86 Comments - Carlos S. - Thursday, Dec 6, 12 @ 8:58 am: Doesn’t the cost shift represent yet another demographic time bomb? Jurisdictions with aging populations and higher ratios of retirees to workers have to raise property taxes (or defund schools) more than younger places and thereby disincentive-ize young people from living there. Vicious cycle of tax hikes and smaller tax base ensues. - nieva - Thursday, Dec 6, 12 @ 8:58 am: Let Mike hand down a bill that he likes. Vote on it and get Pat to sign. Then pass it on to the Illinois Supreme Court and let them decide if it passes the test or not. This is all a big waste of time and worry for the folks that depend on their monthly pension check to pay the bills. We can expect this same mess to come to a head on the federal level with Social Security and Medicare in the next few years. - Downstater - Thursday, Dec 6, 12 @ 9:05 am: Cost shifting will have minimal impact on most local districts, if it is phased in over a 10 year period. This will allow districts to adjust their employee expenses help the state budget. A win for everyone. - Sue - Thursday, Dec 6, 12 @ 9:09 am: According to yesterdays NYT article- David bois is representing Rhode Island in that State’s pension litigation filed by the public unions challenging the constitutionality of changing benefits for existing plan members- Bois assumes the case will be a trend setter and ultimately resolved in the S. Ct- As goes Rhode island will go the nation since many states would love to get an answer to the so called “impairment” issue- Illinois’ has a similar constitution- Frankly, as Bois says in the article- there is no contract and states often impose changes when emergencies dictate- During the depresiion, Justice Jackson issued an opinion I believe involving the State of Kansas which unilaterally changed contract terms asserting the Depression as the emergency- Bois is perhaps the best lawyer in the Country and you can assume the Rhode island case will be fully litigated assuming they can figure out who will hear the case since Bois is assering the State judges have conflicts seeing how they are pension beneficiaries - Small Town Liberal - Thursday, Dec 6, 12 @ 9:13 am: - Doesn’t the cost shift represent yet another demographic time bomb? - If something substantial isn’t done about the pension problem, schools are going to lose funding anyway due to the enormous interest payments. The cost shift will give school districts an incentive to keep salaries reasonable, phased in over time there shouldn’t be any major increase in property taxes. - Been here before - Thursday, Dec 6, 12 @ 9:21 am: I have seen a lot of ideas and policy that were going to have minimal impact, but instead ended up costing much more than anticipated. I definitely think local districts should have some skin in the game, but this shift is a lot to absorb. Especially when you consider that Foundation Grant funding was at about 88% and will likely be lower in the upcoming fiscal years. It’s a hard sell to yank established funding and add in additional revenue burdens. It is time we look at GSA, PTELL and they relationship they have had over the past 15 years. Changes in those laws have cost the state many billions of dollars over a short duration of time. - Dirt Diver - Thursday, Dec 6, 12 @ 9:27 am: As a Tier 1 member who understands why the State Retirement Systems, I am ok with the legislature passing a pension reform bill, if only to for once and for all, have the Courts directly weigh in on this issue. I for one, want an answer so we can finely get some where. I am sick and tired of the same old song and dance that has become the pension reform cluster#@%&. How many working groups, task forces, commissions, blue ribbon panels need to be created to examine the issue? Am I glad that these 2 “independent” HDEMS filed an actual bill? Sure. Do I think it has any shot at passing Consitutional muster even if the impossible happens and the unions agree to something? No. These politicians are cowards. Cowards. If they truly want to solve this issue and completely avoid any issues with the Constitution, tax retirement income. There is no way that will happen because retirees pay attention and vote. Taxing retirement income is a way to generate revenue to help pay off the debt. This would avoid the whole Constitutionality issue. No legislator has the fortitude to support such a concept, Cullertono flirted with that idea, but has since distanced himself. These legislators do not care about the “fiscal stability” of the retirement systems. A legislator wants to reform the systems for 1 of 3 reasons: 1) Will Davis, Cynthia Soto, E. Hernandez signed on because they would rather punish employees than social program recipients. Said differently, they want to free up the money to spend on social programs to keep them in office 2) Those trying to appease the Tribune Editorial Board, Civic Committee, Tea-party minded constituents, and other business groups. 3) Then those like Rep. Biss, Senator Lauzen, and TRS Director Dick Ingram that have such huge egos that they want to be associated with any potential historic reform that passes. These are the type that cause the most fury for me, those that are looking “capitalize” on this issue to spring to a higher profile position. I truly believe Rep. Biss thinks he’s the next President Obama, but he severely lacks charisma, personality, and humility. I will give Nekritz and Biss some credit, at least they are willing to stick their necks out there, unlike many that get involved. - Ray del Camino - Thursday, Dec 6, 12 @ 9:28 am: Hard to figure how House Republicans with a straight face can argue against the cost shift. Other people’s state taxes are paying for the pensions of your local district’s teachers. Or maybe your state taxes are paying for the pensions of someone else’s employees. How is that reasonable or fair according to Republican principles? “I got mine” is not supposed to be a Republican principle. - western illinois - Thursday, Dec 6, 12 @ 9:31 am: Bois”it is not a contract” The Illinois constitution specifically says it is a contract so any claim