Rating Action: Moody’s downgrades Chicago Board of Education, IL’s GO to Ba3; outlook negative
Global Credit Research - 13 May 2015
Ba3 rating applies to $6.2 billion of GO debt
New York, May 13, 2015 — Moody’s Investors Service has downgraded to Ba3 from Baa3 the rating on the Chicago Board of Education, IL’s $6.2 billion of outstanding general obligation (GO) debt. The Chicago Board of Education is the primary debt issuer for the Chicago Public Schools (CPS) (the district). The outlook remains negative.
SUMMARY RATINGS RATIONALE
The Ba3 rating reflects CPS’s steadily escalating pension contributions and use of reserves to fund those contributions. We believe pension costs will place increasing strain on the district’s precarious financial position absent material revenue growth or expenditure reduction, both of which appear increasingly difficult for the district to achieve. Based on the Illinois Supreme Court’s May 8 overturning of the statute that governs the State of Illinois’ (A3 negative) pensions, we believe that the district now has fewer options for reducing its own pension costs. We view the district’s ability to grow operating revenue as similarly constrained. In our opinion, state budget pressures may limit future state aid increases to the district. The district’s credit profile is also pressured by competing demands placed on the local property tax base from the debt and unfunded pension liabilities of the City of Chicago (Ba1 negative) and other overlapping local governments. Finally, the district’s governance ties to the city inform our credit opinion.
OUTLOOK
The negative outlook reflects our expectation that CPS’s budget pressures will intensify due to rising pension costs. The district’s net annual pension contribution will increase by 6% this year. In fiscal 2015, the district’s mandatory net annual pension contribution totals $635 million (an amount which equals the $697 million contribution less state support of $62 million). In fiscal 2014, the district’s mandatory net annual pension contribution totaled $601 million (an amount which equaled the $613 million contribution less state support of $12 million). Further increases are scheduled in future years. CPS officials are actively working to identify revenue enhancements and expenditure adjustments that will be needed to accommodate the increased payments, but solutions remain uncertain. This budget gap is a credit negative that is becoming more pronounced as fiscal 2016 approaches. The outlook also incorporates the likelihood of continued growth in the unfunded pension liabilities of the City of Chicago. The costs of servicing those liabilities exacerbate the practical limitations of generating revenue from a shared tax base.
WHAT COULD CHANGE THE RATING UP (or revise the outlook to stable)
• Revenue growth and/or reductions in other operating expenditures that enable the district to accommodate increased pension costs into annual operating budgets without reliance on non-recurring revenue sources
• District or state actions that halt the growth of the district’s unfunded pension liabilities
• Improvement in the City of Chicago’s credit profile that strengthens CPS’s credit quality given the two entities’ governance ties and coterminous tax base
WHAT COULD CHANGE THE RATING DOWN
• A continuation of structurally imbalanced operations
• Narrowing of the district’s fund balances and liquidity
• Continued growth in the debt and/or unfunded pension liabilities of the district and/or overlapping governments
• Declines in the City of Chicago’s credit profile that weakens CPS’s credit quality given the two entities’ governance ties and coterminous tax base
Rating Action: Moody’s downgrades Chicago Park District, IL’s GO to Ba1; outlook negative
Global Credit Research - 13 May 2015
Ba1 rating applies to $616 million of GO debt
New York, May 13, 2015 — Moody’s Investors Service has downgraded to Ba1 from Baa1 the rating on the Chicago Park District (CPD), IL’s $616 million of outstanding general obligation (GO) debt. The Ba1 rating applies to $333 million of general obligation unlimited tax (GOULT) debt and $283 million of general obligation limited tax (GOLT) debt. The outlook remains negative.
SUMMARY RATINGS RATIONALE
The Ba1 rating on CPD’s GOULT debt reflects the district’s governance ties to the City of Chicago (Ba1 negative). Based on the Illinois Supreme Court’s May 8 overturning of the statute that governs the State of Illinois’ (A3 negative) pensions, we believe that the city’s options for curbing growth in its own unfunded pension liabilities have narrowed considerably. We perceive increased risk that the city’s intensified pressures will adversely affect CPD’s financial operations and position. CPD’s tax base, which is coterminous with that of Chicago, is highly leveraged by the debt and unfunded pension obligations of the city and other overlapping governments. Our opinion weighs the severity of these challenges against the district’s credit attributes, which include an ample liquidity position; considerable ability to reduce expenditures; and manageable direct debt levels.
The Ba1 rating on CPD’s GOLT debt reflects the credit characteristics inherent in the GOULT rating and the sufficient debt service coverage provided by the debt service extension base (DSEB) levy that secures CPD’s GOLT debt. The DSEB is a dedicated debt service levy that is unlimited by rate but is limited by the amount of the DSEB. The district’s 2015 DSEB levy equaled $46.8 million, which provides adequate coverage as it exceeds maximum annual debt service (MADS) on outstanding GOLT debt.
OUTLOOK
The negative outlook reflects the district’s governance ties to the City of Chicago, the GO rating of which carries a negative outlook. The outlook also incorporates the likelihood of continued growth in the city’s unfunded pension liabilities, and the costs of servicing those liabilities. The substantial funding needs of overlapping governments exacerbate the practical limitations of generating revenue from a shared tax base.
WHAT COULD MAKE THE RATING GO UP
• Improvement in the City of Chicago’s credit profile that strengthens CPD’s credit quality given the two entities’ governance ties and coterminous tax base
• Change in governance framework that reduces the influence of the city on the district
WHAT COULD MAKE THE RATING GO DOWN
• Declines in the City of Chicago’s credit profile that weakens CPD’s credit quality given the two entities’ governance ties and coterminous tax base
• Substantial reduction in the district’s reserves or liquidity
• Determination by a court of law that the current statute governing the district’s pension plan is unconstitutional
Services are scheduled for Saturday in Belleville for Janette Weatherall, former lobbyist for the Illinois Education Association.
Weatherall served IEA members and public education from 1993 until her retirement in 2013.
Visitation will be held from 10:00 a.m. to 11:00 a.m. Saturday, May 16, with the funeral service following the visitation at 11:00 a.m.
All services will be held at Signal Hill United Methodist Church, 47 Signal Hill, Belleville, IL 62223.
I’ve known Janette since I started in this business. She was a sweet, kind and inspirational person. She was also a very hard worker and an inspired hire by the IEA. The union was primarily suburban and Downstate focused and had few African-American allies. Janette, who is black, helped build the IEA into the force it is today.
Janette had cancer, beat it, and was enjoying the good life in retirement when the cancer came back.
“My heart hurts,” Sen. Toi Hutchinson told me after I informed her of Janette’s passing yesterday. Mine does too.
On Wednesday, four unions — AFSCME Council 31, the Chicago Teachers Union, the Illinois Nurses Association and Teamsters Local 700 — urged Emanuel in a joint statement to drop the city’s court battle over his plan, given the state Supreme Court decision last week.
“We believe the Supreme Court’s ruling leaves no room for doubt that Chicago’s pension cuts also violate the plain language of the pension clause. In light of that decision and the city’s credit downgrade, we urge Mayor Emanuel to stop wasting time and money in a futile attempt to defend these unconstitutional cuts, and instead work with us to develop fair and constitutional solutions to funding city retirement plans,” the statement reads.
Chicago still has a winning argument: Its reforms do not “diminish or impair” pension benefits. That means the Illinois Constitution is not violated.
The reforms include some reductions in how future benefit increases are calculated, and they require modest increases to employee contributions. But they couple these changes with massive increases in the city’s contributions to the two funds — from $177 million in 2014 to an estimated $650 million in 2021.
The two pension funds were going broke. Twenty-eight of the 31 unions with members in these funds supported the plan because they recognized that in a few years their pension assets would be depleted and benefits would not be paid.
The city, for the first time, would be legally responsible for the funds’ liabilities. That’s a major change. Under state laws that established the pension funds, the obligation to pay benefits has always been on the funds themselves, not the city.
The city has had no obligation beyond a specified contribution to the funds each year. If the city paid its required contribution and the pension funds still went broke, the city had no legal obligation to step in and beneficiaries would receive pennies on the dollar.
Now the city has the obligation. Far from “diminishing or impairing” pension benefits, the city’s reform plan strengthens and protect benefits that were endangered.
But aren’t “reductions in how future benefit increases are calculated” a diminishment, even though they may have saved the funds from insolvency?
Ralph Martire, director of the Center for Tax and Budget Accountability, said the latest downgrade to junk bond status will cost the city an additional $200 million to $300 million, on top of its existing budget deficit and employee pension fund shortfalls.
“It’s already looking at a deficit north of $250 to $300 million. Now pile on another couple hundred million – let’s be conservative – from the impact of the downgrade of the bond status. Now pile on the $550 million increase in pension funding that’s due this year, and you’re talking about a problem that’s collectively in excess of $1 billion, or a third of their budget for current services,” he said.
Chicago may have to pay banks as much as $2.2 billion after Moody’s Investors Service dropped its credit rating to junk, deepening the fiscal crisis in the third-largest U.S. city.
The company’s decision Tuesday to cut Chicago’s $8.1 billion of general obligations two ranks to Ba1, one step below investment grade, allows banks to demand that the city repay debt early and exposes it to fees to end swaps contracts, Moody’s said in a statement. Mayor Rahm Emanuel plans to refinance $900 million of debt to reduce the penalties. […]
City officials may be able to persuade banks not to demand the penalties as long as Chicago can move ahead with its refinancing plan, said Johnson.
“I would guess that most of their counterparties would be fine letting them go,” he said. “If they end up not selling it, then that creates significantly more risk.”
Those big brains in the Daley administration really messed things up, didn’t they? But those swaps probably should’ve been renegotiated long ago.
*** UPDATE *** Press release…
Legislation sponsored by state Senator Daniel Biss (D – Evanston) seeks to shore up local pension funds by diverting state payments from an employer into the local pension fund when the employer fails to make the required pension contributions.
“Just as we must hold our state government accountable for pension contributions, so should we hold Illinois’ local governments accountable,” Sen. Biss said. “This legislation provides the enforcement mechanisms necessary to first encourage and then require the adequate funding of local pension funds.”
For decades, the Illinois Municipal Retirement Fund (IMRF) has had the ability to divert State payments to employers who failed to make their required pension payments. This is the main reason why IMRF is in excellent fiscal health, unlike so many other pension funds in Illinois. In recent years, police and fire pension funds and the Chicago municipal and laborer’s pension funds have acquired this power as well. Under House Bill 3484, the other local public pension funds, including those of the Chicago Public Schools, Cook County, and the Chicago Transit Authority, would be granted this ability.
“The history of pensions in Illinois makes one thing crystal clear: it is absolutely imperative that employers make adequate payments into the pension systems,” said Biss. “Last Friday’s Supreme Court ruling only serves to underscore the importance of this essential truth. Our legislation takes a major step to ensure that we will not repeat the mistakes of the past.”
House Bill 3484 passed out of committee today and now goes to the Senate floor for a vote.
The CTA is already enacting contingency plans to absorb deep cuts in state funding sought by Gov. Bruce Rauner, the transit agency’s top finance official said Wednesday.
The CTA will erase from this year’s budget anticipated revenue of $21 million in state subsidies that would have helped the CTA to offset some of the cost of providing reduced fares and free rides to disabled riders and some senior citizens, Ron DeNard, CTA chief financial officer, told the CTA board at its monthly meeting.
The CTA received about $28 million in state funding last year for the reduced-fare and free-rides programs, which are mandated by state and federal laws.
