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Tillman claims he wants to work with Democrats on pension reform

Thursday, Dec 6, 2018

* Politico

Five years after the conservative think tank criticized lawmakers for passing a pension bill it once called “grossly inadequate,” the group has changed its mind. “It turns out it was pretty darn good,” John Tillman, CEO of IPP, told POLITICO. His organization recently revisited SB1, the bill that passed in 2013 but was found unconstitutional in 2015.

Tillman said the measure would have saved somewhere between $1.1 billion and $1.4 billion a year in 2016, 2017 and 2018. “It would have put the state on a much better path to fully funding pensions,” he said, crediting Democratic state Rep. Elaine Nekritz for shepherding the bill and the bipartisan nature of it.

IPI’s turnaround signals an olive branch toward Democrats and the state’s new administration. And it follows a tumultuous four years working with Gov. Bruce Rauner. The anti-union, anti-tax group appeared aligned with Rauner when he first took office. That changed when the governor signed the controversial HB40 abortion law—after he said he wouldn’t. Tillman called him a “failed” leader. Their relationship spiraled downward. […]

He insists pension reform is still possible, but only with bipartisan support. Tillman hopes to talk to Gov.-elect J.B. Pritzker about creating a two-pronged pension system that would protect already-earned current retirees and current workers’ benefits (possibly with a 401K system) and also those of retirees.

Tillman is indeed on a mission here. We had a long off the record conversation in Springfield this week.

And while he is trying to position himself as extending an “olive branch,” I doubt that the governor-elect is all that interested. Pritzker has talked a lot about the CTBA plan to reamortize the pension debt, but has rejected all other reform ideas. Tillman claims the CTBA plan is unworkable because it won’t contain costs.

…Adding… The group’s opposition to SB1 was a lot harsher than described above. From 2013

Government workers and taxpayers should call out Illinois’ pension bill for what it is – a farce. […]

Workers and taxpayers will need to say no to fake reforms and call for the only sustainable solution going forward: giving state workers control over their retirements through defined contribution plans that workers own and control.

…Adding… And the group knew the projected savings back then as well, but dismissed them

The pension bill saves only $1.3 billion in its first year

…Adding… Tillman also says in that Politico piece that he hopes to meet with Madigan, but his group just published a cartoon comparing Madigan to Satan. I kid you not. Click here.

* From Craig Dellimore’s interview of Tillman

Tillman admits he was wrong about SB1. It would have been good if it stayed in place, he said.

“It turns out it wasn’t just one good step, maybe it was five or six very good steps. If you look at what would have happened since that bill was passed and if the Supreme Court had not ruled it unconstitutional,” Tillman said.

So, now, the controversial think tank, at the center of some turmoil under Governor Rauner, is suggesting a bipartisan effort under JB Pritzker to change the Illinois Constitution and create a two-option pension system that, he said, won’t affect benefits earned by current workers or retirees. He is not expecting an easy sell.

“The most important thing to do is to fix the problem now and that’s why we are using the anniversary day of the 2013 reform to hold ourselves accountable and to encourage the General Assembly to look back at what they did in a bipartisan fashion and say hey there’s a lesson there,” Tillman said.

* And the Illinois Policy Institute’s Austin Berg kinda/sorta explains what they want to do via an op-ed for the Illinois News Network, which is based at the same address

That’s why a constitutional amendment is so necessary. And it doesn’t have to eliminate the pension clause in order to allow cuts.

A solid amendment simply needs to allow for changes in future benefits, while protecting what has already been earned by public employees. Voters could approve the amendment as early as 2020, and lawmakers could pass specific reforms that trigger the morning after Election Day.

Those changes need to be a bit more substantial than in 2013, because the problem has grown tremendously since then. But the principles can remain the same.

* The institute itself recently released a white paper

A constitutional amendment allowing reductions in the growth of future benefits could be followed with legislation that essentially reintroduces the 2013 reform concepts with differences in degree, including the following:

    Increasing the retirement age for those not currently close to retirement
    A cap on the maximum pensionable salary that grows at a rate pegged to inflation
    Replacing Illinois’ 3 percent guaranteed benefit increases with a cost-of-living increase tied to inflation
    Potentially suspending COLA increases for certain years to allow inflation to catch up to past raises

* But even Gov. Rauner told Crain’s this fall that a constitutional amendment was futile

He wants pension reform, but said the idea of amending the Illinois Constitution to reduce such benefits likely is a political and legal non-starter.

If I recall correctly, Rauner specifically said he doubted that voters would approve such an amendment even if you could get it out of the House and Senate.

