* The IFT’s Dan Montgomery has probably the best argument I’ve seen for avoiding the passage of a pension reform plan that appears unconstitutional…
As reason for their recent downgrade of Illinois’ bond rating, Standard and Poor’s warned that unconstitutional cuts would invite “legal challenges” and cause “several years” of uncertainty. Legislators took an oath of office to support the Constitution, yet many have said the courts should do their jobs for them. Passing an illegal bill to the courts is just passing the buck to taxpayers.
Proponents of the Nekritz-Cross plan are going so far in private as to say the plan probably doesn’t pass constitutional muster, but that the pension funding crisis is so bad that it gives the General Assembly certain latitude, even police-type powers. Even so, that’ll take a while for the courts to sort out.
* My syndicated newspaper column…
Illinois House Speaker Michael Madigan was hoping Thursday to avoid the same dismal results as the previous week when he presented some new, and harsh, pension reform ideas.
The week before, one of his pension proposals received just one vote, his own. None of his other proposals got more than five votes.
That wasn’t supposed to happen. Members of his leadership team thought some of those amendments would get at least a few dozen votes. Oops.
Making matters worse, the House Republicans refused to participate in the process, with not a single member voting up, down or “present” on Madigan’s amendments.
Asked on Wednesday’s “Illinois Lawmakers” television program about the GOP’s refusal to vote, Madigan (D-Chicago) said the Republicans had made a “mistake.”
“They’re elected,” Madigan told host Jak Tichenor. “And their electors tell them to come here and vote. They don’t tell them to come here and not participate.”
The Republicans have said their refusal to vote was in protest over Madigan running so-called “gotcha” amendments that were designed solely to make them look bad and provide fodder for negative advertising campaigns.
But in reality, the GOP is going to get zinged no matter what. Refusing to vote on a series of controversial bills easily could be turned into a nasty ad program.
Last week, however, party discipline cracked a little when two House Republicans broke ranks and voted for a Madigan-sponsored amendment to cap the “pensionable” income of government workers at Social Security’s taxable income cap.
That means no further pension benefits can be earned by a state employee making more than $113,000, or whatever Social Security sets the level at in the future.
Reps. David Harris (R-Arlington Heights) and David McSweeney (R-Barrington Hills) both voted “yes” on the amendment, while all other Republicans refused to vote.
McSweeney also voted “yes” on two other Madigan amendments — freezing cost-of-living raises for 10 years and requiring active employees to chip in an extra 4 percent of their pay for their pensions.
Like the week before, when Madigan introduced similarly extreme measures, those two amendments got just a few votes.
A more comprehensive pension reform plan sponsored by state Rep. Elaine Nekritz (D-Northbrook) and House Minority Leader Tom Cross (R-Oswego) is expected to move through a committee this week.
But don’t expect a floor vote any time soon. Cross’ people said publicly that they have 30 votes for the bill, but some insiders are saying otherwise, with one claiming that the number is more like 20. The Democrats may not even have that many.
While the Democrats have a super-majority in the House, they aren’t closer to passing a major pension reform bill now than in the past. Most Democratic legislators by nature just don’t like the idea of forcing cuts on retirees or making them pay more for health insurance or slapping workers with higher pension payments.
And to see how this pension reform problem is stacking up, you might want to take a look at last week’s roll call on a bill to allow people convicted of drug-related felonies to get cash from the Temporary Assistance for Needy Families program.
The bill received 36 “yes” votes, with 80 voting “no.” The roll call provides a pretty good road map for where the real liberals are in the House. The “yes” votes were generally the folks who would be far less willing to cut retiree pensions and to favor alternative solutions such as tax increases and placing the burden on the affluent.
So, doing something like capping pensionable income at $113,000 per year makes sense to most of those more liberal Democrats. Just two members who voted for the TANF drug felony bill voted against the income cap.
Rep. Naomi Jakobsson (D-Urbana) was one of them, for obvious reasons. She has lots of highly paid University of Illinois employees in her district.
“My sense of the attitude of the members of the Legislature is that they’re not yet ready to take this difficult step (voting for pension reform),” Madigan said on Tichenor’s program, adding that he’s holding the pension votes to “better educate the members of the House and the Senate.”
The bottom line is that it’s going to be a while before legislators are “educated” enough to get to a resolution of this very thorny pension issue.
