102 Comments - Ghost - Monday, Dec 9, 13 @ 9:30 am: I notice that Rauner is for capping and freezing how much workers can make, but he isnt pushing for caps on what investment bankers can make in fees for handling pension investments. perhaps if we froze them to earning no more then 109,000 a year for handling 401(k) style plans or public employee retirement investments, regardless of the size of the investment… think of all the money that would stay with retirees and investors…. - skeptical spectacle - Monday, Dec 9, 13 @ 9:36 am: Good summary of the situation….glad to see Rich put in there regarding the public sector’s special and disproportionate influence on state politics. ” Benefits were expanded almost every year, sometimes more than once.” No doubt the GA didn’t fund as promised; Also no doubt the unions received benefits packages which were way beyond anything anyone in the private sector could hope for or the state could afford, especially the higher earners. These benefits were accrued because of legal but very unsavory relationships between unions and politicians involving large amounts of campaign cash, etc. Really the only leg the unions and stateworkers have to stand on against this pension reform has always been the “unconstitionality argument.” From a common sense or political or economic perspective pension reform is a no brainer, and simply must be done in order to maintain viability of state, so it can perform its proper functions of maintaining general welfare for all of its citizens, not just citizens who have happened to work for gov’t, schools, etc. However, the legal argument against pension reform is not a weak one, and it will be interesting to see what the court system says. Ironically, it is only the legal system which will be able to arrest pension reform at this point…..not voters, not economists, not politicians, not common sense. And yes, revenue will now need to be addressed too (I say this pre emptively so we can avoid the Martire, progressive income tax statements that we all know so well). And spending……ouch my head hurts. - Anonymous One - Monday, Dec 9, 13 @ 9:44 am: How interesting that the boys sitting on mountains of personal cash, Fahner, Rauner, etc. are the ones screaming the loudest that those living on 30 or 40K per year are gouging the system. They, however, living on 50+million, couldn’t possibly be asked to give up one single penny however. Who are the greedy ones? - Anonymous - Monday, Dec 9, 13 @ 9:47 am: Is this the same state where two justices were forced off the bench for accepting stock in a bank during the middle of a related case? Is this the same state where the Governorship was decided on a party-line vote, except for one justice who flipped on a personal grudge? Is this the same state where a lawyer believed to have been added to cases for clout, who was married to a leading political figure, rose to the Supreme Court? Is this the same state where a former Chief Justice had been a partner in a law firm where another named partner was suspended from the practice of law after he testified in a Greylord case about a “loan” he made to a judge? “We’re about to find out just what sort of state we really live in.” We’ll soon find out. - facts are stubborn things - Monday, Dec 9, 13 @ 9:56 am: = There is some wiggle room, particularly on cost of living adjustments. The constitutional drafters debated whether to specifically protect benefits against the ravages of inflation and decided against it.= I disagree. “The plain language [of Article XIII, Section 5 of the Illinois Constitution, commonly called the Pension Clause] indicates that an employee’s pension payments and other membership entitlements are ‘contractual’ rights that may be altered [only] through mutual assent via contract principles…; [that] the [Pension] Clause’s prohibition against diminishment and impairment is cast in absolute terms. - Demoralized - Monday, Dec 9, 13 @ 9:57 am: ==The man who reported making $53 million last year == I think that’s one of the most important things to remember about Rauner. He makes boatloads of money and yet he wants to stick it to those with very modest incomes. ==which were way beyond anything anyone in the private sector could hope for == So because the private sector may not have it nobody should have it? We have to race to the lowest common denominator? - facts are stubborn things - Monday, Dec 9, 13 @ 9:58 am: The argument at the convention in 1970 was should the prnsion clause itself contain protection against inflation. They decided no it should not. However, enhansmints to the pension benfits (inflation protection via COLA) are protected by the pensino clause. - Cassiopeia - Monday, Dec 9, 13 @ 9:59 am: Actually we are about to find out what kind of Supreme Court we have. Their votes will be their individual legacies. - Just Observing - Monday, Dec 9, 13 @ 9:59 am: === Rauner would also put all current workers into 401(k) plans — the same plans that most private employees participate in, and the same plans that many are now worried are so inadequate that we appear heading for a national poverty disaster among the elderly. === Isn’t it the case though that these plans are inadequate because workers don’t participate or fully participate? Especially when employees match contributions and employees don’t participate… they are making one of the worst financial decisions of their lives. - facts are stubborn things - Monday, Dec 9, 13 @ 10:00 am: My fingers are much to quick for my brain, my fault, so I have included my previous post again. The argument at the convention in 1970 was should the pension clause itself contain protection against inflation. They decided no it should not. However, enhancements