Rauner is seeking to zero-out the state subsidy in fiscal 2016.
CTA President Forrest Claypool has said that the actual cost to the transit agency for the two programs exceeds $100 million a year in uncollected fares.
Wanted to give some props to the Governor and Rep. Tim Butler for addressing the Curb Your Car Crowd at the Governor’s mansion. The Governor didn’t ride, but said he would if we could find him a seat that didn’t hurt his tookus. (My word, not his)
I think the Viking hat really sets off the moment.
A Kane County resolution calling for state reform got thumbs up from county board members and union members who cited the county as an example of how efficiently government should operate.
Scott Roscoe, of the Fox Valley Building and Construction Trades Council, spoke at several meetings earlier this month regarding the resolution, but his speech had a different tone Tuesday when he conceded the county board’s work on the matter has not been easy.
He thanked the county board for what the resolution says — and what it doesn’t say.
Gov. Bruce Rauner asked the county board, like other governmental bodies, to pass a resolution — provided by his office — supporting his Illinois Turnaround Agenda. Union members have protested Rauner’s reforms accusing the governor of attacking the middle class and unions.
Kane County officials chose to draft their own document that does not touch on any of the controversial issues in Rauner’s version while touting the county’s best practices.
“We needed something that (Rauner) would value that didn’t cost us our unity,” Lauzen said.
The result was a resolution that passed 21 to 3 Tuesday, with only three Aurora-based Democrats objecting. The vote signaled a bipartisan win for a document that calls for budget and pension reform in Springfield while also being a document local union supporters, like Fox Valley Building Trades President Scott Roscoe, lined up to support Tuesday.
“I rise today to thank our county board,” Roscoe said. “Thank you for not including support for right to work, repeal of the prevailing wage act or bans against project labor agreements. We all agree Springfield has work to do. The state of Illinois should be looking to Kane County to see how efficient and effective government operates and how to work within its means.”
In reply, county board member Mike Kenyon, a former chairman of the Kane County Republican Party, voiced his appreciation for local unions.
“I’ve come to realize that if we didn’t have organized labor we wouldn’t have paid vacations. We wouldn’t have health insurance. We wouldn’t have sick days. And I don’t think it’s fair for anybody to blame any of the state’s problems on organized labor,” Kenyon said.
* Related…
* Chamber walks a thin line between Emanuel, Rauner: But the only specifics the chamber’s resolution gets into are “minimizing regulatory burdens and mandates” and “reasonable reforms to minimize the high employer cost related to workers compensation and unemployment insurance.” Nary a word about stripping power from unions, right-to-work, term limits on lawmakers or the prevailing wage. Those omissions are intentional, says Michael Reever, the chamber’s vice president of government relations. “It’s very clear which issues we support and which issues we think the governor should focus on,” says Reever. The ones referenced in the resolution—workers comp, unemployment insurance and tort reforms—”are issues we have supported for decades.”
* My old pal Becky Carroll pointed me today to Teri Ulatoski DeGrado’s Facebook post…
Transport help needed. Please read and share.
We have a huge transport this week with over 70 dogs, more than 40 of which need to get from St. Louis to Joliet and many on to Kenosha! The schedule is below.
Can you spare a few hours on Saturday to help save some lives? Many, MANY puppies, so lots of puppy breath.
To answer a few questions:
1) NO the dogs do not bark the entire trip (they usually all fall asleep within 5-10 minutes of getting on the road.
2) NO you don’t have to worry about taking a dog home! These dogs are all going to rescue, fosters or adoptive homes. That is why they need to get up here .. to start their Happily Ever After!
3) NO you don’t need to have a large vehicle. A regular car, hatchback or small SUV works great! If you look at the sizes of the dogs and puppies, most are under 20 lbs (and lots are much smaller!). If you need crates, I have some extra, but many times the dogs don’t even need to be crated. Even a few dogs in your car helps!!
Leg 3IM: St. Louis, MO to Springfield, IL (1 hr. 35 min./ 98 miles)
Passengers 1-7, 14, 17-31, 33-43, 49-54, 65-71
11:05 am to 12:40 pm
Leg 4IM: Springfield, IL to Bloomington, IL (1 hr. 10 min. / 67 miles)
Kirk for Senate
Mark Kirk, GOP Incumbent US Senator from Illinois
Agency: Mentzer Media, DC
Total Order: $135,170
5/14 – 6/6/15
:60 spots
Networks: CNN, FXNC, MNBC
All dayparts bought
5170 / Chicago Interconnect
Attempting to get the spot. Watch this space.
…Adding… The Kirk campaign says it won’t be distributing the TV ad until tonight.
* I’ve tried two or three times over the past week to get Speaker Madigan to talk about why he is not voting on bills this year. No luck, except he joked in agreement last week when I suggested that part of it was to mess with my head. Reporters asked him about it today…
Madigan was also asked why he's not voting very often this session. "Confused," was his response. About what? He just laughed.
* I’ve seen this very same argument made over and over in recent weeks. Rep. Jeanne Ives, for instance, brought it up during an appearance this week on “Chicago Tonight,” and the Illinois Policy Institute has continually harped on it. Here’s another one from Michael Lucci at the Illinois Policy Institute. Emphasis added…
Though the [Illinois Supreme Court] justices pointed to more tax revenue as the answer, recent history proves tax hikes cannot fix Illinois’ pension problem. In 2011, the General Assembly raised income taxes on every household by a staggering 67 percent, bringing in an additional $31 billion in tax revenue that largely went to pension contributions over the next four years. Despite an additional $7.5 billion per year in additional funding, the state’s pension liabilities continued to skyrocket, increasing by $7.2 billion in 2011, then by $11.5 billion in 2012, then by $6 billion in 2013 and $10.5 billion in 2014. The state staggered along with billions more in borrowing and unpaid bills.
For the four years from 2011-2014, during which income-tax hikes brought in an additional $31 billion in revenue for pensions and the Standard & Poor’s 500 index rose for a net gain of 64 percent, the state’s total unfunded pension liability still rose by a staggering $35 billion. These are the makings of a completely broken system.
The essential argument is, the tax hike didn’t work. It doesn’t matter how much money you throw at it, the pension crisis is unsolvable because the unfunded liability continues to rise.
But the important issue for policy-makers and budget-drafters isn’t really the unfunded liability. It’s how much the state has to pay every year to keep up with former Gov. Jim Edgar’s pension “ramp” schedule.
* Even so, let’s look at why the unfunded liability has risen so much. COGFA took a gander back in February…
Chart 1 is based upon calculations using the market value of assets for all years, including FY 2014. The full effects of the large investment losses during FY 2009 and investment gains for FY 2011 are therefore reflected in the bars for these years. These extremely large investment losses are the main reason for the significant jump in unfunded liabilities during FY 2009. The asset smoothing approach, required by Public Act 96-0043, only recognizes 20% of the FY 2009 investment losses during the current year. Chart 1 above recognizes 100% of the FY 2009 investment losses in FY 2009, and is therefore a much more realistic representation of the retirement systems’ true financial condition. In FY 2013, the market value of investment returns were above the actuarially-assumed rate for all systems. This helped control the growth of unfunded liabilities to a certain degree, however they still rose primarily due to insufficient contributions made by the State.
In anticipation of the June 30, 2014 actuarial valuations, the State Universities Retirement System (SURS), the State Employees’ Retirement System (SERS), and the Teachers’ Retirement System (TRS) all voted to reduce their assumed rates of investment return as per a recommendation by the State Actuary. On April 8, 2014, SERS voted to reduce their assumed rate of investment return (ROI) from 7.75% to 7.25% as recommended, with SURS following suit on June 13, 2014. TRS did not receive a specific rate recommendation from the State Actuary but voted to change its ROI assumption from 8.0% to 7.5% on June 24, 2014. Although investment performance far exceeded actuarial expectations in FY 2014, the rate of investment return assumption changes helped contribute heavily to an increase in total accrued liability, and hence, the significant increase in unfunded liability of $7.1 billion in FY 2014.
During FY 2014 the total unfunded liabilities utilizing the actuarial value of assets increased to $111.2 billion from $100.5 billion in FY 2013. This equates an increase in unfunded liabilities of 10.6 % over FY 2013, due primarily to actuarially insufficient State contribution amounts and the lingering effects of the investment losses caused by the 2008 financial crisis. In FY 2014, market value investment returns for all five State systems were above the actuariallyassumed rates of return, as shown below:
While all systems earned positive returns on a market value basis, the asset smoothing approach, required by Public Act 96-0043, only recognizes 20% of the FY 2014 investment returns. FY 2013 was the last fiscal year that investment losses from the 2008 financial crisis were “smoothed” in the retirement systems’ annual actuarial valuations. With negative returns in the double-digits no longer being recognized, the investment gains of the last five years are now subject to smoothing. This has resulted in a cumulative market value of assets that is now higher than the actuarial value of assets, and therefore the funded ratio using the market value of assets is considerably higher than the funded ratio using the actuarial (smoothed) value of assets
So, a Great Recession accounting gimmick is backfiring on us.
The largest factor was the insufficient employer contributions which caused a $38.7 billion unfunded increase [out of $92.47 billion] during the period under review [start of Edgar ramp in FY 1996 through FY 2014] . Changes in actuarial assumptions; including the changes of interest rate assumptions in FY 2014, caused an additional increase of $19.8 billion
And, as anyone who knows anything about the Edgar ramp understands, those insufficient employer contributions were a feature, not a bug. The ramp put off the problem into the future, which is now.
* But the Edgar ramp will pretty much level out for the next few years, and then the state will see a payment decrease in 2020 when the Quinn pension borrowing is paid off…
And, of course, we could just change the ramp, do another obligation bond and lower the targeted funding percentage. That would increases state costs in the long run, but it would take immediate pressure off of us now.
Without revenues from the expired tax hike, which even the Policy Institute admits went to the pension funds, this is a huge problem. With the revenues, it’s a manageable problem.
Unless somebody can come up with a magical solution that can pass muster with the Illinois Supreme Court, however, it’s time we start working on a practical fix while ignoring the doomsday prophets who claim nothing can be done.
Wednesday, May 13, 2015 - Posted by Advertising Department
[The following is a paid advertisement.]
“I never did give them hell. I just told the truth, and they thought it was hell.”
- President Harry S. Truman
“A plan to financially reward Exelon Corp. for producing no-carbon energy and potentially save three Illinois nuclear plants from closure would cost ratepayers $1.6 billion over five years and strain budgets for financially strapped businesses and municipal governments, a study released Tuesday found.” - Associated Press, 4/21/15
By applying legislative mandates in SB 1585 / HB 3293 to historical data on Illinois electric costs and consumption, the Kestler Energy Consulting study simply calculated how much of a rate hike Exelon’s legislation would impose on families, businesses and local governments statewide.
Just say no to the Exelon bailout. Vote no on SB1585/HB3293.
BEST Coalition is a 501C4 nonprofit group of dozens of business, consumer and government groups, as well as large and small businesses. Visit www.noexelonbailout.com.
For the second time in as many weeks, Democratic House Speaker Michael Madigan summoned the entire Illinois House for a daylong hearing that put the spotlight on business-friendly measures sought by Republican Gov. Bruce Rauner.
Rauner has joined the national push for what’s known in political circles as tort reform — setting geographic limits on lawsuits to stop trial lawyers from shopping for venues, restricting medical expense calculations to include amounts paid rather than billed, and allowing defendants to spread their liability to other parties. The idea is to limit multimillion-dollar legal judgments in civil lawsuits.
