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Hats off to the Civic Committee

Monday, Feb 11, 2019

* Crain’s Chicago Business editorial

It’s not every day that a group of corporate chieftains makes a forceful and concerted argument for a tax increase. And yet, Chicago’s largest employers, members of the Civic Committee of the Commercial Club of Chicago, did just that on Feb. 5, recommending to new Gov. J.B. Pritzker a plan to pay off more than $130 billion in state pension debt largely through a series of significant tax hikes.

* Joe Cahill at Crain’s

Give the folks at the Civic Committee of the Commercial Club of Chicago credit for a comprehensive approach to solving Illinois’ financial and economic crisis.

* Greg Hinz at Crain’s

When the grand pooh-bahs of Chicago business offered their solution to the state’s pension crisis a few days ago, they were roundly attacked—by almost everybody. Liberals and conservatives alike had a grand time ridiculing the Civic Committee of the Commercial Club of Chicago for daring to unveil a plan that did not fully follow their ideology.

That magazine has always had the Civic Committee’s back, including when the group was leading the charge for unconstitutional pension reforms.

* As recently as January 18th, the publication was still pushing an Arizona-style solution

Similarly, the new governor should take advantage of his honeymoon period in Springfield to work with Republican leadership to hammer out pension solutions—and those solutions should include tearing a page from Arizona’s playbook. That state, like Illinois, has a constitutional clause protecting pensions, but its leaders also managed to reach an agreement with unions on an amendment that eased funding woes.

* Here’s Cahill on January 15th

Gov. J.B. Pritzker’s inaugural address was most noteworthy for what he left out.

He went on for 2,600-plus words without mentioning the most urgent and potentially destructive crisis facing Illinois. The new governor had nothing to say about $130 billion in unfunded pension obligations to state employees, a yawning black hole of debt that threatens to swallow the state budget and suffocate Illinois’ economy. […]

Any reduction in benefits would require a constitutional amendment and concessions by state employee unions that backed Pritzker in the campaign. That would be difficult, but not impossible. Arizona, which also has a constitutional clause protecting pensions, managed to reach agreement with employee unions on an amendment that eased funding woes.

Pritzker shows no interest in following suit.

Pritzker clearly campaigned in the opposite direction, but Crain’s and others were still demanding that he see things their way.

* So, kudos to the Civic Committee for starting to turn Crain’s around. Here’s this week’s editorial

The Civic Committee’s plan notably does not call for constitutional changes that would generate savings by requiring workers to pay more, accept reduced benefits, or both. That’s unfortunate. But the organization seems to be betting that a nearer-term infusion of new revenue will buy the state the time it needs to pursue more fundamental reforms.

* Cahill

Yes, a better approach would be to amend the constitution to allow reductions in pension benefits. But such an amendment is a nonstarter under newly elected Gov. J.B. Pritzker and Illinois House Speaker Michael Madigan, who answer to public employee unions unwilling to countenance any benefit cuts.

* Greg

The Civic Committee folks actually tried to base their plan on what Pritzker has hinted would be acceptable to him, at least in part. There are no nasty worker givebacks to rile labor unions and no talk of amending the Illinois Constitution, as other groups, including the Civic Federation, have recommended. Instead, consistent with recent trends on where the pension debate is headed, the Civic Committee proposed paying down the debt early by putting an extra $2 billion a year into the funds. Taxes would have to be levied to get that money, but over the next three decades, the committee estimates, such a move would save taxpayers a cool $46 billion.

There are indeed some worker givebacks in the plan centering around health insurance, but I get where he’s going.

* The Civic Committee’s basic idea is to pump a bunch more money into the pension funds to lower interests costs in the out-years, which is indeed what Pritzker has been talking about for months. They differ only in how to get there. Pritzker wants a progressive income tax, the Civic Committee argues for a flat tax.

Split the difference: How about a temporary flat income tax hike that’s guaranteed by law to sunset if and only if a progressive income tax is fully implemented? We’d find out in a hurry if the Civic Committee’s plan was merely floated to stave off a graduated tax scheme with that one.