that RI isnt wont matter in Illinois - RNUG - Thursday, Dec 6, 12 @ 9:31 am: Sue, Actually the New York, Illinois, and Arizona constitutional clauses are almost identical and the strongest in the nation. Until one of those is tested, you won’t have a complete answer. - Dirt Diver - Thursday, Dec 6, 12 @ 9:36 am: Oh and one more other thing. This proposal will be a “worse deal” for many employees/retirees as compared to the Cullerton/Madigan “consideration” proposal. So any rank-and-file legislator reading this comment, don’t buy into the hype that this proposal is better than SB 1673. That may be the case for many members/retirees, but not for all of them. - Foxfire - Thursday, Dec 6, 12 @ 9:37 am: =ready to work collaboratively toward a solution” But not offer up any ideas of their own or suggest what would be acceptable to unions. - geronimo - Thursday, Dec 6, 12 @ 9:38 am: Dirt Diver has a point. All and any retirement income would need to be taxed. Few states do not tax retirement income, at least at some level and coincidentally none of those states are in Illinois’ fiscal position. In addition, only 7 states have a flat tax rate. States doing well are states with a progressive tax structure. Most states tax services in addition to goods. The pension issue has exposed our tax problems in this state. But Illinoisans want lots of services at low tax rates. - foster brooks - Thursday, Dec 6, 12 @ 9:42 am: Shall not be Diminished or impaired. What part of that does nekritz not understand? - Jechislo - Thursday, Dec 6, 12 @ 9:44 am: Just curious. Does anyone know how many other bills have had their constitutionality questioned/debated before the legislation was even voted on during this past legislative session? - western illinois - Thursday, Dec 6, 12 @ 9:44 am: RNUG I recall AZ was The legislature raised the contributions……and had to refund it all. The only thing I can see passing muster is some sort of negotaited deal for a higher contribution for some sort of benefit -maybe forcing the state to make payments. - RNUG - Thursday, Dec 6, 12 @ 9:47 am: geronimo @ 9:38 am As I pointed out yesterday in a back of envelope calculation, taxing all retirement income would most likely get you $1.2B or less. By comparison, raising the current income tax rate from 5% to 6% would get you $2.3B. A sales tax on services would bring in about $9B if the often stated sertvices is equal to goods is true. - Shemp - Thursday, Dec 6, 12 @ 9:49 am: I am glad Arlington Heights can absorb a cost shift. However, we downstate folks have school districts too in case the metro areas have forgotten, and those costs aren’t so easily absorbed. Again, ask almost any downstate city with full time police and fire what it is like to pay for pensions that the state dictates and the locals have no control over. - Crime Fighter - Thursday, Dec 6, 12 @ 9:51 am: The plan to evade its obligation repay the money borrowed from its employees is becoming ever more complicated. Maybe it would be more effective (and moral) public policy just to pay back the money and move on. - cassandra - Thursday, Dec 6, 12 @ 9:53 am: The COLA change seems pretty drastic to me, and perhaps exploitative in that most people really don’t understand the terrible ravages of inflation over time. The current low inflation rates won’t last forever. But will retirees and their advocates be making an informed decision if they support cola revision. In the rush to make a deal before Pat Quinn goes up for re-election, can we trust him on the subject? No. Remember the income tax hike that got bigger right after the prior election. He probably thinks it’s for our own good, but he fibs–a lot. Ditto the cost shift. How much is it going to cost really. Try to get some numbers from your local school board. And disregard the politicians who tell you it won’t cost much. How do you define much? Let’s see some numbers. - Pot calling kettle - Thursday, Dec 6, 12 @ 9:54 am: ==Some lawmakers are concerned that would lead to higher property taxes.== The money has to come from somewhere. If the cost is shifted to local school districts, they will need to cut back on educational services or raise taxes. The lawmakers created this fiasco because they were concerned about raising taxes, but did not want to cut any services; so, they are passing the tough choices down to the school districts. Unfortunately, they then limit the school districts’ options by imposing tax caps and spending mandates. - illinifan - Thursday, Dec 6, 12 @ 9:55 am: Yes we need to tackle the pension issue, but as many posters are noting it is part of an overall bigger issue, the tax structure in Illinois. The legislature should use this one part of the discussion to actually lead and tackle the whole Illinois tax rate. It is long overdue that we get a progressive rate, increased state funding for education and movement to reduce education dependence on property tax. That said leadership will happen when pigs fly. - Ready To Get Out - Thursday, Dec 6, 12 @ 9:58 am: 20% of states do not tax state gov’t retirement income. Almost 60% of states do not tax Social Security. - Pot calling kettle - Thursday, Dec 6, 12 @ 10:00 am: ==I definitely think local districts should have some skin in the game…== As if the money for salaries comes down like manna from heaven. School districts set salaries based on what they can afford and what they need to offer to attract and retain good faculty & staff. Salaries are the bulk of any school budget, every school already has plenty of skin in the game. The one component the districts do not control is the structure of the pension system; it was created by the GA. The only “skin” the GA has in the game are the payments they make. Take that away and what is to stop them from increasing the benefits, since the full cost will eventually be borne by the local districts. - dupage dan - Thursday, Dec 6, 12 @ 10:17 am: I may have missed it but still am looking for some type of calcuations regarding what this proposal will save. I understand the unions don’t want the pension problem solved on the backs of state employees (who are claimed to NOT be part of the problem) but