* Via an e-mail from Illinois State University President Timothy Flanagan…
Letter to Governor and Legislative Leaders from Illinois Public University Presidents/Chancellors
As presidents and chancellors of the state’s public universities, we write to express our profound disappointment in and our opposition to the proposed pension legislation scheduled to be discussed in the General Assembly Tuesday morning.
For the past three years we have strongly advocated for public pension reform. We have been active and thoughtful participants in pension reform discussions and proactively endorsed a plan to reform the State University Retirement System in fiscally sound and responsible ways. We continue to believe that sensible reform is essential.
However, certain features of the plan scheduled to be discussed on December 3rd in the General Assembly, particularly the approach to COLA and the cap on pensionable salaries, will have a severe impact on the retirement security of faculty and staff in the state’s public universities. It will adversely affect our collective ability to recruit and retain the people we need to educate the next generation of workers and entrepreneurs, provide health care for the state’s neediest citizens, and build new startup companies and create jobs through university research. The bill will be detrimental to higher education in Illinois and ultimately to the overall economy of the State of Illinois.
…Adding… U of I’s letter…
December 2, 2013 — U of I opposes pension legislation
Dear Colleagues,
Members of the Illinois General Assembly as soon as tomorrow are expected to consider, and approve, a major overhaul of the state’s public sector pension systems—changes that as proposed would adversely impact public university employees, place higher education in Illinois at a competitive disadvantage, and ultimately weaken the state’s economy.
For these reasons, the University of Illinois is officially opposing the legislation and we are profoundly disappointed that in nearly three years of engaging the legislative process on this crucial issue, the state’s nine public universities’ counterproposals will not be included.
Details of the final legislative proposal (https://capitolfax.com/DRAFTSB1PensionProposal.PDF) have only just emerged; if passed, the governor has said he will sign it into law, and it is virtually certain to face a constitutional challenge in the courts. The proposed effective date is July 1, 2014. A brief letter from the state’s public universities’ presidents and chancellors expressing their collective opposition went to the legislative leaders and governor today.
In a statement regarding the public pension funding crisis a year ago, the University of Illinois called for a pension system that would be reasonable, responsible, sustainable, and competitive with those offered by our peer institutions.
In our view, the legislation under consideration fails to meet those basic principles. The likely changes arguably lessen the retirement commitments made to employees and retirees, and their net effect also will harm the public higher education sector in Illinois. We will make our opposition heard and monitor the pending legislation, and will keep you informed of developments.
Sincerely,
Robert A. Easter, President, University of Illinois
Phyllis Wise, Chancellor, University of Illinois at Urbana-Champaign
Paula Allen-Meares, Chancellor, University of Illinois at Chicago
Susan Koch, Chancellor, University of Illinois at Springfield
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* Caterpillar CEO Doug Oberhelman was an early endorser of Bruce Rauner’s candidacy. But his company today came out strongly for the pension reform bill, even going so far as to praise the process by which it was negotiated as a template for future Springfield progress on other tough issues. This statement represents the most significant repudiation of Rauner’s opposition to date…
Caterpillar is supportive of this pension reform bill as it is a significant step in moving Illinois toward fiscal stability.
It represents a truly bipartisan agreement and is the result of years of negotiation and compromise. We are encouraged by this action, which represents significant cost savings in the near and long term.
We also hope this first step will be an example of the type of compromise that will also be necessary as lawmakers work to quickly address other significant issues in order to improve the business climate in Illinois, which will drive private sector investment and growth in the state.
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* From yesterdy’s Tribune editorial…
The bill is expected to move through a pension conference committee Tuesday morning before heading to votes in the House and Senate on the same day. That time frame will smack of a rush job if the legislative language isn’t released in time for a full airing. Let’s see the bill.
This editorial followed a previous one entitled “Air the pension reform bill,” which made the same argument.
* Anyway I received the “final” version of the 327-page bill at 12:24 this afternoon.
Less than fours hours later…
At least now we have a definition of what “airing” a bill really means to those folks.
* Meanwhile…
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* A host of people representing Illinois businesses signed an open letter to legislators today…
Dear Legislator:
We are writing as a coalition of Illinois’ major employers and civic groups to ask you to support the bipartisan pension reform bill that was agreed to by the four legislative leaders last week. The bill is to be discussed on December 3rd in a Conference Committee hearing.
The pension crisis is by far the most pressing economic issue facing the State of Illinois today. Despite rapidly escalating pension contributions that are consuming the State’s budget and crowding out funding for critical State services, the fiscal health of the pension funds themselves continues to deteriorate. The bill is a good bill and deserves your support. It incorporates a number of benefit reforms that have been widely discussed and that we have supported in the past.
While not a solution to all of the state’s fiscal problems, this bill is a significant step forward. It will stabilize the pension systems and help put Illinois on the path to fiscal stability. We should note our strong support is conditioned only on the final language of the bill reflecting the reform provisions previously outlined.
We urge you to vote in the best interest of every Illinois citizen, public employee and pensioner and vote yes for the bipartisan pension reform bill.
The letter is signed by…
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* It just gets weirder and weirder. From a Doug Truax press release. Truax, you may recall, is a Republican running for US Senate against Jim Oberweis…
I normally wouldn’t weigh in on a state issue, but the pending pension deal is so pivotal to our state’s financial future I will make an exception.
I fully distrust any monumental fiscal legislation that only is unveiled to the public on the eve of a vote. And, for good reason, I generally distrust the Democratic leadership that for years has run our state’s finances into the ground to the detriment of Illinois families.
My major concern from what has been published is that the agreement appears to make it much more likely that temporary tax increases will be made permanent and new increases will be forthcoming. Middle class citizens in Illinois who pay the bills cannot take further body blows to their finances because of fiscal mismanagement from the political class.