* Cahill has some other revenue ideas

Still, the proposal could be improved. It doesn’t go far enough in taxing services, for example, suggesting only that the sales tax be extended to enough services to raise $500 million. But Illinois could bring in $1.2 billion by taxing all the services taxed by Iowa, researchers at the Illinois Commission on Government Forecasting & Accountability estimate. The plan also proposes eliminating estate taxes and portions of the franchise taxes, which raise a combined $495 million. The group argues these taxes make Illinois an outlier among the states, but they smack of special pleading.

Whatever the case, if the Civic Committee’s greatest contribution to the debate is the abandonment by the chattering class of the fruitless Arizona-style plan (click here for why it’s fruitless) and the need for new revenues, then my hat is off to them.

- Posted by Rich Miller        

30 Comments
  1. - RNUG - Monday, Feb 11, 19 @ 10:17 am:

    Partly a bow to legal and fiscal reality.

    But also enlightened self-interest …

    a) a stable government environment is good for business

    b) sin taxes (e vape, etc.) are always an easier sale

    c) a bit higher flat tax is better for the well off than an unknown progressive tax


  2. - Streamwood Retiree - Monday, Feb 11, 19 @ 10:18 am:

    “The plan also proposes eliminating estate taxes ”
    The real reason that the rich are in favor of tax increases.


  3. - Jibba - Monday, Feb 11, 19 @ 10:19 am:

    Taxing services has the added benefit of not driving business out of state to the same extent as increasing sales tax. You’re not going to get your sewer rooted in Indiana, nor is your lawyer going to appear in an Indiana courtroom for your traffic ticket in Joliet.


  4. - wordslinger - Monday, Feb 11, 19 @ 10:22 am:

    –Yes, a better approach would be to amend the constitution to allow reductions in pension benefits. –

    At this stage of the game, are they still really talking about reneging on already-earned, contracted benefits?

    After the Illinois Supremes rulings? Are they not aware of Article 1, Section 10 of the U.S. Constitution?

    What’s the point of continuing with these pipe dreams?


  5. - Oswego Willy - Monday, Feb 11, 19 @ 10:27 am:

    ===How about a temporary flat income tax hike that’s guaranteed by law to sunset if and only if a progressive income tax is fully implemented?===

    Yes, this is my thought, as we “wait” for the earliest of 2021 for a progressive income tax.

    The bump in a raised flat income tax is later sunset upon the passage of a progressive income tax.

    Of course, that means some will be voting for, arguably, two “increases” in the state income tax, but right now, it’s like a bridge “loan” to get the “one” loan finalized.

    It’s the smartest of the policy bridges to get revenues square, but it’s that “two vote” pill that needs to be swallowed on income taxes.


  6. - wordslinger - Monday, Feb 11, 19 @ 10:28 am:

    –It’s not every day that a group of corporate chieftains makes a forceful and concerted argument for a tax increase.–

    Translation:

    “We think our advertiser and subscriber bases are just brilliant and terrific.”


  7. - RNUG - Monday, Feb 11, 19 @ 10:40 am:

    == “The plan also proposes eliminating estate taxes ”
    The real reason that the rich are in favor of tax increases. ==

    Yes. I read that but forgot to mention that particular 1.4% provision.


  8. - Mouthy - Monday, Feb 11, 19 @ 10:44 am:

    Let’s see. Increase the flat tax, tax retirement, increase sales tax, and eliminate estate taxes. Sounds like a good plan for the rich. Stick it to the poor and middle class and avoid any taxes that affect them. Plus you get to blame all the tax increases on the Democrats.
    Looks like a load of garbage to me..


  9. - Anonymous - Monday, Feb 11, 19 @ 10:49 am:

    Taxes on services will also be paid by retirees. This is a good way of gaining revenue from them without anyone specifically calling for a tax on retirement income.