to the pension benefits (inflation protection via COLA) are protected by the pension clause. - Stones - Monday, Dec 9, 13 @ 10:00 am: Has there been a lawsuit filed yet? If so, does anyone have a reasonable estimate as to a timetable for the decision? - Anon - Monday, Dec 9, 13 @ 10:02 am: Why not just create a new part of the Illinois Constitution…We can call it “the part that we can and will always enforce” and put a requirement in there that says “future pension obligations will be funded 100% every year, per the actuarial tables” - Wallinger Dickus - Monday, Dec 9, 13 @ 10:07 am: – Really the only leg the unions and stateworkers have to stand on against this pension reform has always been the “unconstitionality argument.” — skeptical spectacle And anyone who leans on the rule of law as a means to mainatin order in society is what? - pensioner - Monday, Dec 9, 13 @ 10:08 am: “If the unions had pushed half as hard to actually fund those benefit sweeteners, things might be different today.” Funding WAS challenged. Ruling was the state had to pay benies but could not be forced to fund. No fault to the unions here. It’s not up to the unions as to how to fund. - iThink - Monday, Dec 9, 13 @ 10:10 am: ==Especially when employees match contributions and employees don’t participate…== Yes, it is a terrible decision for those who don’t participate. However, the defined contribution plans run the same problem regardless if people participate - how long will I live? In a pension system that risk is spread through the system, for every person who lives to 99 there will be one who dies at 61. SB1 specifies a minimum of a zero percent match for TRS participants BTW. What a great deal.. - Marty - Monday, Dec 9, 13 @ 10:11 am: For my information, when was the 3% annual pension increase implemented (early ’80s?) and why was it called an annual annuity increase (AAI) rather than a cost of living increase (COLA)? COLA is a much more common term. It seems to me that calling it an AAI directly supports the constitution drafters desires while providing protection from inflation. It seems that a fixed AAI in the Pension Code is a different, and more defensible contractual benefit, than a COLA when trying to satisfy the drafters intend of protection under the Pension Clause of our constitution. - wordslinger - Monday, Dec 9, 13 @ 10:12 am: Stones, pack a lunch. The law doesn’t take effect until June 1, I believe. I don’t think anyone could show harm and grounds for a lawsuit until some time after that date. - Roadiepig - Monday, Dec 9, 13 @ 10:12 am: skeptical spectacle - Monday, Dec 9, 13 @ 9:36 am: However, the legal argument against pension reform is not a weak one, and it will be interesting to see what the court system says Interesting to read you making that statement, considering how many posts you have made here arguing for the unconstitutional cutting of retiree’s earned benefits (AKA deferred compensation). You can say that the benefits were added to too many times, and you won’t get an argument from most of us that a tiny number of people gamed the system to get benefits that they DIDN’T deserve (work for a teacher for a day and receive a pension after a lifetime of being a union agent? Despicable). But regardless of those rare examples, the vast majority of state retirees dedicated their lives to doing jobs that most people wouldn’t even consider doing , especially for the amount of salary included for the job. To decide its ok for the general assembly to take away the future financial viability of retirees after they were the ones who took the pension payment “vacations” is akin to letting the robbers of a bank be in charge of setting up the future security systems for the victims. Taxpayers benefitted from those “vacations” by underpaying for state services (which were funded by money that should have went into the pension system). Now the bills are coming due and the only option the union haters see is cut cut cut the pensions. So why not break contracts with the holders of state bonds? Or shaft vendors who have already provided goods or services to the state? I don’t think this issues will move quickly through the courts (especially after reading about how slow the state of Arizona Supreme Court has litigated their general assembly’s attempts at “reform”). If the largest financial change is thrown out (cuts to what is wrongly called the “COLA”) in a year or two the state will be in even worse shape than it is now, and all the members (and the Governor), smiling and laughing at the bill signing session last week, will have wasted more time without truly fixing the problems they have helped cause. - RonOglesby - Monday, Dec 9, 13 @ 10:18 am: “The pension funds were never given enough state money. Benefits were expanded almost every year, sometimes more than once.” This is a key sentence right here. The court battles about this will be legendary, BUT both sides here (the politicians AND the workers/unions) had a part. Expanded benefits constantly even through decades where they were not paid for or even thought about paying for… Everyone knew it was a scam. But both sides perpetuated it because it was good for them at the time. Now if the unions/state workers don’t make the politicians pay (as the retirees and those working now will have to) then they get what they get. They helped those pols year after year. If in 4 years the ILGA looks almost identical to right now then they have picked their bedfellows have they not? - Belle - Monday, Dec 9, 13 @ 10:18 am: Terrific summary of the situation. - Andrew Szakmary - Monday, Dec 9, 13 @ 10:20 am: Rich, I strongly disagree with the premise that the problem Illinois is facing is a combination of past underfunding and overly