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Behind the semantics

Monday, Oct 21, 2013 - Posted by Rich Miller

* Senate President John Cullerton will undoubtedly set tongues wagging with his declaration yesterday that the pension funding issue is not really a “crisis”

“People really misunderstand the nature of this whole problem. Quite frankly, I don’t think you can use the word ‘crisis’ to describe it at the state level,” Cullerton said in an interview on WGN-AM radio.

“It’s something we have to deal with, but it’s not something that we’re on the verge of bankruptcy on,” Cullerton said.[…]

Cullerton said that under a 1996 law aimed at gradually boosting the amount of money put into the state’s pension funds to eventually get them funded at 90 percent of their liability, payments to the retirement systems are already near their highest level and require only small annual future increases to stay on track. As a percentage of state general revenues, pension payments would continue to be about one-fifth of the state’s general revenues through 2044, his office said. As a percentage of state general revenues, pension payments would continue to be about one-fifth of the state’s general revenues through 2044, his office said. […]

“These pension (proposals) we’ve talked about will save annually anywhere from $750 million to $1.5 billion. So you’re still going to have real huge cuts that we’ll have to make if we don’t raise that income tax higher than what they’re scheduled to go down to,” he said.

* Cullerton’s mistake was attempting to argue semantics. He’s a lawyer, so that’s what they do. And since words matter to those most committed to this issue, the outrage will be utterly predictable. Reboot Illinois is already astonished that Cullerton would say such a thing

For years, I have accepted as fact that Illinois’ ever-increasing pension costs (now consuming more than 20 percent of state revenue) constitute a crisis for state finances.

In general, I’d say a state that is $5.4 billion behind in paying its bills (as of this morning) and is devoting more than 20 percent of its budget to public employee pensions and has the second highest unemployment rate in the nation is in a state of financial crisis. I’d reinforce this point by noting that this is a state that in 2011 raised its income tax rate from 3 to 5 percent to pay down that bill backlog only to see virtually all the new money go toward required pension payments.

OK, once again, with feeling, legislators did not raise the tax rate solely to pay down the bill backlog. A small part of the tax hike was earmarked to pay interest and principal on borrowing that was supposed to be used to pay down the backlog, but that bond was never issued.

And as Cullerton rightly points out, we’re currently pretty much at the top of the pension payment ramp. So the “ever-increasing” rhetoric is just that.

* Either way, though, challenging a totally accepted media narrative ain’t ever easy and will usually fail without a lot of paid advertising behind it. Cullerton loves to do this sort of thing, but he would’ve been better off without trying to define some terms and focusing instead on the reality.

I mean, seriously, when is the last time you read a news story or an editorial that points out state pension payments are finally leveling off? So I’m betting that Cullerton’s needless semantics argument will be what everybody covers.

* But the reality is this: No pension reform currently under serious current consideration would save more than about $1.5-$1.8 billion a year for all but the last few years of the 30-year plan (it may be a little higher than Cullerton’s estimate). Not one. And while $1.5-$1.8 billion is most definitely a lot of money to take out of the state’s spending base, it doesn’t come close to the $5.4 billion budget hit from the partial expiration of the temporary income tax hike. And, of course, that assumes any new pension proposal will be declared constitutional - which is a big “if.”

So, even the harshest pension reform plan would only lower state payments by a four or five percentage points in relation to state revenues. The problem is apparently “solved” when 15-16 percent of annual General Revenues are going to pensions until 2044, but remains a crisis when the share is 20 percent?

On the other hand, allowing the state income tax hike to expire would impose a permanent 15 percent or higher hit on General Funds revenues in 2016, the first full year of the expiration. And yet the enormous “squeeze” felt by state programs from that event is barely mentioned at all by those pushing the hardest for pension reform.

Make no mistake, major pension reform would help the state absorb the hit from the loss of the tax hike revenues. But it’s still gonna be a huge freaking hit and will produce a far more intense budget “crisis” than the one produced by pension funding.