they don’t mention whose back the problem should be laid. I know the legislators bear the brunt of the responsibility since they actually passed the bills however, it is silly to think that somehow they will come up with the billions needed to repair the problem with their personal funds. Who, then, pays? The taxpayers? The tooth fairy? - Been here before - Thursday, Dec 6, 12 @ 10:25 am: Pot calling kettle- I agree that as long as the GA is doing the collective bargaining for benefits then they should bear a portion of the cost. However, moving forward, I think local school districts should be mindful of the salaries they pay, especially considering how closely pension benefits are tied to salary. Those end of the career salary bumps to boost pensions need to stop. They are small part of the problem, but a problem nonetheless. - Dirt Diver - Thursday, Dec 6, 12 @ 10:27 am: To me, what proves that these sponsors do not care about the “financial stability” of the retirement systems is the provision that “recertifies” the Fiscal Year 14 state contribution based upon the reduction in liabilities provided by this Act. That one item alone will undue any positive impact this may or may not have. For the state to realize savings in a potential budget, the only sane thing to do is to wait until the Courts rule on this. This is an Emil Jones type of idea. How anyone can call themselves a fiscal conservative and support such mularky is beyond me. - Bill White - Thursday, Dec 6, 12 @ 10:32 am: The IL Supreme Court, not the US Supreme Court, has final word on what the IL Constitution means unless that interpretation somehow violates the US Constitution. The Rhode Island decision might influence the thinking of the IL Supreme Court but it wouldn’t be controlling. - Madison - Thursday, Dec 6, 12 @ 10:37 am: We all make this harder than it is…look you people raised taxes 66% and added seats. Pay the freight. Pension benefits already earned are sacrosanct in this culture according to our own values. Respect that and act. Change benefits going forward. If you don’t like that, find a new job. Everybody else does it when they need to today. Move on. Cut expenses as needed. Borrowing will never be cheaper. It’s a tool. Raise fees. Not to the moon, but higher. School districts will have to pay their own way. Everybody else does, you will too. Retirees have to pay taxes. Everybody else does. A graduated income tax should be on the table. It’s common sense to most of us. If you are not happy with what we pay union employees, then don’t agree to it. The answers while not politically expedient, are obvious. - Sgtstu - Thursday, Dec 6, 12 @ 10:41 am: Sue - Thursday, Dec 6, 12 @ 9:09 am: Overspending and stealing from the pension funds to cover the cost of pork projects does not equal “Depression as the emergency”. - Tony - Thursday, Dec 6, 12 @ 10:44 am: Almost every school district in Illinois picks up part — and in some cases all — of their teacher’s employee pension payments. They can easily absorb the gradual cost shift in this plan without raising property taxes if they gradually shift the employee contributions back to the teachers. Then, believe it or not, we’ll have a system where the employee actually pays for employee costs of a retirement plan and the employer actually pays for the employer costs. Imagine that, logical and financially sound policy making in Illinois! - mid-level - Thursday, Dec 6, 12 @ 10:59 am: ==Who, then, pays? The taxpayers? The tooth fairy?== Who benefited from underfunding the pension system? Some might say that the taxpayer and corporations through loopholes. - Pot calling kettle - Thursday, Dec 6, 12 @ 11:11 am: ==Those end of the career salary bumps to boost pensions need to stop.== That pretty much stopped a few years ago when the GA passed the 6% cap legislation. - Dirt Diver - Thursday, Dec 6, 12 @ 11:14 am: Pot calling Kettle, In theory they should have stopped but there are exemptions to the 6% rule that are still active, some exemptions recently expired. Employers still found ways to spike final average salary. - Grandson of Man - Thursday, Dec 6, 12 @ 11:17 am: I think the Trib editorial is more honest and less harsh to state workers, but it still has to take a shot at AFSCME when it says the union stonewalled previous pension reform negotiations. That may be true, but the union also has to make sure the workers get the best possible deal. The Tribune editorial board, of all entities, should understand this. If there’s a deal that incorporates reform that is less harsh and utilizes ideas provided by union leaders, and the union rejects it, then sure, take shots, but until then the Trib should strive to be a bit more understanding, in my opinion. I hope that there is less rancor, and that something can get done this time. I like the idea of the gradual cost shift. - Carlos S. - Thursday, Dec 6, 12 @ 11:32 am: ==Salaries are the bulk of any school budget, every school already has plenty of skin in the game== There is a lot of anecdotal evidence, at least, that school districts collude with employees to spike their final salaries. The employee gets a annuity based on the salary for the rest of her life but which was actually paid for by the employer for a very short period. Carol Ronen is poster child for this and stands to extract an ADDITIONAL million dollars in such a scheme. It would be interesting to know the scale of this con game with respect to the entire debacle. - Pot calling kettle - Thursday, Dec 6, 12 @ 11:33 am: == They can easily absorb the gradual cost shift in this plan without raising property taxes if they gradually shift the employee contributions back to the teachers.== This will be not be easy as it is neither simple nor painless. Whatever is shifted to the teachers will result in the teachers asking for that much more in pay. ==Then, believe it or not, we’ll have a system where the employee actually pays for employee costs of a retirement plan and the employer actually pays for the employer costs.