We understand state Senator Jim Oberweis is leaning toward supporting this bill on Tuesday. We hope he reconsiders and protects taxpayers first instead of the insiders in Springfield.
Kinda weird that he goes from “I” to “we” in the same statement. Otherwise, just more pressure to vote “No.”
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In which I finally agree with Ty Fahner
Monday, Dec 2, 2013 - Posted by Rich Miller
* Greg Hinz…
In an extraordinary series of developments in the past 24 hours, gubernatorial hopeful Bruce Rauner and other figures on the GOP right lambasted the deal that was reached by legislative leaders on the day before Thanksgiving, saying it’s way too little and likely to lead to a tax hike. Joining them was the state party’s nominal leader, U.S. Sen. Mark Kirk, who this morning put out a statement saying the plan “relies heavily on accounting gimmicks (and) fails to prevent a permanent income tax hike.”
But at almost the exact moment Mr. Kirk was issuing his statement, Ty Fahner, president of the Civic Committee of the Commercial Club, generally considered Chicago’s most influential big-business group, was telling me the “damned good bill” has his full support — and that Mr. Rauner is seeking the politically impossible. [Emphasis added.]
Fahner is right about that highlighted point. I take no position on whether this is a “good bill” or not, but Rauner is most definitely seeking something that absolutely cannot pass at this point in Illinois history, or maybe ever.
I mean, for crying out loud, a majority of House Republicans voted against Speaker Madigan’s pension bill last spring. How the heck does anyone expect the two parties to back the far more radical Rauner position? No more COLAs ever for retirees and every active employee tossed into a 401(k)? Yeah, that’ll happen this week, or next month or next year, or even next decade. Right.
More…
Mr. Fahner, in an interview this morning, strongly disputed Mr. Rauner’s position, and indicated he would go to Springfield tomorrow to testify for the bill.
The measure “could be better. It is not perfect,” Mr. Fahner said. “But this is a damned good bill, period. . . .We are enthusiastically supporting it,” pending only a final reading of final bill language.
Mr. Rauner’s approach, which among other things could prevent those already working from getting any inflation adjustment at all in their pensions for the rest of their lives, “would not pass in 50 years — or two years, if he becomes governor,” Mr. Fahner said. “Whatever his perfect bill might be, he’s totally wrong in terms of its practicality” of passing a Democrat-dominated General Assembly.
Yep.
* Rauner’s opposition is beginning to make me think of the fantasies spun by the DC tea partiers about Obamacare before they shut down the government. It’s either 100 percent their way or the whole thing must crash and burn. And that ain’t no way to run a railroad.
…Adding… From the IMA…
For years, the Illinois Manufacturers’ Association along with many other voices have been calling for significant reform of the state’s pension systems that are threatening the financial health and well being of our state. Illinois currently has the worst-funded pension system in the nation with an unfunded pension liability approaching $100 billion and an annual payment that eats up nearly twenty percent of the state’s general fund budget. In addition to forcing reductions in investment in education, transportation, and other critical state programs, Illinois’ severely underfunded pension systems are a major impediment to job creators.
This week, the General Assembly is finally poised to act after Governor Quinn and the four legislative leaders reached agreement on a pension reform package that will save $160 billion over the next thirty years while reducing our annual pension payment by $1.5 billion. It will result in a 100 percent, fully funded pension system by 2044.
Passage of this pension reform plan is tenuous because of vociferous opposition from public sector labor unions who are strongly opposed to changes that will limit Cost of Living Adjustments, increase the retirement age, impose a cap on pensionable wages, prohibit pensions and health care from being collectively bargained, and create an optional new 401K system for state employees to replace the defined benefit program. Labor unions are unleashing every possible resource to stop this pension reform plan.
The Illinois Manufacturers’ Association strongly supports pension reform and its imperative that Illinois legislators hear from the business community TODAY OR TOMORROW about the urgent need for pension reform. Please call your respective member of the House of Representatives and Senate and ask them to VOTE YES on pension reform.
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* From a press release issued by Treasurer Dan Rutherford…
“I have taken due consideration over the long Thanksgiving weekend to evaluate the proposal for State Public Pension Reform. Having examined the information available, I do not support the current legislation. I do not believe it will withstand judicial review should it pass the Illinois General Assembly,” said State Treasurer Dan Rutherford.
“Strong beliefs are held in this debate, but fundamental to our rule of law is our Constitution. Our government’s obligation can be changed through a process involving adequate consideration to the employees. In my opinion, the legislation before us fails to address this relationship and offer adequate consideration in exchange for altering the pension benefits.”
“I look forward to working with the General Assembly and interested parties for a fair, Constitutional resolution to the biggest financial issue facing our state”, concluded Treasurer Rutherford.
Looks like Dillard may get a run for his money.
* Meanwhile, credit where credit is due. As we’ve already discussed, the richest man in Illinois Ken Griffin staunchly opposes the pension reform bill. Mr. Griffin is a major Bruce Rauner supporter.
Griffin’s independently wealthy wife Ann, however, is the force behind Reboot Illinois, and that site editorialized today for the pension bill…
What would you say about a state that increases its income tax intake by 92 percent over a five-year span, yet spends less on education during that same time?
Or a state that spends nearly 25 cents of every tax dollar it collects on pensions for its current and future retirees? The same state will send 30 cents of each tax dollar to its pension systems in five years.
A state that now owns the worst credit rating in the nation thanks to a pension system that has become a $100 billion long-term liability and, in the immediate term, becomes a bigger budget-devouring problem with each passing year.
We say it’s a state with a serious problem in both its basic finances and its priorities.