Subscribers know more about the reasoning that AFSCME could be pushed back to the bargaining table and about the Senate’s plans.
* Rep. McSweeney, by the way, explained his vote for Madigan’s amendments in a recent op-ed…
Speaker of the House Michael Madigan finally has started to address pension reform on the House floor. He has designed the process to try to force very tough votes by members. On Thursday, I voted for all three measures that would limit future cost-of-living adjustments, cap the pensionable salary amount, and increase employee contributions.
The stakes are high on passing pension reform. Unless we act immediately, education will continue to be cut and pressure will build to increase taxes. I will strongly oppose any future tax increases. A tax increase would hurt families and kill jobs.
* Related…
* Legal opinion calls pension plan into question - Opinion says plan could be unconstitutional if it covers retired teachers
* Editorial: Quinn Budget a Nonstarter: Gov. Pat Quinn’s budget plan, offered Wednesday, has been met downstate with a resounding thud and even casual disdain or tepid support in Quinn’s hometown of Chicago
* VIDEO: Reactions to Gov Quinn’s Budget Address - We talk with Sen Jim Oberweis (R) about his reaction to the Governor’s FY 2014 Budget Address. The we talk with Joe McCoy Illinois Municipal League — about the impact the Governor’s proposed cuts will have on cities.
- Precinct Captain - Monday, Mar 11, 13 @ 11:26 am:
If an unconstitutional pension plan is passed and tossed out by courts, would the state then be on the hook for making up money to workers in the interim period where the law was in place and active but not yet decided by the courts?
- Old and in the Way - Monday, Mar 11, 13 @ 11:42 am:
Precinct Capt.
In all likelihood there would be an injunction on any changes pending the outcome of a legal challenge.
- wordslinger - Monday, Mar 11, 13 @ 12:36 pm:
–Proponents of the Nekritz-Cross plan are going so far in private as to say the plan probably doesn’t pass constitutional muster, but that the pension funding crisis is so bad that it gives the General Assembly certain latitude, even police-type powers.–
Who’s advising these guys, Dean Faber? Is there a little known codicil in the Illinois Constitution given the General Assembly unlimited powers?
And how do you define crisis? You might miss a payment, maybe, 20 years from now?
Do your job in good faith. No one said it had to be easy.
- Retired - Monday, Mar 11, 13 @ 12:41 pm:
So, for the sake of argument… I choose health care over COLA. Why should I believe the same politicians who thu state statuette
Guaranteed my healthcare after 20 years. Wonder if they change their minds in the future!!!! ??? What if they raise rates in the future???
Why didn’t theyf fund this in the past. Remember when each member had millions of dollars to hand out in their districts…. The late 90’s… Unbelievable we are here today!
- RNUG - Monday, Mar 11, 13 @ 12:57 pm:
para 4 above … rest = reset
- Billy - Monday, Mar 11, 13 @ 1:00 pm:
If a plan is passed involving retired state workers, it will be ruled unconstitutional! The state pensioneers were promissed their benefits at the time of retirement. They made their plans based on what the state promissed them. This would be considered reduction in benefits, and unconstitutional. The state should work on reducing costs of pensions of workers who still have jobs, and can make retirement decisions based on legislation passed, while they still have a job. The state though looks at the benefits retired workers get, and figure that is where the money is!
- Demoralized - Monday, Mar 11, 13 @ 1:07 pm:
@Billy:
There is no plan out there that would reduce what current retirees receive, except for healthcare costs (if you consider that part of retirement).
- StayFree75 - Monday, Mar 11, 13 @ 1:14 pm:
Since CMS is basing retiree health insurance premiums as a percentage of pension income, it sure seems like those premiums have diminished pensions. To tie premiums to pension income in the manner CMS has only strengthens the unconstitutionality argument in the Maag case.
- PublicServant - Monday, Mar 11, 13 @ 1:17 pm:
@Demoralized - I realize that you’re attempting to hold to the Sidley Austin line stating that “current” benefits won’t be affected. The problem with that “logic” is that the ability to receive that next annual COLA is as current as the ability to receive next month’s pension check. But you go ahead and put that out there before a judge if you’d like, and we’ll see what happens.
