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Raters react to pension ruling

Tuesday, Nov 25, 2014

* AP

Moody’s Investor Service said in an announcement released Monday the [Sangamon County judicial ruling on pension reform], if upheld, would speed the growth of debt for one of one of the worst-funded pension systems in the nation.

“The state’s negative outlook indicates the possibility that factors such as further growth in the state’s pension liability will drive the rating lower still,” Moody’s stated.

Standard & Poor’s Rating Services said last week’s ruling would have no short-term effect as savings from pension reform were not included the fiscal year ended July 1, 2015.

“We will continue to monitor the legal process relating to pension legislation,” S&P stated.

* More from The Bond Buyer

Fitch Ratings also said it had not factored in savings from the pension reforms in its rating assessment due to the legal challenge that was always expected to go to the state’s high court and state’s decision not to incorporate savings in fiscal 2015. “The ruling is not an immediate credit concern,” said analyst Karen Krop. “The state’s budget is a more immediate concern.” The state’s fiscal 2015 relies on one-shots and falls to cover a full year’s spending demands as lawmakers failed to approve an extension of the 2011 income tax rates that partially expire Jan. 1

* Bloomberg

“While maybe this ruling was to be expected, the bigger thing is going to be the temporary income-tax hike,” said Adam Buchanan, vice president of sales and trading at Ziegler, a broker-dealer in Chicago. “That, coupled with these pension issues, is really going to put some downward pressure on the rating.”

Rauner’s Chance

For now, rating companies want to see how the state will act. Standard & Poor’s said in a report after the pension ruling that it will maintain its A- rating and negative outlook on Illinois because the grade already incorporated legal hurdles. Karen Krop, an analyst at Fitch Ratings in New York, said this month that Rauner needs a chance to present his plan.

Illinois hasn’t issued general-obligation bonds since April, when it capitalized on a rally following the December passage of the pension measure to lock in borrowing costs close to the lowest since 2009.

Illinois’s yield spread to benchmark munis has shrunk since August as money pours into the $3.7 trillion market. Individuals have added to muni mutual funds for 19 straight weeks, the longest stretch since 2012, Lipper US Fund Flows data show.

More roller coasters ahead, campers.

- Posted by Rich Miller   42 Comments      

Caption contest!

Tuesday, Nov 25, 2014

* It’s been a little dull this week around here…

- Posted by Rich Miller   42 Comments      

*** UPDATED x1 *** Good news and bad news

Tuesday, Nov 25, 2014

* A guy is involved in a motorcycle accident, his passenger dies, he consents to a drug test and it turns up negative except for this

The only positive test result was for benzoylecgonine, a metabolite of cocaine, which was found in both defendant’s blood and urine. A metabolite is a byproduct remaining in the body after metabolism has taken place.

In other words, he wasn’t high at the time.

* During his trial, jurors ask the judge for instructions. Is benzoylecgonine the same as a drug? If it is the same, then the guy is gonna get convicted. If it isn’t, then he has a chance at acquittal. The state’s attorney did not object to the defense counsel’s request that the judge state the obvious. The judge’s response

“It’s not really a factual question or one about review of the evidence,” Kennedy said, according to a transcript in the appellate ruling. “It’s really a matter asking the court to give a legal definition and so the court should answer that as closely as possible by giving a direct answer and then explaining without alluding to facts in the answer, so the answer the court is going to give is, yes, cocaine metabolite qualifies as a drug, substance or intoxicating compound. … I believe that responds to their question and correctly states the law to them, so that’s the response that’s going to be given. I’m going to write that out carefully.”

As a result, Dana Hasselbring was convicted of DUI, even though there was clearly no “influence” involved with his driving.

* The appellate court reversed yesterday

“Both the state and defendant agreed the trial court should answer the question by telling the jury to rely on the evidence it heard during the trial. The trial court’s unprompted response, ‘yes, cocaine metabolite qualifies as a drug, substance, or intoxicating compound,’ was incorrect, in conflict with the evidence presented, and served to direct a verdict in the state’s favor,” the ruling said.

“The better approach would have been for the trial court to accept the parties’ recommended response and instruct the jury to rely on the evidence it heard during the trial. Accordingly, we have no choice but to reverse defendant’s conviction and remand for a new trial.”

* But this is also from the opinion

The State’s expert testified, “Benzoylecgonine is a cocaine metabolite. That means that at some point cocaine was ingested. It breaks down into metabolites. One of them is Benzoylecgonine, which we test for. It is similar to digestion. When you ingest food, it has to break down into other substances. Drugs are the same way.” (Emphasis added).

