* Reboot…
In its Oct. 19 Credit Outlook report, Moody’s focuses on last week’s announcement by Comptroller Leslie Geissler Munger that cash flow problems due to the state budget impasse will force the state to delay its scheduled November payment to the state’s five public pension systems. Moody’s deems that action as a “credit negative” — meaning it could negatively affect the state’s credit rating if not corrected.
“The delay, which was made because the state’s cash on hand is insufficient to meet all of its payment obligations, reflects Illinois’ outsize unfunded pension obligations, the lapse of an existing tax package that would have yielded roughly $5 billion in the current fiscal year, and the continued failure of the state’s political leadership to enact a fiscal 2016 budget. The underpayment also ensures the continued deterioration of Illinois’ pension plans’ funding status,” says Moody’s spokesman David Jacobson. […]
In its Oct. 19 Credit Outlook report, Moody’s focuses on last week’s announcement by Comptroller Leslie Geissler Munger that cash flow problems due to the state budget impasse will force the state to delay its scheduled November payment to the state’s five public pension systems. Moody’s deems that action as a “credit negative” — meaning it could negatively affect the state’s credit rating if not corrected.
“The delay, which was made because the state’s cash on hand is insufficient to meet all of its payment obligations, reflects Illinois’ outsize unfunded pension obligations, the lapse of an existing tax package that would have yielded roughly $5 billion in the current fiscal year, and the continued failure of the state’s political leadership to enact a fiscal 2016 budget. The underpayment also ensures the continued deterioration of Illinois’ pension plans’ funding status,” says Moody’s spokesman David Jacobson. […]
“The state’s $6.7 billion pension contribution for the fiscal year that ended June 2014 was more than 10% of its total governmental revenues, but still short of the $7.8 billion that would have met its actuarial required contribution, a minimum standard needed to achieve full funding. The underpayment ensures the continued deterioration of Illinois’ pension plans’ funding status. Furthermore, the gap between the state’s statutory contribution and the amount that would reasonably amortize its pension liability is only a portion of the state’s structural imbalance, which has resulted in repeated and large payable balances at fiscal year-ends.”
* Gov. Rauner has a new plan, according to the Illinois Policy Institute’s news service…
During a town hall meeting in Decatur, Illinois’ Governor repeated his call for structural reforms and a balanced budget and also laid out a few details about how he wants to reform pensions. Governor Bruce Rauner said there must be changes to the pension system and said he has a constitutional fix. His idea includes a new deal moving forward.
“People can keep their old deal if they want but then their salary increases don’t go into the pension. Or they can have their salary increases count towards their pension if they get into a new deal.”
To encourage workers to enter a potential new tier, the Governor said there would be incentives offered. If the plan is passed by the General Assembly and implemented, Rauner said there would be big savings.
“And if we do that we can save $2 billion for you as taxpayers.”
The Governor said his administration has researched the proposal and said it is constitutional.
It’s not exactly a new idea, but whatevs.
- Anon221 - Monday, Oct 19, 15 @ 2:50 pm:
“The Governor said his administration has researched the proposal and said it is constitutional.”
According to the Magic 8 Ball.
- Precinct Captain - Monday, Oct 19, 15 @ 2:51 pm:
What are the incentives? How much do the incentives cost?
- Oswego Willy - Monday, Oct 19, 15 @ 2:51 pm:
===“People can keep their old deal if they want but then their salary increases don’t go into the pension. Or they can have their salary increases count towards their pension if they get into a new deal.”===
Isn’t that diminishing the pension?
Is it possible to tell employees “You take the deal… or we diminish how your pension is figured from that point forward”?
I don’t know, is this constitutional?
- clerk observer - Monday, Oct 19, 15 @ 2:54 pm:
Didn’t Madiar already propose Rauner’s “new” proposal?
- Concerned - Monday, Oct 19, 15 @ 2:54 pm:
The incentive is “nice pension you got there. It would be a shame if something were to happen to it.”
- drew - Monday, Oct 19, 15 @ 2:55 pm:
looks like the first two paragraphs of the quote got pasted in twice
- Ducky LaMoore - Monday, Oct 19, 15 @ 2:55 pm:
We already heard about this idea… in March, and May, and July…. Hey Bruce… Ever feel like Illinois government is a tuxedo, and you’re just a pair of brown shoes?
- 3rd Party Needed - Monday, Oct 19, 15 @ 2:55 pm:
“The Governor said his administration has researched the proposal and said it is constitutional.”
This means that the “superstars” were unable to comprehend the ISC ruling on pension reform. I am guessing their idea of legal consideration and contractual rights might be different from the views of the court. Are we really going to go through this process again?
- Politix - Monday, Oct 19, 15 @ 2:55 pm:
A pension proposal has suddenly materialized? Magic!
And why doesn’t IPI ever add identifiers to their quotes?
- Dale Cooper - Monday, Oct 19, 15 @ 2:57 pm:
So new deal is basically old deal, but with a starting balance of $0?
- Liberty - Monday, Oct 19, 15 @ 2:57 pm:
Only the supremes can tell us if this will fly. It does fly in the face of Kanerva v Weems and can be construed as a thinly veiled attempt to bypass the constitution by changing the terms of the contract after vesting when hired.