- VanillaMan - Monday, Mar 11, 13 @ 1:19 pm:
A General Assembly willing to spend billions the State does not have in order to remain in office, will be willing to spend money the State does not have in order to remain in office in this situation as well.
It ain’t their money. So, appealing to logic, thriftiness, or doing or their best for Illinoisans doesn’t work for them when it threatens their political power.
Another incentive to avoid this route will be needed. Money doesn’t talk when it isn’t yours.
- Billy - Monday, Mar 11, 13 @ 1:23 pm:
Demoralized, I sure do! Teachers did not have medicare tax taken out of their checks till 2000. This was a state law. This has led to a number of current teachers who do not have medicare, because the cost would be prohibitive. Teachers retired with the promiss that the state would allow them to pay part of their medical costs, with the state also paying part in the teachers retirement medical insurance program TRIP. The state wants to force these non medicare retirees to choose between their medical insurance and their cost of living increase! This is a sure reduction in pension benefits!
- Steve Bartin - Monday, Mar 11, 13 @ 1:29 pm:
All Illinois politicians have to follow the Illinois state constitution. If pensions can’t be cut then : 1)other parts of the Illinois state budget will have to be cut 2) Taxes will have to go up. 3) Property will have to be sold to pay for pensions 4) Current Illinois state workers may have to pay increased contributions into their pension plan or 5) Insolvency.
Illinois state workers may find out that the state constitution is indeed a suicide pact in which their check might not be in the mail because there’s no more money.
- Huh? - Monday, Mar 11, 13 @ 1:41 pm:
Anybody see this NY Times article:
http://www.nytimes.com/2013/03/12/business/sec-accuses-illinois-of-securities-fraud.html?hp&_r=0
- Old and in the Way - Monday, Mar 11, 13 @ 1:41 pm:
Steve
Get a grip on things! Better yet look at the facts and figures. The five pension systems are funded at roughly the same percentage today as they were in 1971. And yet no one has missed a payment.
The villan here is the ramp payments that Edgar and the GA backloaded with escalating payments. Not saying there isn’t a problem, there is, but the ramp payments have created a pseudo crisis. The crisis could be averted in any number of ways. The problem for the GA is that there is going to be some fiscal pain and discipline involved and just dumping this on the retirees is probably not going to work.
- Rich Miller - Monday, Mar 11, 13 @ 1:43 pm:
===Anybody see this NY Times article:===
Um, yeah, it was posted here about four hours ago.
https://capitolfax.com/2013/03/11/state-settles-blago-era-sec-allegations/
Sheesh, man, get with the program already.
- Diogenes in DuPage - Monday, Mar 11, 13 @ 1:55 pm:
Will the Legislature seek a “solution to the pension problem” that meets political science (sells to the anti-public pension rhetoric) or one that meets actuarial science (works to reduce the pension underfunding over time)? Does any one care what COGFA thinks of different pension bill scenarios? (Will a bill produce measurable results?)
And public pension system members seem to think that some plans are out of bounds solely on the basis of “constitutionality.” What if some wise, powerful group seeks to change the Illinois Constitution by amendment BEFORE 2028? Think taxpayers faced with higher taxes and reduced state services would support that in lieu electing to remove the “pension clause”?
- Blockhead - Monday, Mar 11, 13 @ 1:59 pm:
Ralph Martire has a solution to this but our legislators don’t want a solution. They want to punish. Unless there is tax restructuring, any pension “reform” will not solve our state’s inadequate revenue flow. Once again, if we had had adequate revenue in the first place, the pension money would not have been used to buys good/services for all citizens in this state. Given that more revenue is not on the table, but cuts to those who have been stolen from is evidence that this is a vindictive charade aimed at the victims. Why?
- wtf - Monday, Mar 11, 13 @ 2:00 pm:
The police sergeants said no. http://www.suntimes.com/18783904-761/police-sergeants-reject-contract-deal-emanuel-blow-on-pensions.html
- Rich Miller - Monday, Mar 11, 13 @ 2:01 pm:
===Ralph Martire has a solution to this but our legislators don’t want a solution.===
The SEC more than just implied today that Martire’s solution - which I’ve long backed - of refinancing the ramp is unacceptable.
