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*** UPDATED x1 - Pritzker spox re-confirms “pensions are a promise” *** Rahm Emanuel jumps aboard Tribune’s pension bandwagon

Tuesday, Dec 11, 2018

* Click here for background…

…Adding… Tribune

“Too many people look at our pension obligation through green eyeshade – in terms of dollars and cents. That is just one way to see it, but it is not the whole picture. The other is in terms of our principles and priorities,” Emanuel is expected to say in his speech. “That is why I am also for amending the clause added to the constitution in 1970 that caused the Supreme Court to shoot down our initial agreements with labor.”

Emanuel in particular will cite the 3 percent annual compounded cost of living adjustments, or COLAs, for retirees in the laborers fund.

“Think about it. What kind of progressive, sustainable system guarantees retirees 3 percent annual compounded pay increases when inflation has been at basically zero and current employees have at times been furloughed, laid off, or received one percent raises?” Emanuel said. “There is nothing progressive about 3 percent compounded raises for retirees and furloughs for workers. The mantle of progressivity must not just be more taxes on the wealthy, it must be more respect for our workers’ paychecks. I applaud our labor unions for being willing to fix this inequity in 2012 with me.”

*** UPDATE *** Jordan Abudayyeh at the Pritzker transition…

As JB has said, pensions are a promise and the state has a responsibility to live up to that promise. As governor, he will work with the General Assembly to propose a balanced budget that meets our pension obligations and puts the state on a more sustainable path forward.

- Posted by Rich Miller   215 Comments      

*** UPDATED x1 *** Buy a ticket to “Christmas with Rich Miller” and help a great cause

Tuesday, Dec 11, 2018

* I’ve already told subscribers about this, but every year about this time, I’m asked if there are any tickets left for my annual “Christmas with Rich Miller” event with the City Club of Chicago. And every year I have to either turn people down or send them to the City Club people to see if they can squeeze another one in.

We decided to do something a little different this year. The City Club held back ten tickets so we could auction them off to benefit Lutheran Social Services of Illinois. The annual event is this coming Monday at Maggiano’s in Chicago and the auction has begun.

The bidding starts at $35, which is the normal price of a ticket. Six tickets are being sold individually, and four are being sold in pairs of two. I don’t think we’ll get a hot bidding war on every ticket sold, but I would like to see all of the tickets purchased for at least the base price - and LSSI does great work and was pummeled hard by the impasse.

* Click here to bid. You’ll be asked to create an account. Then they’ll send you a verification e-mail and you click a link and enter your bid. The whole thing takes about a minute.

And if you’ve already purchased a ticket, please don’t forget to bring a toy to the event for LSSI’s child care program.


*** UPDATE *** Somebody just paid the “buy now” price of $500 for a ticket. Thanks!!!

- Posted by Rich Miller   Comments Off      

*** UPDATED x2 - Emanuel: Hike gas tax by 20-30 cents - Blankenhorn: Hike gas tax by at least 15 cents *** We really need a capital bill

Tuesday, Dec 11, 2018

* Rachel Droze

Repairing and replacing the city of Springfield’s sewer system is estimated to cost more than $50 million over the next decade. […]

When averaging the age of Springfield’s oldest in newest pipes, the sewer system is about 60-years-old. The oldest pipes were laid about 150 years ago.

If necessary repairs aren’t made, sinkholes can form. […]

Since most of the city’s major sewage pipes run under roads, cave-ins could cause roads to collapse. […]

[Springfield’s Sewer Engineer John Higginbotham] said the city should be spending roughly $4 million a year on repairs and upgrades, but last year they only spent $1 million.

When people think of infrastructure, they often think only of roads, bridges and transit. But sewer and water systems in this state also need attention. It’s easy to get away with neglecting them because they’re underground. Out of sight, out of mind - until, that is, a sinkhole forms and a main road collapses.

*** UPDATE 1 *** Madeleine Doubek

One of Illinois’ biggest and most critical assets always has been its transportation network. We’re smack dab in the middle of America, but we lost Amazon’s HQ2 and we could lose more economic opportunity if we don’t tend to that network. That means planes, trains, transit, roads and, especially, bridges, noted Illinois Department of Transportation Secretary Randy Blankenhorn.

Three quarters of Illinois’ bridges are in need of repair. We should be rebuilding five major bridges a year, but we’re working on one every five years, he said. “This is a crisis that’s coming,” Blankenhorn said. “This is what keeps me up at night.”

If we want to build our communities, attract new people who can contribute to those communities and fund governments, then we need to invest in transportation, Blankenhorn and others said.

He called for an increase of at least 15 cents in the state gas tax, which hasn’t been increased since 1990.