Looking at the evidence in a light most favorable to the prosecution, as we must, we find a rational jury could have found the benzoylecgonine in defendant’s system was a substance resulting from defendant’s use of cocaine before driving… Accordingly, double jeopardy does not preclude retrial of defendant.

So, he could very well go on trial again and lose again.

This goofy state law really needs to be changed.

*** UPDATE *** From an Illinois State Bar Association letter to the editor of the Pekin Times…

Under the current Illinois Vehicle Code, a driver who is not impaired is still guilty of a DUI offense or aggravated DUI offense if there is any trace of an unlawful drug in their blood or urine. So, if a driver smoked marijuana two weeks before an accident, it is still a crime even though a urinalysis can’t test for active THC metabolites, and the driver showed no evidence of impairment. In other words, smoking marijuana two weeks earlier had nothing to do with the accident.

This isn’t good policy. As the Pekin Daily Times recently stated, “The purpose of the DUI laws should be to punish people who drive under the influence of alcohol or or drugs. We don’t see any justice in punishing people who aren’t under the influence.”

We agree.

Accordingly, ISBA Legislative Proposal 98-16 removes this absolute liability offense from the DUI statute and makes it a new separate Class B misdemeanor for a first offense and a Class A misdemeanor for a second or subsequent offense.

The proposal continues to make it illegal to use drugs to the extent that they result impairment under the current DUI statute. A conviction under this new statute would also parallel the DUI statute to require payment of the $150 DUI Analysis Fee and require a professional evaluation of the driver for substance abuse before sentencing.

The punishment must fit the crime. We join with the Pekin Daily Times and request you “fix the law so that those who are driving under the influence are punished but those who are clearly not impaired are not.”

- Posted by Rich Miller   17 Comments      

What’s Madigan’s agenda?

Tuesday, Nov 25, 2014

* The Sun-Times ran a big, splashy headline the other day about how Speaker Madigan’s captains were passing petitions for Mayor Rahm Emanuel. Madigan was neutral four years ago, but Emanuel is now the incumbent, so of course Madigan is with hizzoner. That’s not exactly news.

But the paper also delved into the backgrounds of some of Madigan’s people. You wanna know how the machine is oiled? This is one way

◆ [Patrick J. Ward], a key figure in the scandal that led to Alex Clifford getting a $718,000 severance package and leaving his post as Metra’s chief executive. Clifford accused Metra board members of forcing him out after he rebuffed Madigan about giving Ward a raise and refused to hire another Madigan loyalist. Ward left Metra and got a state job as a labor administrator after Madigan recommended him to Gov. Pat Quinn’s administration. Ward is paid $69,996 a year. As a retired city of Chicago employee, he also gets a $57,591-a-year city pension.

◆ Hugo Chavez and William E. Nambo, who were hired as “staff assistants” for the Illinois Department of Transportation under Quinn — a job class the state’s executive inspector general determined was designed to skirt anti-patronage hiring rules. Chavez resigned in May after a reprimand for an “unauthorized” absence from work in 2012 and for “insubordination” for bringing his dog to work last year against his boss’ orders, records show. Nambo gave $600 to Madigan’s ward organization four months after being hired at IDOT in April 2011. He now works in Republican Comptroller Judy Baar Topinka’s office.

◆ August A. Olivo, who has given $8,100 to the speaker’s ward organization and is the younger brother of former 13th Ward Ald. Frank Olivo. August Olivo, 52, is retired from the Cook County Highway Department and gets a pension of $81,204 a year. Since 2011, he’s been working for the CTA, where he makes $80,194 a year.

The 13th Ward has always been thus.

* In other MJM news, Crain’s published some recent quotes in an attempt to discern a Madigan agenda

* From the story

Michael Madigan is confronting the drawbacks of power.

The Illinois House speaker could spend some of his vast political capital on an ambitious Democratic agenda to tackle the state’s tough problems, with or without the cooperation of incoming Republican Gov. Bruce Rauner. Or he could minimize risks to his overwhelming majority through partisan standoffs and sidestepping meaningful votes.

Guessing Madigan’s true agenda is a popular drinking game in Springfield, but over the past year he has offered a wide range of proposals, including a surtax on millionaires, a hike in the minimum wage and making the 2011 income tax increase permanent to avoid severe budget cuts.