- Fred's Mustache - Monday, Mar 11, 13 @ 2:01 pm:
=== Who’s advising these guys, Dean Faber? Is there a little known codicil in the Illinois Constitution given the General Assembly unlimited powers? ===
I think you mean Dean Wormer, but I got the drift. It seems that the Nekritz and Cross think its about time that someone puts their foot down, and that foot is them! Regardless, Nekritz and Cross should be placed on double secret probation! LOL
- PublicServant - Monday, Mar 11, 13 @ 2:01 pm:
You ought to do a little research on Ex Post Facto laws Diogenes.
- Blockhead - Monday, Mar 11, 13 @ 2:04 pm:
=some members seem to think that some plans are out of bounds solely on the basis of “constitutionality”
Interesting because when the topic of joining just about every other state in this country, adopting a graduated, more fair method of taxing Illinois workers , there is panicked outrage, pointing to the constitution! Why does the constitution provide protection for those in favor of keeping inadequate rates but the constitution is just simply something that can be fixed for those receiving a pension? Isn’t the constitution the constitution for both?
- Rich Miller - Monday, Mar 11, 13 @ 2:09 pm:
PublicServant has a valid point. You can change the Constitution, but that would only apply to going forward.
- PublicServant - Monday, Mar 11, 13 @ 2:10 pm:
Rich, I’m not seeing where the SEC said that Martire’s plan was unacceptable. If it’s taken you more than half a century of borrowing from the pensions to rack up the debt you currently have, its going to take longer than 30 years to sustainably pay it off.
- walkinfool - Monday, Mar 11, 13 @ 2:13 pm:
“double-secret probation” for the Sponsors, based on “private” comments of unnamed “Proponents” LOL
And everyone’s a constitutional expert!
Any serious solution, producing numbers that actually work, with any has a chance of passing, will be pushing boundaries and will guarantee a legal challenge from some direction. How serious a challenge, taking how long to resolve, remain to be seen.
- Norseman - Monday, Mar 11, 13 @ 2:13 pm:
===Proponents of the Nekritz-Cross plan are going so far in private as to say the plan probably doesn’t pass constitutional muster, but that the pension funding crisis is so bad that it gives the General Assembly certain latitude, even police-type powers.===
Sort of like jury nullification, or financial crisis nullification. Despite the constitution its all about the money. What a perverted argument - the rule of law is subservient to the money.
- Fred's Mustache - Monday, Mar 11, 13 @ 2:14 pm:
=== What if some wise, powerful group seeks to change the Illinois Constitution by amendment BEFORE 2028? ===
=== You ought to do a little research on Ex Post Facto laws ===
From my understanding, the prohibition against Ex Post Facto laws only applies to criminal statutes and civil statutes that have a “punative intent”
- Rich Miller - Monday, Mar 11, 13 @ 2:16 pm:
===I’m not seeing where the SEC said that Martire’s plan was unacceptable===
SEC…
===The State’s plan also spread costs over fifty years, in contrast to the thirty-year amortization period adopted by the pension plans of most other states. The longer amortization period extended the amount of time required to pay down the UAAL, reducing the State’s annual statutory contributions while increasing the real cost of the pensions over time.===
- PublicServant - Monday, Mar 11, 13 @ 2:18 pm:
Article 1, Section 10 of the US Constitution:
“No state shall… pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts…”
The pension is an enforceable contract, the benefits of which shall not be diminished or impaired.
- wordslinger - Monday, Mar 11, 13 @ 2:19 pm:
–I think you mean Dean Wormer, but I got the drift.–
I’m so ashamed. Dean Wormer. Faber College.
But this isn’t over. Was it over when the Germans bombed Pearl Harbor?
- PublicServant - Monday, Mar 11, 13 @ 2:21 pm:
Well yea Rich, but most other states didn’t short their pension funds for 50 years. Martire’s plan is the sustainable way to go.
- Rich Miller - Monday, Mar 11, 13 @ 2:22 pm:
===Martire’s plan is the sustainable way to go.===
I don’t disagree. But it would also immediately kick up the unfunded liability, so the ratings agencies would kill us.
- Fred's Mustache - Monday, Mar 11, 13 @ 2:24 pm:
=== But this isn’t over. Was it over when the Germans bombed Pearl Harbor? ===
Heck no… maybe the way the GA can forget about the pension issue and throw a toga party instead.
