ad a new constitutional amendment to the IL constitution. The legislature is now part time with no benifits or pension. Alot of other states do this and we could save millions and would not have one hundred pages of new laws every year
- Reality Check - Thursday, May 3, 12 @ 3:08 pm:
Um, Levine is also the Republican nominee for state Senate against Dan Biss. That too would seem relevant context.
- Rich Miller - Thursday, May 3, 12 @ 3:08 pm:
===Levine is also the Republican nominee for state Senate ===
He dropped out last month.
- Elo Kiddies - Thursday, May 3, 12 @ 3:10 pm:
IPI’s website now says “Please note that Marc Levine is on leave from his role as senior fellow with the Institute.”
No idea how current that is, but it’s here:
http://www.illinoispolicy.org/search/index.asp?searchfield=Author+-+Marc+Levine&Submit=Submit
- Reality Check - Thursday, May 3, 12 @ 3:13 pm:
@Rich, thanks. So Levine is the failed former GOP nominee for Biss’s seat. Got it.
- Union - Thursday, May 3, 12 @ 3:16 pm:
“Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”
Why did the people at the Constitutional Convention place this item in the Constitution? Not every state has this statement on pensions in their Constitutions? Why can’t we find out why this clause was placed in it. Mr. Madigan is the only person who was at the Convention AND is still in the legislature. I know he has said that he doesn’t know why the state should pay into pensions, but can’t he remember why the clause was placed in the Constitution.
The General Assembly has 1 Constitutional option….fund the pensions. It will require a graduated income tax, taxing all retirement benefits (our state is 1 of 2 of the 50 state that do not tax retirement income) and a law stating the state will fund the pensions first in all. Until this happens, and yes it is a hard pill to swallow, we are just spinning our wheels.
- reformer - Thursday, May 3, 12 @ 3:54 pm:
==Why did the people at the Constitutional Convention place this item in the Constitution? ==
Because state workers had seen state government postpone the state’s share of pension payments.
- wishbone - Thursday, May 3, 12 @ 3:58 pm:
The solution is to amend the state Constitution. The U.S. Constitution has been amended 27 times. There is no alternative. The Constitution (any constitution) is not a suicide pact.
- AC - Thursday, May 3, 12 @ 4:01 pm:
Union - thanks for pointing out the elephant in the room. No one wants a tax increase, but compared to all the other options, it makes the most sense. To make it as small as possible, make the pension ramp less steep, cut tge capito
- G'Kar - Thursday, May 3, 12 @ 4:05 pm:
@Union–Eric Madiar’s analysis of the pension system in Illinois includes a rather detailed analysis of why the clause was added to the Constitution. The report is worth reading, imho:
http://www.illinoissenatedemocrats.com/images/pensions/D/Pension%20Clause%20Article%20Final.pdf
- AC - Thursday, May 3, 12 @ 4:07 pm:
Ooops typos and an accidental submit on my phone. Basically, cut everywhere you can, honor commitments to the elderly, disabled and employees.
- too obvious - Thursday, May 3, 12 @ 4:20 pm:
Marc Levine, another rich guy concerned that modest income workers might be making too much.
- Charlie Wheeler - Thursday, May 3, 12 @ 4:23 pm:
Historical note
As a cub reporter, I covered the Sixth Illinois Constitutional Convention for the Chicago Sun-Times. My recollection is that support among delegates for the pension guarantee provision reflected two major concerns advanced largely by public employee groups at the state and local levels. The first was that the state’s chronic underfunding of the systems might cause unfunded liabilities to reach levels that would prompt future governors and legislatures facing difficult fiscal times to reduce substantially or eliminate entirely benefits due public employees. The second was that granting municipalities home rule authority– pretty much a foregone conclusion among delegates– could allow local governments to reduce or eliminate benefits in order to free up resources for other city needs. At the time of the convention, the five retirement systems had an aggregate funding ratio of about 42 percent. Currently, the aggregate funding ratio is about 41 percent, according to the FY 2012 Budget Summary of the Commission on Government Forecasting and Accountability.
- Sue - Thursday, May 3, 12 @ 4:26 pm:
Has anyone ever considered whether the US Supreme Court Blaisdell opinion would permit the legislature to modify pension benfits for current retirees and active employees. In the 1930’s Chief Justice Hughes ruled that a State legislature could adjust the terms of a private contract in an emergency. The depression era cases when the states were facing the same issues Illinois is now facing might allow what the legislature needs to do to reign in these future funding problems without running afoul of the constitutional issues- As much as anyone might want to ignore the realities and just keep paying COLA’s and benefits starting at 55- where is the $$ going to come from
- anonymice - Thursday, May 3, 12 @ 4:27 pm:
==The solution is to amend the state Constitution. The U.S. Constitution has been amended 27 times. There is no alternative. The Constitution (any constitution) is not a suicide pact.==
You would also have to amend the federal constitution again, to delete the “impairment of contracts” clause. It prohibits states doing what you propose.
- G'Kar - Thursday, May 3, 12 @ 4:33 pm:
@Sue,
But also see United States Trust Co. v. New Jersey 431 U.S. 1 (1977)which holds state governments to much higher standards with regards to contracts.