Madigan’s hearing put a human face on what those changes would mean, with lawmakers hearing testimony from nearly a dozen victims of medical malpractice and corporate negligence who told stories of botched diagnoses, mishandled pregnancies and a deadly road collision. […]
Noticeably excluded from the hearing were representatives from the business community, who were left to air their views at a sparsely attended news conference in a basement room at the Capitol.
“There are two sides to civil justice reform, not just what you’re seeing up on the House floor today,” said Todd Maisch, president of the Illinois Chamber of Commerce. “Hopefully, we’ll get, I’ll get, a chance to go ahead and make our case to the House and the full legislature in support of the governor’s agenda.”
Rauner, a Republican, also wants a constitutional amendment in 2018 capping what he broadly phrases “unreasonable damages.”
Elizabeth Sauter is the widow of state police trooper James Sauter, who was in his squad car on the shoulder of I-294 when a truck driver — who’d logged too many hours behind the wheel — fell asleep. The semi crossed over lanes of traffic, and caused a fiery crash.
“Anyone thinking about voting yes to a bill that would put a cap on civil wrongful death lawsuits in the state of Illinois would also be voting yes to killing more innocent civilians,” Elizabeth Sauter told members of the House. “Putting a cap on penalizing these companies just further encourages them to make careless decisions and continue unsafe practices. Putting a cap on these lawsuits mean you care more about big businesses than you do the citizens that you represent.”
Sauter says the $10.8 million settlement she was awarded a year ago shouldn’t be considered “winning the lottery.” Sauter says it was never about money; she says he’s using it to help pay for a state police memorial park in Springfield. Sauter also says the money is being used to care for her deceased husband’s family and to create a scholarship at his high school. She says she also is on the board of The Chicago 100 Club — an organization that helps families of first responders killed in the line of duty.
Jennifer Hill of Huntley told lawmakers doctors delayed performing a C-section during the birth of her oldest son, Ryan, which she said led to profound brain damage. The jury in her family’s civil suit awarded millions, money the mother of three says will ensure her son’s health care is managed.
“The verdict has secured Ryan’s future,” Hill said.
But Indiana resident Crystal Bobbitt, who said her daughter suffers from cerebral palsy, received less than 10 percent of $15 million a jury awarded her family in their malpractice case. She said those responsible for injuring her daughter should pay for her care and that she would rather not have to rely on Medicaid and other sources.
John Pastuovic of the Illinois Civil Justice League, which argues that too much litigation hurts the business environment, said Illinois has become a magnet for plaintiff attorneys across the country because of the “lawsuit-friendly courts.” A report from the group found disparities in case filing and verdict totals between Cook and five southern Illinois counties versus the rest of the state.
* React from Gov. Rauner’s office…
“Illinois has one of the worst lawsuit climates in the country, and reform is essential to address the shortcomings of current laws so we can begin to grow the economy. Reforms are needed to stop venue shopping, clarify liability and to repeal the jury compensation law passed during last year’s veto session. The governor is pleased to see lawmakers discussing reforms to restore sanity in our courts.”
I’m not sure what Rauner saw yesterday, but that wasn’t what happened.
Even so, it’s a sign that the governor isn’t letting this stuff get under his skin.
Wednesday, May 13, 2015 - Posted by Advertising Department
[The following is a paid advertisement.]
The cable industry is asking lawmakers to place a NEW 5% tax on satellite TV service. The satellite tax is not about fairness, equity or parity – it’s a tax increase on the 1.3 million Illinois families and businesses who subscribe to satellite TV.
Satellite Tax Will Hurt Illinois Families and Small Businesses
• Satellite TV subscribers will see their monthly bills go up 5%.
• This tax will impact every bar, restaurant and hotel that subscribes to satellite TV service, which will translate into higher prices, decreased revenues, and fewer jobs.
• Rural Illinois has no choice: In many parts of Illinois, cable refuses to provide TV service to rural communities. Satellite TV is their only option.
Satellite Tax Is Not About Parity or Fairness
• Cable’s claim that this discriminatory tax is justified because satellite TV doesn’t pay local franchise fees could not be further from the truth. Cable pays those fees to local towns and cities in exchange for the right to bury cables in the public rights of way—a right that cable companies value in the tens of billions of dollars in their SEC filings.
• Satellite companies don’t pay franchise fees for one simple reason: We use satellites—unlike cable, we don’t need to dig up streets and sidewalks to deliver our TV service.
• Making satellite subscribers pay franchise fees—or, in this case, an equivalent amount in taxes—would be like taxing the air. It’s no different than making airline passengers pay a fee for laying railroad tracks. They don’t use; they shouldn’t have to pay for it.
A supervisor at the Illinois Department of Revenue made a mistake last fall. She decided to help out with a backlog of tax returns in her department.
For that, the American Federation of State, County and Municipal Employees filed a grievance. The union claimed the supervisor violated a clause in AFSCME’s contract by doing “bargaining unit” work. The case went to a mediator. The union demanded overtime pay for the employees whose work the supervisor performed. Both sides settled instead on comp time for the workers. The supervisor got verbally reprimanded by the union.
Welcome to Illinois, where trying to be productive gets penalized.
When Gov. Bruce Rauner talks about the grip public employee unions hold over state government, this is an example of what he means. The demands in AFSCME’s 196-page contract often controvert the interests of taxpayers. From overtime costs to seniority rules to the endless grievance process, public employee unions can be an enormous drain on state resources. Unions resist progress, efficiency, modernization — anything that threatens a union job.
That’s one reason why Rauner kicked off his first month as governor with a clenched fist toward organized labor. It can be tough to streamline state government alongside obstructionists.
* AFSCME Council 31 Executive Director Roberta Lynch responded via a letter to the editor….
…It doesn’t take much thought, however, to realize that our union’s action was squarely in the public interest, keeping costs down by preventing managers from wasting time on work assigned to lower-paid employees. If the agency doesn’t have enough clerical workers, it should hire more instead of overpaying at a management rate.
In reality, public-service workers in state government are helpers and problem-solvers. Every day American Federation of State, County and Municipal Employees members protect kids, care for the elderly and vulnerable, respond to emergencies and keep their communities safe. By having a voice at work through our union, they are able to advocate for the tools and resources they need to do their jobs. The union contract also ensures fair treatment, protects against political interference and helps to limit outsourcing deals that place private profit ahead of the public good.
We want to work with anyone of goodwill to address the state’s real challenges, constructively, together. But that requires mutual respect, something lacking in both the governor’s incessant pummeling of union members and your editorial’s misleading complaints.
Senate President John Cullerton is dusting off an old pension overhaul plan he says has a chance to beat the constitutional odds.
Four days after the Illinois Supreme Court ruled that a 2013 plan to reduce pension benefits for state workers was unconstitutional, the Democrat from Chicago made a pitch for his proposal to a special committee working behind closed doors in the governor’s office. […]
But, in addition to being on the table during the meetings being sponsored by Gov. Bruce Rauner, members of the House Personnel and Pensions Committee could publicly discuss the Cullerton plan as early as Wednesday.
Cullerton’s plan seeks to avoid the constitutional ban on reducing pension benefits by offering employees a choice. For example, a worker could choose between having future raises count toward their pension or freezing their current salary and then receiving a 3 percent compounded cost-of-living adjustment once they retire.
Cullerton estimates his latest plan could save the state about $1 billion a year, a fraction of the pension system’s overall debt, but savings he says could be spent elsewhere. Cullerton pitched the idea Tuesday before a group of lawmakers and Rauner officials examining the pension idea, but overall support remains unclear.
“We’ll keep the Supreme Court decision close by,” said Madigan spokesman Steve Brown. “It’s an important topic that can’t be ignored.”
A Rauner spokesman declined to comment specifically on Cullerton’s proposal, saying “the governor has his own pension plan but recognizes that he will need to work with the General Assembly to fix our pension problems, which he believes should include a constitutional referendum.” […]
Sen. Bill Brady, R-Bloomington, said Rauner’s plan would bring about more savings than the one put forth by Cullerton but said lawmakers may need to pass several plans in order to see which would withstand any legal tests. “You can do both and see which survives, if that’s possible,” said Brady, who sits on the pension overhaul group.
It’s not being immediately rejected, which is a good sign.
However, despite the state’s dire financial condition serving as an impetus to find consensus on a new pension overhaul plan, some lawmakers warn that a solution should not be hastily agreed upon.
“Time is of the essence, but working too fast and therefore getting it wrong is not good time management,” said state Sen. Daniel Biss, an Evanston Democrat and a leading negotiator of the original plan. “There are a lot of limitations placed on the legislature by this ruling. We need to think carefully about what the options are, what rules can be utilized and design something accordingly.”
[Rep. Elaine Nekritz] said there may be legal questions about Cullerton’s plan as well.
“There are certainly lawyers who say that the opinion precludes that plan,” Nekritz said. “I think it is something we will need more discussion on.”
The House Personnel and Pensions Committee will hold a hearing on the Cullerton plan on Wednesday. Nekritz, the committee chair, said the meeting was scheduled before last week’s ruling.
* Former AFSCME Council 31 Executive Director Henry Bayer still regularly blasts out e-mails to his friends and acquaintances. Here’s his latest missive…
Did the City wait too long to raise revenue? Shouldn’t it have moved before getting to junk bond status? CFO made it quite clear long ago what needed to be done, just chose not to do it
“The reason that we have received the rating agency downgrades that we have is not because we can’t afford our pensions, but rather because we haven’t funded them. Chicago is a highly levered organization, and the issue that the rating agencies and investors have with Chicago is that we can resolve our issues, we just have chosen not to.
“What we know, however, is that the minute we pull the lever of increasing revenue, our ability to drive reform in the system will be gone. The city needs to implement reforms that will promote long-term health, even if it means short-term stress and discomfort for people in the financial community about the fact that we haven’t increased revenues at this point. We are balancing revenues with reforms. That’s what you saw with the recent Chicago Park District reform proposal. When we enact reforms, we increase revenues. When the employees increase what they pay into the system, the state increases its contribution multiplier.”
I have enormous respect for Lois Scott, and that seems like a reasonable approach. But the process dragged out far too long, so Moody’s eventually lost patience and now the City is in junk bond territory.
Wednesday, May 13, 2015 - Posted by Advertising Department
[The following is a paid advertisement.]
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Following the announcement that Meat Loaf was canceling his Illinois State Fair performance, fairgoers took to the phones. Calls came into the Illinois State Fair office with people pleading with state fair staffers to the keep Styx and Tesla on the Grandstand schedule. Ask and you shall receive! Keeping with our theme of Growing Illinois, the Illinois State Fair is pleased to announce Styx, a band with Illinois ties, and Tesla will remain on the Grandstand lineup.
Styx is entering their second decade of averaging over 100 shows a year, and fans repeatedly remark about the bands energy which is apparent in each and every time they take the stage.
Tesla is touring once again with four of its five original band members. Known for their down to earth, melodic tunes, this multi-platinum-selling rock band is once again wowing crowds worldwide. The group is best known for songs like, “What You Give,” and “Love Song,” and credits their loyal fan base (and their younger generations) for their years of success.
Tickets for the Wednesday, August 19thshow will go on sale via Ticketmaster on May 16th. Tickets will be available for purchase at the Illinois State Fair office the following Monday, May 18th.
Tickets to see Styx and Tesla will range from $35 for VIP tickets to $13 for Tier 3 track tickets.
Well, at least now we know the musical tastes of the new State Fair manager.
