Quinn sought to portray his fiscal blueprint as part of an effort to end a cycle of budget game-playing by his predecessors that left state finances in shambles. He said part of his strategy was the controversial pension overhaul law last year that he argued would dramatically cut retirement costs and let more tax revenue flow to schools, health care and other services.
Rauner contends that Quinn’s pension alterations are too timid and will save the state far less than the governor contends. That argument may have gotten a boost Wednesday when the state’s bipartisan fiscal forecasting agency revised downward by several billion dollars its long-term savings projection for the pension overhaul.
* That snippet may have been based on this Bruce Rauner campaign press release…
On the same day of Pat Quinn’s budget address in which he broke his promise to keep the 67% personal income tax temporary, the Commission on Government Forecasting and Accountability released an analysis of the so-called pension reform law that shows it will save $22.6 billion less than was promised when the legislation was passed.
* This isn’t much different than the same stupid canard I dealt with in the subscriber section back in January. Here’s what I wrote back then. Substitute $15 billion with $22.7 billion and adjust everything else and you’ll get the same sort of results…
ONE OF THE DUMBEST ARGUMENTS EVER There’s been much screaming and hollering about how new calculations show that the pension reform law is projected to save $15 billion less than originally advertised last fall when the bill passed.
The complaints are based mainly on a recent Chicago Tribune article entitled “Illinois pension law saves $15 billion less than first thought.” The ultra-conservative Illinois Policy Institute, Bruce Rauner and other pension bill opponents have used the story as ammunition to claim that the law is based on a tissue of lies.
But the premise of that article was completely off base because it looked at the wrong number. The only truly valuable number is what taxpayers will end up shoveling into the pension system. Like everything else, it’s all about the final bottom line.
OK, we’re gonna get into a little math here, but it’s really easy so stay with me a minute.
The basic thing to remember here is that calculations originally showed last fall that pension reforms meant taxpayers would owe the pension systems $220 billion over 30 years. A recalculation with updated numbers, however, showed the total taxpayer obligation is now at $205 billion. That’s really good news, but it’s being irresponsibly spun as bad news.
The original estimates were based on Fiscal Year 2012 data. Without the new pension law, the data showed that taxpayers were on the hook for $380 billion in pension payments over 30 years. The reform law reduced that obligation estimate to $220 billion, which was a 42.1 percent reduction in what the government would have to give the pension funds.
When the numbers were updated to include Fiscal Year 2013 data (which included some pretty high investment returns), the new research found that taxpayers were now on the hook for $350 billion over the next 30 years without the reforms. The reform law would result in a 41.4 percent reduction to just $205 billion.
So, what about that $15 billion difference touted by the opponents? Where does it come from?
It’s not that hard to figure out and here’s an easy little example if you’re still scratching your head.
Let’s say you’re looking for a new watch. You find one at Macy’s that’s originally priced at $109 and is on sale at 40 percent off. You’d save $43.60 for a final price of $65.40. That’s still more expensive than Rauner’s watch, but not a bad deal at all.
But then you go next door to Bergner’s and you see the exact same watch listed at $100 and it’s also on sale for 40 percent off. You’d save $40 with the 40 percent sale, but your final bottom line price would be $60, compared to $65.40 at Macy’s,
It doesn’t take Einstein to figure out the better bottom line deal here. Yeah, your 40 percent “savings” are higher with the more expensive Macy’s watch, but the bottom line price you pay is significantly lower at Bergner’s.
The Policy Institute and Rauner would have you believe that Bergner’s is somehow ripping you off because the sale’s 40 percent reduction amount is lower than Macy’s. But that’s just plainly ridiculous. Who thinks like that?