* And changing the state’s Constitution won’t help with this clause in the US Constitution

No State shall… pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts

- Posted by Rich Miller        

93 Comments »
  1. - Deadbeat Conservative - Thursday, Dec 6, 18 @ 10:14 am:

    Aah.. Pension “reform”.
    Continually oblivious to Tier 2 where employees pay more and get less. So much so that it actually hurts retention and recruitment.
    They still want more from employees.

    The greed of the IPI types knows no bounds.


  2. - Generic Drone - Thursday, Dec 6, 18 @ 10:15 am:

    Wonder where we would be had they just paid the tab.


  3. - Steve - Thursday, Dec 6, 18 @ 10:19 am:

    At least many people could get on board to not cut pension benefits for current or past workers or current beneficiaries . At least that could be a starting point.


  4. - Demoralized - Thursday, Dec 6, 18 @ 10:20 am:

    ==Increasing the retirement age for those not currently close to retirement==

    Reduces pensions. Strike 1.

    ==Replacing Illinois’ 3 percent guaranteed benefit increases with a cost-of-living increase tied to inflation==

    Reduces pensions. Strike 2.

    ==Potentially suspending COLA increases for certain years to allow inflation to catch up to past raises==

    Reduces pensions. Strike 3.

    They won’t be satisfied until they are successful at stiffing people out of their pensions.


  5. - Reality Check - Thursday, Dec 6, 18 @ 10:23 am:

    He and everyone else should start by actually reading the state Supreme Court decision which relied not only on the pension clause but also the contracts clause.

    Even imagining that the pension clause didn’t exist, the contracts clause prevents Tillman’s “steal from grandma” fever dream. This is settled law.

    Or does he want to wipe out the contracts clause too?

    Or is he just a lying ideological grifter who doesn’t care about public policy, reality or pesky facts?

    You had the governor’s office, John. You had four years. You failed. And you got vaporized by the voters. Goodbye.


  6. - Anonymous - Thursday, Dec 6, 18 @ 10:23 am:

    The tier 2 pension system sucks. It is already so bad that it is harming the ability to recruit and retain employees.

    It is expensive and the benefits are dubious. If you go into state government now for the pension you are fooling yourself.

    IPI is pushing for things that already exist. Why?


  7. - SAP - Thursday, Dec 6, 18 @ 10:25 am:

    To Politico’s credit, they did mention that SB1 was struck down: ==His organization recently revisited SB1, the bill that passed in 2013 but was found unconstitutional in 2015.==


  8. - Steve - Thursday, Dec 6, 18 @ 10:29 am:

    Rich brings up some important federal and state constitutional facts about contracts and pensions. It’s going to hard to change pensions. But, if things can’t negotiated and there are no changes and the pension funds (at the city and county level) become insolvent things could wind up in federal bankruptcy court. The state pension funds appear to be a different story.

    https://www.brookings.edu/opinions/why-detroits-bankruptcy-spared-retirees/


  9. - Norseman - Thursday, Dec 6, 18 @ 10:29 am:

    === IPI’s turnaround signals an olive branch toward Democrats and the state’s new administration. ===

    What a silly statement. The Dems understand that their past support of SB 1 harmed Quinn and Dems politically and became futile in light of the constitution. Some may go back and try the faulty Cullerton consideration approach, but SB 1 - never.

    Tillman’s days as a policy influencer are over for at least four years. His roll be that of propaganda purveyor.


  10. - slow down - Thursday, Dec 6, 18 @ 10:31 am:

    I’m far from an expert but it does seem like the whole thing falls apart under a contracts clause analysis.


  11. - TinyDancer(FKASue) - Thursday, Dec 6, 18 @ 10:33 am:

    The three-legged pension funding stool:

    Employer contributions
    Employee contributions
    Return on investment

    So, the IPI’s brilliant solution is to put current employees in a 401k, thus removing the employee contribution leg?
    The pension system is underfunded today because, for years, the employer contribution leg was missing.
    How does removing the employee contribution leg fix this?


  12. - Moby - Thursday, Dec 6, 18 @ 10:34 am:

    So, just so I’m clear….

    IPI acknowledges that there is a Tier 2 system for employees hired after 2011? And they are obsessed with reducing the benefits of current employees hired prior to 2011 even though the SC ruled that’s illegal? They never seem to mention or acknowledge Tier 2.


  13. - Yiddishcowboy - Thursday, Dec 6, 18 @ 10:42 am:

    I’m sorry Mr. Tillman (well, not really), but I simply neither trust you/IPI nor believe you/IPI have any interest or desire other than yentzing current State employees out of their pensions. Given your past actions and language, I already know how this tape plays out. And, it ain’t good for current State employees. So, please, don’t tell me it’s raining on my leg.