* The full Cullerton interview is here

       

66 Comments
  1. - wordslinger - Monday, Oct 21, 13 @ 12:16 pm:

    Good on Cullerton. The hysteria that’s been whipped up over pensions is a money-grab, pure and simple. The numbers don’t support the spin.

    When are the pension systems going broke, again, presuming that you make the legally mandated contributions and enjoy historic investment growth?

    And can something really be in “crisis” when the systems have been chronically underfunded, according to the actuaries, since the 1940s yet no payments have ever been missed?

    Seventy plus years of “crisis?”


  2. - equivocator - Monday, Oct 21, 13 @ 12:18 pm:

    So much for the preamble of Senate Bill 1 regarding the crisis the state is in. Cullerton essentially undermines this argument which could be used by plaintiffs suing if a pension reduction is now made.


  3. - RNUG - Monday, Oct 21, 13 @ 12:21 pm:

    Rich, very good summation.


  4. - Matt Dietrich - Monday, Oct 21, 13 @ 12:21 pm:

    Since one part of my piece is excerpted in this post, I’d like to make sure everyone sees this part as well:

    “Even with pension reform, I have yet to hear anyone explain in specifics how the state budget could weather the more than $5 billion it will lose if the 2011 tax increase is allowed to sunset as scheduled in 2015. What I’ve heard so far from advocates of the sunset is vague, generic talk about ‘cuts’ that ignore the painful budgeting reality that those ‘cuts’ must come from places, like education, that voters almost unanimously don’t want to see cut.”

    So yes, I do think this is a problem that rises to the level of “crisis.” But I don’t think it’s the magic bullet that provides an easy or responsible means of letting the temporary income tax expire. But if any candidate for governor has actual, solid details of such “cuts,” I am all ears.


  5. - Rich Miller - Monday, Oct 21, 13 @ 12:25 pm:

    Matt, when y’all start writing every day, maybe even multiple times a day, about the income tax hike expiration in less than 15 months, then I’ll buy into the fact that you agree it’s a crisis akin to pensions, which y’all do write about every day, sometimes multiple times a day.


  6. - dupage dan - Monday, Oct 21, 13 @ 12:31 pm:

    So, Rich, which part of this does Cullerton love to do - tell us the facts/truth, or do it too late in the process?


  7. - RetiredStateEmployee - Monday, Oct 21, 13 @ 12:32 pm:

    Exactly, because it has been repeated so many times (pension crisis), people generally believe it’s true. Unfortunately, the problem is that the unpaid backlog of bills is the real crisis. The pension underfunding is just a big problem. The coming crisis is the expiration of the income tax hike. Maybe we need to focus better.


  8. - reformer - Monday, Oct 21, 13 @ 12:35 pm:

    I’d like to hear a Cullerton critic explain exactly where he is wrong in asserting the pension ramp is leveling off and the state will no longer see huge increases year to year. Another fact is that over time, an ever-growing proportion of state workers is under Tier II, which is far less costly.


  9. - RNUG - Monday, Oct 21, 13 @ 12:36 pm:

    Speaking specifically to Cullerton’s comments, as Rich explains, Cullerton is speaking the truth. And the truth is it is not a crisis EXCEPT for the FACT of revenue loss from the expiring income tax hike and the DESIRE to not further cut State spending.

    Everyone who is informed on the pension funding problem knows this but Cullerton will be vilified for saying it out loud.

    IF we had a Gov who could actually lead this State, he would be speaking the same thing and pushing for a change in taxation, such as a graduated income tax. But that would be going against the City Club and IPI narrative.

    And if you don’t believe that, you must not have received the latest IPI email blast, which I got today. They are trying to preempt any discussion on moving from a flat tax to a graduated tax.


  10. - MOON - Monday, Oct 21, 13 @ 12:36 pm:

    Cullerton’s comments only undermine the panel working on a compromise dealing with the pension problem.

    I have never thought Cullerton to be “the sharpest knife in the drawer”. He should stay away from making such comments until the panel finishes their work.