- illini - Monday, Oct 19, 15 @ 2:58 pm:
So the IPI is an official spokesman for BVR. Lets see the real facts and figures - and what about the 16,000 residents of our group homes who are having their monthly stipends reduced?
- Reality Check - Monday, Oct 19, 15 @ 2:58 pm:
This — “People can keep their old deal if they want” — and this — “but then their salary increases don’t go into the pension” — are mutually exclusive.
If your pension is not based on your final average salary at retirement, then it’s not your “old deal.”
But thanks to Governor Private Equity and the Illinois Fallacy Institute for playing on today’s round of Constitutional Jeopardy.
- There is power in a union... - Monday, Oct 19, 15 @ 3:00 pm:
Those “incentives” mean taking things out of collective bargaining so they can offer them back to us in return for switching to tier 2…
- cdog - Monday, Oct 19, 15 @ 3:01 pm:
Tax retirement income. Problem solved.
- 3rd Party Needed - Monday, Oct 19, 15 @ 3:04 pm:
As long as Tier II pension benefits remain legal at the Federal level, the state is not in bad shape as far as handling the “normal costs” going forward. It is the massive debt that needs to be dealt with. The sooner the state moves the focus to that instead of bumping up against constitutionally protected benefits, the sooner we can solve the problem.
- Stones - Monday, Oct 19, 15 @ 3:06 pm:
Sort of like when the Blackjack dealer asks if the player wants insurance….the casino will NEVER offer a deal that will lose money. I seriously doubt many state employees will accept such an offer even if constitutional.
- Threepwood - Monday, Oct 19, 15 @ 3:07 pm:
Of course it’s a diminishment. It wouldn’t be a significant savings otherwise.
It seems to me this is precisely the sort of word game the ISC was warning against in their ruling’s strong language. This won’t get past them, so why are we still playing this game?
- @MisterJayEm - Monday, Oct 19, 15 @ 3:08 pm:
You can keep your old deal if you want, but if you keep your old deal, then the deal changes?
That sure sounds constitutional to me!
– MrJM
- Crispy - Monday, Oct 19, 15 @ 3:10 pm:
Seems as though this type of “fix” has been proposed a lot in recent months, w/slight variations and name changes. A diminishment by any other name, hence unconstitutional. What do non-Rauner-bankrolled experts say on this one?
3rdPartyNeeded seems to have a handle on it. …
- 3rd Party Needed - Monday, Oct 19, 15 @ 3:11 pm:
It is going to take major backbone to deal with our pension mess in a fair, responsible and constitutional manner. Anyone seen any indications of that from this administration?
- Johnny Q. Suburban - Monday, Oct 19, 15 @ 3:13 pm:
What’s Senator Math Biss’s take on the deal?
- Oswego Willy - Monday, Oct 19, 15 @ 3:14 pm:
- @MisterJayEm -,
You have been Spot On today, here is no exception. Just wanted to give earned props.
To the Post,
If the IFI can produce the language necessary to pass this as a Constitutional Amendment, then I might look at this with less than a mocking eye.
The ILSC face the avenues, I don’t think this is the avenue they had in mind… without amending the constitution, and allowing what happens up to the complete passage to be absolutely undininshed in ANY way.
That’s what I’m guessing(?), while I’m waiting on - RNUG - and - AA - and - steve schnorf - to weigh in.
- Ahoy! - Monday, Oct 19, 15 @ 3:14 pm:
Well at least Cullerton and Rauner are talking about the same deal, I wonder if they would admit it was at least similar. We might be onto something…
- Joe M - Monday, Oct 19, 15 @ 3:16 pm:
Is it really “consideration” when one doesn’t have the right to keep what one already has? Sounds more like coercion and extortion to me.
- AC - Monday, Oct 19, 15 @ 3:16 pm:
Since the Blago playbook was too thin, why not try the Quinn playbook? I’ll bet there’s some squeezy the pension python literature Rauner could reuse.
- Buzzie - Monday, Oct 19, 15 @ 3:18 pm:
The proposal was probably researched and deemed constitutional by the Tribune editorial board.
- Chicago Cynic - Monday, Oct 19, 15 @ 3:26 pm:
This was Cullerton’s proposal. Is this the whole, “let the boss reject your idea and then propose it weeks later as his own” trick?
- Archimedes - Monday, Oct 19, 15 @ 3:32 pm:
The Supreme Court decision on SB1 said that “capping the maximum salary that may be considered when calculating the amount of a member’s retirement annuity” is a diminishment of the pension and unconstitutional. wonder what the rationalization is that this new proposal is different and does not cap the salary…
- Norseman - Monday, Oct 19, 15 @ 3:35 pm:
=== … there must be changes to the pension system and said he [Rauner] has a constitutional fix. ===
Only in his dreams.
- Anon - Monday, Oct 19, 15 @ 3:36 pm:
It’s just Rauner talk-ity talk to make it look like he is working hard for the little guy.
- cdog - Monday, Oct 19, 15 @ 3:40 pm:
It seems reasonable to ask who will benefit by the credit rating degrading.
So, who will benefit when a lower bond rating, with higher yields, must be offered?