Once again, Blankenhorn says this stuff about a big gas tax hike after the election even though the governor has been saying for years that no tax hike is needed to pay for a capital bill.

*** UPDATE 2 *** Tribune

Mayor Rahm Emanuel on Wednesday called for a 20 to 30 cent per gallon increase in the state’s gas tax to fund a major statewide transportation bill.

Emanuel made the push during a City Hall news conference in which he was joined by members of the Metropolitan Mayors Caucus, an organization that represents the Chicago region’s 275 cities, towns and villages.

“Our state can’t wait any longer,” Emanuel said, noting neighboring states have passed transportation bills with gas tax hikes.

- Posted by Rich Miller   65 Comments      

Illinois Policy Institute responds to CTBA’s response to Fitch

Tuesday, Dec 11, 2018

* Click here for background if you need it. Here’s Adam Schuster with the Illinois Policy Institute’s response to the Center on Tax and Budget Accountability’s defense of its pension obligation bond proposal…

The CTBA plan does use the POBs to reduce contributions, but in the long-run rather than the short-run/Blago-style. It reduces the contributions by both lowering the funding target and extending the pension ramp, both of which violate Actuarial Standards of Practice from professional actuary associations.

Hertz correctly points out that a recession is increasingly likely, but then comes to the exact opposite conclusion about what this should mean. Just prior to a recession is the worst possible time to play an arbitrage gamble with taxpayer money, which is what this plan does. It would be like going all in on a Black Jack hand knowing the dealer has 21. This will likely make our pension repayment even more expensive than already envisioned by CTBA.

Hertz’s admission that arbitrage benefit “isn’t really the point” tells us what their true motivation is here. Potential arbitrage benefit is the only positive aspect of their plan. But that’s not their goal; their goal is to trade soft debt for hard debt by putting taxpayers on the hook for these bonds, which cannot later be made cheaper through reform like the pension debt can.

Hertz claims to be worried about the service cuts being caused by the rapidly growing pension payments, but the CTBA plan explicitly puts pension payments above those services with its $11 billion cash infusion. That insulates pensions from the risk of economic downturn while also restricting the amount of revenue available for the services Hertz claims to care about, by making them hard debt.

You know what our alternative is, because I’ve seen you write about it. I know you think a federal contracts clause challenge is likely. We’ll have more on that soon, but for now its worth noting that Arizona did not face such a challenge despite a virtually identical situation. They have the same pension clause and their court also struck down a prior round of reforms, claiming they diminished benefits. And yet they’ve successfully amended their constitution twice now.

Arizona hasn’t yet faced a federal court challenge. That doesn’t mean it won’t. Or that it wouldn’t be challenged here.

…Adding… Schuster has a new post up on the topic. Click here.

…Adding… From comments…

Not weighing in on the CTBA proposal itself, but it’s worth pointing out that the IPI response seems to misunderstand (or misrepresent) it in several ways. First, IPI writes that CTBA’s proposal “reduces the contributions”, which isn’t really true. In the short-term CTBA’s proposal would increase contributions above what’s required under current law. Yes the CTBA proposal does not conform to actuarial standards, but making payments that align with actuarial best practices would require dramatically higher pension contributions (both above current law and CTBA’s proposal). Second, IPI is critical of the proposal’s use of POBs because it’s an “arbitrage gamble,” but this is simply not what CTBA is proposing. In CTBA’s proposal the POBs are meant to be a revenue source for making pension payments that are higher than required under current law in the short term. This using POBs for budgetary relief. POBs resolve CTBA’s issue of wanting to increase pension contributions without cutting other aspects of the budget or simply raising taxes. It’s also worth pointing out that Quinn issued two POBs for budgetary relief (in 2010 and 2011). The Blago POB was issued for arbitrage reasons; however, once issued Blago used some of the proceeds for budgetary relief (which was a different use than original proposed). Blago’s use of POB proceeds for budgetary relief is one source of criticism; however, it remains to be seen whether the arbitrage play materializes as the bonds aren’t paid off. As of 2017, investment returns have actually exceed the 2003 POB interest rates. (see p. 121

Last, I think people should realize that CTBA’s proposal actually has several distinct policy components that can be independently debated. 1) switching the amortization method (aka debt repayment schedule) from level % of pay to level dollar. Doing this alone requires higher pension payments; 2) changing the funded ratio target from 90% to 70%; and 3) using POBs to make part of the state’s pension payments.

I know who that commenter is, by the way, and the person knows this topic well.

- Posted by Rich Miller   67 Comments      


Tuesday, Dec 11, 2018

* Follow along with ScribbleLive

- Posted by Rich Miller   Comment      

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