  10. - Whatever - Monday, Feb 11, 19 @ 10:55 am:

    ==Whatever the case, if the Civic Committee’s greatest contribution to the debate is the abandonment by the chattering class of the fruitless Arizona-style plan (click here for why it’s fruitless) and the need for new revenues, then my hat is off to them.==

    And, just a reminder — the Arizona courts have not ruled on the constitutionality of the pension revisions under the state and federal contracts clauses.


  11. - Anon - Monday, Feb 11, 19 @ 11:07 am:

    As a tier 2 employee, I already pay more with a reduced benefit.

    I’m also getting paid less than someone with my education in the private sector, and less than my colleagues with similar roles and job titles in most other states. The labor market is a thing too, folks.

    And the economic component doesn’t address that the State is literally the worst employer I have had for organizational culture and organizational dynamics in general and has apparently had a real problem in training and developing it’s managers in such a fashion that they actually understand basic principles of management.

    Every day I am subjected to things that are literally textbook cases of toxic management and the real victim isn’t just public employees — it’s the 12 million folks that call our state home.


  12. - Annonin' - Monday, Feb 11, 19 @ 11:11 am:

    Can we put a hold on all the congrats on all the kudos til we see if the Civic Committee bosses announce:
    1. not a dime for Baise’s dark money front group…
    2. committee expulsion for those who do?
    Seems simple even though the donations are secret we know they all tell one another when they gather for lunch at the club or a round in the desert or …..
    Perhaps Hinz and Cahill can track that one.


  13. - GA Watcher - Monday, Feb 11, 19 @ 11:20 am:

    Rich: In the section that starts “Split the difference:” in the second to last dot point of this item, did you mean to refer to the Civic Committee’s plan, not the Civic Federation’s?


  14. - Joe M - Monday, Feb 11, 19 @ 11:59 am:

    I am a proud union member. But I would like to remind everyone that my - or any other public union does not have to right to negotiate changes in my public pension. State public pensions are not part of a union contract. The “contractual relationship” wording that the Illinois Constitution uses to describe public pensions is not a union contract, but instead, a contract between the State and each individual pension member.


  15. - wordslinger - Monday, Feb 11, 19 @ 12:00 pm:

    –The “contractual relationship” wording that the Illinois Constitution uses to describe public pensions is not a union contract, but instead, a contract between the State and each individual pension member.–

    Strange that some still can’t figure that out. Not exactly a heavy lift.


  16. - Lester Holt’s Mustache - Monday, Feb 11, 19 @ 12:14 pm:

    If anyone ever needs to provide an example of Crain’s bias in favor of the extremely wealthy, they’ve helpfully provided it here. Only the Civic Committee could have offered this plan without the entire staff devolving into a mass of steaming goo while screeching “socialism” over and over like a water-drenched wicked witch of the west. A proposal with this many tax increases (in order to fund public pensions, no less) from a dem legislator or left-wing interest group would have rendered them apoplectic; the same proposal from the Commercial Club gets lauded.

    And they’ll never stop lobbying to inflict as much pain on us commoners as possible in order to cut taxes for the rich (repealing the estate tax - seriously?). Of course we commoners can’t afford their $300 subscription anyway.


  17. - Anonymous - Monday, Feb 11, 19 @ 12:29 pm:

    The Civic Committee plan is reasonable. A few tweaks, like taxing more services and not taxing retirement income would make it very palatable.


  18. - Chicagonk - Monday, Feb 11, 19 @ 12:33 pm:

    Any tax increase should also be pared with investments that make Illinois government more efficient and effective in the long run. Contractors and labor unions are always clamoring for a capital plan. Well any capital plan needs to include significant spending on improving the archaic IT systems that Illinois departments are currently relying on.


  19. - Anonymous - Monday, Feb 11, 19 @ 12:41 pm:

    Ambitious, wealthy, hard-working American’s have helped put smart phones and many other luxuries into the hands of people at all levels of American society. To scorn, degrade, and mock the business community is completely destructive of the American values of prosperity and self-determination.