generous benefits. While the first part of that is obviously correct, the second is contradicted by the retirement systems themselves. For example, in FY 2013, SURS certified that the normal cost of its pensions (i.e. the necessary state payment for benefits accrued in that year) was 12.04% of payroll. In what way is this overly high for an employer that is not contributing to Social Security? If Walmart contributes 6.2% of a typical employee’s salary to SS and matches, dollar for dollar, employee contributions to the company 401k plan up to 6% of pay, is not Walmart contributing approximately as much to their employees’ retirements as the State of Illinois was prior to the recent cuts? I think any reasonable analysis that looks at the big picture over a very long time frame, like 50 or 60 years and not short cherry-picked periods as pension detractors usually do, would conclude that the problem (at least with SURS) is not overly generous benefits or poor investment returns, but is entirely due to past underfunding by the state that it now finds very inconvenient to remedy. I suppose we shall soon find out whether inconvenience is a sufficient excuse to break a contract. - RetiredStateEmployee - Monday, Dec 9, 13 @ 10:23 am: “The pension funds were never given enough state money. Benefits were expanded almost every year, sometimes more than once.” While the first part of this statement is true, I believe the second part isn’t. There have been benefits changes occasionally over the last 30+ years, annual changes for regular state employees have only happened a couple of times, the rule of 85 for example. What has changed annually is the increase in wages for union employees. So much so in fact that many union employees ended up making more than their supervisors, thus leading many of those employees to join the union. This leads to higher benefits paid but only because of salary increases, not changes to the retirement system. - Anonymous - Monday, Dec 9, 13 @ 10:30 am: RetiredStateEmployee - Monday, Dec 9, 13 @ 10:23 am Another thing that put pressure on the systems was calculating the pension amount on base salary plus overtime. Overtime is based on administrative need, but has become routine in many departments facing staff shortages; or cheaper than the cost of adding more staff. I don’t know why the pension amount calculation was not limited to base salary. - Just Observing - Monday, Dec 9, 13 @ 10:31 am: === However, the defined contribution plans run the same problem regardless if people participate - how long will I live? In a pension system that risk is spread through the system, for every person who lives to 99 there will be one who dies at 61. === Good point @iThink. However, one problem I have with pensions, is that it assumes everyone participating will make a long-term career in government. I worked for a government agency for only a few years… since I wasn’t vested… I had my money returned with only three percent interest. That type of set-up is a disincentive to those that may want to serve the public in a government job for less than 10 years. - Enemy of the State - Monday, Dec 9, 13 @ 10:32 am: I already know what sort or State this is. I am hoping for something better. - facts are stubborn things - Monday, Dec 9, 13 @ 10:34 am: @Anonymous - Monday, Dec 9, 13 @ 10:30 am: In SERS, it is the last days pay (base salery) or the highest 4 consecutive years within the previous 10 years. If there is enough overtime such that you have 4 years in a row, whithin the past 10 years, then your pension is based partly on the overtime. I find that reasonable. - second street - Monday, Dec 9, 13 @ 10:35 am: “Enhancements to pension benefits” may well be protected by the pension clause, but those words are not in the pension clause. SECTION 5. PENSION AND RETIREMENT RIGHTS Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired. (Source: Illinois Constitution.) - wordslinger - Monday, Dec 9, 13 @ 10:37 am: Apparently some commenters didn’t read the column. – Pensions have been routinely and chronically underfunded since the 1940s (no payments missed, though). – The Illinois Constitution with its pension language took effect in 1970. – In addition, Illinois state employees did not have collective bargaining rights under law until 1983 (Big Jim). - olddog - Monday, Dec 9, 13 @ 10:38 am: === From a common sense or political or economic perspective pension reform is a no brainer, and simply must be done in order to maintain viability of state, so it can perform its proper functions of maintaining general welfare for all of its citizens, not just citizens who have happened to work for gov’t, schools, etc. === Hogwash. What “simply must be done” is for the state to start paying its bills. Period. That means increasing revenue. We’ve tried the alternatives, and they don’t work. Period. Paragraph. End of story. And it might be nice if we didn’t keep bashing our fellow “citizens who have happened to work for gov’t, schools, etc.,” while we’re at it. - The Whole Truth - Monday, Dec 9, 13 @ 10:40 am: From what I read, only 10% of the supposed savings realized from this reform will be used to fund the pension systems. The other 90% becomes available to the legislature and governor to spend as they see fit. If pension funding is so critical as to warrant this new reform, seems a good bit more than 10% of the savings should be going to funding the pension systems. That 90% now looks to be more of a regressive tax levied solely on employees and retirees, some of whom have been paying for those eliminated benefits through payroll deduction for 30-40 years. The earlier description as “legal theft” seems very apt, and deliberate misrepresentation of the premise and effect of