  14. - Al - Thursday, Dec 6, 18 @ 10:49 am:

    The pensions would be better funded when we tax and regulate, rather than subsidize the liquor and casino monopolies. The casinos have never given a fair share to the common school fund. They export thousands of jobs each year by exporting capital to Nevada and New Jersey gaming companies.
    One wonders which beach Tillman will be spending his holiday and with which billionaire casino owner?


  15. - 47th Ward - Thursday, Dec 6, 18 @ 10:53 am:

    ===Tillman says he “looks forward” to one day meeting with the speaker. “I’d bring an apple.”===

    That explains the strange display in the Capitol.


  16. - Arsenal - Thursday, Dec 6, 18 @ 10:53 am:

    This is no doubt a mission for Tillman, but I think he’s also smart enough to know that JB ain’t gonna bite.

    But, it gets his name in the papers as the leader on a big state issue precisely at the time that the Republican Party is searching for one. He’s staking his claim, and like I said the other day, his existing media apparatus only helps him.


  17. - Chris P. Bacon - Thursday, Dec 6, 18 @ 10:53 am:

    As private sector keeps fleeing we’re headed where it’s govt employees looking at each other wondering how to pay their bloated pensions.


  18. - wordslinger - Thursday, Dec 6, 18 @ 10:59 am:

    –A solid amendment simply needs to allow for changes in future benefits, while protecting what has already been earned by public employees. –

    Isn’t that Tier II? Or is he claiming you can reduce current contracted benefits going forward?

    See U.S. Constitution, Article One, Section 10.


  19. - frustrated GOP - Thursday, Dec 6, 18 @ 10:59 am:

    So, their governor lost his shirt, they lost seats, moderate law makers retired on their’s and the governor’s threats and they think no one who just won will remember any of that, let alone forget their basic legal knowledge?
    Ok, good luck with that.
    maybe they need to figure out how they don’t loose more seats in 2 years when future convict Trump is on the ballot. Or, perhaps talk about options to funding the current liability.
    battle over, submit defeat, move on.


  20. - Steve - Thursday, Dec 6, 18 @ 11:01 am:

    - Al -

    Gambling and liquor aren’t going to solve the public pension problem.


  21. - A Jack - Thursday, Dec 6, 18 @ 11:03 am:

    If the IPI were to put as much effort toward growing the Illinois economy as they do to circumventing the constitutions, we would be well on our way to paying down the pension debt.


  22. - Fraud alert - Thursday, Dec 6, 18 @ 11:07 am:

    More proof that IPI/Tillman only care about self-promotion and self-enrichment. Desperate ploy in an attempt to stay relevant.


  23. - Morningstar - Thursday, Dec 6, 18 @ 11:11 am:

    = his group just published a cartoon comparing Madigan to Satan. =

    The wolf isn’t even doing a very good job of trying clothe himself as a sheep.


  24. - DuPage - Thursday, Dec 6, 18 @ 11:12 am:

    John Tillman, thanks for your suggestion. Thanks but NO THANKS!


  25. - Cheryl44 - Thursday, Dec 6, 18 @ 11:14 am:

    Could this guy explain to future workers why they’d want to work for the state?


  26. - Skeptic - Thursday, Dec 6, 18 @ 11:15 am:

    “while protecting what has already been earned” Here we go again…it’s not “earned”, it’s “promised on the date of hire.”


  27. - Anon221 - Thursday, Dec 6, 18 @ 11:16 am:

    Tillman’s olive branch seems more like a “sting”-

    http://www.aesopfables.com/cgi/aesop1.cgi?4&TheScorpionandtheFrog


  28. - Oswego Willy - Thursday, Dec 6, 18 @ 11:19 am:

    Tillman is another where I have the receipts, so if Tillman wants to be part of whatever he thinks he wants to help, it should be noted that Tillman aided and abetted Bruce Rauner, helped orchestrate the installation of his IPI folks, had a falling out after it was realized by Bruce that even as a white male Bruce made a mistake with the IPI folks.

    Thinking Tillman is about a better Illinois without including the Rauner/Raunerism history…

    Tillman wants to go the mea culpa route, ya know, hurting people on purpose and all…


  29. - Michelle Flaherty - Thursday, Dec 6, 18 @ 11:20 am:

    Who?


  30. - funny haha - Thursday, Dec 6, 18 @ 11:22 am:

    Tillman should go away. Don’t legitimize a fellow who isn’t legit.


  31. - Rich Miller - Thursday, Dec 6, 18 @ 11:25 am:

    ===Tillman should go away===

    If wishes were wolves you couldn’t walk outside.


  32. - Demoralized - Thursday, Dec 6, 18 @ 11:26 am:

    ==their bloated pensions.==

    Another whiner heard from. The old it isn’t fair argument.


  33. - City Zen - Thursday, Dec 6, 18 @ 11:26 am:

    ==Continually oblivious to Tier 2 where employees pay more and get less.==

    You seem proud of this fact.