- titan - Monday, Mar 11, 13 @ 2:27 pm:
@Public Servant - “ex post facto” prohibitions technically only pply to criminal laws. But the same general concept applies to the state employees’ pension rights under prohibitions regarding impairment of contracts and some due process concepts. A later constitutional amendment here can only apply prospectively
- Irish - Monday, Mar 11, 13 @ 2:28 pm:
I am assuming that the fact that one of the stronger “solutions” is the dumping of teacher pensions onto local governments means that a method to pay of that segment of the liability would appease the bond agencies.
So would a combination of Matire’s plan AND a gaming bill that sends all proceeds to pay the pensions suffice to get us out of this tight spot?
- Rich Miller - Monday, Mar 11, 13 @ 2:29 pm:
===So would a combination of Matire’s plan AND a gaming bill that sends all proceeds to pay the pensions suffice to get us out of this tight spot? ===
No.
- Rich Miller - Monday, Mar 11, 13 @ 2:34 pm:
To expand on my comment, there is no painless magic fairy dust out there. Period. End of story.
- RMD - Monday, Mar 11, 13 @ 2:41 pm:
If there is a bill passed and a lawsuit gets filed, does the Attorney represent the state in the suit?
- No Raise - Monday, Mar 11, 13 @ 2:43 pm:
Have offered my legislators a solution…pass HB 3411 and make it voluntary. That way those accepting will opt out of lawsuit and have some certainty going forward.
- Anonymous - Monday, Mar 11, 13 @ 2:45 pm:
Magic beans! That’s it! Not magic fairy dust! Magic beans!
- RMD - Monday, Mar 11, 13 @ 2:53 pm:
I meant the Attorney General. Sorry.
- 47th Ward - Monday, Mar 11, 13 @ 3:05 pm:
The “solution” to the pension problem is more money. Some from taxpayers, some from employees, some from retirees. The question is how much from which group. and that’s where we’re stuck.
It’d be nice if the employees unions negotiated their part of the give-backs, especially on healthcare premiums and COLAs, but nobody is holding their breath anymore.
We can re-do the ramp and try some other gimmicks, but without a serious infusion of money, this problem isn’t going away.
The answer is more money. The question is from whom and how much.
- One of the 35 - Monday, Mar 11, 13 @ 3:11 pm:
How can we expect the people who have led us into this pension crisis to be able to legislate us out of it?
- Arthur Andersen - Monday, Mar 11, 13 @ 3:30 pm:
The SEC just robbed the Food King.
Seriously, am I the only one who thinks that they are exceeding their authority in lecturing a State government about its pension funding plans?
Moreover, don’t they have bigger fish to fry?
Guess there’s only one cure for this. Road Trip!
- Joe M - Monday, Mar 11, 13 @ 3:30 pm:
Nekritz and Bliss seem to be using the financial emergency/police powers argument that their bill could be constitutional.
Using police powers to get out of paying bills sets a bad precedent. If you were a bond buyer or business, would you want to deal with a state that uses police powers to get out of paying its contractual obligations?
The U.S. Supreme Court has had this to say about the U.S. Constitution contract protection clause and states using police powers:
“Contract Clause of the U.S. Constitution limits otherwise legitimate exercise of state legislative authority, and existence of important public interest is not always sufficient to overcome that limitation; moreover, scope of state’s reserved power depends on nature of contractual relationship with which challenged law conflicts”
I would think that the courts would also look at if the state had exhausted all other means to solve the financial problems - such as raising revenues. After all, 32 other states have higher individual state income tax rates than does Illinois.
And the courts might also look at singling out only one group the state owes money to, to renege on. The state also owes money to bondholders and vendors. It seems like it would be discriminatory to single out one group to renege on contracts with?
- Esquire - Monday, Mar 11, 13 @ 3:33 pm:
Who’s advising these guys, Dean Faber? Is there a little known codicil in the Illinois Constitution given the General Assembly unlimited powers?
I liked the reference to the late, great John Vernon.
- Demoralized - Monday, Mar 11, 13 @ 3:36 pm:
@PublicServant:
Take a breath and I will also kindly ask you to cut the sarcasm directed at me. I’m a working member of the system so I have a vested interest in this as well. Bite me.