Hmmm, I wonder…..
- Wordslinger - Monday, Oct 19, 15 @ 3:44 pm:
Geez, is this guy a dilletante of what?
Yacking about imaginary “$2 billion savings” when, due to his actions, that state is exponentially short in just FY16 alone.
- ihpsdm - Monday, Oct 19, 15 @ 3:44 pm:
Do the lawyers have Rauner in their back pockets? They seem to be the only ones benefiting from Bruce’s Reign of Error.
- Norseman - Monday, Oct 19, 15 @ 3:44 pm:
=== “People can keep their old deal if they want but then their salary increases don’t go into the pension. Or they can have their salary increases count towards their pension if they get into a new deal.” ===
Let’s think this through. Rauner thinks public sector employees are paid too much (except for his own staff) and so far is pushing for a salary freeze at a minimum. He’s also pushing the elimination of collective bargaining for all intents and purpose which would permit unilateral salary and benefit decreases. So employees will agree to diminish their pensions for the sake of some future salary increase.
LOL.
The best thing this proposal is good for is to give some lawyers higher paychecks.
- illinoised - Monday, Oct 19, 15 @ 3:47 pm:
Groundhog Day.
- AC - Monday, Oct 19, 15 @ 3:53 pm:
Norseman, you are on to something. Even if this were Constitutional (it isn’t) why would someone trade their pension for future raises that Rauner will never agree to? Does he ever study the impact his policies might have on his policies?
- Relocated - Monday, Oct 19, 15 @ 3:53 pm:
The supreme Court was pretty damn clear about diminishment. Anything that forces you to get less than your current plan is diminishment on its face. Incentives paired with coercion seem unlikely to meet the courts ruling. Sounds like Rauner is looking to kick the can down the road just like SB1 did.
- Arthur Andersen - Monday, Oct 19, 15 @ 3:55 pm:
Norseman, perfect!
Recall what Otter told Flounder after the Deltas wrecked brother Fred’s Lincoln. No one should make that mistake with this guy.
The only way you “save money” in a DB Pension plan is by lowering benefits. It’s just math. We can’t lower earned benefits. Therefore, Bruce, that dog won’t hunt.
- Chicago 20 - Monday, Oct 19, 15 @ 3:56 pm:
What we need to find out is who is benefiting from the repeated lowering of the State’s credit ratings?
- JackD - Monday, Oct 19, 15 @ 3:58 pm:
Let’s try one more time. Justice Burke, when asked what could be done, said “read the opinion; all of it.” This possibility was not mentioned and those that were all involved paying the benefits. The US Supremes, when considering the provision of the affordable care act requiring states to expand medicaid or lose medicaid funding, held that was unduly coercive on the states. Rauner’s demand that they reduce their benefits or forgo raises everyone else will get, seems similarly coercive. I doubt the ILSC will buy it.
- Anonymous - Monday, Oct 19, 15 @ 4:00 pm:
Edgar’s SUV is parked at a meter in front of the Capital. Could be good or bad for him.
- JackD - Monday, Oct 19, 15 @ 4:01 pm:
Ooops, I see I posted my comment above previously under the wrong thread. Sorry, Rich.
- sal-says - Monday, Oct 19, 15 @ 4:17 pm:
== “And if we do that we can save $2 billion for you as taxpayers.” ==
More double talk from the bull master. Over what period of time? Yearly? Term in office? Decade? Generation? Century?
- Ghost - Monday, Oct 19, 15 @ 4:26 pm:
What OW said. not counting salary woukd be a diminishment. Just as removing colas was a diminshment.
i notice that the govs idea of a solution is to not pay the debt….and to cut wages and benefits.
what if instead he foxed the ramp, which could save 2 billion a year off the payment or more, and the. just looked for revenue to pay what is owed. for example approve a chicago casino, and mandate that x percent of its state revenue is used to pay down the pension shortfall. mandate the state make ots controbution each year for current empmoyees, and then in the future require the current debt service used to pay the the 10bil in pension bonds go to paying do the shortage until its caught up to 80% funded.
problem solved, no new taxes and no trying to escape the debt… lets talk somutions other then ripping off the emoyees.
- Mama - Monday, Oct 19, 15 @ 4:29 pm:
Why does the guv keep having town hall meetings in Decatur?
- Striketoo - Monday, Oct 19, 15 @ 4:32 pm:
It is interesting that this comes up just when social security recipients are being told they will receive no cost-of-living adjustment next year. Of course, state retirees will continue to get their 3% so called cost of living freebee.
- Mama - Monday, Oct 19, 15 @ 4:39 pm:
Gov. Rauner has a new plan, but it is not new. It is one of the contract changes the guv is trying to shove down the State Workers throats.
- Jorge - Monday, Oct 19, 15 @ 4:42 pm:
More right to work equivalent type of work Bruce. Well done
- Now What? - Monday, Oct 19, 15 @ 4:43 pm:
Agree with Mama-major fiduciary/constitutional statement…released at a town hall meeting in Decatur!! At least call a press conference if you’re confident with your position. You are the governor, you know. You can do those things…
- Poolguy - Monday, Oct 19, 15 @ 4:46 pm:
Fitch just dropped Illinois to BBB+. here we go…
- Poolguy - Monday, Oct 19, 15 @ 4:56 pm:
credit downgrades worth it for term limits and redistricting? come on man…
- cdog - Monday, Oct 19, 15 @ 4:59 pm:
BBB++. WooHoo.