  11. - thechampaignlife - Monday, Oct 21, 13 @ 12:38 pm:

    A bit off topic but related to the program cuts is this study about childhood obesity prevalence in DCFS-investigated households: http://news.illinois.edu/news/13/1009obesity_JesseHelton_JanetLiechty.html

    One more risk factor to consider in these investigations…


  12. - Matt Dietrich - Monday, Oct 21, 13 @ 12:41 pm:

    Rich: My point is that I do believe we have a pension crisis and — in contrast to some candidates for governor who believe they can make it happen — I do not believe passing pension reform will bring the relief needed to offset the tax sunset. At least not without huge cuts to education and social services that are not popular with voters (and which I think would be irresponsible).

    I never intended to imply that the impending tax sunset is a crisis akin to pensions. Just that if anyone thinks passing pension reform is a ticket to a 3.75 income tax rate, they are delusional.


  13. - reformer - Monday, Oct 21, 13 @ 12:42 pm:

    As far as the income tax hike expiring, editors at the Trib and Daily Herald opposed the hike in the first place. So far they oppose extending it. So they’re willing to accept a $5 billion hit to the budget, which more than twice the savings from the pension takeaways they support.

    Apparently draconian cuts to education, social services, medical care and public safety don’t matter if they’re the result of cutting taxes, as opposed to paying pension debt.


  14. - WirePoints - Monday, Oct 21, 13 @ 12:47 pm:

    The “totally accepted media narrative” is in fact the reform opponents’, who’ve mastered that narrative beautifully. NO independent expert agrees that the unfunded liability is only $100 billion almost universally used, and nobody in the media has figured out that the “guaranty” provisions that will surely be in any legislation are what are really important. See Eden Martin’s piece last week on that. They will bar any serious reform by a future governor, subordinate other state functions and assure continuation of the current system. The reforms will knock less than 20% off the true unfunded liability but are so back loaded they’re really just words that say we will make them 25 years from now.


  15. - JI - Monday, Oct 21, 13 @ 12:52 pm:

    How are we “pretty much at the top” of the pension ramp? State contributions are expected to reach almost $18B by the end of the ramp (2045).


  16. - Former Merit Comp Slave - Monday, Oct 21, 13 @ 12:54 pm:

    Kudos to Cullerton in my humble opinion.


  17. - RNUG - Monday, Oct 21, 13 @ 12:55 pm:

    Moon @ 12:36pm,

    Cullerton didn’t saw anything other legislators haven’t already said when they’ve talked about their spending plans for the revenue freed up by “pension reform”. He just said it in English …


  18. - RNUG - Monday, Oct 21, 13 @ 12:56 pm:

    ** say ** , not saw


  19. - Michelle Flaherty - Monday, Oct 21, 13 @ 12:59 pm:

    JI, because now they are pretty much a set percent every year, whereas they had been ramping up for the past 15 years. Now that we’re making full payments, some fine the payments too much and are looking for ways to reduce them (as opposed to skipping them).


  20. - MOON - Monday, Oct 21, 13 @ 1:02 pm:

    RNUG

    I disagree with Cullerton’s conclusion that it “is not a crisis”.

    If one wants to ignore all of the financial experts/actuaries I suppose you can ignore the obvious.


  21. - Rich Miller - Monday, Oct 21, 13 @ 1:03 pm:

    JI, that’s an average annual increase of about $280 million. Far lower than now.


  22. - Illinois is not any different... - Monday, Oct 21, 13 @ 1:04 pm:

    All state governments… Including the federal government pay a significant portion ( 15-25 percent) of their operating budget to their respective pension funds. Thank you Rich for not being one of the media birds who fly off the wire at the same time. And I think Sen Cullerton to be a man of the highest integrity.


  23. - Arthur Andersen - Monday, Oct 21, 13 @ 1:06 pm:

    In other news, both the IFT (correctly IMHO) and Farmer Bruce (get out) are hailing the Cullerton comments as validating their respective pension viewpoints.