It’s Illinois, and this week Illinois lawmakers have the chance – after years of false starts – to reorder state government’s priorities while also ensuring that pension systems for teachers and other public employees don’t go broke in a few decades’ time.
What we’ve seen so far of the pension bill expected to be offered lawmakers on Tuesday looks like the surest bet to stopping the out-of-control pension debt that has grown to monstrous proportions in recent years.
The anticipated bill lives up to the prediction we’ve been making since rebootillinois.com first went live a little more than a year ago: Nobody is going to be happy with it.
That must’ve been an interesting Thanksgiving dinner.
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*** UPDATED x1 *** Um, Sheila?
Monday, Dec 2, 2013 - Posted by Rich Miller
* Today is the last day to file nominating petitions. As of 11:13 am, the State Board of Elections’ website shows no petitions from Lt. Gov. Sheila Simon, who is hoping to run for comptroller.
Nothing like waiting until the last minute.
Sheesh.
* How about a caption contest while the clock ticks down?…
*** UPDATE *** She filed. Carry on.
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Mo’ money
Monday, Dec 2, 2013 - Posted by Rich Miller
* Bruce Rauner’s campaign just reported a $250,000 contribution from wealthy Republican Richard Uihlein. I’m sure you’ll remember him…
[Uihlein] has contributed nearly $4 million to national tea party candidates and their super-PAC juggernaut, plus almost $1.8 million to the most conservative candidates and causes in Illinois.
“I’m a conservative Republican, and I’m trying to help people who believe as I do in limited government and free markets,” says Mr. Uihlein, 68. “I’m not one to hide from that.”
* Uihlein’s contribution is the third $250K contribution Rauner has received in the past couple of weeks.
Rauner has raised over $2.2 million in the past month, including a million dollars from himself.
* Meanwhile, Comcast just told reporters about a new Bruce Rauner cable TV buy. Fox News in all Chicago-area zones and a bunch of Downstate areas…
Bruce Rauner, Republican candidate for IL Governor
Agency: Access Media, LA
Flight Dates: 12/3 – 12/23/13
Chicago I+ Total: $135,795
Central IL Total: $7,536
Networks: FXNC only
All dayparts purchased in all zones
Syscodes / Zones / $ by zone
5170 / Chicago Interconnect / $118,875
9804 / DirecTV Chicago / $11,610
9810 / DISH Chicago / $5,310
6872 / Galesburg / $936
7827 / Peoria Interconnect / $2,940
7829 / Rockford / $1,884
6805 / Sterling Rock Falls / $1,776
Total All zones: $143,331
These are not new ads, I’m told. Just the two he already has out there.
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Why Quinn needs this bill to pass soon
Monday, Dec 2, 2013 - Posted by Rich Miller
* My weekly syndicated newspaper column was written Friday afternoon. Events have admittedly already overtaken some of it…
As I write this, the House Speaker, Senate President and the two Republican minority leaders have announced a deal on a long-awaited and much-anticipated pension reform bill.
Other than the obvious fact that pension payments are diverting billions of dollars from other state programs like education and human services, Gov. Pat Quinn really wants this proposal passed before the end of the year for a couple of reasons, both political.
Illinois statute requires the governor to propose a new budget based on existing statutes. In the past, governors would almost always say they’d balance the budget if a new tax or fee was passed, or funds were transferred or programs were legislatively changed. That’s no longer permitted.
Gov. Quinn’s Fiscal Year 2015 budget address is scheduled for February 19th. If a pension reform bill is passed and signed into law by the end of the year, it won’t take effect until June 1st. But that’s after the budget address and before the start of the new fiscal year. So, Quinn could still use the proposal’s expected savings when he introduces his budget.
And that’s important because most of the temporary income tax increase expires smack dab in the middle of the coming fiscal year, which will blow more than a $3 billion hole in Quinn’s budget. And that means Quinn will be forced to introduce a budget that makes huge cuts if pension reform doesn’t pass.
If pension reform passes by the end of the year, the savings, which could be as high as $1.8 billion in the first year, can legally be used to “balance” Quinn’s introduced budget. With a strong revenue forecast, it’s possible that the coming year’s revenues could almost cover the remaining hole from the tax hike expiration.
That doesn’t mean, however, that Illinois’ finances would be in the clear. If past is prologue, a court will either set aside the new pension law while its constitutionality is adjudicated, or (perhaps more likely) require that any savings produced by the law be placed into an escrow account. If that happens, then legislators and Quinn will have to deal with a new hole.
The responsible thing to do, of course, would be to not include the pension reform savings in a new budget if the bill is passed. But that would mean proposing an election year budget that slashes education and human services to the bone, and what governor wants to do that ever - let alone in an election year?
And that brings us to the second reason.
The state pension systems are in dire straits because the state has never made enough contributions to the systems. For proof, just look at municipalities outside Chicago, which are required to make full payments. The Illinois Municipal Retirement Fund is very close to being fully funded. No crisis at all.
Quinn and the legislative leaders have long pushed for a funding guarantee to make sure that the state doesn’t skip its payments again.
But Republican gubernatorial candidate Bruce Rauner, who now leads the GOP primary field in two recent polls, is dead set against a funding guarantee.
Does Rauner really want the state to have the flexibility to skip pension payments again, which could lead to even more problems down the road? Well, there’s something else going on here.
Rauner wants a complete revamp of the pension system. He’d immediately put employees into a 401(k) plan instead. The irony is a bit rich here. Rauner’s investment firm made a fortune off of investing state pension fund money. Rauner is now semi-retired and reported making $53 million from his investments last year. A retired teacher making $53,000 a year would have to live another thousand years to equal one year’s income for Rauner.