Let the higher/junk rates cometh.
The buyers of this debt, are the ones that will benefit.
- Langhorne - Monday, Oct 19, 15 @ 5:02 pm:
rauner has a “constitutional fix”. do this by statute, it sure seems like impairment or diminishment. by constitutional amendment, almost anything would be constitutional, just extremely difficult to enact.
- GA Watcher - Monday, Oct 19, 15 @ 5:09 pm:
Today’s Moody’s report also says this: “As the budget impasse continues, less scope is
available to address the current year’s budget gap through either spending reductions or revenue increases and the likelihood of additional credit-negative cash-management actions increases.”
- AnonymousOne - Monday, Oct 19, 15 @ 5:10 pm:
And who is it that buys this debt and benefits?
- Anonymous - Monday, Oct 19, 15 @ 5:22 pm:
What future raises is he going to be allowed to figure in to pension? The governor is forcing the unions to accept wage freezes - so what’s the point There won’t be anything additional to add to the pension calculation anyway
- Meemaw - Monday, Oct 19, 15 @ 5:23 pm:
What future raises is he going to be allowed to figure in to pension? The governor is forcing the unions to accept wage freezes - so what’s the point There won’t be anything additional to add to the pension calculation anyway
- cdog - Monday, Oct 19, 15 @ 5:23 pm:
I know Mr. Miller dislikes conspiracy, hyperbole, and hair-on-fire arguments, (and I get edited quite often because I love those three things) but….
In an alternate reality, maybe the various Illinois bond ratings can be driven so low that the interest rate that must be paid on The Junk is very attractive to Big Equity. Then, the icing on the cake is a big tax increase that would cover those payments.
Of course this is hyperbole and has, and never will, happen.
- Any Mouse - Monday, Oct 19, 15 @ 5:25 pm:
@ Chicago 20 -
@cdog
Would you lend your money to this state?
I know teenagers that are better credit risks.
- cdog - Monday, Oct 19, 15 @ 5:27 pm:
@Any Mouse
Sure if I had the checkbook.
- Old and In the Way - Monday, Oct 19, 15 @ 5:28 pm:
- Langhorne - Monday, Oct 19, 15 @ 5:02 pm:
rauner has a “constitutional fix”. do this by statute, it sure seems like impairment or diminishment. by constitutional amendment, almost anything would be constitutional, just extremely difficult to enact.
The Constitutional Route does nothing to those already in the system. Only those going forward. The US Constitution bars states from enacting retroactive laws as well as diminishing contracts. Good luck changing the US Constitution!
- DuPage Dave - Monday, Oct 19, 15 @ 5:39 pm:
We merit comp employees have already beaten the system on Rauner’s plan, since we don’t get salary increases…..
- AnonymousOne - Monday, Oct 19, 15 @ 5:44 pm:
Anything to get out of paying what is just and rightly owed. Sigh.
- Truthteller - Monday, Oct 19, 15 @ 5:52 pm:
I have a new idea. Listen to the Supreme Court, pay all the money owed by generating the revenue needed to do so, and watch the state’s bond rating improve instead of tanking. Now that would be a new path for Illinois
- Jimmy0 - Monday, Oct 19, 15 @ 5:53 pm:
Courts opinion on Quinn’s pension reformed brought up that the pension protection law can’t be amended or severed in anyway. There’s actually an amendment in it blocking any future amendment diminishing it. Whole thing was about 36 pages long and explained why/how the courts ruled the way they did. How many more times are we gonna keep doing this dance before anybody even tries to fund these?
- Blue dog dem - Monday, Oct 19, 15 @ 5:54 pm:
Just to be a bit provocative….most collective bargaining issues require its voting members to cast votes in public(not secret ballot). Just to add a new dimension to blogging, it may be nice to declare if one is covered under a state,city,municipal,county pension.
- Oswego Willy - Monday, Oct 19, 15 @ 5:58 pm:
- Blue dog dem -
Please, stop trolling.
Thanks.
- ottawa otter - Monday, Oct 19, 15 @ 5:58 pm:
Try as I might, this round of comments covers everything I might want to say. Great job, comprehensive, the thinking caps are on, the transmission is in drive, and I am going to mix my martini as well as my metaphors.
- cdog - Monday, Oct 19, 15 @ 6:03 pm:
“Edgar’s SUV is parked at a meter in front of the Capital. Could be good or bad for him.” (Anon 4:00)
If the man (Edgar) is speaking his conscience, and his intentions are to be helpful, it’s all good, regardless of what spin hits him on the second floor.
Hopefully his example of leadership can be followed by other Republicans that want to do the right thing–find common ground with the other party and move forward on the budget process.