the reform obvious. - pensioner - Monday, Dec 9, 13 @ 10:43 am: Look this is really simple. Of course the unions made deals to benefit their members. Reasons for a contract by EITHER party DO NOT MATTER. The state reneged on a contract (contract in a legal sense, not labor). As simple as that. It is what it is. A violated contract. - catrike - Monday, Dec 9, 13 @ 10:51 am: “And yes, revenue will now need to be addressed too… And spending…” Well said. Reforming pensions, keeping sufficient revenues (eg: extending the income tax hike), and freezing general spending levels are the tripod of fiscal responsibility that the future of the state depends upon. Shorten one leg and the entire system falls. - truthteller - Monday, Dec 9, 13 @ 10:58 am: Benefits increased every year? I believe that benefits were increased for state employees once by Edgar and once by Ryan, neither of whom had substantial support from public employee unions. There were no annual benefits, and the benefit increases came under Republican, not Democratic administrations to whom the bulk of union political action money goes. The facts don’t support the analysis - helloagain - Monday, Dec 9, 13 @ 10:59 am: This is from the sers website. Pensionable Salary Cap:  Applies the Tier II salary cap ($110,631 for 2014) to all Tier 1 members.  This cap is adjusted annually by the lesser of 3% or ½ of the annual CPI.  Salaries that currently exceed the cap or that will exceed the cap based on raises in a collective bargaining agreement are grandfathered in. What does grandfathered mean and who would it affect? - CollegeStudent - Monday, Dec 9, 13 @ 11:06 am: ==Isn’t it the case though that these plans are inadequate because workers don’t participate or fully participate? Especially when employees match contributions and employees don’t participate… they are making one of the worst financial decisions of their lives. == Of course you could fully participate and still be left in a very bad position should something like 2008 or worse happen again. And something like 2008 or worse is going to happen again in the next few decades-we never did anything to address the root causes of that crash and the financial sector appears to have learned nothing from the Global Financial Crisis. I’d put the money I should be investing in a 401K on it. I’m honestly stunned at times that anyone can say 401K money is safer with a straight face after 2008. - Bill_Baar - Monday, Dec 9, 13 @ 11:17 am: @College Student.. The Federal Thrift Savings plan has been successful. Peter Fitzgerald used to hold it up as a model, and it’s done very well post 2008. Following some simple investment rules with it is leading to successful retirements and participants have to feel better off owning something than State Workers in Illinois. - facts are stubborn things - Monday, Dec 9, 13 @ 11:32 am: @- second street - Monday, Dec 9, 13 @ 10:35 am: = “Enhancements to pension benefits” may well be protected by the pension clause, but those words are not in the pension clause.= the benefits of which shall not be diminished or impaired. Enhancements are benefits that are later bestowed on the individual. - PhoenixRising - Monday, Dec 9, 13 @ 11:34 am: Marty/Roadiepig…COLA…COLA…COLA. Is it working yet? I smell a “try and get it to stick” - facts are stubborn things - Monday, Dec 9, 13 @ 11:40 am: The 1970 constitutional convention which added the pension clause was put in for just exaclty this moment. The pensions were way underfunded back in 1970 and people feared the state would not pay the benifits due. Fast forward to today and the state has acted to not pay the benifits that are due. We can argue all day about whether pensions are to big, the part the unions played, the state played etc. etc. etc. but the fact remains the citizens of the State of Illinois in 1970 voted to protect those benfits that are owed. - facts are stubborn things - Monday, Dec 9, 13 @ 11:47 am: @wordslinger - Monday, Dec 9, 13 @ 10:12 am: =I don’t think anyone could show harm and grounds for a lawsuit until some time after that date.= Once the law was passed a law suite can be filed. No need to wait untill June of 2014. Litigation will begin much before the new pension law takes effect. It is law now. - CollegeStudent - Monday, Dec 9, 13 @ 11:50 am: @Bill_Baar Based on a quick scan of the federal retirement system it looks like the TSP is used as a supplement to the federal defined benefit plan rather than being the only source of retirement funds. That is almost certainly why its “worked out” since 2008. Of course only one fund is protected against principal loss, so you could still be inconvenience by the next Global Financial Crisis. - Norseman - Monday, Dec 9, 13 @ 11:51 am: Rich wrote another great column about pension issue. I only have one minor quibble with the following point: === I can see how some of this new might survive. There is some wiggle room, particularly on cost of living adjustments. The constitutional drafters debated whether to specifically protect benefits against the ravages of inflation and decided against it. === The point of the “constitutional drafters” debate was whether the pension clause could be used as a basis for the courts to order inflation adjustments. According to Eric M. Madiar in his paper on the pension clause: “The drafters also made clear during the Convention debates that the Pension Clause was not intended to: (1) … (3) require pension benefit payments to remain immune from inflation.” (IS WELCHING ON PUBLIC PENSION PROMISES AN OPTION FOR ILLINOIS? AN ANALYSIS OF ARTICLE XIII, SECTION 5 OF THE ILLINOIS CONSTITUTION, Eric M. Madiar, Page 20) Madiar goes on to state that one of the conclusions “regarding the original intent may be drawn from the Pension Clause’s Convention debates” is that: “Pension benefit increases are permissible under the Pension Clause, including automatic cost of living adjustments.” The bottom line is that the pension clause could not be used to create a right to inflationary protection where none existed, but it does protect automatic increases once they are made part of the benefit package by the General Assembly. - Anon. - Monday, Dec 9, 13 @ 11:54 am: ==“Enhancements to pension benefits” may well be protected by the pension clause, but those words are not in the pension clause.