== This is the case now. In districts where the school pays the employee portion of the retirement, that portion was negotiated en lieu of salary increases. A board looks at total cost of salary and benefits when negotiating. Some bargaining units want the money in salary, some want it in benefits. If you move money out of benefits, it will need to go into salary to offset the cost to the employee, otherwise the employee is getting a pay cut. - Pot calling kettle - Thursday, Dec 6, 12 @ 11:38 am: ==There is a lot of anecdotal evidence, at least, that school districts collude with employees to spike their final salaries.== A lot of bad policy is based on anecdotal evidence. This was certainly common practice in the past, but after the 6% cap was passed, it has either gone away or districts are required to pay for the excess cost to the system. - Exhausted - Thursday, Dec 6, 12 @ 11:43 am: - mid-level - Thursday, Dec 6, 12 @ 10:59 am: ==Who, then, pays? The taxpayers? The tooth fairy?== Who benefited from underfunding the pension system? Some might say that the taxpayer and corporations through loopholes. During the years preceding, while the GA wss underfunding the pensions, the unions looked the other way. It was not only to the benefit of the social programs that grew at expontential rates but for the good of the union membership who saw increased salaries and other benefits. Of course the union membership had to pony up additional dollars towards their pension, but it appears that what they received exceeded what they gave. There is plenty of fault to pass around. The union leadership is try8ing to demonize the legislature, the Governor is demonizing the union and the employees, and the legislature is trying to pass along the buck to whomever they can. A suggestion to all of you…..It is time to stand up and be counted. Otherwise you will most certainly find yourself witout a job. The taxpayer has not benefitted from any of this. Taxes have increased and the problems have only increased as well……………. - Arthur Andersen - Thursday, Dec 6, 12 @ 11:52 am: In related news, Gov. Pat Quinn (D-Irrelevant) has offered a cash reward for the safe return of Squeezy, the Pension Python. Squeezy was last seen losing wind and disappearing into the air over Springfield during this week’s Fall Veto Session. Quinn said, ” Squeezy is a big part of our plan to reform the pensions here in the Land of Lincoln and we need him back as we speak truth to power.” Quinn asked anyone with information on Squeezy to contact “Dave Vaught, no, make that Kelly, no, oh have ‘em just call me.” - the Patriot - Thursday, Dec 6, 12 @ 11:55 am: AFSCME and the IEA are like the guy asking Jim Jones for their third cup of kool aid. You folks have elected officials for the past several decades and let them get away without paying your pensions. Mike Madigan Signed every budget for the past two decades that screwed you out of your pensions and you will continue to support him. If you belong to a public sector union in IL, just put your head down and ask for another cup of Kool-Aid. - dupage dan - Thursday, Dec 6, 12 @ 11:58 am: mid-level, I agree, for the most part. However, how do you get them to first admit that they benefitted from the way things were done and then how do you get them to pay up. Taxpayers/voters/businesses won’t easiliy accept that they benefitted because there is not a straight line from cause to effect. Politicians don’t want to tick off the taxpayers/voters/businesses. This is the problem here. Politicians handed out what they perceived would get them re-elected and the voters went along with it. Who wouldn’t go along with more programs but no new taxes? Now the piper has to be paid and we state employees/unions (not entirely faultless) are being demonized by the governor and the MSM. As a state employee I have stated here more than once that I think we should embrace some changes - we would look bad if we didn’t. We would look good if we did. All have had to belt tighten these past few years - put blame aside. How that happens is the tough part. Should the rank and file accept these changes? Can we do so without setting some type of precedent that would result in future changes occuring that would violate the constituion - “hey, you did it once, why not now?”. Will AFSCME accept some reasonable changes or are they gonna circle the wagons and refuse everything? - Anon. - Thursday, Dec 6, 12 @ 12:08 pm: Sue @ 9:09 == since Bois is assering the State judges have conflicts seeing how they are pension beneficiaries == If he doesn’t know that this issue was resolved decades ago, he certainly is not the “best lawyer in the country,” so it wouldn’t surprise me that (assuming he was quoted correctly, and that the statement isn’t just hyping his case for the public) he also doesn’t know that federal contract clause cases have held that statutes that look like contracts (”you work for 20 years, we pay you a pension”) ARE contracts or how often the courts have rejected “fiscal emergency” arguments by states trying to weasel out of contracts. - Leave a Light on George - Thursday, Dec 6, 12 @ 12:31 pm: “20% of states do not tax state gov’t retirement income” Illinois does not tax ANYONE’S PENSION. Retired state employee’s do not get a special break on taxes. - Ready To Get Out - Thursday, Dec 6, 12 @ 12:44 pm: George…and is that the fault of state employees too? Was just stating a fact clarifying an earlier post. - Cook County Commoner - Thursday, Dec 6, 12 @ 12:44 pm: “The IL Supreme Court, not the US Supreme Court, has final word on what the IL Constitution means unless that interpretation somehow violates the US Constitution.” I suspect that ultimately the SCOTUS will have the final word on county and local governnent employee pensions via ch 9 bankruptcy courts. I then suspect that state plans will begin absorbing so much revenue that elections may yield new state level officials truly committed to abolish these fiscal anachronisms and substitute something more sustainable. This will take years. The vested interests in gov pensions are huge (pensioners, their families, elected officials, investment advisers, connected borrowers from plans, gov employees running the plans, union officials). This is a politically savvy blog. You