- Joe M - Monday, Mar 11, 13 @ 3:38 pm:
There seems to be some disagreement about what the U.S. Constitution’s contact protection clause says.
The Contract Clause appears in the United States Constitution, Article I, section 10, clause 1, and it states:
NO STATE SHALL ENTER INTO ANY Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, OR LAW IMPAIRING THE OBLIGATION OF CONTRACTS, or grant any Title of Nobility”
(I added the capitol letters to emphasis the obligations of contracts parts)
- soccermom - Monday, Mar 11, 13 @ 3:40 pm:
I don’t think it is the job of the General Assembly to do their own judicial review. If Nekritz and Biss think their bill has a chance of passing Constitutional scrutiny, I think they are justified in trying to pass it.
I will say, though, that they should make sure the other provisions in their bill are fully severable, to avoid losing the entire bill if the courts rule against them.
- Just The Way It Is One - Monday, Mar 11, 13 @ 3:45 pm:
And how long is “a while” before all House Members are sufficiently “educated??” Well, ya can be sure that it’s not until Oz, the Great and Powerful, decides. Oh yeah, that’s right-that’s the name of the Movie out now. Maybe it should be re-titled, just for Illinois, “Madigan, the Great and Powerful.” And will he just decide to wait and figure the Members are “educated” for two years from now, on his most EARnest secret hope and desire that, Gov. LISA instead would be ready to swoop in and solve the pension crisis THEN with the help of her Pop and all of those “educated” Members? What a joke.
The very idea Madigan propounds is an outright insult to every voter in Illinois who actually believes that he/she’s not voting for a bunch of UNeducated Imbeciles to represent us in the General Assembly until only “The Great and Powerful” One can first educate them!
I repeat–what a joke! After decades of wielding virtually unchecked power and persisting as the single, dominating force in the Illinois House of Representatives, I guess he just arrogantly, but really DOES, look down on the rest of us poor slugs merely known as the electorate, continuing to observe HIM get NOTHING accomplished on this all-important crisis, as the actual imbeciles!!!
- Robert the Bruce - Monday, Mar 11, 13 @ 3:47 pm:
===If pensions can’t be cut then: 1)other parts of the Illinois state budget will have to be cut 2) Taxes will have to go up. 3) Property will have to be sold to pay for pensions 4) Current Illinois state workers may have to pay increased contributions into their pension plan or 5) Insolvency.==
Don’t forget 6) Pass as much of the liability as possible to municipalities.
- titan - Monday, Mar 11, 13 @ 3:51 pm:
@soccermom - there is a difference between making the GA do its own judicial review and the GA feeling free to pass any old pandering piece of crap and throw it in the courts’ laps to fix or reign in.
The GA has some responsibility to at least try to keep things within the lines. They could certainly be forgiven for imperfectly living up to that responsiblity, but not for ignoring it.
- RNUG - Monday, Mar 11, 13 @ 3:57 pm:
In Felt, the IL SC denied the Police Powers argument re State pension impairment.
- Demoralized - Monday, Mar 11, 13 @ 3:58 pm:
@titan:
Actually, the don’t. They can pass whatever they want. It might not be the smartest thing to do but everything they pass is automatically “assumed” to be constitutional until a court says otherwise. It’s their job to pass laws. It’s the court’s job to adjudicate the law.
- titan - Monday, Mar 11, 13 @ 4:04 pm:
@Demoralized - I suppose their behavior does at times show disregard for their oath of office…but they did all swear to uphold the constitution
- steve schnorf - Monday, Mar 11, 13 @ 4:16 pm:
Rich, I’m not so sure. I think maybe what the SEC is saying isn’t that the method is unacceptable (I’m not even sure how they would have that authority), but that failing to ADEQUATELY DICLOSE how the state was dealing with its pension problem, and that the manner was not consistent with generally accepted accounting practices, is unacceptable.
- Ruby - Monday, Mar 11, 13 @ 4:26 pm:
It will be interesting to see what pension bills the Illinois House will vote on this week. I am looking forward to another exciting Thursday of pension funding reform drama.
- Norseman - Monday, Mar 11, 13 @ 4:40 pm:
I too don’t see how Illinois funds its pensions as any business of the SEC except as it pertains to info on bond issues.
- Arthur Andersen - Monday, Mar 11, 13 @ 4:42 pm:
Schnorf, you stated my point much more clearly than I did. Thanks.