== Well, when you get down to it, “pension benefits” are not in the pension clause. But it does say that “the benefits” [no modifier] of “membership in any pension or retirement system” are protected. - Bill - Monday, Dec 9, 13 @ 11:56 am: Decatur Herald and Review ‘Letter to the Editor’ December 6, 2013 “Who started pension problems?” http://bit.ly/18wXmUm - skeptical spectacle - Monday, Dec 9, 13 @ 11:57 am: Norseman, We know what Madiar thinks…..will see what ISC thinks. - wordslinger - Monday, Dec 9, 13 @ 11:59 am: –Once the law was passed a law suite can be filed. No need to wait untill June of 2014. Litigation will begin much before the new pension law takes effect. It is law now.– No, it’s not. It’s law on June 1. What harm can you demonstrate for filing a lawsuit now? - Anonymous One - Monday, Dec 9, 13 @ 11:59 am: College Student You should not be stunned. It’s the propaganda line by the privileged who make money managing those 401ks. - Earl Shumaker - Monday, Dec 9, 13 @ 12:04 pm: Maybe this has been mentioned before, but didn’t the unions sue the state when elected officials started their “pension holiday” games? And wasn’t the ruling that unions had no standing since the state had not diminished contracted benefits but instead had diminished only the contributions to the pension funds? - funny guy - Monday, Dec 9, 13 @ 12:08 pm: Regarding comments about the unions being in bed with the politicians about pension increases,and therefore retirees are part to blame, let’s remember that not all government employees belong to a union. For the City of Chicago, its something like 10% or 3,000 employees who do not belong to a union. Does anyone know the state percentage? - Norseman - Monday, Dec 9, 13 @ 12:13 pm: facts are stubborn things, Unless I hear otherwise from some learned attorney, my understanding of the legal process is more in line with what Word is saying. Since the legal action in this case is intended to enjoin the implementation of this law, I’ve always understood that it requires several factors to be successful. [This has been referred to the ripeness of the action.] One being standing - that the person taking the action has a dog in the fight. Another factor is that there is some harm to those affected. Since SB 1 doesn’t take effect until June 1, 2014, I’m not aware of how you can argue that harm has occurred. I think it would be in everyone’s benefit if a challenge could be heard sooner rather than later, but I’m not aware of the legal theory that would allow that to happen. I’d love to hear from lawyers on the subject. - RNUG - Monday, Dec 9, 13 @ 12:21 pm: Other commenters have hit some of this but I’m still going to post my thoughts. A few quibbles on some of the details in the history portion of Rich’s article but mostly accurate given the broad brush approach. The biggest missing item is some information on the 1975 IFT attempt to require full funding. Once the Illinois Supreme Court tells you that you can’t force pension funding, it’s hard to try to get the politicians to do the right thing … there was no club left. The second biggest item is that benefit enhancements were not granted every year. It might have seemed that way given the 5 different systems were being piecemeal enhanced, but when you back off and view each system independently, most of the time the systems went years before additional benefits were added. When they were added, it was usually in response to a new labor contract. I’m going to disagree with Rich on the AAI having some wiggle room. As structured in SB0001, I don’t think there is any since (a) it was a granted enhancement and (b) the change is arbitrary. Had they offered a voluntary switch from a fixed 3% AAI to full and uncapped CPI-U, that would have survived. The changes to new hires will survive; the higher retirement ages to existing workers probably won’t. Prediction: unless the challenge is expedited to the ISC and they decide to issue a very pointed ruling, we’ll still be talking about this in 3 years. - RNUG - Monday, Dec 9, 13 @ 12:22 pm: Marty - Monday, Dec 9, 13 @ 10:11 am: I believe it was 1989. Historically, the State occasionally and randomly granted a misnamed “cost of living” increase that was a fixed amount determined through the political process. The automatic annual increase is just that, an annual increase that is fixed and automatic granted outside the political process. The 3% figure was arrived at by looking at the history of the CPI. - RNUG - Monday, Dec 9, 13 @ 12:22 pm: second street - Monday, Dec 9, 13 @ 10:35 am: That was in at least one of the court rulings. - RNUG - Monday, Dec 9, 13 @ 12:23 pm: helloagain - Monday, Dec 9, 13 @ 10:59 am: Simply, it means if you make more than that amount when the law takes effect or your existing contract will have you earning more, your pension can continue to be calculated on the higher amount. It’s a bit of irony that while the GA was busy violating contract law overall on the pensions, they made sure to honor an existing labor contract. - Anonymous - Monday, Dec 9, 13 @ 12:26 pm: TSP works because there are THREE benefits: - Social Security. - Defined benefit. - 401k-type contributions. http://en.wikipedia.org/wiki/Federal_Employees_Retirement_System As soon as the state starts paying Social Security contributions for its (new) employees, reducing the defined pension benefit and adding a 401k-type plan might make sense. (As if that’s going to happen.) - No Longer A Lurker - Monday, Dec 9, 13 @ 12:29 pm: Will the decision in Arizona last year help influence the decision of the supreme court here in Illinois? http://op.bna.com/dlrcases.nsf/id/scrm-8r9t4n/$File/Willett%20v.