folks know the power involved here to maintain the staus quo. It’s enormous. This will have to take its course over years of pain in the private sector until regular citizens have had enough. - PublicServant - Thursday, Dec 6, 12 @ 12:55 pm: The unions never “looked the other way”, or “let them get away without paying pensions”. The state was sued. The courts ruled that while we couldn’t force the legislature to pay, the were ultimately responsible for paying pensions as they come due. State employees are blameless here. Face up to it. - Tony - Thursday, Dec 6, 12 @ 12:59 pm: Reminder: Teacher unions and school districts have both lobbied the GA in favor of pension holidays in the past because they wanted to avoid cuts to state education funding. Yes, the GA and a succession of guvs deserve almost all the blame for creating the pension crisis through underfunding, but the teachers and districts have, at various times, endorsed this behavior. And Pot Calling the Kettle: == This is the case now. == It most certainly is not the case now. For the most part, the employers (the districts) are paying employee costs and a government that is not the employer (the state) is paying the employer costs. No matter how you slice it, that represents poor public policy. Yes, school districts are going to have to hunker down in some tough negotiations with teachers, but we are in a crisis and the crisis was caused, in part, because the school districts could toss around pension benifits freely knowing they didn’t have to pay the bill…the state did. Any pension reform must correct this structural stupidity. - Ready To Get Out - Thursday, Dec 6, 12 @ 1:15 pm: PublicServant is correct. Was just trying to find the specific references to those lawsuits, as they have been referenced on this blog many times. It’s an old and untrue accusation! - Ready To Get Out - Thursday, Dec 6, 12 @ 1:25 pm: PublicServant…found one reference. In the 1998 “Sklodoswski” decision by the Illinois Supreme Court, “beneficiaries in various state employee pension systems brought suit seeking to compel the state and its officials to appropriate monies necessary to meet statutory funding obligations contained in the Illinois Pension Code.” Essentially, Supreme Court ruled that while beneficiaries do have a contractual right to benefits, the Illinois constitution does not require that the state pre-fund those benefits. - Sgtstu - Thursday, Dec 6, 12 @ 1:27 pm: dupage dan - Will AFSCME accept some reasonable changes or are they gonna circle the wagons and refuse everything? It would seem at this time that is all the union can do. If you are not invited to the Pow Wow best thing to do is “circle the wagons”. At some point someone with a clue is going to have to say, we need to have the people who have the most skin in the game at the table to help come up with a plan. My mother use to say “easier to catch a bee with honey than it is vinegar”. Common sense should dictate that everyone stop trying to shove their pension “reform” ideas down the throats of those it effects. Try asking for some help and ideas, might get some good ideas and cooperation that way. - soccermom - Thursday, Dec 6, 12 @ 1:35 pm: Dirt Diver, I have known Dan Biss for years. He is smart, thoughtful, hard-working (and very funny.) He truly cares about getting this right, and about putting the State on a solid financial footing. And no, I don’t work for him. - Pot calling kettle - Thursday, Dec 6, 12 @ 1:44 pm: @Tony ==For the most part, the employers (the districts) are paying employee costs and a government that is not the employer (the state) is paying the employer costs.== My point was, it all comes out of the same pot and that teachers who choose to have the district pay their portion of TRS do so at the expense of receiving a lower salary. Just because it does not come out of their pay check does not mean it has no link to their overall salary. ==…the school districts could toss around pension benifits freely knowing they didn’t have to pay the bill…the state did.== Really? As you wrote in the prior paragraph, many districts ARE paying the bill; granted it’s the teachers portion, but it is the bill. For the record, last year, 594 of 941 districts (63%) paid at least some portion of the teacher’s contribution to SURS. 557 (59%) paid more than half. - Sue - Thursday, Dec 6, 12 @ 1:44 pm: If the legislature does transfer all or part of the funding obligations onto the local school districts- it will be time to visit the funding formula used by ISBE when it comes to sending money to CPS- CPS always cries about how chicago residents have to pay for their own pension and the rest of the state’s teachers through the income tax but always neglact to mention how much more $$ CPS gets from Springfield( which of course comes from the suburban and downstate taxpayers) - Exhausted - Thursday, Dec 6, 12 @ 1:58 pm: PublicServant and Ready to get out: You are correct that the unions sued for funding, but non the less..they also benefitted from the underfunding by asking for and receiving large increases in wages. Promises made by Blago and Quinn that may prove impossible to keep. - Archimedes - Thursday, Dec 6, 12 @ 2:15 pm: Rhode Island consitution does not speak to pensions. RI pensions are created by statute and only have constituional protection if the court rules they are a contractual obligation - even then, the court would have to rule as to the scope and breadth of the contract. i.e. when is there a contract (when an employee is vested? retired? hired?), what does it cover (accrued and/or yet to be earned benefits?). Finally, RI has invoked “police power” in their pension reform statute - a state may break or alter a contract if it justly exercises police power. The use of police power to alter a contract is rarely granted by the courts - and even then it is narrowly construed. It is unlikley that RI will be very useful in predicting the outcome of any legal action in Illinois, New York, or other States that have strong consitutional protection for pensions. - Norseman - Thursday, Dec 6, 12 @ 2:24 pm: Exhausted, I don’t recall there being a quid pro quo