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Against it before he was for it

Wednesday, May 29, 2013

* As I’ve pointed out before, former attorney general Ty Fahner and his Civic Committee of the Commercial Club of Chicago have been all over the place on pension reform.

This, for instance, is from a statement Fahner issued back in February…

The Civic Committee opposes Senate Bill 1 (SB1) for a number of reasons, described below.

Sending two alternative pieces of legislation in one bill makes no sense. On appeal, it would confuse the legislative record and intent, invite the Court to take on the Legislature’s role and it would only further delay the implementation of reforms. In addition, the bill as currently drafted presumes that Part A is unconstitutional. It also presumes Part B is constitutional and without flaws of its own.

Part A:

Any serious pension reform proposal should reduce the unfunded pension liability by $30 Billion or more (with additional substantial reductions in the retiree health care liability to be pursued later). Because of changes incorporated in this bill, it is no longer apparent that it meets this standard. [Emphasis added.]

* SB 1, of course, was since amended to include just Speaker Madigan’s pension proposal. The Civic Committee endorsed that plan earlier this month

Tell your legislators to support SB1 as it will generate the cost savings necessary to help move our state forward and on its way to good financial health.

SB1, which generates real and significant savings for Illinois, recently passed the House with bipartisan support. Other proposed bills, like SB2404, simply do not go far enough, leaving Illinois with a substantial pension burden.

* But yesterday, Rep. Elaine Nekrtiz released the actuarial data for Speaker Madigan’s pension reform bill. The totals…

$21 billion off unfunded liability
$187 billion off total payments
$1.9 billion off first-year payment

One wonders if Fahner will oppose the Madigan plan, now that it comes up $9 billion short of Fahner’s demand.

Don’t hold your breath.

* Meanwhile

Downstate school districts could escape increased pension expenses under a proposed cost shift if a House pension reform plan is approved, lawmakers said Tuesday.

Rep. Elaine Nekritz, D-Northbrook, said benefit changes and higher employee contributions contained in the House plan would cover downstate teacher pension costs going forward. It’s those future pension costs that House Speaker Michael Madigan, D-Chicago, wants to shift away from the state and onto local school districts.

“The employer (ongoing) cost would be zero,” Nekritz said. “I think that will be part of the discussion on cost-shift going forward.”

* Related…

* Ill. Teachers Plans Hedge-Fund Overhaul

* Unes: How and why ’shifting’ became the new ‘taxing’

- Posted by Rich Miller        

  1. - foster brooks - Wednesday, May 29, 13 @ 9:32 am:

    The employer (ongoing) cost would be zero,” Nekritz said

    Get the truth police on this please.

  2. - Joe M. - Wednesday, May 29, 13 @ 9:37 am:

    ==The employer (ongoing) cost would be zero,” Nekritz said==

    I would think that it would be hard to prove a police state financial emergency to the Illinois Supreme Court if SB 1 is reducing the employer’s cost to zero.

  3. - Big D - Wednesday, May 29, 13 @ 9:41 am:

    The bill actually saves a bit more than $21 billion off the unfunded liability. The reason is that the bill switches the systems to modern actuarial practices so it begins by raising the unfunded liability by about $6 billion, but that is an honest assessment of the situation and GASB will require the State to do that soon anyway. So the bill goes up about $6 billion before it goes down $21 billion for a total of about $27.24 billion.

  4. - archimedes - Wednesday, May 29, 13 @ 9:42 am:

    Further - given Tier 2 and the changes in SB0001, the employee will be paying MORE than the Normal Cost of the pension benefit. This excess will pay down some of the State’s unfunded liability.

  5. - ProblemChild21 - Wednesday, May 29, 13 @ 9:45 am:


    Amen… How many times have we heard from politicians about the cost (or lack thereof) of something, only to have them proven so wrong in the end. In such matters, poor planning, poor actuarial calculations, and the law of unintended consequences often sacks legislators… Absolute proof, please!

  6. - walkinfool - Wednesday, May 29, 13 @ 9:51 am:

    Fahner pushed for $30B, got $21B, and knows he cannot do better — so he says to support it. Standard progression as bills come closer to resolution.

    Achievability trumps purity late in the process.

  7. - RNUG - Wednesday, May 29, 13 @ 9:58 am:

    What goes unsaid is there will be no savings when the courts throw it out …

    Any police powers argument went out the window the last couple of weeks when some of the legislator’s went on record about spending the “savings” instead of directing that money to pay off the “crushing” pension debt.

  8. - Concerned Retiree - Wednesday, May 29, 13 @ 10:04 am:

    If Nekritz is correct and there is no future employer cost, why does the shift need to occur?

    Also if Nekritz is correct, it means that benefits have been reduced and employee costs increased beyond what any rational person would consider reasonable. Current employees would fund the entire pension system. Yet another reason to vote against SB 1.

