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Bringing it on himself

Tuesday, Oct 22, 2013

* Crain’s goes super-hyper-breathless on John Cullerton

It’s official: Illinois Senate President John Cullerton is the Alfred E. Neuman of Illinois politics.

As all but the most dedicated news-avoiders know by now, Illinois has a problem on its hands. It’s a big, big problem. Whopping. Ballooning. Staggering. Mushrooming. You could use any of those adjectives and then some, and they’d all be pretty accurate. That’s because Illinois has racked up more than $100 billion in unfunded pension obligations to its public employees. It’s a debt burden that’s threatening to sink the state’s finances. And no one in Illinois government seems ready to do a thing about it.

Now to limited thinkers like you and me, a state that’s more or less in bankruptcy is a state that’s facing something like a crisis. But then, we don’t think like Mr. Cullerton. What fortitude it must take to look upon tempests and never be shaken, to be presented with a mile-long IOU and simply shrug. That’s what happened this past weekend, when the North Side Democrat told a WGN-AM/720 radio interviewer that Illinois’ massive pension debt — the worst in the nation, mind you — is not a “crisis.”

Never mind the fact that the partial expiration of the state income tax increase in a little over a year will cost state coffers hundreds of billions of dollars by 2045 - the year arbitrarily designated by Jim Edgar back in the ’90s to fully fund the state’s pension systems. That tax hike budget hit is not a “crisis,” you see. It’s only a “crisis” if the powers that be decree it is so.

* But, I do admit that it’s Cullerton’s own fault that he’s being ridiculed for his “crisis” comment, as the Tribune rightly notes

Barely a year ago, on Sept. 13, 2012, Illinois Senate President John Cullerton met with the Tribune editorial board. He was positively loquacious in explaining why public pension reform was his No. 1 priority for the 2013 legislative session:

“It may not be the No. 1 priority of the public because they don’t understand the significance of how this crisis affects the operation of state government,” Cullerton said. “But those of us who know the state budget know this is essential because you wouldn’t have enough money to pay for health care or education.”

And that wasn’t the only time Cullerton referred to the pension “crisis”…



Oops.

- Posted by Rich Miller        

82 Comments
  1. - Timmeh - Tuesday, Oct 22, 13 @ 10:29 am:

    I’d refer to a major problem as a crisis if it kept it in the public eye. And pensions need to be in the public eye.


  2. - Fight Fair - Tuesday, Oct 22, 13 @ 10:35 am:

    Question: “… 2045 - the year arbitrarily designated by Jim Edgar back in the ’90s to fully fund the state’s pension systems.”

    Fully fund or only 90 percent fund? If 90: These numbers are huge — who pays the other 10 percent?


  3. - PublicServant - Tuesday, Oct 22, 13 @ 10:39 am:

    We have a debt crisis in this state. That the pensions were used as the bank does not mean we have a pension crisis. The 20% of the state budget that pension payments currently represent are mainly caused by repayment of that debt, which the state has been borrowing over the last 6 decades. Now that the state starts to pay that debt back, now we have a crisis right? And IPI and the plutocrats that they’re ventriloquist dummies for are calling it a PENSION crisis, and vast swaths of the media are on board with that? Correctly identify the portion of annual pension payments due to repayment of debt, as opposed to the normal cost of funding pensions, and you’ll see that Cullerton is spot on in his description of pensions not being the cause of the debt crisis facing this state.

    I submit that making the “temporary” tax increase permanent will result in a near immediate increase in the state’s bond rating. Get on with it, and quit trying to impoverish middle class state employees and retirees with onerous, callous, and illegal cuts to the benefits they’ve earned through decades of work for Illinois.


  4. - PublicServant - Tuesday, Oct 22, 13 @ 10:43 am:

    @Fight Fair-The same people that pay the non-deferred portion of state employee salary.


  5. - wordslinger - Tuesday, Oct 22, 13 @ 10:48 am:

    –Now to limited thinkers like you and me, a state that’s more or less in bankruptcy is a state that’s facing something like a crisis. –

    Perhaps the limited thinkers at Crain’s should explain what that means — especially the “more or less in bankruptcy” part.

    That must be an effort to communicate something.

    Cullterton is too smart for his own good some times. He played up the “crisis,” when it was in his political interest.

    But in reality, he was right the the other day. The “crisis” is hysteria of the mathematically challenged, designed to steak money pledged for services already rendered.


  6. - Wallinger Dickus - Tuesday, Oct 22, 13 @ 10:49 am:

    It’s amusing to sit on the sidelines and witness the debate over public pensions.

    Those who proclaim the “crisis” to be the end of civilization as we know it are the staunchest defenders of the free market.

    The cornerstone, foundation and capstone of the free market is the sanctity of the contract. Until the contract is the agreement between employers and workers.

    That’s when rabid free market advocates call upon the emergency police powers of the otherwise meddlesome government to dissolve the sacred pact.

    And their sanctity becomes sanctimonious.


  7. - Cassiopeia - Tuesday, Oct 22, 13 @ 10:49 am:

    Cullerton’s statements are actually very refreshing candor about the pension situation. Making the promised payments does squeeze out other state programs, but so be it. The promises were made and the state is just going to have to live with the constitutionally guaranteed consequences.


  8. - Cassiopeia - Tuesday, Oct 22, 13 @ 10:49 am:

    Cullerton’s statements are actually very refreshing candor about the pension situation. Making the promised payments does squeeze out other state programs, but so be it. The promises were made and the state is just going to have to live with the constitutionally guaranteed consequences.