  34. - PublicServant - Thursday, Dec 6, 18 @ 11:27 am:

    The right to those pension benefits, future or not, were contractually locked in on the individual employee hire date, or so says the Illinois Supreme Court…more than once. But Tillman the Shill just doesn’t listen because it’s not in his best interest as a grifter to do so. Go pedal your Koch Bros Snake Oil somewhere else.


  35. - Jocko - Thursday, Dec 6, 18 @ 11:28 am:

    ==how to pay their bloated pensions==

    You didn’t seem to mind when they taught your kids and your home kept its worth. Now that you have cashed out, their value is diminished.


  36. - Demoralized - Thursday, Dec 6, 18 @ 11:28 am:

    When discussing pension reform I wish people would spend their time discussing options that are legal rather than twisting themselves into pretzels trying to figure out how to reduce somebody’s pension. The Court has been crystal clear that isn’t allowed. If you want to take something away you have to give something in return.

    Also, there is nothing stopping changes to the pension system for future employees. Tier II did that. If they want a 401K plan they can do it right now - for new workers. Instead we waste time talking about things that aren’t ever going to happen.


  37. - Obamas Puppy - Thursday, Dec 6, 18 @ 11:29 am:

    Tillman wants JB to betray the group that helped elect him so that he will turn into a Quinn casualty next election. It is such a transparent setting of a trap. Don’t fall for it Rich this group has no interest in real public policy just platitudes and ideological dogma that attacks unions and any one who might align with them.


  38. - Anonymous - Thursday, Dec 6, 18 @ 11:32 am:

    Tier 2 will fail in a lawsuit and all employees will have to be put in to Tier 1. This will happen in the next 3 years when the first Tier 2 retires and filed suit. The state will then add to its debt by having to pay the missed amount between Tier 1 and Tier 2.
    Be ready for another 1/2 -1 billion minimum pickup for 8 years of underfunding Tier 2 who should have been Tier 1.


  39. - Langhorne - Thursday, Dec 6, 18 @ 11:34 am:

    “I thought you folded your tent.” Says it all.

    Comparing madigan to satan. Not smart. And not even cute.
    If tillman has a seat at the table, it is for brewskis with bruce.
    He brings nothing to the party.


  40. - City Zen - Thursday, Dec 6, 18 @ 11:37 am:

    ==When discussing pension reform I wish people would spend their time discussing options that are legal ==

    Like a Tier 1 pay freeze?

    ==Tier 2 will fail in a lawsuit==

    Can you please forward this to the pension fund actuaries and pension re-amortization evangelists who are including Tier 2 “savings” in their pension liability projections?


  41. - JS Mill - Thursday, Dec 6, 18 @ 11:37 am:

    =Tillman claims the CTBA plan is unworkable because it won’t contain costs.=

    In other words Tillman wants peoples income diminished after receiving the benefit of their work because he does not like it.

    =It’s going to hard to change pensions. But, if things can’t negotiated and there are no changes and the pension funds (at the city and county level) become insolvent things could wind up in federal bankruptcy court. =

    2011 called and said you are wrong. What you cannot change is a contract you agreed to before. In 1970 they knew you would come along and try to rip us off, so they did something about it.

    ===their bloated pensions.===

    Maybe you can find someone who can articulate what a bloated pension is. You know, using words and numbers that are factual.


  42. - Demoralized - Thursday, Dec 6, 18 @ 11:38 am:

    ==Like a Tier 1 pay freeze?==

    Yes, though that isn’t the brightest of ideas. Of course to those of you constantly complaining about what others make or what others get in benefits I’m sure that’s an excellent option.


  43. - Rich Miller - Thursday, Dec 6, 18 @ 11:39 am:

    ===Like a Tier 1 pay freeze? ===

    That’ll surely help recruit much-needed DCFS investigators, DNA analysts, mental health workers, nurses, etc.


  44. - Demoralized - Thursday, Dec 6, 18 @ 11:41 am:

    ==Like a Tier 1 pay freeze?==

    There are Tier I workers who are 15 or 20 years from retirement. You really think that’s a good option to freeze their pay for the next 15 or 20 years? It’s a ludicrous idea.


  45. - Skeptic - Thursday, Dec 6, 18 @ 11:50 am:

    “==Like a Tier 1 pay freeze?==” Considering many of those are union (and not just AFSCME either), how are you going to negotiate that into a contract?


  46. - Moe Berg - Thursday, Dec 6, 18 @ 11:51 am:

    Playing the role of the Black Knight in today’s community theater staging of Monty Python & the Holy Grail is John Tillman.

    “All right, we’ll call it a draw.”