- Eric Zorn - Monday, Oct 19, 15 @ 6:04 pm:
Rich is right that this is far from a new idea. Eric Madiar, a lawyer who is Cullerton’s pension expert and widely considered an honest broker in these matters has looked carefully at the case law and thinks it can pass constitutional muster — I did a column on it recently http://www.chicagotribune.com/news/opinion/zorn/ct-tough-choice-pension-reform-perspec-0909-20150908-column.html
- John Parnell - Monday, Oct 19, 15 @ 6:12 pm:
This is just plain malfeasance on Rauners part. Without the governor moving his turnaround plan to a future session, the Supreme Court should be brought into this.
- Arthur Andersen - Monday, Oct 19, 15 @ 6:14 pm:
Ghost, believe it or not, the ramp is gone. We’re at level funding.
I think earmarking pension contributions now going to POB debt service to pay down the unfunded once the POB’s are paid off is a great idea. In fact, a guy I know tried to get that in the POB law but ran into a brick wall called John Filan.
- Oswego Willy - Monday, Oct 19, 15 @ 6:18 pm:
- Eric Zorn -
Respectfully, diminishing?
===“People can keep their old deal if they want===
Ok…
===but then their salary increases don’t go into the pension.===
How is that “not” diminishing? A protected pension based on what is earned is then reconfigured based on a choice that may diminish its value?
===Or they can have their salary increases count towards their pension if they get into a new deal.”===
So, the pensioner only gets a “non-dimished” plan by… changing plans?
It only “works” as a constitutional amendment. Difficult to see a “non-choice” choice to keep adding to your pension and that’s not diminishing the pension.
The ILSC seemed quite clear.
- Southern Illinois Hoopdee - Monday, Oct 19, 15 @ 6:19 pm:
This gets fixed when Rauner realizes that he’s Madigan’s scapegoat. That might take a while longer.
- Jimmy0 - Monday, Oct 19, 15 @ 6:20 pm:
brings back Anne Burkes riddle from July “all the legislature has to do is read the decision and interpret it. Read the whole decision.” Is this what she meant?
- Anonymous - Monday, Oct 19, 15 @ 6:23 pm:
Mr. Zorn, If Mr. Madir is suggesting that forcing a “choice” that results in a diminishment will pass constitutional muster with the ILSC, he is, with all due respect, mistaken. Even for sake of conversation if it did, it certainly would not pass muster at the Federal level pursuant to the Contract Clause of the US Constitution. The desperation of Mr. Rauner and some politicians in both political parties to find a way to compel workers hired subject to specified terms of employment to accept an impairment breaching said terms of employment and incur the financial burden is breathtaking. Its also morally bankrupt and unconscionable. Illinois needs a constitutional amendment to address its regressive income taxation and adopt rates similar to comparable states. Taxpayers benefited from projects funded by what should have been pension fund contributions, they have an obligation to pay for such.
- kitty - Monday, Oct 19, 15 @ 6:25 pm:
I (kitty) posted the Anonymous comment at 6:23pm
- Oswego Willy - Monday, Oct 19, 15 @ 6:27 pm:
===This gets fixed when Rauner realizes that he’s Madigan’s scapegoat. That might take a while longer.===
Rauner isn’t a victim. If you can’t figure that out…
Rauner owns his proposal, heck Rauner is floating it.
- Jimmy0 - Monday, Oct 19, 15 @ 6:27 pm:
This Burke thing is gonna bug me now. The courts opinion sounded like there’s no way around it but Justice Burke, more or less, implied that there’s something in the decision that could be considered a way around it.
- Jimmy0 - Monday, Oct 19, 15 @ 6:51 pm:
The “you keep the orginial deal and we re-do how you get your money” sounds unconstitutional but are they on to something? If they offer a package, that doesn’t effect any part of the CBA like the Governor tried doing in Chicago, that’s even modest or would convince a starry eyed kid, already well off state worker or someone who doesn’t need the money and is willing to help And they pass on the original deal voluntarily wouldn’t that work? Idk what state worker would be willing to give up on tier 1 benefits but isn’t it worth a shot? If they voluntarily do it then there wouldn’t necessarily be a lawsuit would there?
- Rufus - Monday, Oct 19, 15 @ 6:55 pm:
This is like watching a volcano about to blow, you don’t know when it’s going to blow, but all your input tells you that it is going to blow. Watch out.
- Arthur Andersen - Monday, Oct 19, 15 @ 6:56 pm:
Eric, thanks for following along and reminding us of your timely column.
First, I think there’s a huge loophole in your loophole. Most raises provided to State employees arise out of contractual provisions. If those are excluded, there goes the savings and here comes a big lawsuit from the remaining (Merit Comp?) employees.
Moreover, I don’t see how this passes muster with the IRS qualified plan requirements pertaining to contributions.
- Just a Guy - Monday, Oct 19, 15 @ 7:13 pm:
How about trying this: no overtime, unused sick days or vacation days gets to be applied toward retirement. Pensions should be based on your what you salary is, plus this OT counted benefits a few not. This doesn’t diminish one’s benefit.
- Harvest76 - Monday, Oct 19, 15 @ 7:14 pm:
Yeah, the legislature and governor said the last one was constitutional too. I’ll pass, thanks.
- Just a Guy - Monday, Oct 19, 15 @ 7:16 pm:
Plus, in some agencies it is well known that you let the workers that are within the 3 years of retirement to wok all the OT they can to boost their retirement. As I said previously, check the agencies and see how many do not have a chance of collecting OT during their time at the state.