    Crains is fine. Business people are fine. A little balance is needed to keep the pie growing and fit more into it, through things like justice and opportunity. Don’t be going full kaczynski.


  20. - wordslinger - Monday, Feb 11, 19 @ 12:55 pm:

    –Don’t be going full kaczynski.–

    LOL, are you seeing that here? Wake up, you’re having a fever dream.


  21. - Lester Holt’s Mustache - Monday, Feb 11, 19 @ 1:37 pm:

    ==To scorn, degrade, and mock the business community is completely destructive of the American values of prosperity and self-determination.==

    Oh of course, Mr. Schultz. We will start on assuaging the hurt feelings of the poor dears in the “business community” right after we finish yet another round of corporate tax cuts and deregulation. We can squeeze that in before we finalize the elimination of estate and capital gains taxes. Although this means we may have to push back our plans for replacing “billionaire” with “person of means” in our American lexicon….


  22. - Political Animal - Monday, Feb 11, 19 @ 1:50 pm:

    A constitutional amendment to allow pension reform is the only thing we can do to save Illinois.

    Until we do so, we’re just spinning our wheels and delaying the inevitable. We have two options at the end of the day, both with major hurdles.

    The first option is the best: pension reform. If we don’t do it in time there will eventually be a Puerto Ricco style bankruptcy, and Illinois will cause a constitutional crisis that leads to the end of federalism as we know it.


  23. - Nonbeleiver - Monday, Feb 11, 19 @ 1:51 pm:

    Note the total attack on pensions. Almost as if this were the only cause of the state budget problems. It is part of the problem but only a part and as has been stated over and over again would be far less of a problem if money would have been put in the pension funds over the decades.

    Give me a break.

    Will be totally mazed if this happens under this Governor.


  24. - RNUG - Monday, Feb 11, 19 @ 1:54 pm:

    == The Civic Committee plan is reasonable. A few tweaks, like taxing more services and not taxing retirement income would make it very palatable. ==

    And tweak it to leave the estate tax in place.


  25. - Honeybear - Monday, Feb 11, 19 @ 2:13 pm:

    Political Animal- and you guys think I’m hyperbolic. Talk about the sky is falling.


  26. - Whatever - Monday, Feb 11, 19 @ 2:32 pm:

    ==A constitutional amendment to allow pension reform is the only thing we can do to save Illinois. ==

    Unless it comes with a repeal of the federal contracts clause, it won’t mean a thing with respect to the current underfunding. The repeal will only apply to employees who a hired after the repeal by letting us change their “contract” after they were hired. Everyone who is already working for the state has a contract that cannot be repealed by the state.


  27. - Joe M - Monday, Feb 11, 19 @ 2:39 pm:

    Political Animal, what part of Article 1, Section 10 of the U.S. Constitution’s contract clause is it that you do not understand.

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


  28. - Anonymous - Monday, Feb 11, 19 @ 2:42 pm:

    We should all be in agreement that eleminating the pension clause will protect future generations of Illinoisans from our current predicament and would be a good thing.

    We still have to pay the current employee pensions though.


  29. - Nonbeleiver - Monday, Feb 11, 19 @ 2:48 pm:

    - Political Animal - Monday, Feb 11, 19 @ 1:50 pm:

    A constitutional amendment to allow pension reform is the only thing we can do to save Illinois

    @Political animal

    You do understand that this would not effect those already retired due to the U.S. Constitution.

    As to whether an Illinois CA would affect hose under current employment, my guess is that it would and they would have a 2 Tier system under the state’s already 2 Tiered system. (kind of gets confusing)


  30. - Demoralized - Monday, Feb 11, 19 @ 3:43 pm:

    ==will eventually be a Puerto Ricco style bankruptcy, and Illinois will cause a constitutional crisis that leads to the end of federalism as we know it.==

    That’s not a hysterical comment at all. I think you need to go lie down.


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