Negotiating against themselves
Monday, Jun 17, 2013 - Posted by Rich Miller
* There’s lots more to the pension reform impasse than what the AP is telling you, but this’ll do for starters…
Cullerton is known for trying to work collaboratively with interest groups and fellow senators, both Democrat and Republican. Madigan is known for his strategic control of House matters through his years of experience and formidable fundraising powers. Currently, he controls more than $2 million he can distribute, while Cullerton oversees funds with about $100,000 in them.
Cullerton “likes to bring parties to an agreement,” said Sen. Don Harmon, an Oak Park Democrat. His pension proposal “is the first and only time (state) workers impacted have agreed to meaningful pension reform. … He attempts to simultaneously do what’s in the best interest of the state and what the caucus would like to do.”
Rep. Lou Lang, a Skokie Democrat and assistant majority leader under Madigan, argued that part of the problem is senators under Cullerton who bristle over the speaker’s influence. Cullerton has to deal with members that “go overboard not doing things the speaker’s way,” Lang said. “The senate wants to have its own identity.”
But Kent Redfield, a former House staffer who teaches political science at the University of Illinois Springfield, believes Cullerton has more to gain from taking a tough stand at an opportune moment. He says Cullerton realizes his pension proposal likely has the most support in the legislature, and that’s why he’s still pushing it regardless of how he and Madigan have worked together in the past.
“Part of it is redefining those roles … Cullerton does not want to be in a position of weakness,” Redfield said. “He’s got an agreement with the unions that puts him in a pretty strong position.”
* That’s the usual take. But Madigan always forces the other side to negotiate against themselves…
Madigan has indicated he doesn’t believe the Senate plan saves enough money and that approving it will result in the state having to address pension reform again.
“What’s been frustrating is (determining) what is the dollar amount they think needs to be saved,” [Sen. John Sullivan] said of the House. “What is the money (Madigan) wants to get to? Once we have that number, let’s see … what we can negotiate.”
* More on that topic…
Earlier this week, Quinn proposed a compromise that would combine Madigan and Cullerton’s plans: Madigan’s legislation would be “Plan A” and Cullerton’s plan - with more cost savings worked in - would be the backup if the courts threw out the other.
Madigan quickly showed his disapproval, filing an amendment on Cullerton’s bill that would essentially gut it and replace it with his own measure. Asked Friday whether his digging in could be perceived standing in the way of compromise, Madigan said he believes he’s doing what voters want him to do.
“I don’t think you send people to the Legislature to be weak,” he said. “I think you send them down there to be strong, to understand the issues, work on bills, advocate for positions and advance those positions through the Legislature. That’s what you want.”
* That’s probably why there’s no comment from Madigan’s office on this…
Legislation resolving the state’s public university and community college pension debt could to be used as a model for reforming all state public employee pension plans and eliminating a nearly $100 billion debt over 30 years, SIU President Glenn Poshard said Saturday.
Poshard said Senate President John Cullerton would present a plan from the state’s public university presidents, created by the Institute for Government & Public Affairs at the University of Illinois, to the Senate executive committee Tuesday. It would then be heard by the full Senate in Wednesday’s General Assembly special session and, if passed, move to the House.
Poshard was optimistic about the potential of the plan passing the House and being signed by Gov. Pat Quinn. It grew out of an early meeting with Quinn, has the support of Cullerton and addresses key pension reform objectives of House Speaker Mike Madigan, Poshard said.
* And once again, you should really take some time today and listen carefully to Madigan’s and Cullerton’s comments during Friday’s pension reform press conference. You’ll learn a whole lot more than you would by just reading the news stories…
* Related…
* Universities offer partial Illinois pension fix: Although Cullerton supports the idea, Phelon said it’s uncertain whether he’ll sponsor the legislation. A version was introduced May 31 by Democratic Sen. Michael Hastings of Orland Hills.
* Rival pension plans likely to bog down special session: Republicans voting “no” on the Madigan plan, also known as Senate Bill 1, include state Sens. Jason Barickman of Bloomington, Tim Bivins of Dixon, Dave Luechtefeld of Okawville, Dale Righter of Mattoon and Chapin Rose of Mahomet.
* Editorial: Sen. McCarter, Sen. McCann, why are you crushing Illinois?
* Editorial: The obstructionists, Part 3
* Brown, Steans blast Legislature for coming up short on pensions
- Anonymous - Monday, Jun 17, 13 @ 11:19 am:
“Madigan said he believes he’s doing what voters want him to do.”
Which voters is he talking about, the ones that represents in his district? Or does he think he represents everyone in Illinois?
- east central - Monday, Jun 17, 13 @ 11:27 am:
Could these be among the darkest days in Illinois government in terms of twisted principles?
Legislators are advocating setting aside the Constitution to give the legislature almost unrestricted power.
Comments have been made questioning the independence of the judiciary.
The balance between the legislative chambers is being overwhelmed by attempts to use raw power rather than negotiation.
Divided government is giving way to nasty power plays within a single party.
- Pelon - Monday, Jun 17, 13 @ 11:32 am:
“Madigan has indicated he doesn’t believe the Senate plan saves enough money and that approving it will result in the state having to address pension reform again.”
If the numbers from the actuaries are correct, SB1 will also require the state to address the pensions again because the state will eventually either need to increase benefits for teachers or start paying into social security.