The question now is the extent to which Madigan will use his clout to address the state’s huge budget problems and other issues, persuading vulnerable members to take tough votes, as he did when the General Assembly passed pension reform and marriage equality last year.

You can bet the house (and the Senate) that his agenda will include taking care of his captains, as the Sun-Times story illustrates. At his very core, he’s a 13th Warder. It has always been thus.

- Posted by Rich Miller   45 Comments      

Today’s quotable

Tuesday, Nov 25, 2014

* From the twitters…

- Posted by Rich Miller   63 Comments      

Chicago filing deadline roundup

Tuesday, Nov 25, 2014

* The list of Chicago candidate filings is here. Yesterday was the filing deadline. Greg Hinz has more

Drawing a clear path to a new term, at a minimum of $106,558 a year (before extra stipends for committee chairs) were Ald. Marty Quinn, 13th; Ed Burke, 14th; Brendan Reilly, 42nd; and Harry Osterman, 48th. Ald. Patrick O’Connor, 40th, the mayor’s floor leader, drew just one opponent.

Burke, dean of the City Council, chairs the powerful Committee on Finance. Quinn comes from Illinois House Speaker Michael Madigan’s home ward, and Reilly represents the bulk of the central district. Osterman is from Edgewater and is a close Emanuel ally.

At the other end of the spectrum: the South Side’s 7th Ward, where 16 foes filed to take on incumbent Natashia Holmes, and the Northwest Side’s 38th Ward, where nine candidates have filed, including Ald. Nick Sposato, who decided to move to this ward after his 36th Ward was pretty much dismembered in a remap three years ago. There are also 14 candidates in the West Side 24th Ward, and 12 in the neighboring 29th Ward.

Overall, however, the number of candidates for alderman is off by about a third at this point, with 252 filing this year compared to 351 last time, according to the Chicago Board of Election Commissioners.

Ald. Reilly reported around a million dollars cash on hand in his two accounts.

* The Sun-Times looks at the mayoral filings

In all, 10 people filed to run for mayor, including incumbent Rahm Emanuel.

Seven of them filed on Monday, including Cook County Commissioner Jesus “Chuy” Garcia, who turned in more than 63,000 signatures. William “Dock” Walls was the last filer at 5 p.m., according to the Chicago Board of Election Commissioners.

“I believe the city is not heading into the right direction, and I’ve heard that from people all over the city of Chicago,” Garcia told reporters after filing. “The fact that we submitted the highest number of nominating petitions underscores the change people in the city’s neighborhoods would like to see Chicago take.”

Ald. Bob Fioretti (2nd) also turned in his petitions on Monday. His campaign brought in 55,523 nominating signatures. Fioretti made note of the financial battle facing him and every candidate going up against Emanuel, who has upward of $9 million in his campaign war chest.

* More

Amid chants of “Chu-y, Chu-y,” Garcia took another jab at the mayor’s closing of 50 schools.

“That’s the difference between me and the present administration,” Garcia said Sunday. “We believe in opening schools up.”

Just Friday, Garcia blasted the mayor over the move, portraying the incumbent as a big-money “Washington insider” who lacks the “temperament” to “listen and engage” everyday Chicagoans.

A spokesman for Emanuel said Sunday the decision to close a school is “very difficult.”

“But we cannot shy away from difficult decisions to move Chicago forward, to keep the rising graduation rates, the longer school day, and the full-day kindergarten,” Steve Mayberry said. “Last week, Commissioner Garcia said he would have closed some schools. Today, he says he would open them. In neither case did he offer any specifics. Voters deserve detailed, thoughtful plans, not inconsistent rhetoric from the sidelines.”

* Tribune

Garcia said he believed his 63,000 signatures were “challenge-proof,” before saying he would campaign on reducing gangs and gun violence, hiring more police officers, improving schools, creating jobs, reducing the city’s deficit and addressing its looming unfunded pension obligations.

The Cook County commissioner, however, offered no specifics on how he’d achieve those improvements and would not take questions from reporters, even as they followed him through the Dunne Cook County office building, into the city’s underground pedway and through another nearby office building. […]

Emanuel had nearly $8.7 million in his campaign fund through the end of September and has raised at least $328,000 since then, according to state campaign finance records. Fioretti had $258,000 in his fund at the end of September and has raised about $52,000 since, records show. Garcia, a late entrant to the race, did not open a mayoral campaign fund until Nov. 6 and has collected $214,000 since, almost all of it from unions representing teachers and Chicago Transit Authority workers.