  9. - dupage dan - Tuesday, Oct 22, 13 @ 11:03 am:

    Great. So which Cullerton should we listed to? Rely upon? Work with?

    It would be nice to see someone ask Cullerton to his face to compare and contrast those past and present statements. I wonder if he gets dizzy from the spinning?

    This state employee has seen little to mitigate the overwhelming cynicism he has had with the jamokes in Springfield.

    I asked the question before - what should we be more proud of, that he told the truth (this time?) or that he did so at this stage of the process? When it would likely have little impact on a process so far down the line. Now that we have been reminded of his earlier remarks I can see it will do little good to ask. Either he has little idea what he says from one day to another or he is counting on many folks to have a short memory. Thanks to the Tribune for linking the past Cullerton to the present one.


  10. - bored now - Tuesday, Oct 22, 13 @ 11:05 am:

    i’m positive he meant it was a crisis when he thought the legislature would address the issue. now that he’s not so sure about that, it’s less pressing…


  11. - ZC - Tuesday, Oct 22, 13 @ 11:06 am:

    The potential problem with the pension “contract”, is that it was never “signed” by the current generation of Illinoisans who have to honor it.

    I’m generally in favor of contracts and pensions and Democrats, etc., but just saying, “It’s a contract, we have to honor it, shut up” grossly oversimplifies the moral situation.

    If it were that easy, Illinoisans twenty years ago should have signed a “contract” that future generations would have to devote half of their salaries to paying for their retirement, high fived each other, and called it a day.

    It doesn’t work that way. Most notably if the repayments really did get too onerous, remember future generations can vote with their feet and depart the state. And then where’s the money to honor this sacred contract?

    I’m so not a Republican, but just to keep this in perspective!


  12. - UIC Guy - Tuesday, Oct 22, 13 @ 11:14 am:

    To ZC: the pension contracts are in this respect no different from any other government contracts, state or federal. All those bonds that were issued, to take the obvious example….


  13. - Rich Miller - Tuesday, Oct 22, 13 @ 11:17 am:

    ===it was never “signed” by the current generation of Illinoisans who have to honor it===

    So, um, then we’re not obligated to abide by the 1st Amendment because it was approved in the 18th Century?

    Your argument makes no sense.


  14. - dupage dan - Tuesday, Oct 22, 13 @ 11:24 am:

    No, Rich, I think you missed ZC’s point. We need to re-sign every single law and contract that was ever enacted every time each person reaches voting age. It’ll be simple - just use your tweet account and get your thumbs ready.

    sheesh


  15. - Ithink - Tuesday, Oct 22, 13 @ 11:31 am:

    Zc, every time an employee signed that contract on their date of employment that contract was resigned. At least it was until January of 2011. They could have changed pensions benefits for new hires at any time- they being your elected representatives form just a few years ago. Let’s not pretend anything different.


  16. - Mason born - Tuesday, Oct 22, 13 @ 11:36 am:

    @ZC

    Would you care to use that language on everything? Say social security that was enacted in the 30’s. How about Medicare? 1965. And as Rich mentioned the U.S. Constitution.

    Like it or not your generation and mine are on the hook for this just like my children and anyone else paying taxes in IL. Sorry but we owe this money to the retirees once we accept that point then we can discuss how do you pay it going forward and what if any changes can be made?


  17. - Norseman - Tuesday, Oct 22, 13 @ 11:53 am:

    Word, well said.

    === Great. So which Cullerton should we listed (sic)[listen] to? Rely upon? Work with? ===

    Good question Dan. Frankly, I take everything said by an elected official with a grain of salt. That’s why it’s important for the public to research issues and listen to the views of others. You rely on those who, based upon your research, have consistently acted in support of your policy concerns. You try to work with everyone, but place emphasis on working with those you rely on.


  18. - Wallendar - Tuesday, Oct 22, 13 @ 11:56 am:

    Rich, I wish we could have the opportunity to vote for a comment, “agree” or “disagree or to make a direct reply to a comment. Thanks.


  19. - cod - Tuesday, Oct 22, 13 @ 12:00 pm:

    Cullerton said on WGN that the current proposals for pensions would reduce state income taxes by only 1/4 of 1 percent. If that is indeed factual, it does clarify the relative scope of the pension unfunded liability within the total revenue shortage.

    That fact also exposes the dishonesty of the media in promoting the idea of a ” pension crisis”, which has been a deception by false emphasis.

    Cullerton’s talk was about looking forward to the real problem: the impending expiration of the tax hikes in 2015. He stated that will result in a 5.4 B annual reduction in revenue, making it impossible to balance the budget. That shortfall in revenue is much bigger than the pension issue.


  20. - RNUG - Tuesday, Oct 22, 13 @ 12:02 pm:

    Put very simply, 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.


  21. - Anonymous - Tuesday, Oct 22, 13 @ 12:05 pm:

    People need to catch themselves when they talk about taxpayers. Everyone who works for the 5 state pension systems and contributes to them from their paycheck also pays taxes in addition to the pension payment. Retirees also pay taxes, at least property taxes. So it’s not taxpayers vs. pension contributors. The tax increase is also being paid by public workers. So any reduction in their benefits would be in addition to paying the same increase in taxes that the so-called taxpayers are complaining about.


  22. - ZC - Tuesday, Oct 22, 13 @ 12:13 pm:

    All fair points, made above. But, to respond:

    1) UIC Guy and Ithink: _no_ difference, whatsoever? If I sign a contract with an employee or a business to deliver a service, and they deliver it, and I pay them - that’s the exact same, as if I sign a contract that essentially requires voters who haven’t been born yet (in 2045, say) to pay a certain percentage of their paychecks, to honor that contract? Morally those are the exact same, nothing to see here, move along?