Anyway, the funding guarantee is mainly just an excuse to derail the pension deal. Once pension reform is passed, it’s doubtful that legislators will want to revisit it unless the courts strike it down as unconstitutional. And since the proposal has support from the most powerful Republicans in the Illinois General Assembly, it would be uncomfortable for Rauner to continue his harangues against the compromise over the next year. Better to just kill it up front.
So since Quinn could end up facing Rauner in the general election, defeating the wealthy Republican on the legislative battlefield now would take some air out of his well-funded campaign down the road.
Passing this bill, in other words, is a must-have “twofer” for Quinn.
Thoughts?
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Unions gear up for final push
Monday, Dec 2, 2013 - Posted by Rich Miller
* Stopping pension reform is an uphill battle for the We Are One Coalition, but they’re not ready to give up. As I told you over the weekend, union members and retirees are planning to meet with dozens of legislators today in their district offices.
President Carrigan talked about the numbers…
Michael Carrigan, president of the Illinois AFL-CIO, said 25 “persuadable” lawmakers will be the subject of the most intense lobbying efforts. Carrigan declined to disclose names to The Associated Press, but said 8 to 10 lawmakers are targeted in the Senate and another 15 to 17 in the House.
“We’re certainly going to apply every ounce of energy that we can to prevent the passage of legal theft of lifetime savings,” said Dan Montgomery, president of the Illinois Federation of Teachers, another member of the We Are One Illinois union coalition fighting pension reforms.
“Legal theft of lifetime savings” is probably the best rhetorical argument I’ve seen against this bill.
* The unions also say they’re angry at being cut out of final negotiations. But were they really ready to negotiate such a deal? Highly doubtful…
Asked about ignoring the unions in reform talks, state Rep. Elaine Nekritz, a Northbrook Democrat and top pensions negotiator, said it has been clear that union officials would “not consider anything” but the original Senate proposal. “There didn’t seem to be a lot of benefit in trying to have a dialogue,” Nekritz said.
A Cullerton spokesman, Ron Holmes, says the Senate president has been briefing union leaders and is “aware of their desires.” But he said Cullerton now is pushing “a compromise that might be palatable” for the entire General Assembly, and is personally calling lawmakers to support the plan.
* I’m personally sympathetic to the unions’ constitutional arguments. I also can’t stand the idea of whacking the pensions of little old ladies (and men)…
The cost-of-living adjustment (COLA) cuts in the proposal erode the value of a person’s pension by nearly a third after 20 years in retirement and deprive retirees of thousands of dollars in income over the next five years, the [We Are One Coalition] states on its website.
Over the next five years, a nurse who retired from the state with a pension of $40,000 would lose $7,500, and a retired teacher who has a pension benefit of $60,000 would lose $14,000, the group said.
And…
AFSCME’s Lindall said the cuts to the COLA would reduce the total value of a typical retiree’s pension payments by some 30 percent over 25 years of retirement.
And…
Montgomery, whose teachers union is part of the We Are One coalition of public unions opposed to the plan, said his union’s calculations show that a person with a $50,000 pension who has worked for 30 years will have lost 80 percent of the buying power of his or her benefit 20 years into retirement.
But the reality is you don’t negotiate on a bill that you plan to oppose, and the unions always planned to oppose this bill.
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* As I told you before, one of US Sen. Mark Kirk’s top guys is now working for Bruce Rauner’s campaign. Keep that in mind when reading this hot off the presses statement from Sen. Kirk…
“The Illinois General Assembly shouldn’t pass a bill that neither lawmakers nor the voters have had time to read. What we do know is that this legislation relies heavily on accounting gimmicks, fails to prevent a permanent income tax hike, and falls short of finding the savings needed to solve Illinois’ fiscal crisis. There will be no federal bailout for the state of Illinois, so legislators must get this right.”
Almost nothing would ever provide “enough savings” for that faction. It’s just one more argument for delay.
But Kirk has some real sway within the GOP, so this is a fascinating development.
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Hiding behind excuses
Monday, Dec 2, 2013 - Posted by Rich Miller
* You just gotta love stories like this…
House members have been told that a one-day session is anticipated. Senators also could wrap things up on Tuesday, although they’ve been told the session could extend an extra day.
That schedule, though, is drawing complaints from some lawmakers that the pension reform bill is being rushed through the legislature before people have a chance to fully grasp all of its details, particularly those people who will be affected by the changes.
“That’s not enough time to digest it,” said Rep. Raymond Poe, R-Springfield. “You don’t give the people it affects enough time to do some research and crunch the numbers and see how it works. I think it puts everybody who’s affected by it at a serious disadvantage. Their people need a little time to digest this thing.”
Rep. Poe represents a kajillion state employees. There’s no way on God’s green Earth that he would be a “Yes” vote no matter how long they debated this bill.
Here’s a handy guide: Legislators who say they want to delay the vote are almost assuredly voting “No” anyway.
Look, there are very good reasons to have a full, open debate on this bill. But it’s so easy to use “debate” as an excuse, and far too easy for reporters to claim a legislative sentiment exists when everybody knows that the real reasons are quite different.
* Sen. Dillard may fall into that excuse category…
Dillard wants two days of hearings before the Senate so all sides can have a say.
More…
Like the unions, Dillard questioned the constitutionality of the plan, saying it lacked a “true bargain,” or give and take, with employees over the changing of their benefits. Supportive lawmakers say the agreement satisfies constitutional requirements of such give-and-take considerations, noting that employees actually would be required to contribute 1 percentage point less from their paychecks toward their retirements.
Man, wouldn’t it be something if a guy who voted for every union-opposed pension reform bill ends up voting against this one because of “constitutional questions”? He really wants that AFSCME endorsement, eh?
* And another gubernatorial hopeful is trying to stay a bit too quiet…
Treasurer Dan Rutherford declined to comment on what’s viewed as one of the most pressing issues facing state government.