* And the lede of the day

West Side aldermanic candidate Gabe Beukinga sent a series of accusatory and threatening emails to a major developer in his ward Friday. Monday, Beukinga, a Chicago businessman, says that while he regrets the emails he sent while he was drunk, he has decided to quit his day job to concentrate on his drinking relapse problem and to run for 27th Ward alderman.

- Posted by Rich Miller   20 Comments      

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Tuesday, Nov 25, 2014

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- Posted by Rich Miller   Comments Off      

Question of the day

Tuesday, Nov 25, 2014

* I usually do the question later in the day, but I’m running a bit behind this morning, so let’s do it now…

To celebrate Illinois Statehood Day on Wednesday, December 3, the Illinois State Society is hosting a reception and short program in the U.S. Capitol’s Visitor Center (1 First St., SE, Washington, D.C.). December 3 is the 196th anniversary of Illinois becoming the 21st state in the union in 1818.

The event from 6 p.m. to 8 p.m. will be in room 201 A/B on the House side of the Visitor Center. It is open to the public and the media.

U.S. Senator Mark Kirk (R-IL), a former naval officer and honorary chairman of the event, will introduce a special guest, Commander Jess Porter of the U.S.S. Illinois (SSN 786), a new nuclear submarine now under construction. This is the first Navy vessel to be named after Illinois in 70 years.

Commander Porter will give details on the new Virginia-class submarine, expected to be delivered from the Electric Boat division of General Dynamics in Newport News, Virginia, in August 2016.

The U.S.S. Illinois is the third in the Block III of nuclear subs. It will feature a revised bow, and other advance technology from Ohio-class SSFNs. The first group of sailors reported for duty in June 2013. The contract to build her was awarded in December 2008.

* The Question: What other ways should Illinois celebrate its birthday? Snark heavily encouraged, of course.

- Posted by Rich Miller   62 Comments      

Good morning!

Tuesday, Nov 25, 2014

* A tiny handful of you old-timers may recall my big, yellow, 1973 Cadillac, which was affectionately named “Althea.” I sought and successfully obtained an unofficial dispensation from the Illinois Environmental Council to own that gas-guzzling beast because it was just so cool. This one’s for those who remember

Ain’t nobody messin’ with you but you

- Posted by Rich Miller   11 Comments      

From the department of least surprising headlines

Monday, Nov 24, 2014

* He sent me this “first,” so he wants it posted, so let the mourning begin, campers

[William] Kelly ends Chicago mayoral bid, will donate $100K to challenging corrupt Cook County, Chicago GOP establishment

- Posted by Rich Miller   61 Comments      

Question of the day

Monday, Nov 24, 2014

* Tom Kacich gives us some good news about Gordy Hulten, a longtime friend of this blog who did very well on election day

In all the countywide, contested races the top vote-getter was Republican County Clerk Gordy Hulten with 32,261 votes, or 60.7 percent over challenger Scott Hays, who ran a good race but didn’t become a candidate until late August. Hulten, meanwhile, had run two years earlier and had a high name identification. The only other candidates to get more than 30,000 votes were Republican Comptroller Judy Baar Topinka (30,848 votes, 57.4 percent) and Democratic Secretary of State Jesse White (30,551 votes, 56.3 percent).

* The Question: What was the most positive (to you) local election result this year?

- Posted by Rich Miller   17 Comments      

Rauner’s smart moves

Monday, Nov 24, 2014

* There’s no doubt that Bruce Rauner is a different sort of Republican. While the DC crowd was gnashing their collective choppers last week about the president’s executive order, Rauner was praising it

Republican Gov.-elect Bruce Rauner on Friday called President Barack Obama’s executive action on immigration a “great start” to “get the dialogue going” on immigration policy changes.
lRelated Rauner says Obama immigration move a great start of conversation

The comments came as Rauner addressed more than 900 advocates for the Latino community in Rosemont. Rauner told the crowd he supports “comprehensive immigration reform,” which he acknowledged will take more work.

“The real way to do it is on a bipartisan basis, through Congress, through the legislature, with the president, with the states all working together … to make sure the changes are permanent, they’re structurally in place for the long term,” said Rauner, receiving applause.

Later, when asked by a reporter if he supported Obama’s executive orders, Rauner said “It’s good that the president gets the discussion moving.”

He is a lot smarter and more attuned to the sort of state he now represents than the Springfield crowd has ever given him credit for.