  47. - City Zen - Thursday, Dec 6, 18 @ 12:02 pm:

    ==That’ll surely help recruit…==

    I suggested a Tier 1 pay freeze, not Tier 2, so zero impact on recruiting new employees.

    Tier 2 employees already paid…in spades.

    ==You really think that’s a good option to freeze their pay for the next 15 or 20 years?==

    I wouldn’t suggest a permanent freeze. Could be a few years. Maybe another freeze a few years after that. It’s the only legal way to control pension costs.


  48. - Pot calling kettle - Thursday, Dec 6, 18 @ 12:02 pm:

    The guaranteed benefit plans of the past (AKA Tier 1) have the added fiscal positive of keeping a lot of employees (ie. TRS and SURS members) out of Social Security. That means no bill from the feds for the employer portion.

    Tier 2 is on the verge of tipping the taxpayers into becoming responsible for that added cost. Any further diminishment or a move to defined contribution would put things over the edge. For K-12 and Community College districts, that cost would be posted to the property tax payers without referendum. For the universities, the GA would be required to pay the bill every year (the Feds don’t do “next year”).

    Bottom line is no money saved and a bill that cannot be put off to the future.


  49. - walker - Thursday, Dec 6, 18 @ 12:04 pm:

    Predictable “quid” for the “quo” of a Constitutional amendment allowing for a graduated income tax. Political sabotage.


  50. - RNUG - Thursday, Dec 6, 18 @ 12:07 pm:

    The way I’m reading it right now, same unconstitutional reforms attempting pension theft, different day.


  51. - Thomas Paine - Thursday, Dec 6, 18 @ 12:08 pm:

    === Tier One pay freeze ===

    Never going to happen. Its unconstitutional.

    Lemme save folks some time: whether you try to come at it from the front door, sneak in the back, climb through a window, or shimmy down the chimney like the Grinch…the Illinois Supreme Court has said you cannot diminish promised benefits, whether de jure or de facto.

    It should inspire no confidence and tell everyone everything they need to know that Tillman is embracing a measure that has been declared unconstitutional (not narrowly, but unanimously and resoundingly by a bipartisan court) while assuring us he has a new idea that is definitely, definitely gonna work.

    Why aren’t there 45 House Republicans co-sponsoring Tillman’s plan to reduce the pension benefits of police and firefighters across the state? LOLOL


  52. - RNUG - Thursday, Dec 6, 18 @ 12:09 pm:

    == At least many people could get on board to not cut pension benefits for current or past workers or current beneficiaries . At least that could be a starting point. ==

    It’s the same “only benefits earned to date” are protected argument.


  53. - Norseman - Thursday, Dec 6, 18 @ 12:11 pm:

    === That’ll surely help recruit much-needed DCFS investigators, DNA analysts, mental health workers, nurses, etc. ===

    This is a concern for folks who want government to work. It’s not Tillman and his ilk’s concern. They’re cheering the hollowing out of government.


  54. - Still Waiting - Thursday, Dec 6, 18 @ 12:19 pm:

    -A solid amendment simply needs to allow for changes in future benefits, while protecting what has already been earned by public employees. -

    There should be a rule than anytime a “reformer” makes a statement like this, they have to explain what they mean by “protecting what has already been earned.” The pension system I was forced to join decades ago says my pension is based on the average salary of my 4 highest consecutive years of the last 10 years I work. So if my pension is based on an average of my future earnings, exactly what do you mean by protecting what has already been earned? How are you calculating that amount? Show your work.


  55. - theq - Thursday, Dec 6, 18 @ 12:23 pm:

    I as a tier 1 employee have had my pay froze for the last four years…. don’t think I will be volunteering for that


  56. - Grandson of Man - Thursday, Dec 6, 18 @ 12:28 pm:

    Enough cutting has been done on pensions, with Tier II. I agree with those who were angry and called Democrats neoliberals for passing Tiers I and II, but I was unwilling to blow up the entire apparatus and sink Quinn because of Rauner.

    The key is for the narrative to not be shifted away from raising taxes on the wealthy, which is long overdue. Democrats failed in my opinion because they didn’t insist on a progressive income tax before or during pension reform—not that they could get it, but to give their supporters a fair shake at the least.


  57. - John Bracke - Thursday, Dec 6, 18 @ 12:32 pm:

    The only real way to meaningfully reduce pension expenses is to limit salary increases. Considering Rauner vs AFSCME is still unresolved four years later and it’s kind of clear that politicians are going to opt for the can kicking approach yet again.


  58. - Demoralized - Thursday, Dec 6, 18 @ 12:34 pm:

    ==Tier 2 employees already paid==

    So have Tier 1.


  59. - Demoralized - Thursday, Dec 6, 18 @ 12:38 pm:

    ==protecting what has already been earned==

    They aren’t truly protecting what has already been earned. Once you enter the system you have earned all of the benefits of that system. There is no stopping at a point in time.