  24. - reformer - Monday, Oct 21, 13 @ 1:09 pm:

    == How are we “pretty much at the top” of the pension ramp? ==

    See the Cullerton statement:
    “As a percentage of state general revenues, pension payments would continue to be about one-fifth of the state’s general revenues through 2044, his office said.”


  25. - Anonymous - Monday, Oct 21, 13 @ 1:16 pm:

    Rich, as you correctly pointed out the “ever-increasing” is just a lie. The key, however, is how the payments being made are simply labeled “pension costs”. STL has argued that Quinn has never employed the “pension holiday solution”, and that is true. The state, under Quinn, has been making its pension-ramp-law required contribution, but the vast majority of that is the back-loaded payback of 60 years of state borrowing due to those pension holidays that were used. People generally don’t understand what comprises the current “pension cost” bucket and how those pension costs were backloaded by the pension law. Far from kicking the can down the road, now that the state is finally paying back the money it borrowed by failing to make the required payments over the last 6 decades, people screem that “pension costs” are 20% of the budget, when we should be clearly referring to the pension debt repayment cost as representing x% of the budget, and the normal cost of the pensions representing a far lower percentage. Now that the state is finally paying off its accumulated pension debt according to schedule, and NOT “kicking the can down the road”, people are screaming that “pension costs” are not sustainable. It took 60 years of not making the emminently sustainable normal payments to the pension that got us into this mess, but the spin is that we need to have state pensions funded at 100%, (Why? Since the state can’t declare bankruptcy), and that we must do this over 30 years, or we’re kicking the can down the road. If it took us 6 decades of borrowing to accumulate the pension debt, why should the Republicans, like Darlene Senger, demand that it be paid back to 100% in no more than 30 years. I think it’s because it makes the pensions look “unsustainable” because the payments need to be larger, thus justifying the drastic benefit cuts being proposed. Make the pension debt repayments over 40 years and fund to 80%, and “pension costs” will represent a far lower percentage of the budget.


  26. - PublicServant - Monday, Oct 21, 13 @ 1:22 pm:

    Sorry Rich, that was me at 1:16.


  27. - DuPage - Monday, Oct 21, 13 @ 1:30 pm:

    Stunned! Not by the facts Cullerton stated, but by the fact Cullerton stated it. An Illinois politician stood up and spoke the truth!


  28. - JI - Monday, Oct 21, 13 @ 1:43 pm:

    A year ago, we thought the 2045 contribution would be $15.1 billion.


  29. - Joe M - Monday, Oct 21, 13 @ 1:45 pm:

    I applaud Senator Cullerton for this declaration, his negotiation attempt with SB2404. I also applaud the piece his chief legal officer Eric Madiar did on the legal issues.

    That being said, I am wondering why he is throwing his support around the pension committee’s proposals and wishing to bring those proposals to a vote in the Senate? Is he really supporting those proposals? A few weeks ago he called the pension committee’s proposals less un-contitutional than Madigan’s bill. Not exactly a reason to then support such plans.


  30. - JI - Monday, Oct 21, 13 @ 1:50 pm:

    FY 2011 expected annual increase: $186.9M
    FY 2012 expected annual increase: $415.2M
    FY 2013 expected annual increase: $421.4M
    FY 2014 expected annual increase: $300.8M


  31. - JI - Monday, Oct 21, 13 @ 1:53 pm:

    Point being: the annual variation we keep seeing isn’t what we expected.

    What we thought the increase would be in 2011 over 2010 wasn’t right. What we thought the increase would be in 2012 over 2011 wasn’t right. What we thought the increase would be in 2013 over 2012 wasn’t right. What we thought the increase would be in 2014 over 2013 wasn’t right.

    But don’t worry. What we think it will cost for the next 30 years is unquestionable.


  32. - Loop Lady - Monday, Oct 21, 13 @ 1:54 pm:

    Hmmmm…is Cullerton stating the obvious or making an pre-emptory excuse for nothing happening on pensions during Veto?


  33. - anon - Monday, Oct 21, 13 @ 2:01 pm:

    sorry if this is an ignorant question, but does the requirement to be funded at 90% mean that if 90% of the work force retired, the state would need enough money to pay out? if so, can’t we just lower the percentage at which the systems need to be funded to save some money?