between the unions and Blago/Quinn on pension funding. Even if this was the case, folks still ignore the fact that merit comp employees haven’t seen these increases. Instead, they were subjected to decreases due to furloughs. Nobody is empowered to negotiate any of these issues for merit comp employees. They are at the will of the politicians. - dupage dan - Thursday, Dec 6, 12 @ 3:06 pm: Sgtstu, Quinn did ask ASFCME to come up with some ideas a few years ago early in his administration. The union came up with a few feel good offerings that some criticized as more slight of hand accounting and window dressing that real cuts. What I recall from that period is that there is real fear that agreeing to more substantive cuts would have opened up the union contract which the union was loath to do. Further cuts would have required the union to cooperate with some type of constitutional amendment - something the union will NOT do. The union is on record stating that they do not believe ANY changes can be made to the pensions since same is codified in the constitution and is therefore inviolate. How do you negotiate with that position? - Dirt Diver - Thursday, Dec 6, 12 @ 3:09 pm: Soccermom, I don’t disagree with some of the things you stated. There is a very serious flaw with this bill, probably a flaw (refer to my comment @ 10:27 AM about the flaw) that will be removed. Until that component is removed, I cannot say with a straight face that this reflects caring about “doing this right”. As I believe that the sponsors’ primary concern is short term budget relief, to free up money for other worthy expenditure items. I can’t disagree with accepting the fact that the current payment plan is un-achievable given the political/budget pressures, but to attempt to realize savings immediately (before a court challenge) is a sucker’s bet. - WhoKnew - Thursday, Dec 6, 12 @ 3:53 pm: - Arthur Andersen - On Squeezy, the Pension Python. I’m not sure I saw him, but I’m damn sure I smelt him. Now, tell me again, who do I call!! - Ruby - Thursday, Dec 6, 12 @ 3:55 pm: The money that should have funded public pension funds was used to keep taxes low for everyone. It would seem logical therefore that everyone should be responsible for paying back this money to the public pension funds. There are many constitutional ways to do this such as taxing some services, keeping the state tax on income at 5% for an additional 5 years, and stopping the corporate welfare drain on state revenue. Shifting some of the cost of pensions to local school districts and state universities 1/2 % a year up to 6 % of employees salaries that are over $50,000 would be a fair and constitutional solution to funding public pensions. Taxing all retirement including state pension income until the pensions are better funded would also be constitutional and fair. These solutions would require some sacrifice by everyone. Did I leave anyone out? - Crime Fighter - Thursday, Dec 6, 12 @ 4:21 pm: Ruby - Your idea is straightforward, legal, moral, and elegantly simple. Unfortunately, those who blame the lenders (workers) have already won by framing a partial pension default as “reform”. - Sue - Thursday, Dec 6, 12 @ 4:30 pm: Ruby- the tax revenue generated from the increase to 5 percent doesn’t come close to what is needed to retain the current benefit levels—– - Your additional revenue suggestions also would be insufficient and probably difficult to enact- I for one assume the 5 percent is permenant since even absent the pension drain the State is essentially insolvent due to the large backlog of bills already owed- The reality(and no one ever wants to accept the truth) is that due to the perenial underfunding of the Pension Plans for 40 plus years along with the regular enrichment of benefits IT IS IMPOSSIBLE to catch up- Every dollar the State failed to contribute results in an annual 8 percent loss(or at least actuarial loss) of investment returns- Given the compounding of these losses and the growth in the Pension Payroll, the State, the taxpayers and the beneficiaries are in a deep hole- Absent a significant revamping of the benfit schedule(which the Unions claim would be unlawful) there is not enough money available to pay the benefits- People on this Board jut assume the courts will order the legislature to come up with the money but it is probably not likely to happen nor would the Courts impose what would amount to a confiscatory tax on the taxpayers- We would be looking at rates probably something north of even 10 percent- At some point the IEA, the IFT and other Unions will have to face the reality that their members are making contributions into Plans which will not be there for their members down the road and they will come to the table and agree to concessions- Until the unions come to the reality that absent concessions the Plans will run out of money nothing will happen - Unlike the federal Government which can print money- illinois is stuck with imposing taxes and borrowing- With the single worst credit rating in the United States- how much more borrowing do the unions believe Illinois can pull off before the spigots are shut off and/or the borrowing rates become impractable- Believe it or not we as a State are approaching the situation Greece is in - geronimo - Thursday, Dec 6, 12 @ 4:39 pm: Pension reform………..if you steal money from my wallet is that called wallet reform? - Sgtstu - Thursday, Dec 6, 12 @ 4:43 pm: Ruby - Yes you did, the Governor, the legislators and Judges. Did I leave anyone out ? - Ruby - Thursday, Dec 6, 12 @ 4:53 pm: Sgtstu 4:43 pm The Governor, legislators and judges would pay state income taxes on their retirement income. - western illinois - Thursday, Dec 6, 12 @ 5:43 pm: Thanks for the RI facts Archimedes As for this Bankruptcy (or Greece nonsense). To be comparable to Greece Illinois would have to have debts of 700 billion dollars. - Anon* - Thursday, Dec 6, 12 @ 5:47 pm: Sue, Believe it or not we aren’t Greece and this is not the same situation. There are plenty of ways to raise revenue and trim expenses which don’t include pensions. Of course that wouldn’t let folks like you blame the mess on those pesky unions and their desire to bankrupt the state in order to line their own pockets. - Crime Fighter - Thursday, Dec 6, 12 @ 5:48 pm: - geronimo - Thursday, Dec 6, 12 @ 4:39 pm: =”Pension reform………..if you steal money from my wallet is that called wallet reform?”