  60. - justacitizen - Thursday, Dec 6, 18 @ 12:48 pm:

    If we maintain the status quo the pension problem should resolve itself in about 50 years as all the tier 1 pensioners die off, right? I’m not trying to be facetious. If the pension systems can pay retirees with assets and investment earnings won’t the systems funded status keep improving over time?


  61. - Old and In The Way - Thursday, Dec 6, 18 @ 12:48 pm:

    Tillman and IPI just keep pitching the same song. It’s always about reform and saving the state from fiscal calamity. The truth is it’s about saving the 1% from paying more in taxes by stealing from those who have worked for the state and paid their share. To do this they, including Jeanne Ives, twist themselves into legal fantasies that would be laughable if they weren’t so serious. Face it Tillman is a shill for the moneyed interests and could care less about either workers or the State of Illinois. There’s nothing to see here, let’s move on.


  62. - City Zen - Thursday, Dec 6, 18 @ 12:49 pm:

    ==Never going to happen. Its unconstitutional.==

    Your pay remaining the same from one year to the next is unconstitutional? How so?


  63. - Rich Miller - Thursday, Dec 6, 18 @ 12:53 pm:

    City Zen, this is not a sophomore dorm room. Stop arguing like it is.

    You have a Democratic governor with a Democratic super-majority and a bunch of Republicans with state facilities in their districts. Your idea doesn’t advance the debate, but diverts it into trollish thumb-sucking.


  64. - RNUG - Thursday, Dec 6, 18 @ 12:54 pm:

    Here’s a suggestion for a voluntary and legal consideration change to Tier 1. It should give Tillman conniptions. It will cost the State a bunch of money up front. And it may not even save money long term, but it could reduce the current pension debt. (I haven’t calculated any numbers on it; just considered the legality)

    In exchange for agreeing to receive only Tier 2 retirement benefits, give current Tier 1 employees the following new benefits:

    a) an immediate cash refund of all pension contributions paid to date with 7% compounded interest

    b) an immediate cash payment of one half of the net present value of the difference between the Tier 1 AAI and the Tier 2 COLA calculated using current life expectancy tables and an assumed retirement age of 65.

    c) a contractual agreement that the State, going forward for that employee, will make one half of the employee’s Tier 2 pension contributions to the applicable pension fund

    New immediate benefits and an ongoing benefit, in exchange for a reduction in future retirement benefits.

    I doubt I would take such as deal, but I would at least crunch the numbers and consider it.


  65. - RNUG - Thursday, Dec 6, 18 @ 12:59 pm:

    == If we maintain the status quo the pension problem should resolve itself in about 50 years as all the tier 1 pensioners die off, right? ==

    Yes. The problem is the cash to pay the increased by for the rest of the current ramp the next few years, and the balloon payment at the end of the ramp … but the State could just change that balloon and stretch it out.


  66. - Sue - Thursday, Dec 6, 18 @ 1:05 pm:

    IPI is kind of irrelevant so why give him any space at the table. Absent the Supremes reversing themselves there is not any pension reform to be had. Cullerton’s Plan is a non starter and IMO not constitutional. Unions can’t bargain away tier one rights period- end of story. Perhaps Pritzker could appoint some people with better investment experience and focus on returns but the reality is the hole is so deep a percent or two ain’t all that significant. I still wish someone would visit my past suggestion to outlawtge pickup - force the members to pay their own contributions but still have an agreed period where the employers still paid in as if the pick up continued. 15 or 20 years of double contributions would bring in a lot of new money provided the State also continued to follow the ramp.


  67. - Anonymous - Thursday, Dec 6, 18 @ 1:14 pm:

    RNUG, I would take the deal. 7 % is a bit light. Cash invested in Standard and Poor 500 average has been 10% over 90 years.


  68. - Old and In The Way - Thursday, Dec 6, 18 @ 1:19 pm:

    Your pay remaining the same from one year to the next is unconstitutional? How so?

    It’s simple really. You are changing the condition of employment. Currently your pension, and payments, increase if you get a raise. Under the freeze scenario you could only get a raise if you forgo an increase in your pension. You are changing the existing contractual conditions of employment and diminishing the pension. It will NEVER pas either the legislature or the ISC. US Constitution presents a formidable obstacle to unilaterally changing or impairing a contract.


  69. - TinyDancer(FKASue) - Thursday, Dec 6, 18 @ 1:38 pm:

    =Cash invested in Standard and Poor 500 average has been 10% over 90 years.=

    Trouble is ya never know where the market’s gonna be when you need it. That’s the failure of a 401k - if you retire during a downturn you’re outta luck - and the upside of a defined benefit pension - pension funds have long timelines.