* And while we’re on that topic, Reboot interviewed Jim Edgar about his advice to and impressions of Bruce Rauner

A: …His style is to listen a lot and then he kind of takes what he wants to from all of those people he’s talked to, so I guess my major advice I’ve given him is you don’t want to rush into any decisions you don’t have to make right now.

He has a luxury. I told him he got through this campaign for governor without kind of saying a lot about where he was on a whole lot of specific issues and, governmentally, that’s great because now he can take positions based off of what he finds as governor, not what he promised in a campaign and I think that’s a great plus for him. As I told him, until you’re ready to make a decision, until you have to make a decision, I would hold off just so you really feel comfortable with whatever that decision is.

Q: You think he’s a listener? Because the story I heard was that the first time you met him, he didn’t listen very much, that he did most of the talking and that the meeting was a little bit tense.

A: I think I expressed that. I told him the next time we met – we met after the primary– told him, “You’re a quick study. You listened a lot more today.” And my experience with him since, we’ve had probably three conversations and we spent the day flying around Monday before the election and he spent most of it listening to me. Now, how much of it he thought was worthwhile listening to I don’t know, but he’s a much better listener now.

One thing I found is, I thought I had a pretty good resume going into the governorship, and I have to say I had a lot to learn after I got there. I think he understands that. He’s not just listening to me. He’s listening to a lot of people and in the end he has to make the final call, but I think if he can get as much information and have time to think about it. … You don’t really have a chance in a campaign to think about some of those things as well as you should. Now, he has this two-month window, almost, where he can really think things over.

I had heard the same things about Rauner early on. He wouldn’t listen and was a know-it-all.

But I also started hearing different stories as the primary wore on. He was much more willing to listen to advice and began using the best of that advice to his advantage.

Speaker Madigan and Senate President Cullerton both went into a meeting with Rauner not long ago figuring it would be a glad-handing meet and greet followed by a photo op. They wound up talking to the guy for almost two and a half hours.

* And then Rauner met with Cullerton again last week

Cullerton says his meeting was largely procedural. He says they talked about vetting gubernatorial appointments before they are announced and up for Senate confirmation.

That demonstrates Rauner’s eagerness to get up to speed on process, which is unimportant to most people but has done more to damage a governor’s effectiveness than almost anything else.

* Meanwhile

On top of Rauner’s spending millions to get elected, Tom Bowen, a former political adviser to Chicago Mayor Rahm Emanuel, notes that once the legislative session gets underway, “[Rauner] can mount an aggressive issue-advocacy campaign if he needs to,” to garner public support for his agenda.


* And, finally

Governor-elect Bruce Rauner said “Happy Thanksgiving!” several hundred times Sunday afternoon, with each utterance accompanied by a free frozen turkey for throngs of people who lined up at a South Side church for fixings and a bird.

Rauner stood next to Pastor Corey Brooks and posed for dozens of selfies at Brooks’ New Beginnings Church, 6620 S. King Drive.

Brooks, one of a handful of black pastors from the South and West sides who went against their traditional Democratic grain in September to endorse Rauner, a Republican, smiled broadly as he stood shoulder-to-shoulder with the Winnetka multimillionaire. […]

“God made us in his image, not as Republicans, not as Democrats, not as politicians, but as human beings who care and make the world a better place by making a difference, and that’s what we’re doing here today.” [Rauner said.]

One of the chief complaints that black ministers have about Democratic politicians is that they appear to be everywhere during campaigns, but invisible the rest of the time. So, that’s another smart move by Rauner.

- Posted by Rich Miller   60 Comments      

Turn on the Wayback Machine

Monday, Nov 24, 2014

* A text from Cook County Commissioner John Fritchey, who is a former Illinois legislator…

Cleaning out my office and came across an old Rolodex (remember those?). In any event, thought you’d get a kick out of a few things I found. I clearly need to clean out my stuff more often.

* Some of what he found…

What do you have in your wallet?

- Posted by Rich Miller   36 Comments      

“RNUG” looks ahead

Monday, Nov 24, 2014

* I asked our pension expert RNUG (fka Retired Non-Union Guy) to look forward after Judge Belz’s decision last week striking down the state’s pension reform law. Here it is…


As I said in another e-mail, no way does Belz’s decision get overturned so the State needs to find another way forward. I’m also assuming there is no way to negate the $111B of pension funding indebtedness.