= Appropriate analogy geronimo. - PublicServant - Thursday, Dec 6, 12 @ 6:44 pm: Sue, please provide links to the actuarily-based studies that support your contention that “IT IS IMPOSSIBLE to catch up”. Absent those links, what do you base your opinion on other than your right wing ideology? Until you can support your contentions with verifiable facts, your opinion I will give your opinion the respect that it’s due. Zero. Zip. Nada. Romney lost. You will not be balancing the budget on the backs of the middle class in this country. As Madison has stated, it’s simple, raise the revenues needed to pay back the money that was borrowed. The pension funds are no different than bond-holders; debt is debt. Pay it back. Simple as that. I await your links to the studies that support your position. - Sue - Thursday, Dec 6, 12 @ 6:46 pm: Anon- OK- lay it out- how would you pay for the pensions going forward- what expenses do we trim- Medicaid, schools, prisons, roads- the fact is that the pensions are freezing out all other funding needs and it is only going to get worse every year- what is your plan - Sue - Thursday, Dec 6, 12 @ 6:56 pm: Public Servant- I don’t think the illinois Pension issue has anything to do with who is our President- If you want a link- just go to the TRS web page- they spell it out- Their own Executive director in a rare moment of candor acknowledged the State is unable to honor the commitments made- I don’t blame the unions anymore then the legislature and various Governors who agreed to the benefit enhancements over the years without enacting and living up to sufficient funding mechanisms- All I am saying is that at this juncture the damage is probably irreparable- There is no taxation program which would pass political muster available to satisfy the obligations which have accrued and are accruing every passing day- Frankly, the union representatives are really failing their memberships having the employees continue paying into the funds not having any assurance that the benefit payments will be made when these folks retire- Does anyone expect that the teachers recently entering service as tier one participants are going to collect the pensions they will be paying for over the next 25 to 30 years- The term “Ponzi scheme” comes to mind - PublicServant - Thursday, Dec 6, 12 @ 7:52 pm: The term unsubstantiated opinion comes to mind actually Sue. I don’t care who you blame, or don’t blame. The point is without supportable answers to legitimate questions, your opinions, the unassailable “facts” you attempt to build your arguments upon, are wothless. What is your estimate of when and if the funds will run out? What can you point to that has informed your opinion? What do you base your comment on when you say that “There is no taxation program which would pass political muster available to satisfy the obligations which have accrued”? I’ll bet you didn’t think the legislature would be able to raise taxes at all. They did, however. And revenue needs to be part of the solution now too Sue. I see that in none of the proposals except Fortner’s. If you don’t think that what is happening to middle class state employees here in Illinois has everything to do with the recently repudiated national Republican push to make the middle class responsible for replenishing the coffers while the rich get off scott-free, you’re more willfully blind than I thought. - Anon* - Thursday, Dec 6, 12 @ 8:07 pm: Sue, Cut them all. Tax trades, services and pensions. Make schools pay their own. The good folks of Illinois were paying 3% income tax for the last 40 years and getting goods and services that in reality needed a tax of around 5%. If the chicken littles want to scream the sky is falling then be prepared to pay up to catch up for 40 years of underfunding. - RNUG - Thursday, Dec 6, 12 @ 8:35 pm: Ready To Get Out @ 1:15 pm: Haven’t read all the comments yet to see in anyone else answered but the initial suit you are looking for is IFT, et al (a lot of the other unions) 1975 or 1976. That was the first test of the pension clause and underfunding. - Old and In The Way - Thursday, Dec 6, 12 @ 8:47 pm: Anon-you are right on target. Sue-Get a grip on reality. What was the pensions funding level in 1970 the year the pension clause was included in the new state constitution? In fact it was roughly the same as it is today, hence the clause. Better yet read some of the debate and correspondence during ratification. The intent of the pension clause was clear and the issues sound exactly the same as we are hearing today. Yet somehow we have managed to avoid Armageddon for 42 years. I suspect that Illinois will survive this too but EVERYONE will need to pay, not just the retirees. CME, no more $500 million gifts. Civic Club and Tribne crew, no more gimmes. And farmers, no more property tax breaks. EVERYONE. It’s not Armageddon, it’s fair and to some it just seems like Armageddon! - Old and In The Way - Thursday, Dec 6, 12 @ 8:57 pm: IFT vs Lindbergh 1975 McNamee vs State 1996 Both cases ruled that while the state was compelled to honor the contractual pension obligation the clause did not compel the state to contribute either at a minimum level or formula. - RNUG - Thursday, Dec 6, 12 @ 9:01 pm: Sue, Anon, et al, Earlier I cited several sources of taxation and the amounts they could generate. This is based on IDOR state revenues for 2011. To repeat and expand: For comparison, raising the current income tax rate from 5% to 6% is estimated to bring in another $#2.3B annually. Starting to tax retirement income is estimated to bring in something less than $1.2B annually. Starting a sales tax on services could be as big as about $9B annually. If you tax retirement income and sales tax on services and DEDICATE EVERY BIT OF IT TO PAYING BACK THE PENSIONS WITH NO NEW SPENDING … you have repaid around $52B of the $95B shortfall in 5 