  70. - Thomas Paine - Thursday, Dec 6, 18 @ 1:41 pm:

    On top of what “Old and in the Way” said, freezing the salaries of employees in Tier One - and only employees in Tier One — is gonna open you up to a massive discrimination case, which you will lose, because the vast majority of those workers are over 40.

    Also, freezing future pay does nothing to reduce the pension debt. I am not sure it even helps free up more money to pay down the debt. Remember, Tier Two employees are helping to pay down the debt with their withholdings, so freezing their paycheck has the perverse effect of raising liabilities.

    I have a few ideas for how to Constitutionally reduce the pension debt that RNUG would love. Regardless we have to keep making payments and increase them if we can.

    Tillman’s suggestion effectively kicks the can down the road for a few more years, and that is about it, while he fleeces a few more sheep.


  71. - Anonymous - Thursday, Dec 6, 18 @ 1:49 pm:

    -Trouble is ya never know where the market’s gonna be when you need it.-

    Yes. It’s nosediving right now. I just said I would take it. I have time. Obviously not everyone should take it.


  72. - SSL - Thursday, Dec 6, 18 @ 2:36 pm:

    Seeing all the same comments as every other pension post.

    There’s nothing to be done on this issue. If you don’t want to pay higher taxes, you better plan on moving. Might as well get a head start before home values are impacted.

    If you can’t move for career or family reasons, bend over and get ready to feel a little pain. At least you’ll be able to smoke dope legally to take your mind off the fact that you are getting ripped off.


  73. - Sue - Thursday, Dec 6, 18 @ 2:46 pm:

    Thomas P- please share those ideas


  74. - Sue - Thursday, Dec 6, 18 @ 3:41 pm:

    One way to deal with the budget would be to at least make the effort to reduce non- pension outlays to offset the tax increase impact imposed by higher pension costs. The unions might not like but as Rhett Butler would say- who gives a damn


  75. - City Zen - Thursday, Dec 6, 18 @ 3:55 pm:

    ==That’s the failure of a 401k - if you retire during a downturn you’re outta luck - and the upside of a defined benefit pension - pension funds have long timelines.==

    Like those retired truck drivers in the Central States Pension Fund? How long is their timeline?


  76. - Honeybear - Thursday, Dec 6, 18 @ 4:11 pm:

    I wonder if the pension debt will take a big spike up when the step increases are paid out?
    Rauner illegally withheld my wages for four years.


  77. - RNUG - Thursday, Dec 6, 18 @ 4:28 pm:

    == I wonder if the pension debt will take a big spike up when the step increases are paid out? ==

    Yes, but.

    The FAC will spike things a bit but not that much. Remember, AFSCME step raises only affects SERS which is about 1/4th of the pension debt. Then factor in that AFSCME only covers 75% - 80% of SERS positions. So that gets you to about 20% of all current employees across all the systems. Let’s say the overall FAC increase is 10%. By the time you spread it over the 5 funds, the effect may only be a 2% or 3% in the total pension debt.


  78. - Demoralized - Thursday, Dec 6, 18 @ 4:53 pm:

    ==Like those retired truck drivers in the Central States Pension Fund?==

    Not relevant. Apples to pears.


  79. - Nick Name - Thursday, Dec 6, 18 @ 5:01 pm:

    ===The only real way to meaningfully reduce pension expenses is to limit salary increases. Considering Rauner vs AFSCME is still unresolved four years later and it’s kind of clear that politicians are going to opt for the can kicking approach yet again.===

    Tell us all how this plan will help attract educated, motivated, quality employees to state government.


  80. - City Zen - Thursday, Dec 6, 18 @ 5:23 pm:

    ==Not relevant. Apples to pears.==

    The comment was comparing apparently risk-free defined benefit pensions to apparently risky 401k’s. Central States is indeed a pension, is it not?


  81. - Just Saying - Thursday, Dec 6, 18 @ 5:32 pm:

    Meaningful pension reform would be the employer funding their part in whole with interest. There, fixed it.


  82. - Mama - Thursday, Dec 6, 18 @ 6:18 pm:

    What are JB’s thoughts on pension reform?


  83. - Demoralized - Thursday, Dec 6, 18 @ 6:28 pm:

    City

    You know better (or should) that the “comparison” isnt a comparison at all. Don’t be daft


  84. - Anonymous - Thursday, Dec 6, 18 @ 6:41 pm:

    -One way to deal with the budget would be to at least make the effort to reduce non- pension outlays to offset the tax increase impact imposed by higher pension costs.-
    Like paying our bills on time to avoid interest?


  85. - ArchPundit - Thursday, Dec 6, 18 @ 6:59 pm:

    The reality is that the state has already cut costs for new employees (other than tier 3 that may require increased costs once litigated). The need then is to figure out how to refinance the current employees and then actually pay into the system for the state government.