- Old and In the Way - Monday, Oct 19, 15 @ 7:27 pm:
Jimmyo
What Judtice Butke was saying was that the state had options to meet the obligation. Taxes etc. she never suggested that there is an put or a way to legally diminish pensions. Read the opinion, it is quite clear in its inference. Raise revenue and pay the debt.
- Andy S. - Monday, Oct 19, 15 @ 7:29 pm:
Striketoo, the 3% automatic annual increases the retirees get are not COLAs and were never called that, at the insistence of the State. The unions wanted annual increases tied to the cost of living, but the State refused to provide that, insisting instead on a flat 3% that the pension system members (at least partially) pay for with a specific, dedicated portion of the employee contribution. At the time the automatic annual increases were added (in the 1980’s) inflation was running much higher than 3%, so the state thought they would save money by not granting a genuine COLA. Well, they guessed wrong, as have countless other individuals and businesses who bought or sold stocks, bonds, etc. at prices that in retrospect turned out to be disadvantageous. If the state were allowed a do-over by reneging on the contract they signed, will every other person who made a bad trade in the past 30 years be provided with a similar do-over?
- Old and In the Way - Monday, Oct 19, 15 @ 7:30 pm:
Justice Burke…….small button on the phone!
- RNUG - Monday, Oct 19, 15 @ 7:57 pm:
All,
Rich tried to get me earlier but I’ve been dealing with a medical issues with an elderly mother-in-law.
I haven’t read any comments but I did catch the story about the remarks in Decatur either yesterday or today. I just ignored it because is sounds like yet another more or less coercive cjhpice going for
- Tone - Monday, Oct 19, 15 @ 8:09 pm:
Layoff the public employees immediately and replace them with private contractors whose benefits are paid by a third party. Also eliminate the awful pension protection in the silly Constitution. Many of us never had a say in this ridiculous clause.
If not watch the continued exodus from this once great state.
- Wordslinger - Monday, Oct 19, 15 @ 8:15 pm:
Tone, another brilliant post.
Almost as good as your earlier post, to sell JRTC rather than clean it.
Such a conservative, you are.
- RNUG - Monday, Oct 19, 15 @ 8:16 pm:
Darn, where’s that edit button?
continuing … it because is sounds like yet another more or less coercive choice going forward. Given the Pension Clause and the clear SB-1 ruling, unless it contains a complete “keep what you’ve got option”, it won’t pass Contract Law logic as consideration.
Yes, you could make such an offer along the lines of what Rauner suggested and bribe some people into taking cash and moving to a new tier and have it be legal, but it probably won’t be the existing “Tier 1″ people who take the deal. They will most likely say “thanks but no thanks, we’ll keep what we have” and the courts will back them up. In the past, the courts have mostly shot down any change (age, years of service) that, when applied to the formula, would have reduced a pension.
I get where Rauner is coming from. He thinks yet to be earned benefits can be modified; the courts have disagreed. Eric Madiar, when charged with finding a loophole in the Pension Clause, could only come up with the “consideration” possibility in contract law. But anyone who spends any time researching contract modification by consideration will find it has to be totally voluntary.
And, as it stands now, the threat of not having mythical future salary increases included in the pension calculation may not be much of a threat. Rauner wants to hold the unions to no raises; a lot of the Merit Comp people haven’t have a raise in 13 years. In the case of SERS retirees, the Final Average Compensation is based on the highest consecutive 48 months in the last 120 months (10 years) of service. So if you aren’t getting raises anyway, it won’t make a bit of difference.
That’s my off the top of the head analysis of what little has actually been published in the newspapers …
- Oswego Willy - Monday, Oct 19, 15 @ 8:18 pm:
===Layoff the public employees immediately and replace them with private contractors whose benefits are paid by a third party. Also eliminate the awful pension protection in the silly Constitution. Many of us never had a say in this ridiculous clause.===
Since there are laws prohibiting layoffs and possible rehires under different hiring rules, your Dorm Room “solution” isn’t worth a buy one get one free coupon for your roommate and you.
- RNUG - Monday, Oct 19, 15 @ 8:18 pm:
== Layoff the public employees immediately ==
Aside from union contracts, there is the little thing called “Civil Service” that protects almost all State employees, both union and Merit Comp
- RNUG - Monday, Oct 19, 15 @ 8:21 pm:
== Are we really going to go through this process again? ==
Sounds like it. The Rauner crew may want to be careful what they wish for. The last time the IL SC stopped short of ordering specific pension fund payments …
- Bushwacker - Monday, Oct 19, 15 @ 8:21 pm:
@ Just a Guy……..the state deducts $ for retirement from the overtime pay checks and always have so now not computing it in the retirement benefit won’t hold water! They can’t have it both ways!
- RNUG - Monday, Oct 19, 15 @ 8:28 pm:
== It is going to take major backbone to deal with our pension mess in a fair, responsible and constitutional manner. ==
Fair - keep your contracted promise
Responsible - pay what is owed
Constitutional - “Tier 2″ was the reform
The only things left to do with the pensions are to (a) restructure the debt (longer ramp or borrow the $110B in the markets at lower than the assumed rates of return), (b) probably shift the normal pension cost on the local school districts AND (c) come up with revenue to pay off the debt.