years. Toss in the extra ‘ramp up’ $3B that is being paid every year and that’s another $15B for a total of $67B. Add in shifting the ‘normal’ pension cost to the school districts and you get another $4B for a total of $71B. Of course, that solution means all other state spending will, as a matter of inflation, decline about 20% in terms of “current dollars” by the end of the 5 year period unless there is a huge economic boom during the same period. The problem is not insurmontable … but there is NO political will to do so because the legislature would have to admit they screwed up and would have to accept the blame for the tax hikes. And for the record, I’m mostly closely aligned with the tea party people who don’t want any new taxes … but that is what it’s going to take to fix the problem without even more drastic cuts to the various social / welfare programs. It’s past time for the GA to pick their poison and take it … - Anon* - Thursday, Dec 6, 12 @ 9:15 pm: RNUG, I didn’t realize a service tax would bring in so much revenue. An extra 9 bil a year would probably make Moody’s upgrade us a notch to slightly terrible from completely horrible. - Old and In The Way - Thursday, Dec 6, 12 @ 9:23 pm: Moody’s? Hey, don’t they rate mortgage backed securities too? - western illinois - Thursday, Dec 6, 12 @ 9:44 pm: Why not put the Casino money toward it? - RNUG - Thursday, Dec 6, 12 @ 10:34 pm: Anon*, In fairness, I don’t KNOW a service tax would bring that much since I don’t work at IDOR. As I said a couple of different times, I’m basing that on the often quoted statement that the services industry not being hit with a sales tax in Illinois is as big as the hard goods that do have a sales tax. According to the IDOR annual reports, the current “Retailers’ Occupation, Use, Service Occupation, Service Use” tax brought in $9.3B, $8.7B and $9.5B (rounded down) annually the past three years. That’s the second biggest pile of tax revenue. Here’s a link: http://www.revenue.state.il.us/Publications/AnnualReport/2011-Table-1.pdf I was pointing out possible sources where the State could get money. Doesn’t mean it wouldn’t be painful, doesn’t mean it wouldn’t be a drag on private sector business of Illinois; doesn’t mean some of the potential tax “targets” couldn’t leave Illinois. And it definitely doesn’t mean you could do it without being horribily vilified by the press and public … but there is potential revenue sitting out there. There are other things that could be taxed. Someone here (I apologize for not remembering the name) proposed a $2 tax ($1 each on buyer and seller) on all the CME trades. Potentially, that was a really huge number. I started with the assumption that Illinois will be forced to keep the “temporary” income tax increase in place. A lot of people seem to think that is a valid starting point. You could tinker with the existing income tax, either by pushing the rate even higher which is, relatively speaking, easy to do or you could try to move to a graduated income tax which is much harder and requires a constitutional amendment. Either of these moves could generate big amounts of revenue depending on how the change was structured. The flip side choice is to cut spending by trying to tackle the entire welfare spending state. But to be objective in looking at those cuts, about 90% of the welfare money comes from the Feds (not that we should be wasting fed money but we don’t control it at the state level) as pass-thru … so to get any big amount of money, you would have to completely eliminate welfare in this state to save the state’s 10% or so portion. At best, you could get millions or maybe close to a billion here, not the multiple billions needed. Not going to happen, not only from the compassion standpoint but also because there isn’t enough state-only money in just that approach. Since you can’t legally dump the pension obligations, you have to either dump other obligations, raise revenue, or delay paying the pension obligations … that’s simple logic. Since it’s reached the point where the bond houses won’t stand still for any more delay, it’s cut or tax. Or you try a unconstitutional Hail Mary, get shot down by the courts, and tell the bonds houses to take a hike … but then you have a problem borrowing money next time to build roads or whatever. The bottom line right now is the uncertainty. Businesses (and individuals also) like to be able to plan the future knowing the environment (taxes, income, etc.) they will be facing. They can deal with almost any scenario IF they know what it is and are assured it will remain that way for some period of time. As someone else observed, this just reflects the entire national debate right now on who’s going to pay for what level of spending. - Soccertease - Thursday, Dec 6, 12 @ 11:01 pm: Nekritz is setting herself up to lose her seat (as she should) by sponsoring a bill that will end up being tossed by the court. This bill will compound the state’s pension problem because there will be a ’stay’ delaying any of the payments until the court case is final and that may take a while. - wishbone - Friday, Dec 7, 12 @ 9:14 am: “The point is without supportable answers to legitimate questions, your opinions, the unassailable “facts” you attempt to build your arguments upon, are wothless (sic). You seem to spend an inordinate amount of time telling other people what they can and can’t post rather than responding to their arguments with your own. Support your view that the state is not approaching a crisis, and you won’t have to worry so much about other people’s opinions. - PublicServant - Friday, Dec 7, 12 @ 10:25 am: Wishbone, as I previously stated, you and Sue seem to get your future predictions from the same source: a crystal ball. If I were the one making predictions, I’d be glad to provide my sources. Apparently you don’t feel the need to do that, leaving us to give your opinions little weight. - Ruby - Friday, Dec 7, 12 @ 11:01 am: RUNG - 10:34 pm - Thanks for the link: http://www.revenue.state.il.us/Publications/AnnualReport/2011-Table-1.pdf There is so much good information there. Sorry, comments for this post are now closed.