  34. - Sue - Monday, Oct 21, 13 @ 2:03 pm:

    Cullerton just demonstrated beyond any doubt he is clueless as to the State’s fiscal crisis- Madigan should reach out to his supporters in the Senate and move whatever consensus Bill comes out of the Committee without any further discussions with the idiot we call the Senate president


  35. - Grandson of Man - Monday, Oct 21, 13 @ 2:04 pm:

    Who will listen now to the screamings of the Trib editorial board? Will all the bluster fall on deafer ears?

    Is this the time, then, to pass SB 2404, and keep the current income tax or try to raise it more or change the tax code (Sisyphean task)?


  36. - thechampaignlife - Monday, Oct 21, 13 @ 2:11 pm:

    anon @ 2:01:

    It means that if the State suddenly ceased to exist, 90% of earned pension benefits could eventually be paid out without requiring any extra funding source beyond investment returns. So, it doesn’t mean the State would be sitting on 90% of the required funding but rather they’d be sitting on, say, 50% of the required funding with investment returns eventually equaling the rest.


  37. - wordslinger - Monday, Oct 21, 13 @ 2:13 pm:

    –IF we had a Gov who could actually lead this State, he would be speaking the same thing and pushing for a change in taxation, such as a graduated income tax. But that would be going against the City Club and IPI narrative.–

    I’ve grown convinced over the years that the Civvies campaign of hysteria over pensions has nothing to do with the state’s fiscal position or the soundness of the pension funds, but is simply a long-term preemptive strategy against any consideration of a progressive income tax.

    If you look at the Civvies board, the corporate income tax means nothing to the multi-nationals. They pay oogats.

    But if you’re Miles White at Abbott and you’re pulling down $25 million a year, Wisconsin’s progressive top personal rate of 7.65%, compared to Illinois’ flat rate of 5%, means real money.


  38. - equivicator - Monday, Oct 21, 13 @ 2:15 pm:

    Moon, ==Cullerton’s comments only undermine the panel working on a compromise dealing with the pension problem.==

    Could Cullerton’s statement reflect the fact that the CC is in deadlock and cannot come to a resolution. He must know the status of their deliberations. He may simply be frustrated by the lack of consensus on this issue. I do not think he was undermining the panel, which has had several months to do their job. In fact, he said he would support the emerging compromise if they voted it out. As to the dull knife metaphor, I have seen more integrity displayed by Cullerton as this debate has unfolded than in most of the other alleged legislative leaders combined, including the Governor.


  39. - Arthur Andersen - Monday, Oct 21, 13 @ 2:15 pm:

    JI, if you can predict the market returns for the next 30 years with certainty, pull up a chair. We’re all ears.

    That variation, and demographics to a lesser extent, is why you see the fluctuation. I don’t have access to the data to do it myself, but your chart would be more informative if you showed projected and actual year to year changes.

    This is how we want the system to work in the long run, at least for my two cents worth. We want the State to pay less when the markets are good and kick in more when they are down.


  40. - Marie - Monday, Oct 21, 13 @ 2:18 pm:

    I think it is important to remember there are multiple systems. One of the first changes was the initiation of local school districts paying there own retirement costs - they had not been doing that and there were many huge increases the last couple of years leading to great big retirement checks - Olny paying for Evanston (made that up) - state employees get 1.67% per year - that is not a fortune


  41. - anon - Monday, Oct 21, 13 @ 2:27 pm:

    Maybe Cook County could revoke its invite for the Illinois Policy Institute to speak at a brown bag lunch about the “looming crisis” and invite Cullerton instead. Now that the sky isn’t falling. http://www.cookcountygov.com/portal/server.pt/community/law_library/


  42. - Rich Miller - Monday, Oct 21, 13 @ 2:29 pm:

    JI, the TRS increase ALONE is almost $800 million dollars over last fiscal year.