    Rich - The First Amendment doesn’t require large transfers of cash from future generations of taxpayers to current retirees. You are of course correct that this is what the Constitution says (and what the IL Constitution says). But that’s not the analogy I’m trying to make. You’re not saying that anything in a Constitution, should be seen automatically as morally binding or automatically deserving of respect? (The 3/5 clause?)

    Mason Born - You’re correct, Social Security and Medicare function very much on the same sphere. And _Medicare_ (Social Security is in much better shape than its critics say) may yet pose the same kinds of future questions of generational justice. But the key difference here of course is that Social Security and Medicare -aren’t- constitutional contractual rights. The Supreme Court was very clear on this in its decision _Flemming v. Nestor_. If we need to reduce benefits paid by these programs (meaning not absolute cuts, but reductions in the future rate of growth, which could include absolute amounts promised to current retirees), all that takes is a law, not a constitutional amendment. So Social Security and Medicare are in much better shape, politically and morally, than this idea of an insuperable pension contract that we’re just supposed to deal with. If we need to make any tweaks to these programs to try and balance fairness to those we made promises to, -and- future taxpayers, we’re better positioned to do so than we are in Illinois.


  23. - A guy... - Tuesday, Oct 22, 13 @ 12:16 pm:

    Social Security has seen reduced COLAs, raised retirement ages, etc. Public Pensions are a contract in need of fair review. It is a crisis, when it relies upon funding that isn’t even close to being adequate. It’s not impossible to fix however. All entitlements should be reviewed along the way. Tier II was a good idea. It should have been enacted earlier. When Rosty worked for Catastrophic Health Care at the Federal level, it passed and was repealed after huge senior public outcry (with one senior lady even physically laying on the hood of his car). That would have solved some problems. Reform is difficult. You can’t call it a crisis for months and then before a session state it isn’t. Kinda saw this coming.


  24. - skeptical spectacle - Tuesday, Oct 22, 13 @ 12:17 pm:

    Rural school districts think it is a crisis. They are currently being funded at 87% of what they were “promised” and they have already been advised to expect 85% next year. Teachers will be laid off because of this. Educational offerings will suffer.


  25. - skeptical spectacle - Tuesday, Oct 22, 13 @ 12:19 pm:

    So which is more important…..educating our children or paying our pensions. These are the sort of devilish decisions which will continue to be made unless some sort of reform is accomplished.


  26. - Bobbysox - Tuesday, Oct 22, 13 @ 12:19 pm:

    If a crisis is a “crucial time or state of affairs whose outcome will make a decisive difference for better or worse,” (Webster’s), then yes, it is a crisis. Will it make a major difference whether it is addressed in October or January? Essentially no.
    Madigan also apparently must not think it is a crisis with an urgency of time or he would have allowed a vote on the agreed Senate bill, and it would have passed and made an immediate impact.


  27. - Anonymour - Tuesday, Oct 22, 13 @ 12:19 pm:

    The latest Cullerton gaffe — saying something everyone knows is true — just illustrates the game that Madigan and Cullerton have been playing. As we’ve discussed before, the Speaker knows that the income tax hike needs to be made permanent. He also knows his bill is unconstitutional — he was there at the constitutional convention. It sure looks like he’s wanted to pass a bill that would be declared unconstitutional, so he could then place the public blame for making the income tax hike permanent on the Supreme Court, and not on his mushrooms.


  28. - wordslinger - Tuesday, Oct 22, 13 @ 12:25 pm:

    –Public Pensions are a contract in need of fair review. It is a crisis, when it relies upon funding that isn’t even close to being adequate. It’s not impossible to fix however. All entitlements should be reviewed along the way–

    Lol, is that how it works? You put a “contract” under review when you don’t want to pay for services already rendered?

    Here’s what Mr. Webster says:

    Contract: a binding agreement between two or more persons or parties; especially : one legally enforceable.

    By the way, how do you get from “contract” to “entitlement?”

    Is your paycheck an entitlement?


  29. - Norseman - Tuesday, Oct 22, 13 @ 12:28 pm:

    Another comment home run by Word. Keep up the good work.


  30. - RNUG - Tuesday, Oct 22, 13 @ 12:33 pm:

    ZC,

    I signed a contract with a business and their shareholders (the State and the taxpayers) to receive part of my pay in the form of then current salary and part of my pay in the form of deferred compensation (a definded benefits pension) and it included the AAI (COLA). I delivered on my part of the contract, working 36 years and achieving retirement age. It is both legal and moral for the State to uphold their end of that contract.


  31. - wordslinger - Tuesday, Oct 22, 13 @ 12:40 pm:

    ZC, you are really talking out your tukkus with this “morality” stuff.

    You might have been born yesterday, but contract law and the Constitution have been around for quite some time.

    And yes, future generations will be bound by them unless they are changed through legal means. It’s called civilization.


  32. - PublicServant - Tuesday, Oct 22, 13 @ 12:45 pm:

    ===…future generations would have to devote half of their salaries to paying …===

    Let me know, ZC, when you hit 25% of your salary being taxed to pay for state pension debt repayment; Not 50%, just 25%, and I’ll start to be morally concerned about your burden. 25% is effectively about how much the current crop of illegal bills want to reduce my future pension. Doesn’t that concern you, morally I mean, in the least? I’m retired. There’s not a thing I can do about having relied on that constitutional, contractual state contract now. You, on the other hand, if it actually gets to the point where a large portion of your future salary (50% by your estimate) is being used to pay for past borrowing from my pension, you’ve got a really easy way to relieve yourself of that burden. I don’t. Nuff said.