- RNUG - Monday, Oct 19, 15 @ 8:33 pm:
Anybody else reminded of the Verizon commercial that takes the satellite providers to task for offering the same old deal in new language?
- RNUG - Monday, Oct 19, 15 @ 8:36 pm:
== by constitutional amendment, almost anything would be constitutional, just extremely difficult to enact. ==
Even by constitutional amendment it wouldn’t get rid of the existing “pension contract” or the $110B debt woed to the pension funds. If you can’t get rid of the $110B (or a major portion of it), there is no reason to amend the constitution or “reform” pensions.
- Wordslinger - Monday, Oct 19, 15 @ 8:38 pm:
RNUG, they’re softening up the ground — again — to try and bank $2 billion in “savings” to the pension fund contribution.
It’s just like the “savings” proposed in February.
See, if you call it “savings,” that sounds so much better than the short-funding that was done in the past.
The effect is the same — more unfunded liability — but you can spin it to tne willfully gullible.
- RNUG - Monday, Oct 19, 15 @ 8:38 pm:
== Would you lend your money to this state? ==
Sure; they’ve never missed a bond or pension payment in about 100 years or so.
- RNUG - Monday, Oct 19, 15 @ 8:42 pm:
== Just to add a new dimension to blogging, it may be nice to declare if one is covered under a state,city,municipal,county pension. ==
(a) regulars here know I’ve a state retiree
(b) regulars here also know that while I do advocate for things, I separate it from my analysis … except for the occasional bit of snark.
I could say the same for a number of other regulars. Not all of us are trolls or shills.
- RNUG - Monday, Oct 19, 15 @ 8:45 pm:
== I did a column on it recently ==
I remember reading it and disagreeing with it.
- RNUG - Monday, Oct 19, 15 @ 8:49 pm:
== How about trying this: no overtime, unused sick days or vacation days gets to be applied toward retirement. ==
At best, maybe. See the various decisions that say (to paraphrase a bit) “enhancements granted by the legislature can’t be diminished once granted”.
- Oswego Willy - Monday, Oct 19, 15 @ 8:51 pm:
===I remember reading it and disagreeing with it.===
1) I can’t tell you how deliciously fun that simple response was. I, indeed, laughed out loud
2)… You made me then immediately think of this;
Hunt for Red October..,
Captain Ramius: What books did you write?
Jack Ryan: I wrote a biography of, of Admiral Halsey, called “The Fighting Sailor”, about, uh, naval combat tactics…
Captain Ramius: I know this book!
Capt. Vasili Borodin: Torpedo impact…
Captain Ramius: Your conclusions were all wrong, Ryan…
Capt. Vasili Borodin: …10 seconds.
Captain Ramius: …Halsey acted stupidly.
Thanks as usual for your insight - RNUG -, and best wishes to your Mother-in-Law.
OW
- JackD - Monday, Oct 19, 15 @ 8:54 pm:
Eric Zorn: we don’t need an “honest broker”; we need a lawyer who can read. The opinion is written in English and is quite clear.
- JackD - Monday, Oct 19, 15 @ 8:55 pm:
Eric Zorn: we don’t need an “honest broker”; we need a lawyer who can read.
- RNUG - Monday, Oct 19, 15 @ 8:55 pm:
== What Judtice Butke was saying was that the state had options to meet the obligation. Taxes etc. she never suggested that there is an put or a way to legally diminish pensions. Read the opinion, it is quite clear in its inference. Raise revenue and pay the debt. ==
-Old and in the Way- is on it. The other thing in the decision was a veiled threat to revisit the “hands off on how it is funded” stance in the IFT decision.
As I said at 8:21pm , Rauner and company want to be very careful what they wish for. They could end up in a real world of hurt if the IL SC decides they’ve heard enough attempted end runs and orders accrualially based annual funding but doesn’t (and they won’t) order a tax hike.
- RNUG - Monday, Oct 19, 15 @ 9:01 pm:
-wordslinger-
It’s a bit more than that. Aside from another attempt to bank fictitious savings, it also some cover to try to sneak smaller pension changes / diminishments through the GA while we are all distracted by the big attack.
We all need to keep a wary eye out for various “nose of the camel under the tent” provisions tacked onto needed bills; just another variation on the Rauner “poison pill” attempts on th eunion.
- RNUG - Monday, Oct 19, 15 @ 9:03 pm:
Rich, check and see if my long post ended up awaiting approval or something. I’d hate to have to try to re-type it.
- Norseman - Monday, Oct 19, 15 @ 9:05 pm:
Mr. Zorn,
Unfortunately, as a non-subscriber to your digital site I can’t read your column.
Eric Madiar did an excellent job with his research, which is to be commended. I’ve also commended Cullerton for allowing publication of research that wasn’t favorable to leadership efforts to reduce pension benefits.
Madiar made the case that consideration was a constitutional method to modify pension benefits. Accepting the consideration concept, the big question is what “consideration” could be offered and accepted by employees that would result in savings to the state. By the very nature of that question, you’re assuming employees/retirees lose money. That makes for a good argument for diminishment.