    Tillman thinks everyone is going to take a haircut and everything will be okay. Never mind that the vast majority of people he is talking about are hurt significantly by a “haircut,” it’s unconstitutional, and he’s not one to ever talk about a haircut. It’s a bit weird that he hates working class state workers as he does.


  86. - Alex Ander - Thursday, Dec 6, 18 @ 6:59 pm:

    For the individual suggesting tier 1 takes a pay freeze for a few years, we have already done that. My last pay raise was Januuary 2015, so there was that few years you were referring to.


  87. - Whatever - Thursday, Dec 6, 18 @ 8:46 pm:

    People talking about not taking away pension benefits already earned, only reducing benefits to be earned in the future, are deluding themselves if they think that is going to do anything for the current underfunding, even if it is constitutional. The underfunding is for pension benefits already earned, not for projected benefits to be earned later. Simplistically, the 100% funding amount is determined by assuming that, if the state were to shut down the pension plans and only have to pay what has already been earned, how much would they have to put into a bank account earning 7% a year (or whatever the e


  88. - ArchPundit - Thursday, Dec 6, 18 @ 9:15 pm:

    ===even if it is constitutional

    So you are going to just ignore the Constitution?

    The reality is pretty easy to understand. The state is going to pay earned benefits. This is for several reasons:
    1) These benefits were legally earned
    2) The Constitution of the State of Illinois prohibits not paying those earned benefits
    3) The state cannot just disregard a contract it entered into

    So you can try and make it sound reasonable to disregard contracts made with employees, but those benefits are going to be paid. The question is how does the state pay for them.

    Future benefits have been reduced for those who begin employment.

    So I assume your response to all laws is whatever–because that’s brilliant.


  89. - Anonymous - Thursday, Dec 6, 18 @ 9:23 pm:

    OK, lets say for the sake of argument that the state constitution is changed and benefit accruals for current workers going forward are cut - not sure how you can implement that, perhaps by leaving benefits unchanged and increasing employee contributions. I do not know for sure if even this would be upheld in court. What I do know for sure is that any forced changes to the current 3% AAI for folks already retired, which was the core of SB1 and is the core of Tillman’s proposal, will not be upheld. The reason is that in each of the state systems, a specific, dedicated percentage of the employee contribution is designated to funding this AAI - in other words, the retirees receiving this benefit paid for it with their own money while they were working for the state. I am willing to bet this differs greatly from the situation in Arizona, where the constitution was recently changed and COLAs were reduced, albeit only time will tell if the changes there will be upheld in court.


  90. - RNUG - Friday, Dec 7, 18 @ 8:01 am:

    If you read the phrasing of the Arizona Constitution’s pension clause, it is not exactly the same as the Illinois clause.

    ARIZONA

    C. Membership in a public retirement system is a contractual relationship that is subject to article II, section 25.

    D. Public retirement system benefits shall not be diminished or impaired, except that:

    ILLINOIS

    Membership in any pension or retirement system of the State, any unit of local government or school district, or
    any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which
    shall not be diminished or impaired.

    NOTE that the AZ clauses are broken into multiple sentences and it included some exceptions, indicating the AZ Legislature and citizens wanted strong protection but also anticipated possible future changes. The IL clause, all in one sentence with the addition of the word enforcable, made it clear the IL Legislature and citizens considered it ironclad.


  91. - City Zen - Friday, Dec 7, 18 @ 9:00 am:

    ==a specific, dedicated percentage of the employee contribution is designated to funding this AAI - in other words, the retirees receiving this benefit paid for it with their own money while they were working for the state.==

    The original deal for AAI was 1.5% simple interest for 0.5% of employee wages. It was enhanced over the years with no corresponding giveback. So, technically, that’s all they’d be entitled to.

    Another way of looking at it…retirees are entitled to the AAI in place when they were first hired. In other words, anyone hired prior to 1989 would receive simple interest AAI.

    Sake of argument, of course. This is all moot.


  92. - TinyDancer(FKASue) - Friday, Dec 7, 18 @ 9:47 am:

    @ City Zen

    “Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”

    Was the the 3 % AAA in the the contract?
    Then it’s contractual and therefore protected.


  93. - Late commenter - Friday, Dec 7, 18 @ 11:17 am:

    I’d like to see a proposal that would increase benefits for employees willing to pay more now.

    For example, an employee might agree to contribute an additional 1% or 2% in exchange for an increase from 3% compounded AAI to 4% compounded AAI.

    An employee might agree to pay the employer portion (7% of salary) of their contribution to the system in exchange for an increase in the multiplier applied to the FAC from 1.67% to possibly 2% or 2.5% (SERS).


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