%20Arizona%20State%20Retirement%20System.pdf - RNUG - Monday, Dec 9, 13 @ 12:29 pm: Earl Shumaker - Monday, Dec 9, 13 @ 12:04 pm: Pretty much so. See IFT v Lindberg 1975 - RNUG - Monday, Dec 9, 13 @ 12:32 pm: Norseman - Monday, Dec 9, 13 @ 12:13 pm: I think -Old and In The Way- said the other day that you could start the lawsuit once Gov Quinn had signed the bill. - helloagain - Monday, Dec 9, 13 @ 12:40 pm: Rnug. Thanks but I cant find anything about grandfathering in the actual bill. Am I missing it? Thanks - RNUG - Monday, Dec 9, 13 @ 12:41 pm: No Longer A Lurker - Monday, Dec 9, 13 @ 12:29 pm: Don’t know. Although current rulings in AZ have been in favor of the retirees / employees, that fight is not over. From what I’ve seen reading different IL rulings, they have mostly relied on IL past cases and, occasionally, NY cases since IL basically copied the NY pension clause. This is from memory of a year or more ago, but I think the AZ case filings quoted both IL and NY law. - RNUG - Monday, Dec 9, 13 @ 12:54 pm: helloagain - Monday, Dec 9, 13 @ 12:40 pm: Kind of buried in the modifying clauses. Here’s one section: (h) Not withstanding other provisions of this code, the annual compensation of a Tier 1 member … (iii) the annualized compensation of the Tier 1 member immediately preceding the expiration, renewal or amendment of an employment contract or collective bargaining agreement in effect on that effective date. - JustMe_JMO - Monday, Dec 9, 13 @ 1:12 pm: I wish the GA members had been required to state constitutional or unconstitutional along with their yea / nay. Should the court rule in favor of the retirees is there a PLAN B or does the GA start from scratch again? I would still love to see someone crunch the numbers from the 70’s to present on what the systems would have looked like (year-to-year) if the GA and not messed with them. - RNUG - Monday, Dec 9, 13 @ 1:15 pm: JustMe_JMO - Monday, Dec 9, 13 @ 1:12 pm: A lot of us think Plan B is raise taxes and blame it in the IL Supreme Court - facts are stubborn things - Monday, Dec 9, 13 @ 1:20 pm: @- wordslinger - Monday, Dec 9, 13 @ 11:59 am: You don’t have to wait until you have experienced the harm. Law suite by law can be filed now. - Norseman - Monday, Dec 9, 13 @ 1:20 pm: === Will the decision in Arizona last year help influence the decision of the supreme court here in Illinois? === The link is to a lower court ruling. It’s my understanding that their SC is still considering the issue. This came from a commenter who noted the long time it takes to adjudicate some issues. - wordslinger - Monday, Dec 9, 13 @ 1:23 pm: Facts, I might be persuaded by your expertise if you’d stop writing “law suite.” One word, “lawsuit.” - facts are stubborn things - Monday, Dec 9, 13 @ 1:27 pm: @- Norseman - Monday, Dec 9, 13 @ 12:13 pm: =Unless I hear otherwise from some learned attorney, my understanding of the legal process is more in line with what Word is saying.= I think you will see otherwise. - gesquire - Monday, Dec 9, 13 @ 1:34 pm: As a side note, the Arizona case was brought by a judge who had his 4% Cola reduced. - facts are stubborn things - Monday, Dec 9, 13 @ 1:37 pm: @Norseman - Monday, Dec 9, 13 @ 1:20 pm: === Will the decision in Arizona last year help influence the decision of the supreme court here in Illinois? === States are not bound in any way by decisions from other states. That does not prevent the reasoning from those cases to be looked at and considered. The main driver for the IL SC is first the plain reading of the text of the IL Constiution. They will also look at their past rulings. They may give some consideration to the states fiscal situation ie. “police powers” argument. They will look at each sides oral arguments and written briefs. They can at the end of day use anything they wish, but suspect they will stay close to past rulings and rely heavily on the 5th amendment and it’s very clear intention and meaning. There is a part of law that states the presumption is the words mean what the words mean. - JohnTwig - Monday, Dec 9, 13 @ 1:42 pm: Rich, In your article you say, “… including a compounded annual 3 percent increase for all retirees that has wound up costing a fortune.” As a 20+ year retiree under SURS Tier I (non-union) I am curious why you believe the 3% AAI is a big cost driver. Keep in mind that a correctly funded defined benefit plan like mine is actuarially designed to be prepaid (“all the money in the bank”) to pay a lifetime annuity to each retiree on the day of his/her retirement – including the 3% automatic annual increase. In fact, a specific portion of each SURS employees’ “contributions” is earmarked to pay for this future AAI. (That may be while it is not called a COLA – it is a set amount that the retiree has purchased in advance.) I am assuming your statement refers to only the normal cost of the pension and not the payment on the debt that has accrued. I would be interested in how you arrived at you judgment about the 3% AAI being a big cost driver. I believe that when everybody pays their part on time and in full, the SURS Tier I plan works out pretty well – including the 3% AAI. To see my math, go to: http://illinoissqueezy.com/questions.html - facts