#leaveoutthesnarkAA
- Demoralized - Monday, Mar 11, 13 @ 4:55 pm:
I agree with Schnorf. The SEC has no authority over our pension planning. Their authority only extends to accounting methodology, and only as it pertains to our bond issues (public market). It’s up to the investors to decide whether or not our pension plans create too much risk to their rates of return and payback of principal on the bonds they buy. The SEC just wants us to disclose how bad we are.
- wordslinger - Monday, Mar 11, 13 @ 5:13 pm:
It’s all very weird that the SEC is digging into official statements on $2.2 billion in bonds issued 10 years ago, and then commenting about pension funding.
I wish they’d done the job they’re charged with. It wouldn’t have taken five years to recover our 401K investments in the stock market and miilions of Americans would not have been foreclosed upon and their mortgages would not be under water. they h
- Arthur Andersen - Monday, Mar 11, 13 @ 6:43 pm:
word, quite ironically, the State pension systems would have also had more assets had the SEC done its “real job” timely and fully.
- PublicServant - Monday, Mar 11, 13 @ 8:48 pm:
@demoralized- Wasn’t trying to be sarcastic, but when you state that “There is no plan out there that would reduce what current retirees receive”, it makes me think that you are woefully ignorant of the latest Nekritz plan-to-screw-public-employees du jour, or I’m missing the truth of your statement. Please explain how there is no plan(bill) out there that wouldn’t reduce what current retirees receive.
If you can explain that statement, I sincerely apologize, otherwise, I second the bite me.
- PublicServant - Monday, Mar 11, 13 @ 9:07 pm:
===Martire’s plan is the sustainable way to go.===
===I don’t disagree. But it would also immediately kick up the unfunded liability, so the ratings agencies would kill us. ===
That’s debatable Rich. But, as Word always points out, the ratings agencies ratings don’t mean squat. Illinois can sell POBs cheaper than ever before, and the buyers are lining up to buy them. The ratings agencies reputation is only as good as their history dictates, and we’ve seen how well they rated the banksters and their securitized mortgage garbage and credit default swaps, so their “ratings” are a big yawn as far as reality is concerned.
- steve schnorf - Monday, Mar 11, 13 @ 9:17 pm:
PS, I tend to generally agree, though I don’t like how much further out Ralph moves the date, and if I understand it correctly, Stermer said DOA. What if we split the difference?
- PublicServant - Monday, Mar 11, 13 @ 9:24 pm:
===Stermer said DOA===
Steve, you’re on the board of CTBA. Jeez, talk to Ralph. The closer the time horizon, the greater the annual debt payback. What can Illinois afford?
- PublicServant - Monday, Mar 11, 13 @ 9:25 pm:
Oh, and what Stermer said…so what?
- steve schnorf - Monday, Mar 11, 13 @ 9:36 pm:
PS, as a former budget director, I give a whole lot of weight to what Stermer says. Budget directors don’t normally make public statements just for the heck of it.
BTW, I think you just nailed the pension problem solution problem: it starts with how e define the problem. If we define the goal as “a solution that constitutionally produces sufficient funding for the systems to meet their obligations for the foreseeable future, while at the same time requiring an affordable state contribution that doesn’t grow at an unaffordable rate, and thereby reduces the concerns of the bond market”, I think we open up a lot of potential options. I think we are unnecessarily constraining ourselves by saying “100% 30 years, and GASB” instead of saying “something that works”.
- wordslinger - Monday, Mar 11, 13 @ 9:50 pm:
Shouldn’t the S&P rating of Illinois and related debt be withdrawn?
After all, the State of Illinois, along with the United States of America, have filed suit accusing them of participating in recklessly and wantonly crashing the world economy for their own greed.
Given that, they’re hardly an an objective judge of a state that has not missed a debt or pension payment in nearly 200 years.
Could we at least get a break and not be required by law to pay these cheap hustlers to rate us, and let the market decide? Despite what the goofy SEC says, Illinois’ financial situation is quite transparent, and Illinois paper is very attractive to investors.
- PublicServant - Monday, Mar 11, 13 @ 10:04 pm:
OK Steve, I agree. I’m saying Stermer is stonewalling. He’s not attempting to arrive at a workable solution with a statement like that, with all due respect to his omnipotence as budget director. What I think a statement like that indicates is a feeble attempt at injecting politics into a fiscal issue.