  33. - Mason born - Tuesday, Oct 22, 13 @ 12:47 pm:

    ZC

    I still don’t think you understand. Even if you feel the pensions must be changed and hate the language in the State Constitution as RNUG points out this money is owed and is a legal debt. The sooner both sides accept this the sooner we may be able to reach a reasonable fix.


  34. - Cook County Commoner - Tuesday, Oct 22, 13 @ 12:50 pm:

    It may be that Sen. Cullerton is starting to tenderize the public to the increasingly likely inability of the Gen Assembly to agree to even modest state pension reform. I remain of the view that the state will do nothing until SCOTUS rules on a municipal bankruptcy involving pension gov protections similar to Illinois. Detroit? Perhaps, there is one brewing in Illinois, which the state will allow to file chapter 9.


  35. - Andrew Szakmary - Tuesday, Oct 22, 13 @ 12:51 pm:

    Yes, Social Security and Medicare are not contractual obligations and can be reduced. But what about the $17 Trillion in Federal goverenment debt? Granted, with the FED’s current policies it is not that much of a burden now, but what happens when the debt continues to grow and interest rates return to more historically normal levels? Well, in its latest report, the CBO projects that by 2038 interest payments on Federal debt will consume nearly 5% of U.S. GDP and over 25% of Federal government revenues.

    Illinois is the proverbial canary in the coal mine. The national burden posed by contractually-required debt payments will one day be every bit as large, if not larger, than the burden currently faced by Illinois taxpayers in servicing pension and other debt. May God help us if the millenials, and future generations after them, decide that they are not morally responsible for all this debt, and the solution is to simply default on it.


  36. - Anonymous - Tuesday, Oct 22, 13 @ 12:55 pm:

    Crisis is akin to calling fire in the theater. Hurry up and take action. In the pension case, it was an effort by the civvies and their friends to pin the blame for every financial ill in the state on the public pension funds. I guess they were hoping to fire up the folks into a frenzy of hatred and get a bill whacking pensions f-a-s-t! Before the realities were exposed. Too bad it didn’t work because now rational folks will realize that those in the pension funds already got whacked once with everybody else benefitting from their dollars that went missing. Cullerton is just slowing it down to get the message out that not only are these attempts most certainly illegal, but a further waste of taxpayers money when they are challenged in the courts. I’m hoping that maybe there’s a teeny bit of morality involved in this too. Once victimized…..do we need to really ream them again? Maybe all who benefitted from the continued theft should pay for services already received. That would be every citizen.


  37. - wordslinger - Tuesday, Oct 22, 13 @ 12:56 pm:

    –May God help us if the millenials, and future generations after them, decide that they are not morally responsible for all this debt, and the solution is to simply default on it.–

    LOL, you failed to mention the Four Horsemen and Dogs and Cats sleeping together.

    “default on it.”

    What is that supposed to mean? Default on a debt owed to oneself?


  38. - Farker - Tuesday, Oct 22, 13 @ 12:57 pm:

    Came here to see wordslinger, rnug, and publicservant school the uninformed. Leaving satisfied…..


  39. - skeptical spectacle - Tuesday, Oct 22, 13 @ 1:00 pm:

    I think what ZC is alluding to is that there is not much public support for current pension system, especially when they see funding to schools, services, etc. going down and taxes likely to go up.

    This is a separate issue from the one of legality most discussed here, but it is relevant.

    The people who are most supportive of current pension system are people who are entitled to a pension (and their families). This is not surprising.

    Again, this does not speak directly to issues of legality, but ZCs point is at least relevant. How much support is there out there in our state for these sorts of public pensions?


  40. - Anonymous - Tuesday, Oct 22, 13 @ 1:00 pm:

    ==Social Security has seen reduced COLAs==

    If one looks at inflation over the last 30 years, Social Security’ COLAs, and the State pension systems’ compounded 3% COLA’s have kept pace with inflation at about the same pace, according to Richard Rich. However, the proposed half the rate of inflation COLA would not keep pace with Social Security.

    “The Consumer Price Index has gone from 97.6 in 1982 to 229.6 in 2012. The cost of living has more than doubled over this 30-year period. In other words, a person receiving a pension of $9,760 in 1982 would need a pension of $22,960 in 2012 to maintain the same purchasing power.
    Over this same 30-year period, a person in the State University Retirement System earning a $10,000 pension is receiving $24,272.62 in 2012 under the current COLA system — a 3-percent compounded annual increase.
    If a person is part of the current U.S. Social Security system and receiving a $10,000 pension in 1982, he would receive $24,175.23 in 2012, reflecting the Social Security system COLA.
    However, if this same person was limited to one half of the consumer price index (the current IGPA proposal), he would be receiving a pension of $15,687.31 in 2012 and would have lost about $8,500 in purchasing power.”


  41. - skeptical spectacle - Tuesday, Oct 22, 13 @ 1:01 pm:

    I think it is a fair question to ask……how much do we continue to cut funding to public schools and other public services so we can maintain escalating pension obligations?


  42. - mythoughtis - Tuesday, Oct 22, 13 @ 1:02 pm:

    ZC

    I didn’t agree that the US Government could start an income tax, but I am obligated to pay it. Why? Because I live here and I have to help fund the government.

    I didn’t agree that we should have $17 trillion in debt owed by the US Government, but I am obligated to pay it. Why? Because I live here and I (or my past or future family) in some way/shape/form. benefited from that debt.