* From a Bill Brady statement…
Senator Dillard voted for the major provisions of this agreement last spring. Treasurer Rutherford as a constitutional fiscal officer certainly understands the dire consequences on state finances of continuing down the current path. Why are they silent now?
This is a time for leadership and hard decisions, not a time to stand on the sidelines. Pension reform is an issue of fiscal responsibility and the future of Illinois
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More Raunerish hyperbole and obfuscation
Monday, Dec 2, 2013 - Posted by Rich Miller
* Surprise, surprise. Eden Martin, who maxed out to Bruce Rauner’s campaign in May (back when caps were in place), agrees with Bruce Rauner that the pension reform proposal just isn’t harsh enough.
But there are some real whoppers in the former Civic Committee president’s latest Sun-Times column, and they’re worth a look. For instance…
Second, the amount of “savings” attributed to the reforms is exaggerated. The current unfunded liability is about $100 billion. The proposed deal would reportedly reduce that by about $14 billion, which is less than had been projected under House Speaker Michael Madigan’s earlier reform proposal.
Advocates say that in future decades the “savings” will amount to perhaps $160 billion. But those “savings” are speculative and over-stated. What would $1 billion of savings — realized in, for example, 2040 — be worth today? Only about $125 million — roughly 1/8th — using the state’s pension discount rate.
Oh, come on, man.
Taxpayers are presently on the hook for about $380 billion in pension system payments over the next 30 years. The proposal on the table right now claims to slash those payments by $160 billion.
You can argue with the actuarial projections, but Martin’s thesis relies on a complete red herring.
* More…
Similarly, private-sector plans rarely grant anything like compounding 3 percent cost-of-living adjustments, regardless of inflation. Yet the pension deal would preserve these COLAs for major chunks of the pensions of retirees.
And why, when the funds are so badly underfunded already, reduce employee contributions going forward?
Tinkering with the retirement age, fine-tuning the COLA mechanism, and reducing employee contributions — these appear to be an attempt to dress up the deal to make it look like a “compromise” with labor: bundles of offsetting give-ups and gains. Yet the unions have flatly rejected any such compromise and are preparing to go to court. So what’s the point of weakening the reforms — or taking on a new state funding commitment? […]
Third, what would be the likely impact of the deal on the state’s budget? Will the state’s required annual pension contributions compel cancellation of the scheduled roll-back in the state’s income tax? Or perhaps even require an increase? How much, and when? The number-crunchers surely know the answer, but they’re not talking. Why sign on to a huge deal like this without knowing the likely consequences?
The intellectual dishonesty in that piece is so blatant. Where to begin?
The idea, as Martin well knows, is to try and make the pension reforms constitutional enough that the Illinois Supreme Court can somehow figure a way to approve them. Martin would obviously prefer that legislators push for even deeper benefit cuts and not even try for a hint of constitutionality. What’s the point in doing that?
Also, notice how he not so subtly repeats Rauner’s claim that the bill on the table would lead to a tax increase. Rauner blames it on the state funding guarantee, which most people believe is a good thing, but could be worked around.
* As with everything, whatever a legislature passes can always be undone. Heck, even strict, plain language constitutional requirements can be upended, as the pension bill itself clearly shows.
I posted this over the weekend, but it’s worth a repost now that comments are open…
[Rep. Elaine Nekritz] said that’s not the case and noted the bill’s so-called pension payment guarantee has wiggle room. If the state fails to make a pension payment, a retirement system could file action in the Illinois Supreme Court to compel the state to make the required payment. But if the state faces a crisis, it could simply vote to change what the required payment would be, she noted, effectively working around that guarantee.
Nekritz noted that flexibility does cause her some concern, despite her support of the deal.
Rauner’s scare tactic about how a vote for the pension bill is a vote for a tax hike is just that.
The political reality is he doesn’t want this issue to disappear. So, perhaps Bill Brady ought to be more forceful when calling him out…
“Pension reform is an issue of fiscal responsibility and the future of Illinois, not a political strategy,” said Bloomington’s Brady, who sits on a special House and Senate panel that forged a framework before the leaders put on the finishing touches.
…Adding… Sen. Brady actually was more forceful. I didn’t see his full statement, which included these shots…
The spokesman for Bruce Rauner, one of my opponents, talks about “insiders” keeping the public in the dark on the details of the bill. There is nothing in this legislation that has not been discussed and debated publicly, including during pension reform debates on other proposals last spring. If Mr.
Rauner were to talk about “insiders”, maybe he could talk about his connections Stuart Levine and Ed Rendell and his pension business.
Mr. Rauner also opposes a state funding guarantee. That’s the same excuse governors and legislators have used in the past, but just look where the lack of such protections has taken us.
Ouch.
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The new preamble
Monday, Dec 2, 2013 - Posted by Rich Miller
* As with House Speaker Madigan’s original SB!, the pension reform conference committee report has a preamble explaining the reasoning behind the bill…
Section 1. Legislative statement.
At the time of passage of this amendatory Act of the 98th General Assembly, Illinois has both atypically large debts and structural budgetary imbalances that will, unless addressed by the General Assembly, lead to even greater and rapidly growing debts and deficits. Already, Illinois has the lowest credit rating of any state, and it faces the prospect of future credit downgrades that will further increase the high cost of borrowing.
The State has taken significant action to address these fiscal troubles, including, but not limited to, increasing the income tax and reducing pension benefits for future employees.
Further, the State has enacted a series of budgets over the last several fiscal years that resulted in deep cuts to important discretionary programs that are essential to the people of Illinois.
At the time of passage of this amendatory Act of the 98th General Assembly, the State’s retirement systems have unfunded actuarially accrued liabilities of approximately $100 billion.