  43. - Rich Miller - Monday, Oct 21, 13 @ 2:30 pm:

    anon, if you listen to the audio posted above, you’ll hear Cullerton say Chicago and Cook definitely have a crisis on their hands.


  44. - RNUG - Monday, Oct 21, 13 @ 2:35 pm:

    Joe M @ 1:45pm,

    I think it is because Cullerton is starting to feel like a lot of the rest of us: just pass something and get the ISC to tell us if the GA can get away with it. And if that is your strategy, then passing a less restrictive diminishment and finding you can’t get away with it also precludes anything more drastic. Once the GA gets past the idea of “pension reform”, then they’ll have the justification to get serious about revenue reform.


  45. - Rod - Monday, Oct 21, 13 @ 2:43 pm:

    I totally applaud Senator Cullerton for telling the truth. His statement that on an annual basis the savings would range from “$750 million to $1.5 billion” was really the first time that was publicly admitted.

    So now the City of Chicago and the Chicago Public Schools had better take stock of their own situations relative to pension obligations. Because it is highly unlikely all their problems would be solved on any bill that uses the state pension reform model to build on.

    It is also very unlikely the General Assembly would allow Mayor Emanuel deeper relative cuts to pension payments than they are likely to establish for the State as a whole. So we are nearing the time that the City of Chicago will have to do something about its low property tax rates in order to generate revenue. The speed cameras, red light cameras, and fines a plenty will not meet the obligations of the school district and City to its retirees.


  46. - Ruby - Monday, Oct 21, 13 @ 3:01 pm:

    Cullerton is in election campaign mode now. He knows that there is no way to solve Illinois’ financial problems with a pension funding reform bill. There is a very good reason why the state income tax increase will expire after the election, and not before.


  47. - facts are stubborn things - Monday, Oct 21, 13 @ 3:01 pm:

    If a pension law goes before the IL SC, I wonder if the words of Pres. Cullerton can be used to debunk the idea that Illinois has a crises. The MjM bill had about 8 pages laying out why the Police powers could be used to diminish pensions. His Police powers argument rested on the fact that he claimed Illinois was in Crisis. I don’t beleive Pres. Cullertons words would be needed to show how silly it is that Illinois is in crisis but might be nice to have.


  48. - reformer - Monday, Oct 21, 13 @ 3:03 pm:

    == So we are nearing the time that the City of Chicago will have to do something about its low property tax rates in order to generate revenue. ==

    But it would be a catastrophe and beyond the pale if Chicago property owners paid what their suburban Cook counterparts have been paying for decades. At least that’s what Chicago pols tell us.


  49. - Grandson of Man - Monday, Oct 21, 13 @ 3:17 pm:

    “clueless as the the State’s fiscal crisis”

    I know, you’re stressing out just like so many others over our state’s finances. There is a remedy that should calm you down and make you feel proactive. There is currently a campaign for a progressive income tax in Illinois, and you can join in and collect petition signatures and do other grassroots activities. Then you can feel like you’re actually contributing to the solution, which I bet will make you feel better.

    Do join the campaign to raise the state income tax on the wealthy. If you can’t do this now, at least please meditate on it and keep it in mind. You will feel much more relaxed.


  50. - Arthur Andersen - Monday, Oct 21, 13 @ 3:22 pm:

    -the TRS increase ALONE is almost $800 million dollars over last fiscal year-

    And before someone asks, that’s not because they lost money last year. They made 13 percent.

    See “actuarial smoothing”


  51. - Anonymous - Monday, Oct 21, 13 @ 3:41 pm:

    With respect to legislation that has never gone anywhere, one theory is that the reason Madigan wanted SB1 is because he knew it was so severe that it would be thrown out in court. Then, the GA would have the courts blessings to raise revenue in the numerous ways discussed along the way. The GA is looking for a way out here….a way to raise revenue but not jeopardize their reelection. Everyone knows our state is a very low tax state and we need more revenue. We are low tax, low spending. How much lower can you go?