    You and/or your past/future family has benefited in some way from money being diverted from the Illinois pension funds to other things. You and/or your past/future/family has received services from the state of Illinois (even if it is processing a tax return or a driver’s license). Taxpayers are obligated to appropriately pay the state employees and retirees what they were promised for providing services. Taxpayers have already altered (in advance of hiring, as appropriate) the contract for employees hired after 2011.


  43. - Rich Miller - Tuesday, Oct 22, 13 @ 1:02 pm:

    ===You’re not saying that anything in a Constitution, should be seen automatically as morally binding or automatically deserving of respect?===

    It is the law of the land unless and/or until it’s repealed, which happened to the goofy example you used. Illinoisans were given an opportunity a few years back to rewrite the state Constitution and they overwhelmingly rejected a do-over for the second time - in essence, re-ratifying the document as is.


  44. - RNUG - Tuesday, Oct 22, 13 @ 1:03 pm:

    Cook County Commoner @ 12:50 pm:

    Under current IL law, government entities like towns, etc. can’t go bankrupt.

    The one that will most likely “break the bank” is the Chicago Public School pension fund or Chicago Police pension fund. But even there any possible bailout is going to receive a cold shoulder downstate because of the higher percentage Chicago schools receive and the property tax assessment levels being one-half of the collars and downstate.


  45. - RNUG - Tuesday, Oct 22, 13 @ 1:07 pm:

    skeptical spectacle @ 1:01 pm:

    The actual question is: “Now that we can’t steal from the pensions anymore to pay for essential services like schools, are we willing to raise taxes to fund the schools?”


  46. - wordslinger - Tuesday, Oct 22, 13 @ 1:09 pm:

    ===You’re not saying that anything in a Constitution, should be seen automatically as morally binding or automatically deserving of respect?===

    Hmmm. Would you say you’re more of an anarchist narcissist or narcissist anarchist?

    What is your understanding of the concept of “morality?” You throw it around like a manhole cover.


  47. - Name/Nickname/Anon - Tuesday, Oct 22, 13 @ 1:30 pm:

    One good analogy might be the contract that was signed for the restaurant at Millenium Park. Can that be renegotiated.

    I think that representatives might not have been negotiating in good faith on behalf of taxpayers when some benefit increases were passed.


  48. - PublicServant - Tuesday, Oct 22, 13 @ 1:31 pm:

    ===How much support is there out there in our state for these sorts of public pensions?===

    Well, I’m sure that there’s one or two polls that have been, or could be, done to determine that, but what would that accomplish? Apparently there was enough support at the 1970 Constitutional Convention. No one likes using their earnings to pay past debts, including me, but I do it. Why? Because I pay my bills. Now, I’ve tried (see past lawsuits) to request that our elected representatives not take “pension holidays”, but they didn’t listen to me. I told them that one day they’d have to pay back those debts, but I failed to see their grand plan. Create a financial crisis of our own making, then attempt to declare police powers to void a contractual agreement. Admittedly, I’m relying on the State and Federal Supreme courts to give that specious argument the quick brushoff that it deserves, but I think I’ll be successful. True conservatives know the value of and themselves rely upon the rule of law. I’m pretty sure they have my back here, or at least they’re holding their nose as they ignore that core belief in the case of pensions. As for the politicians, whether conservative or liberal, most can’t be trusted to do anything other than what is in their best personal interest regardless of the morality or legality of their position in any given matter.


  49. - Ghost - Tuesday, Oct 22, 13 @ 1:37 pm:

    The pension payment is 6% of gross receiepts roughly.

    Not much of a crisis. Toss in that half that payment is an artifical amount designed to increase the contributions to make up for prior years, and our actual payment if we just paid the correct total is 3%.


  50. - ZC - Tuesday, Oct 22, 13 @ 1:49 pm:

    Yikes, wordslinger.

    I’ll say one thing: I should have left the 3/5 clause out of it. Soon as I clicked “Say It!” I thought, ugh, totally not in the same moral ballpark. Only weakens my point. Not as bad as Godwin’s Law but still.

    My initial point was directed at those early up on this thread who seemed to say, “Look it’s a contract, it was promised, end of story.”

    I still think that’s a very crabbed way of thinking about politics and political obligations. If such posters above don’t think at all about how these future payments create opportunity costs, they they impact the rest of Illinois’ priorities, including future stresses on spending for public education, infrastructure, public health, etc. - all the things that made Illinois a good state for them to work and live in - if it’s just, “I want mine, period, I have my contract, and you deal with it” - then yes, I consider that somewhat selfish. I guess that’s my best position about what “moral” means here.

    What I’d like to see, is a situation where everyone gives up something - the rich pay more, those future kids do in fact acknowledge that yes, there are a lot more retirees and IL is going to continue to spend a lot more money there than in the past, and some current and future retirees give up some of their promised future rate of growth, according to these pension formulae.

    But, with that, I’m out … Go gay marriage …


  51. - Sue - Tuesday, Oct 22, 13 @ 2:08 pm:

    Rich/Wordslinger- the enforceability of the pension impairment clause and the issue of whether fiscal conditions permit an impairment will be resolved by the Illinois Supreme Court. That is assuming the legislature ever gets around to passing something- Your comments seem to suggest some kind of “untouchable” status is to be afforded simply because of the existence of constitutional language- Read Blaisdell 290 U.S.398(1934)and your views might need to be reconsidered - Private contracts aren’t always enforced and their is a basis to reduce future benefits when the public welfare is at issue


  52. - 47th Ward - Tuesday, Oct 22, 13 @ 2:29 pm:

    I can almost hear Cullerton channelling his inner Stanley Motss:

    “Crisis? This is nothing. This is nothing. Did you ever shoot in Italy? Try three Italian starlets wacked out on Benzedrine and grappa, this is a walk in the park.”