As for the concerns of the bond market, I’m not sure how those concerns translate into the state obtaining financing at rates that will never be lower, nor have the buyers we have, than where they are at today.
100%? Why? Illinois is a sovereign entity that cannot declare bankruptcy as can a private entity. It exists in perpetuity, and as such, does not need to fund at any more than a reasonable percentage that will minimize interest while ensuring adequate funding to pay out current pensions.
At any rate, I think the ratings agencies would look favorably on the ctba reamortization because it works out financially and subjects the state to an amount of pain that is both sustainable, moral, and justified given the relatively free ride taxpayers have had over the last half century.
- unbiased observer - Tuesday, Mar 12, 13 @ 5:26 am:
the only solutions that really can make a substantial difference with this fiscal problem will be considered unconstitutional by the state workers. so they need to just come up with the best solution and just pass it.
beware to those arguing against pension reform based on “unconstitutional” or “illegality” arguments.
irrational or impossible laws go away all the time. and constitutions can be changed.
illinois faces catastrophic problem over the next 2-3 years. extraordinary measures will have to be take to make any sort of dent in this problem within the next 10-20 years.
- PublicServant - Tuesday, Mar 12, 13 @ 6:06 am:
God unbiased observer, I hope you’re the lawyer representing the state in court when any pension bills hit the courts…
- Rich Miller - Tuesday, Mar 12, 13 @ 6:10 am:
===the ratings agencies ratings don’t mean squat.===
Yes, they do. A major bond sale has been held up because of a lowered rating.
- unbiased observer - Tuesday, Mar 12, 13 @ 7:03 am:
i’m sorry, in 2018 over 30% of annual state budget will be going towards pension obligations.
- PublicServant - Tuesday, Mar 12, 13 @ 7:23 am:
===i’m sorry, in 2018 over 30% of annual state budget will be going towards pension obligations. ===
Implement Martire’s debt restructuring and that will not occur.
===A major bond sale has been held up because of a lowered rating.===
Because of the proximity of the ratings change, Rich, the state felt it could get a better rate at a later date. In addition, the ratings agencies are calling for action on the debt run up from pension borrowing that can be implemented quickly. Martire’s solutions are legal, can be implemented immediately, will put the state on a sustainable course to repay the debt, and will satisfy the infallable ratings agencies that you seem so concerned about.
Or, we could pass something unconstitutional and not resolve the crisis for years.
I’d bet that if we just implemented Martire’s debt restructuring, the ratings would go up immediately.
- facts are stubborn things - Tuesday, Mar 12, 13 @ 7:39 am:
unbiased observer
That is really the point. The GA has many remindies before they should freeze retiree COLA’s and dramaticaly reduce them. The GA can rais taxes, cut other spending, reamertize the debt, transfer teacher pension payments to local districts, make further changes to future employees, perhaps try and make some changes to younger workers in the tier I system (under police powers) etc. you just don’t fund state services over 40 yeras with pension dollars — creating a crises — and then claim police powers to trash the constituion to solve the very crises you created on the backs of those already retired.
- facts are stubborn things - Tuesday, Mar 12, 13 @ 7:53 am:
The rating agencies have warned Illinois not to pass something that is illegal. I beleive the rating agencies may look very poorly on the Nekritz/Cross style plan that clearly invites legal challeng and with a high degree of success.
- unbiased observer - Tuesday, Mar 12, 13 @ 8:16 am:
facts are stubborn things,
yes, there will be many changes that will be made and you alluded to some good ones. however, these are all small potatoes compared to two items:
1) decreasing pension obligations
2) increasing taxes
its going to take both of these to do it.
- facts are stubborn things - Tuesday, Mar 12, 13 @ 8:59 am:
unbiased observer
I did mention raising taxes — agree that is both legal and likely. Reducing benfits is also an option (tier II is a good legal example of that) it just needs to be done in a ethical just and legal way. Illinois has a revenue problem….that is why the GA spend the pension dollars on state services.
- facts are stubborn things - Tuesday, Mar 12, 13 @ 9:00 am:
I bleive searching for revenue on the backs of those already retired is unjust and illegal.