I mean, really, I saw Styx way back in 1978. It was a decent show I suppose, but I only went because Thin Lizzy was the opening act
Rating Action: Moody’s downgrades Chicago, IL to Ba1, affecting $8.9B of GO, sales, and motor fuel tax debt; outlook negative
Global Credit Research - 12 May 2015
Also downgrades senior and second lien water bonds to Baa1 and Baa2 and downgrades senior and second lien sewer bonds to Baa2 and Baa3, affecting $3.8B; outlook negative
New York, May 12, 2015 — Moody’s Investors Service has downgraded to Ba1 from Baa2 the rating on the City of Chicago, IL’s $8.1 billion of outstanding general obligation (GO) debt; $542 million of outstanding sales tax revenue debt; and $268 million of outstanding and authorized motor fuel tax revenue debt.
We have also downgraded the following ratings on debt secured by net revenues of Chicago’s water and sewer enterprises: to Baa1 from A2 on $38 million of outstanding senior lien water revenue bonds; to Baa2 from A3 on $2.3 billion of outstanding second lien water revenue bonds; to Baa2 from A3 on $35 million of outstanding senior lien sewer revenue bonds; and to Baa3 from Baa1 on $1.5 billion of outstanding second lien sewer revenue bonds.
We have also downgraded to Ba2 from Baa3 the rating on $6 million of outstanding MetraMarket Certificates of Participation (COPs), Series 2010A, and to Ba3 from Ba1 the rating on $3 million of outstanding Fullerton/Milwaukee COPs, Series 2011A.
Finally, we have affirmed the Speculative Grade (SG) short term rating on $112 million of Chicago’s outstanding Sales Tax Revenue Refunding Bonds, Series 2002.
The outlook on all long term ratings remains negative.
SUMMARY RATING RATIONALE
The Ba1 rating on Chicago’s GO debt incorporates expected growth in the city’s highly elevated unfunded pension liabilities. Based on the Illinois Supreme Court’s May 8 overturning of the statute that governs the State of Illinois’ (A3 negative) pensions, we believe that the city’s options for curbing growth in its own unfunded pension liabilities have narrowed considerably. Whether or not the current statutes that govern Chicago’s pension plans stand, we expect the costs of servicing Chicago’s unfunded liabilities will grow, placing significant strain on the city’s financial operations absent commensurate growth in revenue and/or reductions in other expenditures. The magnitude of the budget adjustments that will be required of the city are significant. Furthermore, Chicago’s tax base is highly leveraged by the debt and unfunded pension obligations of the city, as well as those of overlapping governments. Balanced against the city’s many credit challenges are several attributes, the greatest of which is the city’s broad legal authority to tap into its large and diverse tax base for increased revenue.
The Ba1 rating on Chicago’s sales tax and motor fuel tax debt reflects the absence of legal segregation of pledged revenue from the general operations of the city. This lack of separation caps the ratings at the city’s GO rating, despite sound maximum annual debt service (MADS) coverage provided by pledged revenue.
The Baa1 rating on Chicago’s senior lien water revenue bonds reflects the water enterprise’s large and diverse service area that extends well beyond city boundaries; the Chicago City Council’s unlimited rate setting authority; and sound debt service coverage. These credit attributes are balanced against challenges including an elevated debt ratio and the water system’s status as an enterprise of the city, a connection which we believe links the system’s credit profile to that of the city’s GO. The Baa2 rating on the city’s second lien water revenue bonds is based on the credit characteristics of the senior lien water revenue bonds and the subordinate lien pledge of net water system revenue. The Baa2 rating on Chicago’s senior lien sewer revenue bonds reflects similar credit characteristics as the senior lien water revenue bonds and also incorporates the sewer system’s relatively smaller service area, the boundaries of which are conterminous with those of the city. The Baa3 rating on the city’s second lien sewer revenue bonds is based on the credit characteristics of the senior lien sewer revenue bonds and the subordinate pledge of net sewer system revenue.
The Ba2 rating on the MetraMarket COPs, Series 2010A, reflects the tax increment financing (TIF) district’s moderate equalized assessed valuations (EAV) and sound debt service coverage provided by pledged revenue. The Ba3 rating on the Fullerton/Milwaukee COPs, Series 2011A, reflects the TIF district’s small size, negative trend in incremental EAV growth, and the COPs’ subordinate lien on pledged TIF revenue, which is first used to pay debt service on certain series of the city’s GO debt. The ratings on both series of COPs incorporate the relationship of the TIFs with the city’s GO credit profile.
The SG short term rating on the Sales Tax Revenue Refunding Bonds, Series 2002, is based on the credit fundamentals inherent in the city’s Ba1 long term sales tax rating and the conditional liquidity support associated with the bonds.
OUTLOOK
Our negative outlook reflects our expectation that Chicago’s credit challenges will continue, both in the near term and in the long term. Immediate credit challenges include potential draws on liquidity associated with rating triggers embedded in the city’s letters of credit (LOCs), standby bond purchase agreement (SBPA), lines of credit, direct bank loans, and swaps. The current rating actions give the counterparties of these transactions the option to immediately demand up to $2.2 billion in accelerated principal and accrued interest and associated termination fees. Of this amount, the GO and sales tax revenue rating actions trigger $1.7 billion of potential payments; the second lien water revenue rating action triggers $99 million of potential payments; and the second lien sewer revenue rating action triggers $355 million of potential payments.
The negative outlook also reflects our expectation that Chicago’s credit quality will weaken as unfunded liabilities of the Municipal, Laborer, Police, and Fire pension plans grow and exert increased pressure on the city’s operating budget. In the near term, Chicago’s administration must comply with a 179% contribution increase to its Police and Fire pension plans in 2016.
Developments involving the Municipal and Laborer plans present longer term risks to the city’s credit profile. In our opinion, the Illinois Supreme Court’s May 8 ruling raises the risk that the statute governing Chicago’s Municipal and Laborer pension plans will eventually be overturned. If so, the city’s obligation to fund the Municipal and Laborer plans would likely revert to that which existed before the statute took effect in January 2015. Under the prior funding requirements, the city’s pension contributions were well below the plans’ actuarial requirements. Therefore, if the Municipal and Laborer statute is overturned, and no other adjustments are made to plan revenues and/or expenditures, we believe the plans will continue to extinguish assets to pay annuitants. As the plans move toward insolvency, the city’s credit standing will continue to deteriorate, given our view that the state may eventually implement legislation forcing Chicago to pay annuitants directly. Annuitant payments would materially exceed current employer contribution levels. In our view, Chicago’s ability and willingness to fund annuitant payments, should they be required of the city, is uncertain.
WHAT COULD MAKE THE RATINGS GO UP (or revise the outlook to stable)
- City or state actions that halt the growth of the city’s unfunded pension liabilities
- Revenue growth and/or reductions in other operating expenditures that enable the city to accommodate increased pension costs into annual operating budgets
- Demonstrated legal separation of pledged revenue from the city’s general operations (sales tax and motor fuel tax ratings)
WHAT COULD MAKE THE RATINGS GO DOWN
- Determination by a court of law that the current statute governing the city’s Municipal and Laborer plans is unconstitutional
- Continued growth in the debt and/or unfunded pension liabilities of the city and/or overlapping governments
- Narrowing of the city’s fund balances and liquidity
OBLIGOR PROFILE
The City of Chicago, with a 2010 US Census population of 2.7 million, is the largest city in the State of Illinois and the third most populous city in the US. Chicago’s water enterprise serves an estimated population of 5.3 million in northeast Illinois consisting of residents of the city as well as 125 suburban communities. Chicago’s sewer enterprise serves 2.7 million city residents.
LEGAL SECURITY
Chicago’s GO bonds are secured by a pledge to levy a tax unlimited as to rate and amount to pay debt service. The city’s outstanding CP bank bonds are secured by the city’s GO full faith and credit pledge but do not benefit from a dedicated levy.
Chicago’s sales tax revenue bonds are secured by a senior lien pledge on both receipts of the city’s local home rule sales tax revenue and the city’s share of state sales tax collections.
Chicago’s motor fuel tax revenue bonds are secured by a senior lien pledge on 75% of the city’s annual allocation of state motor fuel taxes as well as additional revenues pledged by the city that primarily consist of dock licensing fees collected from tour boats operating on the Chicago River.
Chicago’s senior lien water revenue bonds are secured by a senior lien on the net revenue of the city’s water enterprise. Chicago’s second lien water revenue bonds are secured by a second lien on the net revenue of the city’s water enterprise. Chicago’s senior lien sewer revenue bonds are secured by a senior lien on the net revenue of the city’s sewer enterprise. Chicago’s second lien sewer revenue bonds are secured by a second lien on the net revenue of the city’s sewer enterprise.
The MetraMarket COPs, Series 2010A, and the Fullerton/Milwaukee COPs, Series 2011A, are secured by a pledge of payments made by the city on developers’ notes to finance redevelopment in the respective TIF districts. Neither series of COPs is an obligation of the City of Chicago. The city’s payments on the respective development notes have been assigned to the trustees by the developers as security on the COPs.
One thing the city needs to do right away is separate those special funds from the general operating fund. But that’s only a small step.
“While Chicago’s financial crisis is very real and at our doorsteps, today’s irresponsible decision by Moody’s to downgrade the City’s credit by two steps goes far beyond that reality. Their decision was driven solely by the overturning of a state pension bill that did not include Chicago’s pension reform, yet they did not downgrade the State of Illinois. Moody’s is out of step with other rating agencies – by as many as six steps – as they refuse to acknowledge Chicago’s growing economy, progress we have made on our legacy financial liabilities, balancing four budgets without raising property taxes while adding to our reserves, securing pension reforms for two of the City’s four funds to preserve and protect retirements for 61,000 employees that were previously in danger, and the progress we are now making with our partners in labor at the other two city funds. This action by Moody’s is not only premature, but it is irresponsible to play politics with Chicago’s financial future by pushing the City to increase taxes on residents without reform. I am committed to focus on both reform and revenue to address Chicago’s fiscal crisis, and we will continue our work in Springfield and with our partners in labor to ensure we will always meet our obligations, protect the retirements of our workforce, continue to deliver vital city services, while protecting our taxpayers.”
“(I)t is irresponsible to play politics with Chicago’s financial future by pushing the City to increase taxes on residents without reform.” Heh. Sounds a bit like the governor.
One analyst was sympathetic to the mayor’s argument that Moody’s acted too quickly, but noted the message being sent about Emanuel’s leadership as he enters a second term.
“A cut below investment grade is a major statement, implying that there is material risk to the city not paying its bondholders on time or in full,” said Matt Fabian, a managing partner at Municipal Market Analytics. “To have gone there without waiting to see the city’s approach to the current budget gap, or whether or not they will raise revenues is clear demonstration of a lack of confidence in city management. In other words, they see little reason to wait because they expect little in the way of a management response.” […]
Some financial analysts said they were caught off guard by the downgrade, which came less than three months after another significant Moody’s downgrade of Chicago’s debt. Those analysts said they weren’t sure if the Moody’s action would increase city borrowing costs, given that other agencies have given the city higher ratings and the city’s already paying relatively high interest rates.
“The downgrade is a surprise to me, because I see no reason to give up on management yet,” Fabian said. “There is still time for them to formulate a plan and, over time, fix their budget issues.”
Clint Krislov, the attorney representing retired city workers in one of two lawsuits against the Chicago pension reform law, said he will ask a judge on Wednesday for a summary judgment invalidating the law. […]
The latest Moody’s downgrade gives banks that provide credit support and interest-rate swaps the right to demand a total of $2.2 billion in accelerated principal, interest and termination payments from Chicago, according to Moody’s.