    “Crisis? This is nothing. Try a ten a.m. script meeting, coked to the gills, no sleep and you haven’t even read the treatment.”


  53. - equivocator - Tuesday, Oct 22, 13 @ 2:40 pm:

    Assume that pensions do account for 20 percent of the budget. That a majority of retirees still reside within Illinois is my hunch. What do they do with the pension money they receive. They spend it and pay taxes with it. Pensions are a transfer of transfer payment that actually helps the economy of Illinois. If it did not, then why would Illinois not tax retirees if their contribution to the state economy was nil. My point is that the real cost to the state for paying the pensions people have earned has a lower total system cost than 20 percent. By the time the retirees spend their pension check, a good chunk has been put back into the state economy that has a positive ripple effect.


  54. - PublicServant - Tuesday, Oct 22, 13 @ 2:49 pm:

    Sue, when the public welfare is at issue due to a lack of revenue, so is a reasonable increase in taxes to pay for the priorities your elected representatives have set.


  55. - PublicServant - Tuesday, Oct 22, 13 @ 2:50 pm:

    But your concern for the public (other than state employees that is) is touching.


  56. - Sue - Tuesday, Oct 22, 13 @ 2:54 pm:

    Public Servant- Over time no tax increase which is imaginable will be sufficient to amortize the pension obligations- get over it- some reduction is a must and that is true whether the tax increase is made permenant


  57. - RNUG - Tuesday, Oct 22, 13 @ 3:03 pm:

    Sue,

    It’s hard to make either the police powers or public welfare argument when:

    a) IL law specifically enshrines the pensions with protection via contract law and specifically bars the contemplated diminishment actions … and that is NOT in conflict with Federal contract law so the State and voter’s right to make such a law is pretty much unquestioned

    b) IL taxes at lower levels than surrounding states … so there is at least one recourse, raising taxes, that does not require negation or modification of the existing contract

    c) IL citizens have a opportunity every 20 years to exercise a recourse, a Constitutional Convention, and have consistently rejected such action

    d) IL has never missed a pension payment in the 5-+ years the pensions have been under funded

    e) In the specific case cited, at the base level the moral issue was the state government stepping in via legislation to allow foreclosed owners limited extra time to try to save their homes from the S&L. Here the moral issue is whether government will pay what is already owed…

    f) Specifically on pensions, you have a whole bunch of various State’s rulings that side with the retirees when the State has the same or equivalent Pension Protection language

    g) Plus you have the whole issue of whether or not you could even get the case into Federal court

    In the case you cited, the court approved a temporary extension of the time to redeem a foreclosed home; there was a specific time limit set. It was not a permanent injunction against the company trying to exercise their right to recover via foreclosure.

    In the case of the State pensions here, the remedies proposed, such as the AAI (COLA) reduction are not temporary in nature (such as a one year suspension required by an “emergency”) but permanent.

    It would be a real stretch to say the cases are anywhere close …


  58. - RNUG - Tuesday, Oct 22, 13 @ 3:07 pm:

    Sue,

    There have been at least two creditable tax proposals put forth. Neither one is that onerous. And they will solve the revenue problem AS LONG AS the GA doesn’t go nuts and spend the revenue on new programs.


  59. - skeptical spectacle - Tuesday, Oct 22, 13 @ 3:10 pm:

    –if it’s just, “I want mine, period, I have my contract, and you deal with it” - then yes, I consider that somewhat selfish. I guess that’s my best position about what “moral” means here.

    ZCs point here is accurate. This is the way the message comes across to all the remainder of the citizens who do not get pensions or are affected by them directly.

    Anti pension reform people will ultimately lose in the court of public opinion. We will see what happens in the Supreme Court.

    It will take both tax increases and pension reform to obviate this mess.


  60. - RNUG - Tuesday, Oct 22, 13 @ 3:21 pm:

    skeptical spectacle @ 3:10 pm:

    As I said previously, all it takes to resolve the pension funding “crisis” is to continue to make the scheduled payments under the 1995 “ramp” plan through 2045.

    If the State can’t make those payments while also funding all the other State needs it used to pay for with pension monies, then the State has a REVENUE problem, not a pension problem.


  61. - cod - Tuesday, Oct 22, 13 @ 3:31 pm:

    skeptical spectacle - Tuesday, Oct 22, 13 @ 12:19 pm:

    Not to further belabor your comparison, since it has already been beat up by RNUG, but you should also know that educating a child is done by a teacher who is compensated with salary and benefits.

    The pension is part of that compensation, and is a contractual obligation, morally, by contract law, and by state constitution.


  62. - Grandson of Man - Tuesday, Oct 22, 13 @ 3:34 pm:

    “Another comment home run by Word.”

    I agree with this and would like to thank the commenters who always contribute knowledge about pensions and finances, and who help us sort this stuff out.


  63. - skeptical spectacle - Tuesday, Oct 22, 13 @ 3:52 pm:

    –skeptical spectacle - Tuesday, Oct 22, 13 @ 12:19 pm:

    Not to further belabor your comparison, since it has already been beat up by RNUG, but you should also know that educating a child is done by a teacher who is compensated with salary and benefits.

    The pension is part of that compensation, and is a contractual obligation, morally, by contract law, and by state constitution.

    I agree with you. That is the way things are currently set up. But I think it is clear that the way things are currently set up hasn’t worked too well.

    The question now is how can we legally change the current situation to best meet the needs of all of the citizens of Illinois.’

    That is currently being evaluated. It will be interesting to see what happens. It will be interesting to see how much traction this issue gets in the next wave of elections.