Here are some off the top of my head thoughts on how to deal with it. A lot of them are NOT original to me; I’m sure I’ve plagiarized ideas from almost every blog commentator. Heck, we need to steal all the good ideas we can find to solve this problem. I’m probably going to be too long-winded (no surprise!) and not all of this directly addresses the pension debt but here goes:

* The classic cut waste / abuse / fraud suggestion. Not saying it doesn’t exist, but the last couple of year’s tight budgets under Quinn have already squeezed some of it out of the State agencies. The biggest problem will be finding it; I don’t’ believe there is anywhere close to enough auditors / inspector generals’ staff to root out what is left. And since you will need to hire people or contractor’s to find it, you will quickly reach a point of diminishing returns.

* Have an honest debate in the Legislature about what should be government functions and what the State should quit doing.

* Just keep following the 1995 “ramp”. Problem is not enough tax revenue when the temporary increase sunsets Dec. 31st.

* Rework the “ramp”. This has several ways to approach it. One item would be to reset the target to 80% funded. Another way would be to bond out most or all of the just “indebtedness” and fund it with a commitment of either a fixed portion of current tax revenues or a new revenue source dedicated to just repaying the new “pension bonds”.

* Again change the pension terms for new hires. You could force all new people into a 457 plan (government version of a 401K) but this would be a double-edged sword for multiple reasons. (1) Right now, projections are that “Tier 2″ members not only pay for their full amount but will also end up paying part of the “Tier 1″ debt. This is only going to increase percentagewise as “Tier 1″ members retire and “Tier 2″ members increase. If there are no more new “Tier 2″ members, then there is none of their money going to offset the “Tier 1″ debt. (2) With a 457, there will be much more clamor and scrutiny of the employer match. No employer match and it probably runs afoul of IRS pension regulations. If there is an employer match, I don’t think the State can get away with “notational entries”; it will have to be cold, hard cash going into the 457 plan. (3) 457 plans have an interesting “loophole”; the funds can be withdrawn upon leaving government service with no age requirement or penalty. That creates the potential for people who leave government employment to blow their entire retirement savings, which kind of defeats the purpose of retirement savings. Yes, I know that’s branching into “nanny” government to make sure people don’t waste their retirement savings … but there is a common interest in making sure people don’t end up on welfare in their old age.

* Create a program for current “Tier 1″ (and probably have to be offered to “Tier 2″ also) employees to either fully or partially (credits going forward) opt out of the Defined Benefits program in favor of a 457 plan. Still has the “457″ problems I noted above. If full opt out, it would also require the State to immediately pony up the cash equivalent of the already earned benefits. The other problem is I would expect the “Tier 1″ people at least halfway to retirement would not choose it, so the savings would be limited.

* Create a program for both “Tier 1″ employees and retirees to opt out of the guaranteed 3% AAI in favor of a uncapped COLA guaranteed to match the Federal SSA COLA. This would be a pure gamble on the State’s part because the COLA over any period of time has averaged between 2.9% and 3.1% (in other words, the State pension planners knew what they were doing when they picked 3% as the AAI). IF, and that’s a big IF, inflation stayed below 3% the State would achieve some savings. However, if inflation were to soar, the State would be stuck with some large unplanned costs.

* Go back to the previous “Schnorf” plan and stick to it. For current employees, pick up the full employee contribution in exchange for foregoing some scheduled raises or COLAs. Going forward, that would have the effect of permanently lowering pensionable salaries by 4% (assumed normal SERS contribution).

* A different twist on the “Schnorf” plan. Some people want / need time off more than they need pay. Develop a plan to allow work schedules with less than “full” hours with pro-rated salary reduction. It won’t save a lot in the short run, but if it is in place for more than 6 years, it will affect the “final average compensation” which will reduce the amount of the earned pension.

* For existing “Tier 1″ employees, offer an uncapped COLA in place of the fixed 3% AAI but require a higher contribution rate (0.5%. 1% ?). It might have some of the same problems as the AAI / COLA swap suggested above but they should be able to create a cost structure to offset some or most of those issues.

* One of my more off the wall ideas would be to offer another 2002 ERI style early out, but make the buy-in cost more. Upside would be stopping any increases in additional pension benefits for the people who take the deal anyway. Downsides would include the immediate cost hits, less employee contributions going into the pension funds, and yet another loss of institutional knowledge that the State probably can’t really afford.

* The cost shift to the school districts for the “normal” pension costs. This one is fraught with perils. Potentially, the State would save money at the expense of the school district (local taxpayers) getting stuck with an unaffordable cost. It doesn’t get rid of the cost going forward; it just shifts it from the State to the local districts. And I can see such outcry that the State ends up sending the same money to the school districts, except it is now called school funding instead of pension funding. I may be in the minority, but I just see this as another way to kick the can down the road and end up with a lose / lose situation.