Chicago debt has been trading at huge spreads over the municipal market’s triple-A benchmark yield scale. Chicago’s descent into junk status could obligate managers of some high-quality muni funds to dump the city’s bonds, warned Dan Heckman, senior fixed-income strategist at U.S. Bank Wealth Management.
“We would continue to urge investors to have an extreme level of caution here,” Heckman said.
If Krislov is successful, we could see a stampede.
Budget Director Alex Holt said Tuesday the city plans to forge ahead with that plan, even though “swaps that overlay variable rate debt” could be called in immediately as a result of the double-downgrade.
“If they do, there will be termination payments we’ll need to make. But we were going to take out $200 million in variable rate debt anyway over the course of this year,” Holt said.
As for the city’s ability to borrow to fund capital projects, Holt said, “We think the capital markets will continue to be available to us. We think investors still have confidence in the city.”
Yeah, but some institutional investors won’t be able to buy those bonds now.
* Gregory G. Katsas, Brian J. Murray and Anthony J. Dick are identified as “constitutional and appellate lawyers at Jones Day” for their Crain’s op-ed about the governor’s proposal to move all active state workers into a Tier 2 retirement plan…
Unlike the law just struck down, Rauner’s proposal operates entirely on a going-forward basis: It guarantees that workers will keep every cent of every pension benefit earned for past service under current law, and it thus leaves current retirees unaffected. At the same time, his proposal saves the state budget by slightly modifying the formula used to calculate benefits based on future service. […]
According to the critics of Rauner’s proposal, the pension “benefits” protected by the Illinois Constitution include not only earned pension benefits but every aspect of the pension formula used to calculate future benefits. On this reading, every employee who has drawn a public salary for even one day has a right to continue earning future benefits under the same formula for the entire course of his working life. If this view prevails, it will force the state to continue racking up staggering pension liabilities for decades to come.
We recognize that the Illinois Supreme Court’s recent decision contains language broadly stating that “benefit calculation formulas are entitled to constitutional protection.” Nonetheless, Illinois courts never have squarely addressed whether pension formulas can be modified only as to future years of service.
On the contrary, the court’s decision emphasized that pension benefits are not protected until the employee “complies with any qualifications imposed when the additional benefits were first offered.” This means that as long as the Legislature changes the pension formula to be applied to future years of service, employees will have a fair chance to decide whether to continue working for the state while earning new retirement benefits based on the new formula.
* I dunno. From last week’s Supreme Court ruling. Emphasis added…
Under article XIII, section 5, members of pension plans subject to its provisions have a legally enforceable right to receive the benefits they have been promised. People ex rel. Sklodowski v. State, 182 Ill. 2d 220, 229-32 (1998); McNamee v. State, 173 Ill. 2d 433, 444-46 (1996). The protections afforded to such benefits by article XIII, section 5 attach once an individual first embarks upon employment in a position covered by a public retirement system, not when the employee ultimately retires. See Di Falco v. Board of Trustees of the Firemen’s Pension Fund of the Wood Dale Fire Protection District No. One, 122 Ill. 2d 22, 26 (1988). Accordingly, once an individual begins work and becomes a member of a public retirement system, any subsequent changes to the Pension Code that would diminish the benefits conferred by membership in the retirement system cannot be applied to that individual. Buddell v. Board of Trustees, State University Retirement System, 118 Ill. 2d 99, 105-06 (1987) (pension protection clause barred statutory change in Pension Code which prevented current pension system member from purchasing service credit for time spent in military); Felt v. Board of Trustees of the Judges Retirement System, 107 Ill. 2d 158, 162-63 (1985) (amendment to Pension Code adversely affecting base salary used to compute annuity impermissibly reduced retirement benefits of existing retirement system members in violation of pension protection clause); Kraus v. Board of Trustees of the Police Pension Fund, 72 Ill. App. 3d 833, 844-48 (1979) (change in Pension Code’s method of computing a police officer’s pensionable salary in a way that would reduce the amount of the pension could not, under the pension protection clause, be applied to persons who were members of the retirement system prior to the amendment’s effective date); Miller v. Retirement Board of Policemen’s Annuity & Benefit Fund, 329 Ill. App. 3d 589 (2001) (amendments to Pension Code which reduced benefits of existing retirement system members with respect to eligibility for automatic annual increases unconstitutional under pension protection clause); Schroeder v. Morton Grove Police Pension Board, 219 Ill. App. 3d 697 (1991) (finding invalid, as violation of pension protection clause, amendment to Pension Code reducing pension benefits based on receipt of workers’ compensation benefits).
Tuesday, May 12, 2015 - Posted by Advertising Department
[The following is a paid advertisement.]
Ann Harris, IBEW Local 51 Member & Employee of Clinton Power Station
I am a proud member of IBEW Local 51 and an employee of Clinton Power Station in DeWitt County. For the past 34 years, I have worked at the plant day in and day out to provide safe, reliable, clean air electricity to the state of Illinois.
My job at the plant has provided a great living for my family. Without this job, I could not have put my two sons and daughter through college. I live in Farmer City and enjoy volunteering in the community. I’m active in the local chamber of commerce and like to volunteer at local food pantries. Exelon does a great job supporting these organizations.
But all of this and the economic well-being of my family and families across the state are at risk because outdated energy policies are driving nuclear plants around the country to close prematurely. Clinton Power Station could be next. The Low Carbon Portfolio Standard would help prevent this. It’s good for Illinois and good for our economy.
I urge members of the General Assembly to support the low carbon portfolio standard (HB 3293 & SB 1585)
Hoping to trigger support for a law legalizing gun silencers, an Illinois firearms lobbyist said Monday there is a difference between the way Hollywood portrays suppressors and how they actually work and sound.
Todd Vandermyde, a key architect of the state’s concealed carry law, took members of the central Illinois media to the Athens Police Department’s gun range Monday and had them listen to the difference in the ways guns sound with and without a suppressor. Reporters then tested out the guns for themselves.
“So what this is all about is we’ve had some legislation pending in the statehouse to legalize suppressors in Illinois,” Vandermyde said. “Suppressors are the industry term for what a lot of people call silencers. They’re called suppressors because they don’t really silence the sound of the gun, they suppress it.”
Thirty-nine states allow some form of legal possession of suppressors. Vandermyde said suppressors help limit the noise from neighbors who are shooting on their own land or hunting and helps give peace to neighbors of gun ranges. They are also helpful to those who are shooting the firearms, especially if ear protection is not being worn.
Will County officials say they could support an amendment in the works designed to lessen the financial blow of a new state law requiring juror pay hikes. […]
The draft legislation obtained by The Herald-News has yet to be filed and is still being vetted and discussed among working groups. But the draft increases juror pay from the current $4 to $10 per day to $20 the first two days and $30 for each subsequent day.
That’s still a raise — but it’s not as substantial as the pay raises outlined in the original legislation approved last-minute during last year’s veto session. That bill increased juror pay to $25 for the first day and $50 each successive day.
Sangmeister said the amendment reduces the estimated increased expense by about $125,000 annually for the county.
* From a press release…
On Wednesday morning, State Representative Robyn Gabel will present Senate Bill 1564 to the Illinois House Human Services Committee. The proposal, which already has passed the Senate on a bipartisan vote (34-19), amends the Illinois Health Care Right of Conscience Act to ensure that patients get all the information they need in order to make the best decisions about their health care treatment.
The measure, as passed by the Senate, reflects a compromise between the ACLU, the Catholic Conference, the Catholic Health Care Association and the Illinois State Medical Society.
In recent days, a group of legislators and anti-abortion advocates have launched a “fact-free” campaign, designed to derail the legislation. One advocate, for example, told a press event last week that the measure would force doctors to perform abortions. This is not true. A legislator told the same press gathering that the measure was an idea ”in search of a problem.” This will come as news to Mindy Swank, whose health and future fertility were put at risk after health care providers failed to give her all the information she and her husband Adam needed to make an informed decision about a difficult pregnancy.
* We could certainly use more tourism, but I dunno how many places outside a new Chicago casino would see much of an uptick…
Tourism officials on Monday pitched the benefits of a Chicago casino to lawmakers whose task of balancing Illinois’ books has become harder after the state Supreme Court threw out hoped-for savings on pension costs.
Continuing long-standing efforts to expand gambling in Illinois, representatives from the dining, hotel and tourism industries told a panel of lawmakers that a casino in Chicago’s downtown area would create thousands of jobs, drive more business to local restaurants and send much-needed money into state and city coffers.
* As is too often the case, we missed out. It took us too long to get started and then it took too long to get the law passed and the rules hammered out…
(T)he overall outlook for fracking in Illinois is uncertain, a consequence of low oil prices that started dropping right about the same time the state finished composing its fracking permit process in November.
Not a single company has applied for a fracking permit in Illinois, the state Department of Natural Resources reports. Nationwide, about 1,000 oil and gas rigs have ceased operations since the recent peak in September 2014, said Ethan Bellamy, a senior analyst at Robert W. Baird & Co.
* Back in March, the Rauner administration put out a request for bids “to obtain knowledge that will assist in developing and issuing a comprehensive formal solicitation to acquire appraisal services of the James R. Thompson Center.”
The Department of Central Management Services, Bureau of Property Management is requesting bids for appraisal services for the James R. Thompson Center (JRTC) located at 100 W. Randolph St, Chicago, Illinois in Cook County.
The intent is to assist CMS in establishing a Fair Market Value for the purpose of a potential sale of the JRTC property.
The Department of Central Management Services issues this Request for Proposal to contract for logistical and management services. To meet the State’s goal of reducing the cost for occupied State employee space, the State needs to assess and implement relocation of State employees within the James R. Thompson Center (JRTC) located at 100 W. Randolph Street in Chicago, Illinois and the Michael A. Bilandic Building (MABB) located at 160 N. LaSalle Street in Chicago, Illinois.
It will be the responsibility of the awarded Vendor to implement the plan established by the vendor and approved by the State and provide overall management and services to assure the complete relocations, transfer of contents, furnishings and equipment and procurement of alternative work space for employees affected by the dislocation.
* The House Democrats have released their witness list for today’s “Committee of the Whole” dealing with tort reform. Not surprisingly, some of the same folks who appear in the Illinois Trial Lawyers Association’s ads on this blog are also scheduled to testify today…
Panel 1
• Jennifer Hill – Mother of Ryan Hill (Illinois)
• Crystal Bobbitt – Mother of Juliann Bobbitt (Indiana)
• Prof. Bernard Black, JD – Professor of Finance and Law,Northwestern University
• Dr. David Hyman, MD, JD – H. Ross and Helen Workman Chair in Law and Professor of Medicine, University of Illinois
Panel 2
• Molly Akers (Illinois)
• Linda Reynolds (Missouri)
• Prof. Bernard Black
• Dr. David Hyman
Panel 3
• Richard Marston – Caregiver and close friend of Len Kulisek (Illinois)
• Frank Krivach – Father of Donald Krivach (Indiana)
• Prof. Bernard Black
• Dr. David Hyman
Panel 4
• Sarah Deatherage – Widow of Trooper Kyle Deatherage (Illinois)
• Elizabeth Sauter – Widow of Trooper James Sauter (Illinois)
Panel 5
• Madlyn Steffey – Mother of Samantha Bellino (Illinois)
• Kim Bermingham – Mother of William Bermingham (Indiana)
• Prof. Bernard Black
• Dr. David Hyman
Panel 6
• Amy Clark – Mother of Timothy Clark (Illinois)
* While attending last week’s House vs. Senate softball game, I noticed that Daily Herald Public Affairs Reporting intern Erin Hegarty had an unusual tattoo on her forearm. We talked about it a bit and I asked her to write something for y’all…
I knew I wanted a tattoo that incorporated both Chicago and the state of Illinois, and while I did take several art classes in high school, I could not come up with a design idea on my own. So, I found out at the beginning of June 2014 that a nearby tattoo parlor was offering $20 pre-drawn tattoos on both Friday June 13 and Saturday June 14. I took a look at the sheet of design options for the tattoos, and I immediately knew I had met my destiny: an outline of Illinois with part of the Chicago flag inside. It wasn’t too big and fit nicely into my budget. I, of course, researched the tattoo parlor and found out a good friend of mine had most of her (very nice looking) tattoos done by the same artist who would be doing mine.