Meanwhile, the State’s annual pension contribution has substantially increased in recent years, and will continue to increase in coming years. The General Assembly recognizes that without significant pension reform, the unfunded liability and the State’s pension contribution will continue to grow, and further burden the fiscal stability of both the State and its retirement systems.
This amendatory Act of the 98th General Assembly is intended to address the fiscal issues facing the State and its retirement systems in a manner that is feasible, consistent with the Illinois Constitution, and advantageous to both the taxpayers and employees impacted by these changes. Having considered other alternatives that would not involve changes to the retirement systems, the General Assembly has determined that the fiscal problems facing the State and its retirement systems cannot be solved without making some changes to the structure of the retirement systems. As a result, this amendatory Act requires more fiscal responsibility of the State, while minimizing the impact on current and retired State employees.
Going forward, the automatic annual increase in retirement annuity will be based on a participant’s years of service to the State and inflation, which more accurately reflects changes in the cost of living. For participants who have yet to receive an annuity, a pensionable salary cap will be imposed; however, it will only impact future salary increases that exceed a cap. Those workers 45 years of age and younger will be required to work an additional 4 months for each year under 46, which results in a minimal increase in retirement age given that the life expectancy for a 45 year old is 87 years of age. Current employees will receive a 1% reduction in required employee contributions.
With these changes, the State can adopt an actuarially sound funding formula that will result in the pension systems achieving 100% funding no later than 2044. The State will also make additional contributions that will considerably aid in reducing the unfunded actuarially accrued liability.
The General Assembly finds that this amendatory Act of the 98th General Assembly will lead to fiscal stability for the State and its pension systems.
Discuss.
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Draft pension bill released
Sunday, Dec 1, 2013 - Posted by Rich Miller
* 10:44 pm - Some legislators have received a draft version of the pension reform bill tonight. Click here to read it, but keep in mind that this is only a draft.
…Adding… TRS did an analysis of the proposal which you can read by clicking here. From the analysis…
• The cap on pensionable earnings is indexed at half of CPI. Indexing the pensionable pay cap at half of CPI does make it more likely that at some point in the future that TRS will no longer meet the requirements for FICA tax exemption. Indexing this cap at half of CPI generates savings in the short term. That being said, future policy makers will likely find it necessary to update this cap to full CPI indexation to meet the requirements of FICA tax exemption and to keep pace with reasonable benefits practice. We recommend the use of full indexation.
• The current COLA does a reasonable job of keeping pace with inflation. The current Tier 1 COLA accounts for 25% of the active liability and 22% of the retiree liability. By definition, the proposed COLA will not keep up with inflation. It will remove about 40% of the COLA liability.
• The proposed staggering of the skipped COLA increases is less harmful to members than one continuous period with no increases, but with somewhat less savings to the State.
• Since the proposed skipping of COLA increases applies to actives and not current retirees, there could be a rush for actives to retire; however, proposing only a one year skip for active members currently eligible to retire should mitigate the rush to retire.
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* Public employee unions are planning to have their members and retirees meet with legislators about pension reform at numerous district offices on Monday. From an e-mailed schedule, sans organizer contact info…
AFSCME
• Rockford – Stadelman/Syverson, Jefferson
o Start Time: 10 a.m.
o Transportation: Self. (Parking is plentiful.)
o Meeting Location: All three offices are located in third-floor suites at 200 S. Wyman, Rockford, IL.
o Note: The lead local has set a meeting time in a conference room with Sens. Stadelman and Syverson and plans to fill it to overflow capacity with 50+ retirees. The event for Rep. Jefferson would follow.
• Chicago (traveling squad) – M. Davis, Dunkin, Evans, C. Mitchell, Turner, Berrios
o Start Time: 9 a.m.
o Transportation: Bus
o Bus Pickup Location: Jewel-Osco parking lot, near the junction of W. 87th St. and the Dan Ryan on the south side of Chicago
o Food: Lunch will be provided on the bus.
• Chicago – North Suburbs, morning wave (traveling squad) – Gabel, Biss, Nekritz/Moylan
o Start Time: 9:30 a.m.
o Transportation: Bus
o Bus Pickup Location: Evanston Plaza parking lot, 1968 Dempster St., Evanston, IL
o Order of Visits: Gabel, Biss, Nekritz/Moylan (Nekritz/Moylan share space)
o Pledged Turnout Support: IFT
• Chicago – South Suburbs, morning wave (traveling squad) – T. Jones, Riley
o Start Time: 9 a.m.
o Transportation: Bus
o Bus Pickup Location: K-Mart parking lot at 17550 Halsted St., Homewood, IL (Note: The K-Mart itself is closed, but the parking lot stages bus pickups.)
• Chicago – West Suburbs, morning wave (traveling squad) – Willis, Landek, Harmon, Radogno, Durkin
o Start Time: 10 a.m.
o Transportation: Bus
o Bus Pickup Location: Melrose Crossing shopping center parking lot at 1903 N. Mannheim Rd., Melrose Park, IL
• Aurora (Kane County) – Kifowit
o Start Time: 10 a.m.
o Transportation: Self. (Parking is ample.)
o Meeting Location: Rep. Kifowit’s district office at 1677 Montgomery Rd., Ste. 116, Aurora, IL
o Pledged Turnout Support: IEA
• Metro East – Kay
o Note: There was a fire very recently at Rep. Kay’s office, and it is unclear if this event will take place or whether he has even made temporary district office arrangements yet. If there is no office, the event may be cancelled.
