* 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.
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* 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.
Thanks!
*** UPDATE *** Somebody just paid the “buy now” price of $500 for a ticket. Thanks!!!
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* 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.
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* 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 http://cgfa.ilga.gov/Upload/FinConditionILStateRetirementSysMar2018.pdf)
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.
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* The Sun-Times editorial board asked the city’s candidates for mayor what they would do about Tax Increment Financing Districts if elected…
Candidates Toni Preckwinkle and Ja’Mal Green would get rid of TIF districts altogether.
“We’ve really got to look at unwinding as many of those TIFs as we possibly can and turning the resources back to Chicago Public Schools,” Preckwinkle said last Monday, a day before she won the Chicago Teachers Union endorsement. She said she would give all annual TIF surpluses to the schools until all 144 TIF districts are phased out. […]
Lori Lightfoot, Robert “Bob” Fioretti and LaShawn Ford called for a moratorium on creating new TIF districts. […]
Paul Vallas vowed to “implement a new paradigm” with “clearer TIF guidelines for developers.” Vallas would dedicate a third of TIF revenue to a Chicago Equity Investment Fund to be used in blighted areas.
Click here to see all the answers.
* David Greising at the BGA…
Lightfoot touched on a topic during a mayoral debate last month that merits more attention: the issue of regressive taxation in the city of Chicago.
“We live in one of the most taxed cities and the most taxed county, unfortunately, in the country,” she said at a debate in November. “And low-income families and individuals and working families have shouldered far too great a burden because our tax system, our levies and fees have been completely regressive.”
Technically, Lightfoot’s wording was a bit overstated, as my colleagues at the Better Government Association recently pointed out. But her larger point—about the inequity of how taxation in Chicago affects the rich and the poor—is one that deserves consideration. It would be useful to hear more on this from all the candidates hoping to occupy the office on the fifth floor of City Hall.
I agree that, “technically” she might possibly have “a bit overstated” the facts, but Greising’s BGA colleagues rated her claim “mostly false” in yet another example of the BGA’s attempt to police political rhetoric instead of hard facts. Maybe the group should follow its leader and focus on policies and not goofy little click-bait gotcha pieces.
* Greg Hinz bemoans the lack of proposals about crime…
But most of the contenders so far are barely touching this issue. Like businessman Willie Wilson, No. 2 on the February ballot, who says on his website that he wants to “create safe neighborhoods” and “end carjackings . . . (and) police brutality”—along with letting seniors ride free on the Chicago Transit Authority. I appreciate that, sir. This senior just loves free stuff—providing the CTA doesn’t slash service to pay for it, that is. But what specifically are you going to do to make the streets safe?
Ditto Bill Daley, who says in his new TV ad that he’ll “make getting gangs and guns off of our streets priority No. 1″ but doesn’t give a clue as to how. […]
As usual, the most detailed policy plans come from Paul Vallas, and I give the former Chicago Public Schools chief lots of credit for daring to open himself up to critics rather than peddling bromides. Among ideas from him: bringing back—perhaps part time—retired but experienced detectives who could help the Police Department clear up a huge backlog of unsolved cases, and offering a city witness protection program for those who are worried about gang retaliation if they help prosecutors. Of course, it’s not clear Vallas has a plan to pay for that and other proposals. But his ideas are worth a look.
Then there’s Toni Preckwinkle, who calls herself a progressive but lately has been focused on trying to knock foes off the ballot on technicalities and lining up endorsements from powerful labor chiefs. On her website, she talks not about cutting crime but cutting the number of nonviolent drug offenders in the county jail and the number of children tried as adults. There’s some merit to both, but what does Preckwinkle want to do about crime? What would she do to those who run around with guns, terrorizing people?
* Another good question…
The Chicago Sun-Times editorial board has the heft to put all of these questions and more to the candidates. What they did with TIF districts was a good start.
…Adding… Sounds like I hurt the BGA’s fee-fees…
My name is Bob Secter and I am the senior editor at the Better Government Association. I realize that it has become fashionable these days for people to elevate themselves by trying to diminish others, so I usually laugh off your gratuitous commentary about us and others as well. Today’s ridicule of our recent Lori Lightfoot seemed particularly ill-informed, however. Here we have a candidate for Chicago mayor who is making sweeping assertions about complicated tax policy that are ill informed. The irony was that she could have made a compelling point had she simply stuck to the facts about how the tax system was particularly unfair to low-income residents. But she didn’t do that, and our job is to provide context for the claims politicians make. One of the reasons tax policy is so difficult to fix is that its too easy to demagogue rather than deal with the nuance. Your ill-informed attack on us simply reinforces that problem.