The morning of June 14 rolled around. I biked to Chicago’s Millennium Park for free 8 a.m. yoga, then biked back up north to stand in line for my new body art; running shoes, bike shorts and all. Out of everyone in line, I probably looked the least likely to be standing in a 3-hour line for a discounted tattoo.
I chose to get it on my forearm because I wanted to be able to see it. And I love wearing blazers and cardigans, so I knew covering it up at work wouldn’t be a problem. I caught some flack from family members who said it was unprofessional and something they wouldn’t have done themselves. But I love it.
I argue that as an Illinois Statehouse reporting intern, my tattoo shows a great deal of dedication and love for Illinois. I like that if I ever need to draw Illinois, I can look at my arm and use it as a guide. And I hope to be a Chicagoan, or at least Illinoisan, for the rest of my life, so while some people can live here all their life and not feel the need to have their favorite city and state permanently inked on their body, I think it’s a fine idea.
When I have it more visible during the summer months, I look forward to playing this situation out as it has numerous times:
Stranger: I like your tattoo.
Me: Thanks.
Stranger: What is it?
Me: Oh, just an outline of Wisconsin, it’s my favorite state.
Stranger: (with a puzzled look)…yeah but that’s Illinois.
Me: What?! They told me this was an outline of Wisconsin!
So, of course everyone loves to hate on Illinois, and maybe they’ve good reason to. But growing up in the suburbs, living in Chicago and now living in Springfield, there is no other design I would rather have permanently on my arm.
Pretty cool story.
* Erin…
* Closeup…
Thoughts?
* Erin is also attempting to increase her Twitter following, so click here and follow her if you like her tattoo!
The following communities have passed the resolution:
Lincolnshire
Watseka
Iroquois County
In addition, the Naperville Chamber of Commerce and the Naperville Development Partnership also passed the resolution.
Best,
ck
* No local updates appear on the Illinois AFL-CIO’s Facebook page today, but there is this…
* Meanwhile, Greg Hinz talked to DCEO Director Jim Schultz…
(T)he DCEO [private development agency] plan is part of Rauner’s wider agenda to reform tort law, cut back on workers’ compensation insurance and aid to the unemployed, allow local communities to ban union shops, and reduce the power of public-sector unions.
Asked what ranks highest on that list, Schultz replied: “All of it. There’s no rank order.” Pushed a bit, he seemed to suggest that the privatization idea is his personal priority, but termed the other items “all the same.”
More than 1,100 companies “blacklist” Illinois because it has no right-to-work law, Schultz said, declining to name any of the 1,100.
In a move that’s surprising to some, Volvo recently announced that it’s establishing a new factory outside of Charleston. The Swedes are following the growing trend of foreign automakers setting up shop in the South, making it a growing manufacturing center in the U.S.
The new Volvo facility will cost about $500 million to build. When the factory is finally operational, it will roll out about 100,000 vehicles annually and employ about 4,000 people in the area. Ground is set to be broken in the fall, with the first wave of vehicles expected to roll off the assembly line in 2018. […]
The new Volvo factory will build vehicles for the North American market, plus other areas of the world. Many manufacturers have been drawn to the South because of right-to-work laws that have diminished the power of labor unions.
* I think AFSCME is going to have a real problem with this issue during negotiations…
A coalition of state and national business groups hopes to deliver a death blow to organized labor in Louisiana, pushing an anti-union bill that would ban automatically deducting membership dues from the paychecks of government workers. Unionized firefighters, police officers and teachers would be among those affected.
While Gov. Bruce Rauner is urging local governments to establish local “right to work zones,” where workers wouldn’t have to join a union and pay dues as a condition of employment, the Champaign County Board is looking into a new level of cooperation with labor unions on construction projects.
The concept — called a “local economic growth initiative tripartite” — is scheduled to be discussed at a county board committee of the whole meeting at 6:30 p.m. today at the Brookens Administrative Center. […]
(T)wo county board Democrats who are promoting the agreement say it’s meant to benefit the county, which is facing several million dollars’ worth of construction programs in the future.
Urbana Democrat James Quisenberry said the initiative — which involves the county, contractors and unions on projects of over $100,000 — builds on existing agreements.
“In a project labor agreement, you not only commit to the prevailing wage and working with the local trades on a project, but they turn around and give you assurances against work stoppages and strikes,” Quisenberry said. “This is going to come off as a response to Rauner and ‘the turnaround agenda’ because that’s about right to work and getting out of collective bargaining arrangements, and this is about committing more to those, but I think it’s a reality of our county that we tend to be more supportive of labor.”
Tuesday, May 12, 2015 - Posted by Advertising Department
[The following is a paid advertisement.]
My name is Amy Clark. Shortly after my first son, Brandon, was born I noticed he wasn’t meeting developmental milestones. He was showing severe developmental delays. As he got, he couldn’t speak and was excessively happy.
Brandon was diagnosed with Angelman Syndrome, a rare neuro-genetic disorder. After genetic testing, I was told Brandon’s form of Angelman Syndrome was spontaneous and not hereditary.
Brandon’s condition required so much of my time and attention I wanted to be 100 percent positive his condition was not hereditary before I thought about having another child. I sought a second opinion and was assured the initial tests were negative. I was told I had a less than 1 percent chance of conceiving another child with Angelman Syndrome.
Our second son, Timothy, began showing the same symptoms of Angelman Syndrome that Brandon had. I sought answers and discovered my original genetic tests were not negative. The doctors were wrong, I indeed tested positive for the hereditary genetic mutation. This meant I had a 50 percent chance of having a child with Angelman Syndrome.
Because of the doctors’ mistakes, I now have two disabled children who demand 100 percent of my time and attention.
The civil justice system in Illinois allowed me to hold the doctors accountable for their mistakes. I cannot work, because it’s impossible to find someone to care for the boys. My life is not normal by any means, and my settlement did not place me in the lap of luxury. I needed my settlement to survive, pay the bills and to put food on the table. I didn’t win a jackpot—I obtained justice. Trust me, I’d give it all back to have that big, healthy family I always wanted.
* Things are getting a bit tense in comments these days, so in an attempt to make this environment more civil, I’m going to start banning more words.
Words like “moron,” “idiot,” etc. are currently banned now. You might be able to see your posts, but nobody else can. I’ve too often allowed those words to slip through the net, but no longer.
This morning, I banned “dope” and “stupid.” If you use those words, your comment will not post. There will be no exceptions. I’m tired of the vitriol. Repeat violators will be banned for life.
* This is not a public space. This website belongs to me. No one has an inherent right to say anything that comes to their minds here. Go scream in a park, or on a street corner or wherever. Not here.
You’re obviously free to disagree with me, the subject of a post, another commenter or whatever your heart desires. But the level of hostility is just getting out of hand. So keep it civil or you’re gone.
I don’t sell ads based on the number of page views or impressions. Ad sales are based on the fact that most everybody at the Statehouse is on this blog and some of y’all are becoming an embarrassment to me and could wind up driving my target audience away. If you are among those commenters who are getting too hot-headed, just know that I don’t need you here, I don’t want you here and you are harmful to my business model. I will not hesitate to kick you to the curb.
/rant
* Look, I fully understand how people can get angry at times. I do, too, as is clear by the above rant. And I also understand how posts here (like that horrible idea to lay off all state employees) can get people truly fired up. But we can criticize and even ridicule without becoming personal and without resorting to nasty words. We all need to elevate ourselves, and I’ll try to do the same.
* The Question: Your nominations for newly banned words in order to hopefully foster a more civil commenting environment?
An attempt by holders of bonds issued by bankrupt San Bernardino to win the same treatment accorded the city’s biggest creditor, state pension giant Calpers, was rejected by a federal judge on Monday, in a ruling the judge called “tentative.”
The ruling comes three days before the southern California city of San Bernardino produces its bankruptcy exit plan, which, if confirmed, would appear to clear the way for the city to slash its bondholder debt. The city has already said that it intends to pay Calpers, which has assets of $300 billion, in full.
The ruling mirrors what happened in two other recent city bankruptcies - Detroit Michigan, and Stockton, California - where bondholders were paid little of what they were owed, while pensioners and pension funds emerged relatively untouched.
Tuesday, May 12, 2015 - Posted by Advertising Department
[The following is a paid advertisement.]
Oppose $810 million in proposed FY 2016 hospital Medicaid cuts because:
· In a new report, the Civic Federation, a well-respected, non-partisan fiscal watchdog organization, opposes the Governor’s recommended FY16 budget because “it relies heavily on projected savings that do not appear to be achievable or prudent in light of the State of Illinois’ obligations and long-term policy objectives.”
· The Civic Federation opposes “budgeting for other unrealistic savings,” including the Governor’s proposal to reduce Medicaid funding to hospitals by $400 million under the Hospital Assessment Program – the largest single proposed Medicaid reduction. Under the program, hospitals pay assessments to the State to draw down federal Medicaid matching funds.
· The Civic Federation is concerned that the Governor’s proposal to eliminate fees [$60 million] for new Medicaid managed care entities [provider-sponsored Accountable Care Entities and Care Coordination Entities] and require them to accept fully capitated rates “could disrupt the State’s overdue transition to managed care.” This proposal “has the potential to disrupt medical care for approximately 485,000 recipients if their managed care entity does not agree to full capitation and must disband.”
Cutting Medicaid in the FY2016 budget is shortsighted and will result in real harm to people and communities.
“They are private meetings,” Rauner spokeswoman Catherine Kelly told Kurt Erickson of the Lee Enterprises’ Springfield Bureau. “They are private discussions that we’re keeping confidential to protect the process.” […]
It’s hard to see how private meetings are needed to “protect the process.” It’s troubling because we don’t know if the meetings are bipartisan, or if there is any diversity. For all we know, they are loaded with like-minded people who are merely rubber-stamping an agenda. We are used to legislators meeting in private, but often we were at least aware of who was involved in the process and vaguely what they were talking about. Now we are completely in the dark.
By choosing to work out of public view, the Rauner administration is effectively telling the public that they know what’s best for the state and that we shouldn’t worry our silly heads about what kind of deals or discussions are going on in private.
For the record, transparency is defined by Merriam-Webster as “something transparent; especially: a picture (as on film) viewed by light shining through it or by projection.”
Defending the idea that conducting business out of the public’s view makes for better government does nothing to give us confidence that things have changed for the better in Springfield. There is no light shining on this process. State government in Illinois has never been known as a bastion of openness, but this takes it down one more notch.
* Kurt Erickson on the governor’s idea to pass a constitutional amendment to fix the pension issue…
On Monday, Rauner spokeswoman Catherine Kelly declined to answer whether the governor or his staff is preparing to introduce a proposed constitutional amendment. The spring legislative session is scheduled to end in 20 days.