• Southern Illinois (Marion) – Bradley
o Start Time: 10 a.m.
o Transportation: Self. (Parking is limited, so members/retirees should carpool if possible.)
o Meeting Location: Rep. Bradley’s district office at 510 W. DeYoung St., Ste. 5, Marion, IL
o Pledged Turnout Support: IEA
IFT
• Lake County/Hainesville – Yingling
o Start Time: 4 p.m.
o Transportation: Self.
o Meeting Location: Rep. Yingling’s district office at 20 W. North St., Hainesville, IL
• Will County/Joliet – Manley
o Start Time: 4 p.m.
o Transportation: Self.
o Meeting Location: Rep. Manley’s district office at 2701 Black Rd., Suite 201, Joliet, IL
o Pledged Turnout Support: AFSCME
• Will County/Romeoville – McAsey
o Start Time: 4 p.m.
o Transportation: Self.
o Meeting Location: Rep. McAsey’s district office at 209 W. Romeo Rd., Romeoville, IL
o Pledged Turnout Support: AFSCME
• Grundy County/Morris – Rezin
o Start Time: 4 p.m.
o Transportation: Self.
o Meeting Location: Sen. Rezin’s district office at 103 Fifth St., Peru, IL
o Pledged Turnout Support: AFSCME
• Peoria – Gordon-Booth
o Start Time: TBD
o Transportation: Self.
o Meeting Location: Rep. Gordon-Booth’s district office at 300 E. War Memorial Dr., Suite 303, Peoria, IL
• Peoria – LaHood
o Start Time: TBD
o Transportation: Self.
o Meeting Location: Sen. LaHood’s district office at 5415 N. University, Suite 105, Peoria, IL
• Quincy – Tracy
o Start Time: 4 p.m.
o Transportation: Self.
o Meeting Location: Rep. Tracy’s district office at 3701 East Lake Centre Dr., Suite 3, Quincy, IL
IFT
• Rockford, second wave – Stadelman, Syverson, Jefferson
o Start Time: TBD
o Transportation: Self. (Parking is plentiful.)
o Meeting Location: All three offices are located in third-floor suites at 200 S. Wyman, Rockford, IL.
• Evanston/Chicago North Suburbs, second wave – Gabel
o Start Time: 4 p.m.
o Transportation: Self.
o Meeting Location: Rep. Gabel’s district office at 820 Davis St., Suite 103, Evanston, IL
• Glenview/Chicago North Suburbs, second wave – Fine
o Start Time: 4 p.m.
o Transportation: Self.
o Meeting Location: Rep. Fine’s district office at 1812 Waukegan Rd., Suite A, Glenview, IL
• Chicago North Suburbs, second wave – Silverstein
o Start Time: 4 p.m.
o Transportation: Self.
o Meeting Location: Sen. Silverstein’s district office at 2951 W. Devon, Chicago, IL
• Skokie/Chicago North Suburbs, second wave – Biss
o Start Time: 4 p.m.
o Transportation: Self.
o Meeting Location: Sen. Biss’s district office at 3706 N. Dempster St., Skokie, IL
• Northlake/Chicago West Suburbs, second wave – Willis
o Start Time: 4 p.m.
o Transportation: Self.
o Meeting Location: Rep. Willis’ district office at 112 N. Wolf Rd., Northlake, IL
• Burbank/Chicago West Suburbs, second wave – Landek
o Start Time: 4 p.m.
o Transportation: Self.
o Meeting Location: Sen. Landek’s district office at 6215 W. 79th St., Suite 1A, Burbank, IL
• Villa Park/Chicago West Suburbs, second wave – Conroy
o Start Time: 4 p.m.
o Transportation: Self.
o Meeting Location: Rep. Conroy’s district office at 28 S. Villa Ave., Villa Park, IL
• Burr Ridge/Chicago West Suburbs, second wave – Durkin
o Start Time: 4 p.m.
o Transportation: Self.
o Meeting Location: Rep. Durkin’s district office at 16W281 83rd St., Suite C, Burr Ridge, IL
• Lemont/Chicago West Suburbs, second wave – Radogno
o Start Time: 4 p.m.
o Transportation: Self.
o Meeting Location: 1011 State St., Suite 210, Lemont, IL
• Oak Park/Chicago West Suburbs, second wave – Harmon
o Start Time: 4 p.m.
o Transportation: Self.
o Meeting Location: 6933 W. North Ave., Oak Park, IL
IEA
• Streamwood — Crespo
o Start Time: 3:30 p.m.
o Transportation: Self.
o Meeting Location: Rep. Crespo’s district office at 1014 E. Schaumburg Rd., Streamwood, IL
• Schaumburg — Mussman
o Start Time: 3 p.m.
o Transportation: Self.
o Meeting Location: Rep. Mussman’s district office at 15 W. Weathersfield Way, Schaumburg, IL
• Bloomington — Brady
o Start Time: 3:45 p.m.
o Transportation: Self.
o Meeting Location: Sen. Brady’s district office at 2203 Eastland Dr., Suite 3, Bloomington, IL
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Rauner blasts pension proposal
Sunday, Dec 1, 2013 - Posted by Rich Miller
* From a Bruce Rauner e-mail blast…
This Tuesday a group of Springfield insiders, many of whom caused the pension crisis with decades of bad deals and giveaways, will try to rush through a pension deal without giving Illinoisans an opportunity to study the details.
They want us to trust them.
We don’t – and can’t.
In the early 1990’s, Senate President John Cullerton was on a committee of 10 legislators who inserted language into a pension bill that allowed 23 government union bosses to collect an extra $56 million from municipal pension funds. According to the Chicago Tribune, “the changes became law with no public debate among state legislators, and, more importantly, no cost analysis.”
Sound familiar?
A few years ago, the legislature approved a workers compensation law that was highly touted for its bipartisan “reforms.” Despite the acclaim it received at the time, in the end it accomplished very little. Illinois’ workers compensation system remains uncompetitive with neighboring states and our economy continues to suffer.