* Get creative with taxation / revenue sources in order to just pay the bills. Various ideas have been floated; there seem to be a number of reasonably viable paths but none will be easily achieved. (1) Eliminate some or all of the various income tax exemptions. (2) Switch from the current flat income tax to a graduated income tax with the goal of increasing overall revenue. (3) Expand the sales tax to cover all services. (4) Phase out the income tax completely in favor of an expanded sales tax with no exemptions. (5) Replace the corporate income tax / sales tax with a gross receipts tax; makes exemptions or evasion almost impossible. Some of these will require changing the constitution with voter approval. Almost all of these changes will require overcoming the entrenched special interests supporting the current approach or the current loophole.

* DOC is one of the larger budget costs; reform the laws in this State to decriminalize victimless / non-violent offenses. Yes, that includes things like decriminalizing drug possession of minor amounts (keep the dealing offenses on the books). Also take a serious look at the rest from releasing elderly prisoners; it costs the State a lot to incarcerate them for what may be minimal safety benefit.

* Just get Rauner’s friends to pay off the pension fund indebtedness in total. Okay … this one is snark.

Bottom line: the pension funding will not get solved in a vacuum or in a stand-alone solution. It’s going to have to be just a part of a bigger solution addressing a number of the State’s problems.


- Posted by Rich Miller   89 Comments      

Budgetary war-gaming leads to panic

Monday, Nov 24, 2014

* This story is setting off alarm bells across the state bureaucracy

The state’s higher education czar issued a dire budget warning to the presidents of Illinois’ public universities Friday, telling them to be prepared for cuts in state funding of up to 30 percent over the next 18 months.

In an email to the presidents, Illinois Board of Higher Education Executive Director James Applegate said he was issuing the “bad budget news” after meeting with Gov.-elect Bruce Rauner’s budget transition team.

The newly elected Republican businessman takes over for Gov. Pat Quinn 12 days after the 2011 temporary tax increase rolls back from its current 5 percent to 3.75 percent, blasting an estimated $2 billion hole in the state’s current fiscal year budget and dropping revenues in the fiscal year 2016 budget beginning on July 1 by an estimated $4 billion.

“They have asked us to prepare a budget recommendation for FY 16 involving a 20 percent reduction. We may also be asked to create spending reserves of 5 percent or 10 percent out of our existing budget for the remainder of FY15,” Applegate noted in the email obtained by the Lee Enterprises Springfield bureau.

* From Mike Schrimpf on the transition team…

While Governor Quinn signed and is implementing the current, unbalanced budget, Governor-elect Rauner is taking seriously his duty to responsibly manage the broken budget he will inherit and is also beginning preparations for next fiscal year.

The budget that Governor-elect Rauner will ultimately present will not incorporate all of the suggestions he will receive from Agency CFO’s, which is why the transition team is asking for this information to begin developing a range of options, but it is already clear that major structural changes must occur to save Illinois. Our state’s fiscal house is in disrepair and years of patching over the problems have only made things worse. The time is coming for a new foundation.

If you parse that through, it seems apparent that the Rauner folks are just going through their due diligence, gathering info and doing some budgetary war games to see what would happen with various levels of revenue, etc.

In other words, they’re trying to find out exactly where universities (and agencies) are right now and what exactly will happen when the tax hike rolls back, both in this fiscal year and the next. They can then use those numbers to justify higher revenues and/or cuts to other areas. But what they’re finding out is university execs are a highly entitled bunch, especially since Rauner promised to increase their funding during the campaign.

- Posted by Rich Miller   52 Comments      

Wild tales flourishing

Monday, Nov 24, 2014

* AP

Rauner said his “No. 1 priority” is hiring the most talented team possible. Former GOP Gov. Jim Edgar, a key member of Rauner’s transition team, told The Associated Press that selecting smart and experienced advisers is the “first and most important” task for any governor-elect. […]

With hundreds of Quinn administration hires and appointees eventually departing, jockeying already has begun to fill coveted posts under the new governor. Rauner said he hasn’t spoken with any GOP legislators about jobs in his administration, though that doesn’t mean some lawmakers won’t end up there.

* And that leads us to my weekly syndicated newspaper column

Whenever a new governor is about to be sworn in, one of the most popular Springfield parlor games is figuring out who is on their way out and who is on their way in.