are stubborn things - Monday, Dec 9, 13 @ 1:52 pm: I am not sure if State police are blending with SS or not. But I know corrections officers, pilots and many others are. The figures above don’t change much if you use the non SS number of $1,000 times years of service. - Jack Handy - Monday, Dec 9, 13 @ 1:53 pm: I have to agree that the AAI is not a COLA but an enhancement to the pension benefit. Madigan even stated in his preamble when introducing SB1 that it is not a COLA. I think he possibly shot himself in the foot with regards to getting the AAI reduced. - Anonymous One - Monday, Dec 9, 13 @ 1:59 pm: Benefits were added== So were increases in employee deductions. I saw mine rise from 7% to 9.4%. No one’s getting anything for free here, people. Pensions were bought and paid for by employees. If the 5 funds contributions had been honored like IMRF’s contributions by EVERYONE, no one would be having this conversation. As employees contributed more of their income towards their retirement, the state paid less. - RNUG - Monday, Dec 9, 13 @ 2:06 pm: Jack Handy - Monday, Dec 9, 13 @ 1:53 pm: If the plan is to be able to blame the ISC for the coming tax increase, it may not have been a mistake by Madigan. - skeptical spectacle - Monday, Dec 9, 13 @ 2:09 pm: ” If the 5 funds contributions had been honored like IMRF’s contributions by EVERYONE, no one would be having this conversation.” I think the reason why IMRF is funded is because the money primarily funding this came from local municalities,etc…..not primarily the state. I would urge RNUG or someone more knowledgeable to comment on this. But this would help explain why IMRF is better funded. - Did The Math - Monday, Dec 9, 13 @ 2:12 pm: The cost of the SURS AAI is shared between the member contributing a fixed .5% and the employer (state) contributing the remainder which changes from year to year and has been above 3.5% for some time. - Quinn is the Grinch - Monday, Dec 9, 13 @ 2:13 pm: Since Illinois has Revenue Auditors that live and work out of state can the We Are One file the lawsuit in Federal court? - RNUG - Monday, Dec 9, 13 @ 2:15 pm: RNUG - Monday, Dec 9, 13 @ 12:22 pm and Marty - Monday, Dec 9, 13 @ 10:11 am: When talking about the start of the AAI, I should have noted it was initially granted to SERS participants. Subsequently the other four systems (TRS, SURS, JRS & GARS) were included, some by contract negotiation, and all those groups explicitly pay a fixed percentage, either 0.5% or 1%, to fund the AAI benefit. - Anon. - Monday, Dec 9, 13 @ 2:16 pm: ==A lot of us think Plan B is raise taxes and blame it in the IL Supreme Court== RNUG, some of us think that is Madigan’s “Plan A.” - RNUG - Monday, Dec 9, 13 @ 2:21 pm: skeptical spectacle - Monday, Dec 9, 13 @ 2:09 pm: Where the money came from is not the issue. IMRF is and has been properly funded annually because it is State Law … and the State enforced it. If the local governmental units didn’t pay, the State could withhold that unit’s monies such as tax revenue sharing and send it to the IMRF account. Had the State come anywhere close to following their own laws, even the misguided and back-end loaded 1995 ramp, the pensions would not be much of an issue. - RNUG - Monday, Dec 9, 13 @ 2:22 pm: Anon. - Monday, Dec 9, 13 @ 2:16 pm: LOL - skeptical spectacle - Monday, Dec 9, 13 @ 2:32 pm: RNUG is probably right that Madigan was thinking along these lines regarding putting the ball in the ISC lap, and I am weary about following this for three years as well, and am considering a capitol fax holiday for that very reason (hold applause please wordslinger and OW). However, I would not necessarily see an ISC rejection of pension reform as being a good thing for the unions, stateworkers, teachers, etc. If ISC overturns this law, it will force the GA and Governor to make very palpable and painful cuts across the entire state of Illinois. This would be incredibly challenging to do while maintaining perceived (whether true or not) generous pension benefits to a small portion of the state. It would be perceived (whether true or not) that the entire state is suffering just so pensions can be maintained. People will see their local hospitals closing, schools cutting programs and teachers, the state laying off current workers to pay the retirees pensions, etc. If the ISC overturns pension reform, it could lead to a really dicey fiscal situation, the result of which the retirees would ultimately be left with something far less than what they would get the new pension reform. Their is a math problem going on here in the State of Illinois and that will not go away. - skeptical spectacle - Monday, Dec 9, 13 @ 2:36 pm: In other words an ISC rejection does not mean that all of a sudden, the GA and governor will see the light, adopt a Martire approach, institute a progressive income tax and all will be well. No, I would suggest that if you are hoping for that, then you might want to reconsider. It will not be that neat and tidy……..I predict if ISC rejects pension reform, it will get very messy indeed around here. - JGG - Monday, Dec 9, 13 @ 2:41 pm: RUNG-Monday, Dec 9,13 @ 2:40 I appreciate your commentary over the past year in regard to the Pension Reform Issue. Thank you! I have a question that I’m hoping you may be able to shed some light on. Our current contract expires in two years, however, there is an incentive to sign next year and recieve a higher percentage in our salary for the following four years, starting in the third year of the contract.. Once I sign, I agree to retire in four years. Thus, I will not have a contract in my last three years. Do you know, based on your reading of the Pension Cap, if the GA will honor the addtional, last four years as my highest salary? Or is the number of my calculated salary capped at, based on the end of the original contract? Any help in clarifying would be truly appreciated. Thank you. - JGG - Monday, Dec 9, 13 @ 2:46 pm: My apologies, I meant to state to RNUG! First time posting, a bit nervous. Thanks - facts are stubborn things - Monday, Dec 9, 13 @ 3:04 pm: @ RNUG - Monday, Dec 9, 13 @ 2:21 pm: =Had the State come anywhere close to following their own laws, even the misguided and back-end loaded 1995 ramp, the pensions would not be much of an issue.