“He will continue to work with the Legislature to find a commonsense, bipartisan solution that will help put the state back on sound financial footing,” Kelly said.
If a constitutional amendment did make it through the process, legal experts say any changes could be appealed in the federal court system, which could rule that reducing pension benefits violates the U.S. Constitution.
In other words, a final answer on Rauner’s proposal could be several years away.
“Even if everything went right, you would be talking five, six, seven years,” John Colombo, interim dean of the University of Illinois College of Law, told Reuters.
It’s fine if the governor wants to propose a constitutional amendment. Let’s see it.
But we also need an immediate fix, which I discussed with subscribers yesterday. The Rauner plan might not be implemented until he’s out of office, for crying out loud.
* One thing is certain, however. The hyperbolic goofballs who swore up and down that the last pension reform plan was absolutely constitutional and demanded immediate action need to either admit they were wrong from the beginning or be cut out of this new process.
Also, too, remember how the aforementioned goofballs dismissed as unworkable Senate President John Cullerton’s “Plan B” amendment which would’ve been attached to the pension reform bill in case that one was declared unconstitutional? Yeah, well, if Cullerton had been listened to, then maybe we wouldn’t be in this freaking mess today. Or maybe not, but at the very least Cullerton should be given a much more influential seat at the table.
Our pension reform policy is being driven far too much by screamers instead of thinkers. That needs to change.
The state’s pension system is underfunded by more than $100 billion, and beyond repair. When it comes to reforming the system, lawmakers’ hands are tied. On Friday the court ruled that the retirement benefits offered on current workers’ first day of employment can never be changed; only new hires can earn retirement benefits differently.
So if changes can’t be made, here is what Gov. Bruce Rauner should do: Lay off the entire state workforce, and close the pension system. Work with the General Assembly to open a different retirement plan for newly hired government workers, modeled after the nation’s most popular retirement vehicle: the 401(k). Then offer to rehire state workers under the new retirement plan.
It won’t be easy, and it won’t happen overnight.
State laws will need to be changed. Pension benefits earned to date will need to be paid.
The government unions will file lawsuits, and the legality of this strategy will be challenged. Understandably, some workers will turn down the new deal. Daily operations of state government will be disrupted — and potentially result in a government shutdown.
But even if all those things happen, the ultimate outcome will be better than what’s ahead if the state does nothing.
Moreover, no possible claim can be made that no less drastic measures were available when balancing pension obligations with other State expenditures became problematic
The General Assembly may not legislate on a subject withdrawn from its authority by the constitution
So, yeah, the Supremes will approve this idea for sure.
Right.
* When those employees were hired, they were promised pension benefits. And if they quit their jobs for a while and then returned to government service they picked up where they left off. The Supreme Court was crystal clear. The General Assembly can’t break that contract now.
The promotions meant to drum up interest in horse racing at 90-year-old Fairmount Park among customers more comfortable staring at an iPhone than a tip sheet are creative and constant.
Horse Hooky is designed to lure those willing to skip out of work early each Tuesday to drink cheap draft beer and eat even cheaper hot dogs. Couch potatoes can rent six-person sofas in the grandstand. Saturday nights in the summer offer live bands, and more cheap beer.
Despite the party vibe, attendance continues to plummet at this southwestern Illinois horse track and the state’s four others. Purses are low, betting is down and horse owners are increasingly spurning Illinois tracks for venues in Indiana, Iowa, Ohio and other nearby states that have paired some casinos with ponies, according to track owners.
“We’re the third biggest market in the country, and we’re getting beat out by Indiana, Iowa, Arkansas and Minnesota,” according to Glen Berman, executive director of the Chicago-based Illinois Thoroughbred Horsemen’s Association. “It just shouldn’t be.” […]
(T)he average total pay-out this year in a state-bred thoroughbred race at Arlington Park in suburban Chicago was less than $25,000, Berman said, less than half the amount paid to winners in Iowa and at least $12,000 less than tracks in Indiana and Minnesota. At Fairmount Park, the track’s 54 racing days represents a 35 percent reduction from the yearly activity eight years earlier, and in 2000, when the track discontinued harness racing, there were more than 150 days on the schedule.
* The Question: Time for slots at tracks? Take the poll and then explain your answer in comments, please.
* Senate President John Cullerton actually used the “B-word”…
Lawmakers also take issue with his style, complaining that Rauner treats them like “middle management.” They say his aides have taken a position that the budget is their problem, and unless they agree to the governor’s wishes, he’ll keep cutting services.
“He must think we’re going to come to him and say: ‘We’ll do whatever you want, just let us pass a tax increase because we need it so much,’ ” says Senate President John Cullerton, D-Chicago.
“As if the state budget is our problem and, whether we have a state budget or not, it’s not a big deal for him.”
Cullerton says Rauner is mistaken if he thinks his hand is strengthened after the May 31 deadline passes when legislators must present a balanced budget. He argues that if the Legislature goes into overtime, the areas the governor wants to cut will instead automatically get funded by law — including Medicaid.
“What would be shortchanged would be what he cares about — education,” Cullerton says. “He doesn’t have the leverage he thinks he has. Obviously, you can be elected governor and know nothing about the office. [Ex-Gov. Rod] Blagojevich did it twice. It wasn’t just Rauner.”
Gov. Bruce Rauner said Saturday that he is not worried about passing a budget, even after House Democrats struck down a portion of his proposal.
The Republican governor made the remarks before giving his commencement address to 320 graduates at Lincoln College. House Democrats brought the human services portion Rauner’s proposed budget to the floor Thursday, where it received zero “yes” votes. Republicans, who voted “present” in protest, called it a blatantly partisan attack at a time when bipartisanism is woefully necessary.
“I’m not too concerned about anything going on right now in the legislature because in difficult negotiations there tends to be some political theater, I’ll call it,” Rauner said.
He said the budget working groups and chiefs of staff from his office and the legislative leaders are working well together, and he expects progress before the spring legislative session ends May 31. The state is facing a $6 billion budget gap for the fiscal year that begins July 1, and Rauner has proposed closing it without any new revenue.
“Government negotiations often involve a certain amount of political theater,” Rauner said. “That’s fine. It’s not very relevant. It’s all part of the process. It’s fine. No big issue.”
In fact, he said that while he hasn’t spoken to Madigan “in a number of days,” top officials in his administration met with senior staff of the four legislative leaders for four hours on Thursday.
“They’re working through what our (legislative and administration) working groups have done this week,” he said. “I’m cautiously optimistic things are going well. We’re getting some progress.”
He said he wasn’t disheartened by the setbacks of the last week.
“That’s why I wanted the job. I knew it was going to be hard. That’s what we’ve got to do, we’ve got to take this stuff on,” Rauner said.
Subscribers know a bit more about that meeting last week.
* Nothing yet from the governor’s office. From the Illinois AFL-CIO…
Village of Cambridge has pulled the Rauner anti-worker resolution from its agenda for Monday (May 11).
Rauner anti-worker resolution not called at Henry County committee [Friday] morning. Big turnout from labor and community. Great work. May be brought up for hearings in future. We’ll keep you posted.
The agenda item was to discuss rescinding the bad resolution, which had been hurriedly passed. Apparently the item has been pulled to stifle debate. I understand that Cambridge residents are still turning out tonight to make clear they want their voices heard.
* Meanwhile, we’re coming up to an historical milestone. Almost 34 years ago on May 15, 1981 the Republican-controlled Illinois House debated and overwhelmingly defeated (138-25) a “right to work” bill sponsored by DuPage County GOP Rep. Ray Hudson. The debate transcript is here.
This proposal is in a very real sense a link in the chain of American liberty. This measure does in a very real sense epitomize the age old struggle between capitalism and freedom. House Bill 831 simply provides the First Amendment right of our citizens to associate or to refrain from associating in a labor union.” […]
This seems fair. It provides freedom of choice for the worker. It not only seems fair it is fair. The worker joins or doesn’t join but either way he has a job. The union gains because its members are on the rolls paying dues, contributing to Pension Funds and all of the rest of it not because he or she is forced to but because that employee wants to. Because they see in their membership something they really believe is worth having and keeping voluntarily. Of course, this voluntary membership could test the unions’ metal. Of course, this voluntary membership would require responsive and responsible union leadership, but is that so bad? I don’t think so. Why not give the Illinois worker this fundamental right of free choice?
* From Democratic Rep. Jim McPike’s remarks during debate…
…The only thing that is required of that employee is to pay union dues. to pay his fair share. Now, why is that important? It is important because federal law requires that the union, if a union is voted in, federal law requires that that union represent everyone at the plant. They must negotiate fringe benefits, salary increases, holidays, all of their benefits. Not just for union members in good standing but for everyone at the plant. If someone has a grievance they must represent that person at grievance hearings against the employer. Since there are associated costs that the union has in negotiating contracts and representing people at grievance hearings unions feel that workers who share in the benefits of a union should pay for the cost associated with the union. And that’s all the law says. That there can be no free loaders at a given plant. That since everyone benefits from a union everyone should pay for the cost of that union.
“I’m happy to see this is going down the tubes where it ought to be. It’s not been here for a vote positively for 45 years and I hope it doesn’t come back in 45 years.'’
* Bernie profiles Republican congressional candidate Mike Flynn…
While he describes himself as a “pro-life libertarian,” he also said he voted in a Democratic primary in Virginia in 2008 because he wanted to support a local candidate he knew. He did vote for Barack Obama for president on that ballot.
“I thought it would be my only chance to vote against Hillary,” he said of 2016 Democratic presidential frontrunner Hillary Clinton.
It may seem like a little thing, until you remember what happened to Kirk Dillard five years ago in the GOP primary after he supported Obama. If Flynn gets any traction and tries to portray Sen. Darin LaHood as some sort of Republicrat centrist, you can bet good money you’ll see the admission about voting for Obama in a mailer and/or TV ad - sans the Hillary stuff, of course.
Flynn says his family has been in Quincy for six generations, but he’s been in the Washington area for 20 years. He is married with four children, ages 9 to 17, and living in Alexandria, Virginia. He got an apartment in Quincy to run for Schock’s seat, and he says “there would be a transition” and his family would move to Illinois if he wins. He lived in Springfield while on the Illinois House Republican staff from 1992 to 1995. […]
In response to some issues raised by Flynn, LaHood’s campaign spokeswoman, Karen Disharoon, wrote in an email, “It’s impossible to change D.C. with a candidate from D.C., and that’s why Darin’s message of eliminating wasteful spending in government, fighting to repeal Obamacare, and working for term limits to get rid of the career politicians in both parties resonates with the families of central Illinois.” She also said LaHood was “the chief prosecutor of an anti-terrorism unit” and understands national security threats.
* Footnote 12 of the Illinois Supreme Court’s pension ruling…
Additional benefits may always be added, of course (see Kraus v. Board of Trustees of the Police Pension Fund, 72 Ill. App. 3d at 849), and the State may require additional employee contributions or other consideration in exchange (see Gualano v. City of Des Plaines, 139 Ill. App. 3d 456, 459 (1985). However, once the additional benefits are in place and the employee continues to work, remains a member of a covered retirement system, and complies with any qualifications imposed when the additional benefits were first offered, the additional benefits cannot be unilaterally diminished or eliminated. See, e.g., Taft v. Board of Trustees of the Police Pension Fund, 133 Ill. App. 3d 566, 572 (1985); Carr v. Board of Trustees of the Police Pension Fund, 158 Ill. App. 3d 7, 9-10 (1987); cf. Kuhlmann v. Board of Trustees of the Police Pension Fund, 106 Ill. App. 3d 603, 609 (1982) (member not eligible for increase in benefits where he had ceased contributing to the pension fund prior to the change in the law). [Emphasis added.]