  52. - wordslinger - Monday, Oct 21, 13 @ 3:52 pm:

    –There is a very good reason why the state income tax increase will expire after the election, and not before.–

    Don’t hide your light under a bushel, brother. What would that very good reason be?

    I’d be fascinated to know the very good reason why politicians would leave a tax on the books before an election, and let it expire after an election.

    Is that ju-jitzu? Bizarro world?


  53. - Juvenal - Monday, Oct 21, 13 @ 3:55 pm:

    @Matt -

    To quote The Princess Bride: “I do not think that word means what you think it means.”

    Cuban Missile Crisis. Illinois Pension Crisis.

    Just try using them in the same sentence.

    The collapse of the financial sector in 2008. The floods of 1993. Katrina.

    These were crises in that they required immediate, decisive action to avoid widespread and irreversible harm.

    But in politics, we throw the term “crisis” around like teenagers cooing “awesome.”

    Accept that cooing teenagers can easily be dismissed like vapor, but lobbyists and the reporters and editorial writers who regurgitate them generate panicky, wrongheaded policies that are sometimes far worse than the
    problems they aimed to cure.

    The history books are rife with examples.

    One of the most recent I read was the Malaysian Turtle Crisis.

    Letherback turtle populations were declining in the Pacific because the eggs were considered a delicacy. In response to the crisis, conservationists started rescuing and artificially
    imcubating the eggs en masse. What they didnt know was that incubation temperature determines the sex of leatherbacks in vivo. All the hatchlings turned out to be females. Needless to say, reproduction ratrs for adult turtles didn’t fare well as a result, and the entire subpopulation was wiped out a result.

    So, before you use the word “crisis” again, go research all the claims made during the medical malpractice “crisis” in 2005 and see how many of them actually came true…and how many turned out to be puffery.


  54. - cod - Monday, Oct 21, 13 @ 4:09 pm:

    This seems to be the first time a leading politician publicly said something intelligent and truthful about the manufactured crisis of pensions. Most of the others know it is a fraud, but are afraid to say it.

    The media focus on pensions is really about the strategic and purposeful starvation of government budgets in Illinois, of which pension costs are only a part. It is revenue that is in crisis, making it difficult to pay our labor expenses.

    The fact is that about 80% of all the money spent by the government goes to labor costs, either through contracts to private companies or to state employees. Those labor costs include not only salaries but benefits such as sick days, vacations, pensions, 401Ks, social security, medicare, workers comp, health insurance, etc. Taken together that multiplies the cost of direct salaries, whether for the private or public sectors.

    Stiffing the educator’s pension fund is only the first step in slashing middle class incomes, of redistributing it to the 1%. If it succeeds, the strategy will then move into the private sector, and Cullerton knows it.


  55. - JI - Monday, Oct 21, 13 @ 5:22 pm:

    Rich: That’s exactly my point. What I posted above were the EXPECTED increases. Just as the next 30 years are our EXPECTED increases.

    But, as you rightfully noted, the ACTUAL increases far outpaced the EXPECTED increases. We expected the same small increases you’re now touting as evidence that we’re at the top of the ramp, when we had real increases of $500M-$1B per year.

    To say we’re “at the top of the ramp” because we expect increases to be lower — just as we expected previous increases to be lower — is a bit odd.

    Especially given the fact that our most recently projected future contributions are all much higher than we had projected a year before we made those most recent projections. (See, e.g., what we expected FY2045 to cost 2 valuations ago, vs the most recent valuation.)


  56. - Fed up - Monday, Oct 21, 13 @ 5:28 pm:

    Funny Rich I remember you arguing when they passed the temporary tax hike that it was temporary. When I or any other commentator stated no way it will be allowed to expire you didn’t want to hear it. Now your part of the pr machine making the case we can’t let the Temporary tax be temporary.


  57. - wordslinger - Monday, Oct 21, 13 @ 6:22 pm:

    Fed Up, you can’t be serious.

    It will expire without another vote.

    That would be insane, but it could happen.

    A lot of folks up north don’t understand how important state government is to those out of the Chicago Metro.