This time the stakes are much higher.
Getting pension reform wrong could devastate Illinois’ economy over the long term.
The truth is the savings in this bill are both insufficient and will make true, comprehensive reform more difficult. Illinois right now has the highest unfunded pension liability in the country. This proposal would take us from the worst to merely very bad and guarantee a future of higher taxes. If you thought the Quinn-Madigan 67% income tax hike was bad, just imagine what tax-and-spend politicians have in mind for an encore.
Unfortunately, legislative leaders have kept Illinoisans in the dark about the details of this bill. The pension deal was announced on the afternoon before Thanksgiving prior to many legislators being briefed on it. Legislators will be asked to vote for it Tuesday. Yet as of this writing no one has released the legislative language.
Whenever politicians act like this, it is a bad sign for taxpayers. Like ObamaCare, they’ll pass the pension deal before most legislators know all that’s in it.
While the final details are unclear, summaries released to date raise some real concerns.
It’s rumored that the bill would eliminate pensions from collective bargaining alongside pay and health benefits. This could tie the hands of government leaders who will need to negotiate further, more comprehensive, reforms on pensions and related issues in the future.
We’ve also learned that the legislation gives “consideration” to government union members by decreasing the amount state workers need to contribute to the pension system. That means you – and everyone else - pay more.
The bill is also expected to include a ‘guarantee’ provision that could require taxpayers to pay for government pensions before payments are made for other government services and programs. That means payouts to government union bosses are ranked ahead of investments in our schools, public safety, and the social safety net. Provisions like the pension guarantee give government union bosses more power in a system that is already rigged in their favor. Government union bosses are funded by your tax dollars and use your money to elect and lobby politicians who will grow government and give them more money. It’s a closed loop system with taxpayers left standing on the outside.
The biggest problem of all is that the rumored savings from the bill would reduce the government’s unfunded liability by less than 20%! It barely scratches the surface of the problem. All this work for relatively small savings that do nothing to stop future tax hikes, and, in fact, make them more likely.
Bigger government. Higher taxes. That’s the future if we continue down this path.
There is a better way.
Government workers and retirees deserve to be treated fairly. But let’s not forget who pays for this — it’s the hard working taxpayers of our state, who themselves are struggling to make ends meet in an economy that is weighed down by the fiscal blunders in Springfield.
We can have a pension system that is fair to both sides of this transaction, the government workers and the taxpayers who pay for it. True reform would cap the current system and fully put in place a 401k-style program that is similar to the retirement plans of most Illinoisans. That’s fair to workers and taxpayers, and it ensures we will never face a pension crisis again.
Republican Leaders Jim Durkin and Christine Radogno are trying in good faith to negotiate a solution to the pension crisis. Those good intentions are why Democratic bosses are trying to rush this through before there is a full airing of the facts.
We’ve seen what happens when a massive deal is negotiated behind closed doors, announced over a holiday weekend, and no one is given a chance to digest the bill. It ends very badly.
A vote for this bill is a vote for insufficient reform. A vote for this bill is a vote for a future tax increase.
We can solve the pension crisis. This deal doesn’t do it.
Let’s get it right.
Bruce
* “It’s rumored”? “We’ve learned?” C’mon, Bruce. You got that info from the same dot points as everyone else.
Also, this…
True reform would cap the current system and fully put in place a 401k-style program that is similar to the retirement plans of most Illinoisans. That’s fair to workers and taxpayers, and it ensures we will never face a pension crisis again.
“Cap the current system” means no more cost of living adjustments for retirees. Ever. That’s fair?
* This makes no sense…
Provisions like the pension guarantee give government union bosses more power in a system that is already rigged in their favor.
Um, actually no. The pension systems would be allowed to sue if state pension payments aren’t made, not the “government union bosses.” Also, this…
Nekritz said that’s not the case and noted the bill’s so-called pension payment guarantee has wiggle room. If the state fails to make a pension payment, a retirement system could file action in the Illinois Supreme Court to compel the state to make the required payment. But if the state faces a crisis, it could simply vote to change what the required payment would be, she noted, effectively working around that guarantee.
Nekritz noted that flexibility does cause her some concern, despite her support of the deal.
* And this is rich…
Republican Leaders Jim Durkin and Christine Radogno are trying in good faith to negotiate a solution to the pension crisis. Those good intentions are why Democratic bosses are trying to rush this through before there is a full airing of the facts.
Durkin and Radogno aren’t “trying in good faith to negotiate,” they already did negotiate in good faith. Several of their ideas are incorporated into the proposal. Giving them an attaboy at the end after completely eviscerating the legislation they negotiated serves to dishonestly make this a partisan issue when it is not.
This is the most deliberately misleading screed to come out of the 2014 governor’s race to date.
* On a related note, I’m told that the pension bill’s language is expected to be released this evening. That’s two days before the House and Senate are expected to take up the matter. That’s about the same lead time given before Speaker Madigan passed his pension bill in early May - a timeline that suited the Chicago Tribune just fine.
…Adding… Sen. Bill Brady, a Rauner GOP primary opponent who sits on the pension reform conference committee, clearly disagrees that the proposal is being unduly rushed…
“Our staffs are all up to speed on this. They’ve been meeting with us all summer,” Brady said. “The ability to analyze it won’t be difficult. They’re (public employee unions) in tune, too. They’ll have ample time. As hard as it’s been to come to this conclusion, it’s not really all that complex.”
Brady said many elements of the proposal are similar to Senate Bill 1, a reform plan pushed by House Speaker Michael Madigan, D-Chicago, that passed the House last spring but was defeated in the Senate. Those elements have been thoroughly reviewed already, he said.
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