  9. - walkinfool - Wednesday, May 29, 13 @ 10:05 am:

    I believe that potential ongoing costs to local districts have been way overblown, and Nekritz is a straight shooter.

    I’d be more comfortable if she had said “low” or “minimal”. Even keeping track costs something more than “zero”.

    More detail should emerge. But this is the right thing to do long-term.

  10. - Anon. - Wednesday, May 29, 13 @ 10:20 am:

    ==Further - given Tier 2 and the changes in SB0001, the employee will be paying MORE than the Normal Cost of the pension benefit.==

    Does federal law allow them to do that for any plan? And, for teachers and others who are currently exempt from Social Security, would a state plan that does this fail to meet the requirements for continued exemption from Social Security, meaning the state would have to start kicking in the employer’s FICA tax? That would offset a whole lot of the “savings.”

  11. - cover - Wednesday, May 29, 13 @ 10:26 am:

    Thanks, Anon. @ 10:20 am, I thought the same thing when I heard the zero cost estimate. If you are right, that’s a 6.2% cost to school districts - they are the employers, not the state - and also a 6.2% hit to the teachers. Because of Social Security’s windfall provisions, many teachers would gain little in Social Security benefits for that 6.2% payroll deduction, so essentially it’s a pay cut.

    Lower pension benefits and a pay cut to boot… how’s that going to attract the best and the brightest to the teaching profession?

  12. - Social Security - Wednesday, May 29, 13 @ 10:41 am:

    The tier 2 pension plan is already being scrutinized by the feds as a violation of law.

    If they aren’t careful, the same thing will happen under SB1.

  13. - Small Town Taxpayer - Wednesday, May 29, 13 @ 11:10 am:

    “Any serious pension reform proposal should reduce the unfunded pension liability by $30 Billion or more”

    Should not serious pension reform have as its goal to reduce the unfunded liability by $100B? I understand that this may not be possible from a political point of view. So why not come up with a plan that aims for a reduction $60B or $70B rather than the $9B or $21B in the two bills before the GA at this time.

    Maybe the “$1.9 billion off first-year payment” has something to do with the lack of interest in more fully funding the existing pension liability.

  14. - too obvious - Wednesday, May 29, 13 @ 11:16 am:

    Hard to believe Ty Fahner lost the only political campaign he ever ran.

  15. - wtf - Wednesday, May 29, 13 @ 12:31 pm:

    On the question from a few days ago about whether Illinois should tax all retirement income, I would like to see Ty Fahner have to pay up personally for all of his lucrative corporate law firm retirement benefits. And if it drives him out of state, good riddance.

  16. - Anonymous 1 - Wednesday, May 29, 13 @ 1:14 pm:

    ==Ty pay up personally for all his lucrative corporate law firm retirement benefits==

    No, no, no! Only those little people earning an average retirement of 40K-ish need to sacrifice! They’re rich aren’t they? Not me, tho. Don’t even think about it, says Ty. Only them. That’s exactly the way this whole thing is going. It’s actually amusing to see people get into hissy-fits over folks earning what is pin money compared to Ty and the likes. The elite has done a fabulous job—stupendous, really—of turning the average middle class private worker against the average public worker while they get off scott free. I have no idea where peoples’ common sense and logic lies.

  17. - Rod - Wednesday, May 29, 13 @ 1:38 pm:

    Rich’s introduction is correct Ty Fahner was Attorney General of Illinois. But as I recall he wasn’t elected rather he was appointed by Governor Thompson pursuant to Article 5 section 7 of the Illinois Constitution. Mr. Fahner got appointed after William Scott was convicted of income-tax fraud on March 19, 1980, and sentenced to a year and a day in prison for one count of understating his income on a 1972 tax return.

    Given Mr. Fahner’s generally abrasive and elitist public persona it seems very unlikely he could have ever been elected AG.

  18. - Formerly Known As... - Wednesday, May 29, 13 @ 2:02 pm:

    If we fail to get Constitutionally acceptable pension reform, the responsibility will rest with our legislators, not Ty Fahner.

  19. - Concerned Retiree - Wednesday, May 29, 13 @ 4:23 pm:

    Is President Cullerton doing a Ty Fahner? That is, I was opposed to it before I was for it.

    See article in Sun Times which indicates 3 House pension bills have moved in the Senate and are scheduled for 2nd reading tomorrow. These are Madigan’s piecemeal bills which were incorporated into SB1: HB 1154 which caps pensionable salary, HB 1166 which raise the retirement age for those under age 45, and HB 1165 which delays and limits COLA as in SB1.

    Does this mean Cullerton has given up on his pension bill?

Sorry, comments for this post are now closed.

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