= Yes, RNUG a self made crisis. I would ask the court, if all the state has to do is not fund the pension system and then come before this court and cry crisis then what good is the pension clause? The state would have the court beleive that all it needs to do is starve the pension system of dollars and then use its police powers to do an end-around the IL Constitution. - Jack Handy - Monday, Dec 9, 13 @ 3:12 pm: Did you notice in Madigans preamble when introducing SB1 he gave projected percentages of GRF the pension payments would consume. They seemed to level off quite a bit in the far out years like 20 - 40 with the current benefits in place. - facts are stubborn things - Monday, Dec 9, 13 @ 3:13 pm: The AAI is a benefit of being in the pension system, and the Constitution bars the diminishment of that benifit. No, the founders did not want the pension clause in and of itself to in any way protect against inflation. The pension clause was to protect all benifits derived by virtue of being a member in the pension system ie. AAI 3% compounded. You are seeing a political solution trying to solve a fiscal and legal issue. The paths will at some point arrive at the same place, but it will take some time. - RNUG - Monday, Dec 9, 13 @ 3:35 pm: Jack Handy - Monday, Dec 9, 13 @ 3:12 pm: Yes. They know it is only a crisis right now (with the coming temp income tax cliff) and the next few years. Get out past that and the criticality of the problem is much lower IF the state doesn’t take any more pension holidays or play other pension funding games. - RNUG - Monday, Dec 9, 13 @ 3:53 pm: JGG - Monday, Dec 9, 13 @ 2:41 pm: Typo’s don’t bother me; I have a long history of them … If you’ve been reading that long, you know I’m not a lawyer … so this is just my personal opinion. I’d check with both your union reps and maybe even a labor lawyer. I’d also suggest, if you haven’t yet, that you take one of the State / TRS sponsored retirement seminars, which may answer your question(s). The people who do those classes do a really good job of explaining things. I’m kind of reading between the lines here, but I’m going to assume you are in TRS and you’re talking about that system’s early retirement option. I only know a little bit about how that works (a cousin took the ERO). That agreement to retire on a specific date is a contract. I’ve never read the actual from, but it shouldn’t negate your rights under an existing labor contract or a possible future contract. Again, double-check with a labor lawyer on that issue. - kimocat - Monday, Dec 9, 13 @ 4:05 pm: facts — You said it better than anyone I’ve heard. - Pensioner - Monday, Dec 9, 13 @ 4:07 pm: I do not see detriment to judges not being included this round. They know their ruling on this issue will serve as precedent when their benefits are questioned. The fact they were not included means nothing. - facts are stubborn things - Monday, Dec 9, 13 @ 4:18 pm: @kimocat - Monday, Dec 9, 13 @ 4:05 pm: thank you - facts are stubborn things - Monday, Dec 9, 13 @ 4:22 pm: To all those that beleive the current pension law is legal, what was or is the purpose of the pension clause of the IL Constituion? - RNUG - Monday, Dec 9, 13 @ 4:23 pm: JGG - Monday, Dec 9, 13 @ 2:41 pm: Specifically on your pensionable salary cap question (which I missed), the only answer that matters is what your TRS person says. - RNUG - Monday, Dec 9, 13 @ 4:26 pm: facts are stubborn things - Monday, Dec 9, 13 @ 4:22 pm From my reading of the 1970 Con-Con debates, to protect against what is being attempted right now and try to insure the funding of the pension systems … but that last half didn’t work out too well when Walker shorted the payments and IFT sued. - Madison - Monday, Dec 9, 13 @ 5:48 pm: Rauner and the likes of him remind me that we really do need a graduated income tax in Illinois when it comes to constitution reform. Yes, the pension clause can be ignored…to the extent that a flat tax clause can be ignored as well. A top bracket of about ten percent would fit. - ejhickey - Monday, Dec 9, 13 @ 8:44 pm: good column. can’t add anything. - Pacman - Tuesday, Dec 10, 13 @ 6:57 am: Saw the Governor out for a victory lap on Morning Joe (MSNBC) this morning. Made me sick. - Jimbo - Tuesday, Dec 10, 13 @ 8:18 am: Pacman, I hope they have him back when the law crashes and burns and they’ve spent all the savings that will have to be repaid. At that point they’ll have to raise taxes or beg the feds to bail us out. The feds won’t bail us out, so… - Anonymous - Tuesday, Dec 10, 13 @ 8:59 am: Rich accurately explains the problem in IL, but in the vein of solutions….. could we look to Wisconsin? They have the best funded pension system in the U.S., and under Gov Walker (who started with a $3B deficit) now have a surplus. It would be interesting to figure out how both political parties in the Badger state worked together before Walker in order to have a fully funded pension system. (They have better roads also!) - facts are stubborn things - Tuesday, Dec 10, 13 @ 5:15 pm: @RNUG - Monday, Dec 9, 13 @ 4:26 pm: Exactly. Why have the 5th amendment if it would not stop what is happening now. Sorry, comments for this post are now closed.