  64. - PublicServant - Tuesday, Oct 22, 13 @ 3:58 pm:

    Well skep and ZC, frankly here’s the way I feel about it. Let’s see whether you can follow my logic here:

    Who benefitted from pension holidays whereby the state failed to contribute its share in full for 60+ years? Did employees? Obviously not, since we don’t like the current shenannigans that are currently underway. Answer, to be fair, is all taxpayers who would have had to pay more taxes to increase the revenue needed had the pensions not been a convenient bucket from which to borrow.

    I’ll agree to take a financial hit in an amount equal to any other Illinois taxpayer in order to fix the mess we’re in. None of the current proposals do that. If you can explain why I’m somehow more responsible for the mess we’re in than anyone else, I’m all ears. Other than that, as the saying goes, “We’re all in this together”, and equally so, I might add.


  65. - RNUG - Tuesday, Oct 22, 13 @ 4:06 pm:

    skeptical spectacle @ 3:52 pm:

    It’s already been legally changed; see the Tier 2 pension program put in place 1/1/2011.

    The debate now is about who pays the bill that is already owed …


  66. - capncrunch - Tuesday, Oct 22, 13 @ 4:21 pm:

    “There have been at least two creditable tax proposals put forth. Neither one is that onerous.”

    It certainly won’t be onerous for those whose income is primarily received from one of the 5 state retirement plans, Social Security or other private retirement plans. Not sure how other citizens would describe a tax increase.


  67. - reformer - Tuesday, Oct 22, 13 @ 4:23 pm:

    == I submit that making the “temporary” tax increase permanent will result in a near immediate increase in the state’s bond rating. ==

    The rating houses have identified lack of certainty about revenues as a risk factor. Of course our GOP friends who complain the loudest every time our rating is dropped refuse to take the measure that would give the greatest boost to our ratings.


  68. - PublicServant - Tuesday, Oct 22, 13 @ 4:24 pm:

    And that is true Capncrunch. If the law were changed to eliminate the pension tax exclusion for everyone, public or private, on a pension, I’d reluctantly agree to that. Is that what is being proposed to solve the “crisis”, or am I missing something here?


  69. - reformer - Tuesday, Oct 22, 13 @ 4:36 pm:

    == I think it is a fair question to ask……how much do we continue to cut funding to public schools and other public services so we can maintain escalating pension obligations? ==

    How much MORE would we cut funding to public schools and other public services if we let the income tax hike expire?


  70. - RNUG - Tuesday, Oct 22, 13 @ 4:42 pm:

    capncrunch @ 4:21 pm:

    Continuing the current flat tax temp income tax increase (even though it was/is inadequate to solve the actual revenue problem) wouldn’t be a burden since it is currently being paid. Plus the actual effective rate is lower than 5% depending on income, age and number of dependents.

    The graduated income tax rates proposed by Martire will have people paying the same or less total income tax dollars (compared to the current 5% rate) if they make less than $150K, which is most of the taxpayers in Illinois. Yes. some opf the marginal rates are higher than 5% plus the culmulative effect doesn’t surpass the current system until earning more than $150K … and those are IDOR conclusions after modeling the Martire proposal.

    I think it can be honestly said neither of those plans imposes an onerous burden … unless you consider the current 5% rate onerous.

    There have been other revenue proposals that would have anywhere from minimal to large impact. For example, a $1 tax per transaction at the CBOT would raise a lot of money while affecting almost none of the average IL taxpayers. At the other end, adding a sales tax on services at the current sales tax rate (6.25% state plus any local additions) would have a noticable impact on the average person.


  71. - RNUG - Tuesday, Oct 22, 13 @ 4:54 pm:

    While I’m not opposed to it, I will point out that I’ve previously ran the numbers and taxing all pension / social security income would only bring in about $0.8B to $1.1B (depending on some assumptions about over 65 IL census data, property tax exclusions, and retention of the existing “extra” exemption for age 65). Quite frankly, that is almost a rounding error in the total State revenue of $35B.


  72. - Joe M - Tuesday, Oct 22, 13 @ 5:39 pm:

    Sue, the Illinois Supreme Court’s ruling from Jorgensen v. Blagojevich stated, “No principle of law permits us to suspend [Illinois] constitutional requirements for economic reasons, no matter how compelling those reasons may seem.”

    I would also welcome a chance for any law Illinois passes that diminishes or impairs public pensions to get to the U.S. Supreme Court.

    The U.S. Constitution’s contract protection clause says that no state shall pass a law that impairs the obligation of contracts. And the Illinois Supreme Court describes public pensions as a contractual relationship whose benefits cannot be diminished or impaired.

    According to Westlaw, the most cited case about the U.S. Constitution’s contract protection clause and states powers is the case, U.S. Trust Co. of New York v. New Jersey, 97 S.Ct. 1505. In that case, the U.S. Supreme Court stated:

    “Contract Clause of [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……..”.

    also:

    “If a State could reduce its financial obligations whenever it wanted to spend the money for what it regarded as an important public purpose, the Contract Clause would provide no protection at all.”


  73. - RNUG - Tuesday, Oct 22, 13 @ 6:29 pm:

    skeptical spectacle @ 3:52 pm:

    When you talk about the current plans not working well, you conveniently skip over the fact the funds would be in good shape today had the State not SKIPPED and UNDERFUNDED many payments …


  74. - capncrunch - Tuesday, Oct 22, 13 @ 7:07 pm:

    RNUG

    Using 2011 tax data I calculated a higher revenue than you did. I assumed that retirement income is deducted up front before taxes are computed and, therefore, if added back to AGI would be marginal income taxed at 5%. In 2011, retirement income of about $42 billion was subtracted from Illinois tax returns. This deduction results in over $2 billion in lost revenue. That is about the same amount of revenue ($2.4 billion) that CTBA proposes to raise with a progressive income tax.