When first broached, Cullerton proposed that pension reduction be tied to the guarantee of health insurance. That idea was made moot with the ILSC’s Kanerva ruling. Now you have different permutations dealing with salary or other benefits being withheld or not considered in pension calculations. These proposals bring a host of other problems. Arthur Andersen adeptly addressed several of the problems. The central theme of all these proposals is that you have the state taking away a compensation element with the idea that they could get back some (but not necessarily all in some proposals) compensation element in exchange for agreeing to reduce your pension benefits. Reading the ILCS ruling on SB 1, I doubt that this type of “consideration” will pass constitutional muster.
Then you have the practical considerations. Will the machinations actually lead to significant savings to the state? The state’s track record on pricing out pension changes has not proved too accurate. If nobody accepts the “deal,” what pension savings will the state achieve. And do we trust that any offsetting savings from less compensation will be used to address the pension debt? Furthermore, pinning your hopes on pay raises brings in a whole new dimension for employees to consider. Why would anyone agree to trade pension changes for pay raises when we they’ve had none for years and the prospects for increases are bleak. Most “merit comp” have not had a salary increase since Blago’s re-election campaign. Rauner has railed against high public sector pay and he’s made a pay freeze a major goal of his contract negotiations. Other than special instances and, of course, his superstar staff, pay raises are not something folks are going to expect. So don’t expect them to sign-off on losing an annual annuity increase. For some amorphous promise the unknown future.
My bet is that none of the consideration proposals clear ILSC review.
- PENSIONS ARE OFF LIMITS - Monday, Oct 19, 15 @ 9:17 pm:
Somebody said “‘Silly’ Constitution”
- Facts are Stubborn Things - Monday, Oct 19, 15 @ 9:19 pm:
If you get a raise it is going to apply to your pension formula….can not diminish pensions either in the front door or the back door.
- Arthur Andersen - Monday, Oct 19, 15 @ 9:20 pm:
RNUG, I’m glad your sense of humor is holding up during stressful times. My best to you and yours.
I’m also concerned about the notion of the “nose under the tent.” The total lack of response by labor to the stiffed monthly contribution is a concurrent worry. The Frat Boys should never feel any more “empowered” than they already are.
As I noted above, apart from the State legal issues, this general approach has problems as I see it with the Contracts Clause and the IRS Safe Harbor rules.
- Oswego Willy - Monday, Oct 19, 15 @ 9:20 pm:
===Somebody said “‘Silly’ Constitution”===
“Silly” works, but I always though “pesky” really captured the spirit of the thing, but that’s just me.
- PENSIONS ARE OFF LIMITS - Monday, Oct 19, 15 @ 9:29 pm:
I’ve used those exact words in conversation. Not like it’s the law of the land or anything. Just an inconvenience.
- RNUG - Monday, Oct 19, 15 @ 9:33 pm:
See the original comment is back … so you get two versions of my thoughts.
- RNUG - Monday, Oct 19, 15 @ 9:46 pm:
-AA- @ 9:20pm
It’s holding up so far … however, my mood would improve a bit if the Cubs would start playing baseball again …
- Jessica - Tuesday, Oct 20, 15 @ 7:31 am:
Madiar is obviously the guy to talk to about constitutionality of this, but there is case law that suggests this is constitutional. See Peters v. City of Spfld. (http://cgfa.ilga.gov/Upload/2008%20JANUARY%20Handbook%20of%20Illinois%20Pension%20Case%20Law.pdf). Court ruled that future salary increases are not constitutionally protected. The problem is it doesn’t save much and if you make the option for them to move to really unattractive, no one will take it. So it’s not an alternative to a tax increase to be able to amortize the debt. But if it’s enough face saving to let republicans vote for a tax increase, do this!
- RNUG - Tuesday, Oct 20, 15 @ 7:51 am:
Jessica,
To split hairs (which th elaw does), the court ruled future increases are not protected. But my memory, without re-reading it, is that pension benefits do have to accrue for any future raises that do occur.
In other words, Rauner can not give raises, but if he does give raises, they have to be counted in the pension calculation. Rauner wants the raises to not count towards the pension unless you take a reduced pension. Not quite the same thing as Peters.
- Person 8 - Tuesday, Oct 20, 15 @ 8:18 am:
@RNUG
What does Rauner do about TRS then? Since he (kind of) cannot control what a district pays teachers.
- RNUG - Tuesday, Oct 20, 15 @ 8:45 am:
== What does Rauner do about TRS then? Since he (kind of) cannot control what a district pays teachers. ==
My assumption is he plans a “starve the beast” approach even though he is for more school spending. If the State were to transfer the “normal cost” of the pensions to the local districts at the same time the State caps property taxes, the money to pay the pensions would have to come from somewhere. At that point, the only obvious choice for the school district would be to cut out raises and lower their salary costs, either by firing some teaching staff or trying to impose salary cuts on all teaching staff. Such a move, if logically analyzed, might also drive more local school district consolidations in order to achieve an economy of scale and eliminate some duplication of management overhead … but I’m not going to hold my breath knowing the psychological investment small towns have in their schools / sports teams.