Politifact does not allow us to slap any old rating we feel on a statement we are vetting. There are a strict set of guidelines we are required to follow in rating comments, and all ratings are decided on by a jury of three editors. We are not doing this by the seat of our pants. In case you are interested, here are the guidelines: https://www.politifact.com/truth-o-meter/article/2018/feb/12/principles-truth-o-meter-politifacts-methodology-i/
The definition of Mostly False is: “The statement contains an element of truth but ignores critical facts that would give a different impression.”
And that’s exactly where Lightfoot’s claim fell. She didn’t just “overstate things” as you contend. She got a little bit right, but a lot a bit wrong.
As for your snark about “goofy little click-bait gotcha pieces,” have you read your blog lately?
Pot meet kettle.
“I” didn’t originally “contend” that she “overstated” things a bit. That was David Griesing, the president of the Better Government Association, for crying out loud. I therefore have no choice but to rate this Bob Secter reply “Pants on Fire!” /s
Also, I don’t sell ads based on clicks. Never have. So, the senior editor is wrong once again. Is there a double “pants on fire” rating allowed?
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* My weekly syndicated newspaper column…
Gov.-elect J.B. Pritzker was asked last week about the timeline for passage of a new minimum wage law.
“That’s very important to me,” Pritzker said, “It’s probably something we’ll be able to get done in the first six months in office.”
Pritzker had campaigned to increase the minimum wage to $15 an hour, so he was asked whether he was still on board for that goal.
“Yeah,” he said, and then went on a somewhat long, rambling explanation, during which he repeated a talking point about how he wants to make sure that small business “are not ill-affected” by a minimum wage hike and that “large businesses are implementing it in as rapid fashion as we can make happen.”
I’m told that Pritzker hopes to shield small businesses from excessive harm to their bottom lines by using some sort of tax relief, including tax credits. The devil is always in the details, including defining what is and isn’t a small business, but that’ll apparently be part of the upcoming negotiations.
Illinois’ current minimum wage is $8.25 per hour. Indiana, which has often made a public spectacle of poaching Illinois businesses, has a $7.25 an hour minimum wage. Chicago’s minimum is $12 per hour and will rise to $13 an hour next year. Mayor Rahm Emanuel has claimed an increased minimum wage would attract workers from around the region.
The governor-elect also noted that his team has the “various constituents and stakeholders … at the table. The Illinois Retail Merchants, the entrepreneurs and the labor unions, all at the table.”
The Illinois Retail Merchants Association voted earlier this year to not endorse anyone in the governor’s race, making it the only major business group that didn’t back Gov. Bruce Rauner. It also took a pass on the gubernatorial contest four years ago, but endorsed Republican state Sen. Bill Brady over Democratic Gov. Pat Quinn in 2010.
This year’s decision came after two meetings between Pritzker and Rob Karr, IRMA’s president and CEO. Karr came away impressed, believing that, while Pritzker has some very liberal goals, he will negotiate in good faith on ways of reaching those goals.
Retailers are very sensitive to labor costs, and Karr was instrumental in convincing House Speaker Michael Madigan to not move forward with a minimum wage increase bill in 2014. Instead, Madigan pushed through legislation to put a non-binding referendum on the ballot. It passed overwhelmingly, but Gov. Rauner was also elected that year and he had once said he opposed having a minimum wage at all. A minimum wage hike has been put on the back burner ever since.
Crain’s Chicago Business has referred to the pre-campaign version of J.B. Pritzker as the “unofficial mayor” of Chicago’s downtown business community. Not many of those business titans stepped up to endorse Pritzker, but they also didn’t rise up in strong opposition to Pritzker or in fervent favor of Rauner. So, there’s also a level of trust that Pritzker won’t go totally overboard.
The Pritzker folks say they want to negotiate with all stakeholders on numerous issues, with the minimum wage being just one of them. This is the way things were done before Rod Blagojevich came onto the scene. Blagojevich was a big fan of jamming major ideas through on partisan roll calls.
IRMA has always tried to be an honest and willing negotiator. And its leader Karr was reportedly convinced from his two meetings with the then-candidate that once Pritzker made a deal he’d stick with it and pass it, despite any objections from the hard left.
Pritzker will have his work cut out for him in that regard. The head of the legislative Progressive Caucus, Rep. Will Guzzardi (D-Chicago), recently threw down an online gauntlet about how Illinois “must not” follow the lead of Colorado Democrats, who after taking over their state’s legislature have now signaled that they’ll be more open to negotiations with the business community.
“People elected us because we said we’d make their lives better,” Guzzardi wrote. “Raise their wages, provide decent benefits, make college and healthcare more affordable, etc. We ran on this. We won. And now… we run away? If so, why vote for us at all?”
And Pritzker will also have to deal with more moderate Democrats on this topic. Those I’ve spoken with are not necessarily opposed to a minimum wage increase, but going all the way up to $15 an hour gives them serious pause, even with possible tax credits.
*** UPDATE *** Pritzker was asked about a possible tax credit for small businesses and the phase-in of the higher wage today…
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