    It really is. They can’t make it on their own and it would be devastating to them to lose that redistribution of wealth.


  58. - Quinn T. Sential - Monday, Oct 21, 13 @ 6:35 pm:

    The elephant in the room is; that while bankruptcy is not an option, insolvency has and continues to exist.

    The only way the ramp and current pension payments are being made; in addition to the revenue from the temporary tax, is by regularly borrowing from state vendors, suppliers and contractors.

    If we actually paid our bills on time; and didn’t shadow puppet current debt service from one fiscal year to the next, it would be easier to illustrate to the common man that we’re indeed broke. We’re just sliding by with short term borrowing from different sources than before.


  59. - Anonymous - Monday, Oct 21, 13 @ 7:12 pm:

    The media likes to call the $100 billion pension debt a crisis that needs to be solved at the expense of state retirees.

    The media doesn’t seem to have the same sense of urgency about the State’s $71 billion bond debt. Nobody is promoting the bond indebtedness be solved by making the bondholders take less than promised.

    “Total outstanding principal for bonded indebtedness of the State of Illinois at June 30, 2012, was approximately $71.0 billion (net of defeased bonds), a decrease of $1.3 billion (or 1.8%) from June 30, 2011. Overall, during the last four years, this amount has increased $12.3 billion (or 21%) from the $58.7 billion
    reported at June 30, 2008.”
    - from [State of Illinois}Bonded Indebtedness and Long Term Obligations 2012 Annual Report. Page 4

    Of course all of that bond debt isn’t due at once unless every bondholder cashed in their bonds all at once. But neither is the pension debt due all at once unless every teacher, state, and state university employee retired all at once.


  60. - wordslinger - Monday, Oct 21, 13 @ 7:13 pm:

    –The elephant in the room is; that while bankruptcy is not an option, insolvency has and continues to exist.–

    In what way? How does “insolvency” manifest itself in regards to the state of Illinois?

    For crying out loud, do you watch cable tv all day?


  61. - aunt_petunia - Monday, Oct 21, 13 @ 8:29 pm:

    Every dollar “saved” in pension reform is a dollar stolen from state employees and annuitants.


  62. - Ruby - Monday, Oct 21, 13 @ 9:14 pm:

    3:52 pm: –There is a very good reason why the state income tax increase will expire after the election, and not before.–

    I thought it would be too obvious to point out that the state income tax increase would only be extended after the election. The state needs the revenue, but extending the state income tax increase will be politically unpopular.


  63. - Fed up - Monday, Oct 21, 13 @ 9:37 pm:

    Wordslinger, if you think the temporary tax hike needs to be made permanent why didn’t the illustrious king madigan have the testicular virility to pass a permanent tax hike.


  64. - Demoralized - Monday, Oct 21, 13 @ 11:54 pm:

    @Fed up:

    Any sane person knows that the tax hike can’t be allowed to expire unless you (or somebody else) knows how to fill the multi-billion hole in the budget it would leave.

    Also I’m convinced you are a paid drive by commenter.


  65. - Sue - Tuesday, Oct 22, 13 @ 8:27 am:

    The Article in Crain’s puts Cullerton’s stupidity into better contaxt- Last year Cullerton was screaming that the Pension problems were a “crisis” so what has happened since his last characterization- the unfunded liabilities have increased, Illinois’ had a number of credit rating hits and the borrowing costs are the highest in the country, employment continues to lag other Midwest industrial states and School Districts through out the state are continuing with layoffs as legacy retirement costs continue to increase- Yea the pension mess is not a crisis and global warming is all hype


  66. - RNUG - Tuesday, Oct 22, 13 @ 9:22 am:

    Sue,

    The pension mess is not a crisis. If the State continues to make the scheduled payments, everything will be fine with the pensions.

    The “Crisis” is the GA doesn’t want to continue to make the payments at the scheduled level … because that requires either (a) higher taxes than the expiring temp tax or (b) extremely drastic cuts to school funding and welfare … and the GA won’t take either of those actions for fear of losing their seats.


Sorry, comments for this post are now closed.


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