- John Galt - Monday, Jun 17, 13 @ 11:32 am:
Rich: there was a livestream video presser with IPI and the sponsors of HB 3303. Any way we can get a link to that? I heard it was somewhat testy/energetic…
- wordslinger - Monday, Jun 17, 13 @ 11:43 am:
Proportionally, Cullerton has a bigger majority than Madigan. There’s no reason for him to play Robin to MJMs Batman. I’m sure Cullerton can raise the money when he needs it.
- DoubleD - Monday, Jun 17, 13 @ 11:54 am:
Could we be so fortunate to FINALLY have a changing of the guard. I can only hope as MJM has helped lead this state into its current fiasco over his 30 year reign. This is simply a prime example of why term limits are badly needed in government.
- east central - Monday, Jun 17, 13 @ 12:56 pm:
Word’s comments make good sense. If Cullerton does not forsake the unions, he will enjoy their support and the support of other pension members.
- walkinfool - Monday, Jun 17, 13 @ 1:57 pm:
When Poshard speaks on any political topic, I have learned, through experience, to go deaf.
As I think Word implies, the relative power issue between the leaders has little to do with campaign funding. That’s a red herring.
So is the potential SSN risk, though it will eventually need to be addressed as it becomes clearer with time. Its fix will be no means change the fact that of the two bills, SB1 comes substantially closer to fixing the problem financially.
The general voters want the pension mess to be substantially fixed, not just massaged. Those not directly impacted don’t care as much about the arguments or the details, as about putting it behind us. That is how I read Madigan’s comment.
- wordslinger - Monday, Jun 17, 13 @ 1:58 pm:
–Could these be among the darkest days in Illinois government in terms of twisted principles?–
You must be new in town, lol. The state has had a lot of um, characters landing atmosphere from Day One.
- Anyone Remember? - Monday, Jun 17, 13 @ 3:44 pm:
How much money would any plan save if the courts find it to be unconstitutional?
- Frenchie Mendoza - Monday, Jun 17, 13 @ 3:55 pm:
Poshard’s idea that employees can take on “greater risk for greater reward” is absurd. The pensions are protected by the constitution. Why would I switch over to a 401K when the so-called “risky plan” has constitutional protection? The only risk involved is Madigan deciding to skip a payment — and I have no control over that.
- Arthur Andersen - Monday, Jun 17, 13 @ 4:27 pm:
If the professors want to gamble with their money, fine. That is already an option in SURS. The majority of State workers and teachers are not well served by this riskier and more expensive hybrid plan-that’s why it has garnered oogats in the way of support outside the towers of academia. Fail.
- dazed & confused - Monday, Jun 17, 13 @ 5:38 pm:
I have to say that I loved the Tribune slam on McCarter especially. He’s Mr. Conservative (i.e. let’s run for leader) and he won’t make the tough vote because of his state employees.
Man or mouse?
- Andrew Szakmary - Monday, Jun 17, 13 @ 5:53 pm:
As a Finance professor I have done a fairly thorough analysis. SB 2591 (the so-called SURS pension reform) contains massive benefit cuts to Tier 1 retirees, and even more draconian cuts for those 5-15 years from retirement. The diminishments in the bill are even more extreme for many SURS members than those in Madigan’s Bill.
The relatively easy part to understand is that SB 2591 drastically reduces the 3% automatic annual increase for retirees - based on the current 2.12% breakeven inflation rate between ordinary 30-year U.S. Treasury Bonds and 30-year TIPS bonds that are indexed to the CPI-U, and given that the legislation calls for an AAI equal to 1/2 of the increase in the CPI-U, the expected AAI going forward would be reduced to 1.06% annually. In my case, this provision reduces the present value of my expected future pension benefits (making standard actuarial assumptions used by SURS) by 16.7%.
Another provision in the bill that is far more complex is its reduction of the effective rate of interest (ERI) under the money purchase formula going forward, from 6.75% currently (as certified by the State Comptroller for FY2014) to 4.03% for FY 2014 (3.28% yield on 30-year Treasury Bonds currently + 0.75%). Under the current pension code, the ERI is loosely determined by historical and expected future returns on SURS investments. If reductions in the ERI in future years are similar (and there is every reason to believe they will be because 70% of SURS investments are in stocks, and historically stocks have earned returns at least 3-4% per year higher, on average, than bonds) then for each year a SURS member delays retirement beyond July 1, 2013, his/her starting pension annuity under the money purchase formula will be around 2.5% lower. Compound this out 10-15 years and you easily get diminishments in the 20-30% range for many SURS members, on top of the diminishments caused by the reduction in the AAI.
- Andrew Szakmary - Monday, Jun 17, 13 @ 6:05 pm:
Another issue regarding SB 2591: how can you justify imposing huge, unilateral pension diminishments on university employees and retirees, without imposing similar diminishments on members of the four other retirement systems, let alone State bondholders and vendors? I mean, why would you single out university employees for punishment using the police powers argument?
- fake county chairman - Monday, Jun 17, 13 @ 7:12 pm:
pension fraud see sec report our union should maybe look into criminal violations
- a thought - Monday, Jun 17, 13 @ 10:50 pm:
Since there has been a bill voted on in the House and a bill voted on in the Senate, who are the legislators that have not voted for anything?