(The games are usually not played in parlors, but in taverns, restaurants and friendly offices.)

Of course, when a new governor takes office from a different party, the “who is out” part is relatively easy. Pretty much everybody without civil service job protection is out.

And that’s where we find ourselves today. Governor-elect Bruce Rauner is a Republican who just defeated Democratic Gov. Pat Quinn. Almost all of Quinn’s people are surely gone.

But who will Rauner bring in to run the government? I cannot tell you how many times I’m asked that question every single day.

Much of the recent local speculation has focused on Republican state legislators, partly because most of the people closest to the outsider Rauner are unknown to the Springfield crowd. Legislators, on the other hand, are very well known. Some of those legislators are not so subtly floating their own names, some are just naturally assumed to be on a short list.

As a result, there are so many rumors going around about so many legislators being “sure thing” appointments that I long ago lost count. It seems at times the number could be half of the Republican caucus.

Some folks were actively spreading rumors for weeks that Senate Republican Leader Christine Radogno was in line for an agency directorship, possibly to undercut her re-election bid as party leader. Nothing could have been further from the truth. She never wanted to move into the executive branch. As far as I know, nothing was ever offered.

Earlier this month, a potential 2016 House Republican candidate loaned his campaign fund $250,000 because he apparently wanted to set himself up for a campaign in the wake of widespread rumors that Rep. Patti Bellock, R-Hinsdale, would soon be heading up a state agency.

Rumors are rampant that Sen. Dave Syverson, R-Rockford, is in line to run the Illinois Department of Insurance. Syverson added fuel to the fire by indicating his willingness to vote to raise the income tax again after it automatically rolls back from 5 percent to 3.75 percent at the end of this year.

Heck, I’ve even heard that two Downstate GOP legislators are actually fighting bitterly right now over who ought to be the next director of a major state agency.

Last week, Gov.-elect Bruce Rauner was finally asked by a reporter how many Republican lawmakers he’d spoken with about joining his administration.

“None,” Rauner replied.

While everybody and his brother are out there touting themselves or their pals as the next director of an agency or chairman of some state commission, absolutely nobody is a sure thing and Rauner hasn’t yet offered anybody anything.

“Everybody who voted for Bruce thinks they ought to be a director,” cracked one exasperated insider.

Keep in mind that Rod Blagojevich didn’t unveil his new agency directors until a few days after he was first sworn into office in 2003. I think it was late December before we first got word about George Ryan’s nominees.

Rauner could move faster than that. He did act very quickly to put a budget team in place, headed by the highly respected Senate Republican chief of staff Tim Nuding. Blagojevich didn’t announce his budget team until almost a month after the 2002 election.

Once the lists are pared down (and as of last week that process had barely begun), potential nominees will then have to be thoroughly vetted. The one thing Team Rauner doesn’t want is an unpleasant surprise during the confirmation process.

The Republicans have been out of power for a dozen years, so it’s understandable that they’re hungry to get back into the game. And they’re human beings, so like most people they’d like a promotion for themselves or their friends. I get it.

They should probably keep in mind that Rauner said over and over and over until he was blue in the face during the campaign that his top priority was to “shake up Springfield” and bring in new blood. Appointing a bunch of Republican legislators to key administration posts wouldn’t exactly reinforce that message.

Everybody just needs to calm down.

* Kurt Erickson

It seems like nearly every one of the state Senate’s 19 Republicans has been mentioned as a potential head of some agency.

One scenario had Senate Minority Leader Christine Radogno, R-Lemont, going to work for Rauner. Another wild tale had state Sen. Kyle McCarter, R-Lebanon, heading to the administration. State Sen. Dave Luechtefeld, R-Okawville, would then run for McCarter’s seat, paving the way for unsuccessful attorney general candidate Paul Schrimpf of Waterloo to run for Luechtefeld’s seat.

Got all that?

* Finke

So maybe it’s true that the names floating around about possible appointments are coming from the lawmakers themselves.

- Posted by Rich Miller   44 Comments      

Good morning!

Monday, Nov 24, 2014

* A bunch of Canadians playing Delta-inspired Devil/Krishna trance music with a harpist (yes, a harpist) and two bassists? Yep. And, man, I’m seriously kicking myself for missing their Chicago show this month. Enjoy

We’re all half Rama
Half Bonnie and Clyde
Half devoted, half buried alive

- Posted by Rich Miller   14 Comments      

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