  75. - Just The Way It Is One - Tuesday, Oct 22, 13 @ 8:15 pm:

    And a hearty “AMEN” to Crain’s Commentary!!


  76. - Juvenal - Tuesday, Oct 22, 13 @ 8:50 pm:

    Public Servant -

    To be fair, public employees did derive some significant benefit from the pension holidays.

    Absent borrowing from the pension holidays, the alternative would have been increased revenue, decreased spending, or some combination.

    Given the ways of the world and the structure of the state budget, cuts likely would have been to public education, health care and human services, from which working class families derive a significant benefit.

    Cuts likely would have meant atleast some reduction in the state work force.

    Increased revenue would likely have come from an income tax increase, also largely paid for by working families.

    So yes, while it is fair to point out that workers were promised a retirement and made their payments into the pension system, it is not truthful to argue that public employees derived no benefit from skipped pension payments.

    Which is why, I believe, even though they are right on the points of law and the history of the pension problem, public employees still have a moral responsibility to be a part of the solution to the pension challenges.


  77. - RNUG - Tuesday, Oct 22, 13 @ 9:39 pm:

    capncrunch @ 7:07 pm

    It is very possible that you came up with a different number, depending on the starting source and assumptions used. I know I started with a different source, census data. It is possible that such a tax could bring in more than my estimate … or it could bring in less than your estimate.

    Either way, it would not be enough to offset the roughly $5.4B that is going away when the temp income tax sunsets in 2015 … which is the real problem.


  78. - Andrew Szakmary - Tuesday, Oct 22, 13 @ 10:12 pm:

    Juvenal, I agree with you that public employees, morally if not legally, have an obligation to pitch in to solve the state’s debt problem. That is why I supported Cullerton’s original 2-year COLA freeze that passed the Senate. It would have reduced the present value of my pension benefits by about 5.3%, which, although a bit more severe than anything that has so far been proposed with respect to Social Security for current and soon-to-be beneficiaries, was still something I could have lived with. But the current conference committee proposal (which Republicans complain doesn’t do enough) would reduce the PV of my pension by around 15%. That is simply too extreme for me to support when the law is solidly on my side.


  79. - concern1 - Tuesday, Oct 22, 13 @ 11:16 pm:

    Sue…” there is a basis to reduce future benefits when the public welfare is at issue”….guess the legislators didn’t see that one when they used our pension money as their own credit card and thinking “we will never have to pay this back”…Rich Miller I like the way you think…this is interesting reading…some people think us on pensions should get our legs broke, that we don’t deserve our pensions and then some think a little clearer…. it’s a contract our so called leaders should not have spent us into the ground on their many PORK PROJECTS…now they pay not us!!!!!


  80. - PublicServant - Wednesday, Oct 23, 13 @ 6:33 am:

    Juvenal, that is a rather interesting argument and one that I haven’t heard put that way as people have scrambled to rationalize why pension diminishment is justified. Let me see whether I understand the point. I, and presumably a certain percentage of my fellow state employees would potentially not have had the opportunity to have contributed to, nor become victims of the pension “borrowing” had the pension “borrowing” not occurred in the first place, because otherwise cuts to state employment and cuts to programs that benefit working families would have occurred because that’s “the way of the world”.

    In addition, the tax increase that would have had to have been made, due to Illinois regressive flat tax, would have been mostly born by those same working families resulting in a double whammy for the middle class in this state.
    Do I have it right?

    My response is that Illinois is 50th out of 50 states in public employment per capita. We’ve been at or near the bottom for decades, so that employment boon the state employees benefited from at the macro level hasn’t materialized during those halcyon years of pension holidays. You also point out that there would have had to have been cuts to education, healthcare and human services. That point we can agree on. Since that presumably didn’t occur, according to your argument anyway, didn’t I and my fellow state employees essentially pay for the portion of program funding that would have otherwise been cut? Shouldn’t funding for those programs have come via tax revenues as opposed to raiding my retirement funds? But why dwell on what could or should have been, right? Illinois is broke! “We” must do something to staunch the bleeding. I know, lets go to those same people who we leaned on to prop up state spending over the last 6 decades while taxpayers enjoyed the lower taxes that those pension holidays enabled.

    Yep, makes perfect sense to me, Juv. Ya got me there.


  81. - Anon. - Wednesday, Oct 23, 13 @ 7:12 am:

    ==Which is why, I believe, even though they are right on the points of law and the history of the pension problem, public employees still have a moral responsibility to be a part of the solution to the pension challenges.==

    Why just public employees? Why not a partial default on bonds and our obligations to pay vendors, too? And why do you assume that, if the “crisis” is solved by tax increases, public employees won’t share in that burden to the same extent as everyone else?


  82. - RNUG - Wednesday, Oct 23, 13 @ 7:45 am:

    capncrunch @ 7:07 pm

    I think one other difference between our calculations is I assumed people 65+ only had their pensions / SS as income so I was subtracting the various allowed state deductions which would result in a lower effective rate than the full 5%. I think I assumed 1.5 persons per household to calculate the deductions.

    I will agree that the revenue from a pension tax could be up to $2B under some scenarios … but even if the GA decides to tax pensions / SS, I don’t see them deciding to tax the entire amount. My guess is the GA would provide an exemption of the first $15K - $25K of pension income.


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