To my eyes, the footnote seems to imply that Senate President John Cullerton’s “consideration” theory may pass muster. Cullerton would give workers a choice of allowing their raises going forward to be pensionable without the 3 percent compounded COLA or keep the compounded COLA without calculating raises going forward.
Indeed, I talked with Cullerton this morning and he believes that the footnote fully exonerates his approach. His ideas need to be considered as soon as possible. Tick freaking tock, people.
Also, too, it doesn’t look like the Supremes believe that Gov. Rauner’s idea - move all current employees into a Tier 2 system without providing consideration - will pass constitutional muster.
* And speaking of footnotes, the Supremes have in the past refused to order the General Assembly to fully fund the pension systems. However, check out Footnote 3…
Consistent with an earlier opinion by this court in McNamee v. State, 173 Ill. 2d 433 (1996), and comments at the Constitutional Convention, we did not, however, foreclose the possibility that a direct action could be brought by pension system members to compel funding if a pension fund were on the verge of default or imminent bankruptcy. Sklodowski, 182 Ill. 2d at 232-33.
It’s debatable whether state and local pension systems can declare bankruptcy, but the systems could lapse into technical default. If that does happen, the court has staked out its authority to “compel funding” and that footnote was a crystal clear warning shot.
While the group only released the numbers about Charters, we obtained a copy of the full poll, which includes data on state right track/wrong track, governor job approval and legislature job approval. It was done by Public Opinion Strategies, which you know is very good and is of registered voters. It was done after the so-called Good Friday cuts and before the cuts were rescinded.
After staging a mock trial of billionaire Governor Bruce Rauner at Wellington Avenue Church in Chicago yesterday, 300 seniors, religious leaders and workers piled into school buses to deliver an arrest warrant at one of the Governor’s mansions. Organizers of the event say Gov. Rauner is guilty of trying to balance the budget on the backs of seniors and people who are struggling to get by, instead of raising revenue from the wealthy and big corporations.
“Governor Rauner’s talk about ’shared sacrifice’ is a joke,” said Jessie Avraham, a member of Jane Addams Senior Caucus. “Big corporations and the wealthy aren’t ’sacrificing’ anything, they reap the rewards when they don’t pay their fair share. The Governor’s budget cuts threaten the very survival of seniors who would have to sacrifice quality of life; for many, the cuts could mean a death sentence.” […]
This Event was organized by a broad-based coalition of community groups from around Chicago including Jane Addams Senior Caucus, Action NOW, ADAPT, Community Renewal Society, Grassroots Collaborative, Fight for $15, Indiana Illinois Regional Organizing Network, Jewish Council on Urban Affairs, ONE Northside, National People’s Action, SEIU Healthcare Illinois/Indiana.
Making his first post-election appearance at the Capitol on Thursday, Gov.-elect Bruce Rauner said he hopes the Illinois Supreme Court eventually will provide guidance on what changes are acceptable when it comes to fixing the state’s more than $100 billion debt in the government worker pension system. […]
“My preference is probably to wait until the Supreme Court rules so we have some ground rules for what probably works and won’t work. I think that’s the smarter way to do it,” Rauner said.
Republican Gov.-elect Bruce Rauner said Monday that he was hardly surprised by a judge’s ruling last week that found Democrats’ landmark 2013 pension reform law to be unconstitutional.
But he said he hoped future appeals of the decision would supply a blueprint for what type of reform might pass constitutional muster. […]
“Hopefully they will give us some feedback that will help guide the discussion for future modifications as appropriate for the pensions,” Rauner said.
Rauner said he didn’t appreciate several suggestions for pensions fixes that the Supreme Court included in its 38-page decision. The unanimous decision included suggestions by the court that the state raise new revenue or enact a new schedule for repaying pension debt.
“I’m not sure it makes sense for the judiciary to comment on government policy. I think it’s their role to interpret the law, the existing law,” Rauner said.
I recently obtained a document distributed by the governor’s office detailing the membership list and meeting times and locations of the secret state legislative “working groups.”
The governor’s office has insisted that not only should legislators dummy up about what goes on at the groups’ meetings - which are designed to forge compromises on the governor’s “Turnaround Agenda” - but also that outsiders should not even know the membership of the groups or when and where they’re getting together.
That’s pretty ridiculous, if you ask me. Many moons ago, I began writing about private legislative caucus meetings. That didn’t endear me to the powers that be, but I thought the meetings were too important to the Statehouse process to ignore. I still think that, although caucus meetings are somewhat less important these days.
So, I exerted a bit of effort and eventually scored the governor’s document.
The working group tasked with hammering out a potential tax hike is so secret that its very existence would not be confirmed by members I contacted. Legislators were reportedly warned by the governor’s office that if any word leaked about the group then Gov. Bruce Rauner would refuse to increase taxes.
Yep, he’s a control freak.
The group was nicknamed “Vegas” by some of its members because what happens in the group is supposed to stay in the group. It’s official name is listed as “HOLD” on the governor’s document. It’s apparently not an acronym. “They were that afraid to put things in writing,” explained one source. “So just ‘hold’ this slot open.”
I kid you not.
Republican state Reps. Patricia Bellock and David Leitch are on the HOLD group, as well as Democratic Rep. John Bradley. Senate Democrats Heather Steans and Toi Hutchinson are also on the super secret group, as are Republican Sens. Pam Althoff and Karen McConnaughay. The governor’s top staff abruptly shut down a HOLD meeting last week, calling House Speaker Michael Madigan’s unilateral advancement of a budget bill a “hostile action.”
The “Economic Growth” working group will tackle issues like workers’ compensation insurance, the governor’s local “right to work zones” proposal, tort reform and the minimum wage. Democratic Reps. Jay Hoffman and Art Turner; Republican Reps. Mike Tryon, David Leitch and Dwight Kay; Democratic Sens. Kimberly Lightford and Kwame Raoul; and Republican Sens Matt Murphy and Jim Oberweis are on the group. Some initial progress is being made on workers’ comp reform, I’m told.
The “Taxpayer Protection” working group discusses issues like the governor’s proposed property tax freeze. Members were told that the governor’s initial bargaining position is a permanent freeze. Democratic Senators Gary Forby and Andy Manar are on the working group, as well as Republican Sens. Dan Duffy and Chris Nybo. Democratic Reps. John Bradley and Barbara Flynn Currie and GOP Reps. David Harris and Ed Sullivan are also on the working group.
I wrote recently about the “Transforming Government” group, which featured the Democratic throwdown with the governor’s staff over a legislative term limits constitutional amendment. It’s also dealing with implementing the governor’s executive order on state worker ethics and banning public employee union contributions to the executive branch. Democratic Reps. Lou Lang and Elgie Sims; Republican Reps. Norine Hammond and Chad Hays; Democratic Sen. Don Harmon; and Republican Sens. Darin LaHood and Chapin Rose are all on the committee.
The governor wants to move current state employees and teachers out of their “Tier 1″ pension plans and into a “Tier 2″ plan that provides far fewer benefits. His “Pension Reform” working group is comprised of Democratic Rep. Elaine Nekritz, Senate Democrat Daniel Biss, and HGOPs Tom Morrison and Ron Sandack, along with SGOPs Bill Brady and Pam Althoff.
Gov. Rauner has been promising a major road and transit construction plan since the campaign. The “Capital Plan” working group is comprised of SDems John Sullivan and Marty Sandoval, SGOPs Dave Syverson and Karen McConnaughay, HDems Bob Rita and Christian Mitchell and HGOPs Norine Hammond and Ed Sullivan. They didn’t get much done at their last meeting because the governor refused to talk about how to pay for it.
The “Budget Implementation” working group is huge. The last meeting was attended by 38 people, including all legislative appropriations committee chairs. Getting things accomplished with a group that size could be difficult.
The “Unemployment Insurance” working group will use an “agreed bill” process to find a way to bring down employer costs. Republican Sens. Sue Rezin and Kyle McCarter are serving on the group, as is Democratic Sen. Terry Link and Democratic Rep. Jay Hoffman, along with House Republicans John Anthony and Dwight Kay.
OK, can we stop with all the crazy secrecy now, please?
Subscribers have more details about individual working group meetings.
* The Tribune editorial page reacts to today’s pension ruling…
Expect to hear politicians or advocacy groups or finance experts float notions you’ve never heard in Illinois. That to preserve money for pension costs, the state workforce may have to be drastically reduced, that work contracted to private firms that don’t have to provide such benefits. That as the cost of retirement benefits continues to skyrocket, more of the cost must be placed on the workers who will reap those benefits. That’s not to blame the workers; that’s to recognize brutal reality.
You won’t hear these and other dramatic thoughts only about state government: Friday’s ruling vastly complicates life for Chicago Mayor Rahm Emanuel, Cook County Board President Toni Preckwinkle and thousands of other local officials. They prayed that the court would uphold state attempts to curtail retiree benefits, or at least explain how future laws might be written to meet constitutional constraints. Friday’s decision offered neither. Maybe Emanuel et al. can offer the court more compelling arguments: Unlike the state, cutting benefits really is our last resort. But after Friday’s ruling, they’re running uphill.
So the huge enterprise of government in Illinois now confronts a challenge unlike any it has known: The new taxation necessary to satisfy all of these state and local pension demands would make this a ghost state.
A ghost state? C’mon, man.
Raising the state income tax back up to close to where it was before January 1st wouldn’t make this a “ghost state,” but it would prevent draconian budget cuts that would devastate this state. The Tribune blindly refuses to admit this because it hates that tax hike so very much.
Sometimes, you gotta find more income to pay your bills.
…Adding… From Wordslinger in comments…
–…a challenge unlike any it has known.–
Yeah, that Civil War, race riots, labor wars, polio, Depression, WWII, segregation, etc., it was all a stone-cold groove compared to today’s insurmountable and unprecedented problem of paying back borrowed money.
Seiously, they’re demented, should not be operating motor vehicles.
…Adding More… Gov. Bruce Rauner’s magical mystery pension reform plan which he adamantly refuses to unveil would allegedly save the state about $2.2 billion next fiscal year. While there is little doubt that we are staring into perhaps the worst fiscal crisis since the Great Depression as a result of the loss of the income tax hike money and gross Democratic mismanagement, losing out on those pension savings is hardly a crisis outweighing everything in the state’s history. The Tribune editorial board members probably ought to take a nap.
…Adding Still More… From Archpundit in comments…
===They prayed that the court would uphold state attempts to curtail retiree benefits, or at least explain how future laws might be written to meet constitutional constraints. Friday’s decision offered neither.===
Actually I believe Rich highlighted the road map the court gave on just this point. The ed board really is just lazy.
“Detroit offers such a strong example of default and bankruptcy that Chicago ends up being impugned by comparison,” said Matt Fabian, a partner at Municipal Market Analytics.
The broader economic and demographic positions of the two cities are vastly different. Chicago is the third-largest city in the country, with a vibrant economy and large, taxable population. Detroit had been suffering from a population exodus for decades, along with a crippled economy after much of the auto industry moved out.
“A property tax increase could solve Chicago’s problems tomorrow,” Fabian said. “But the city has chosen not to do that, even though it has the potential.” Chicago could raise taxes by 50 percent and still have lower taxes than New Jersey, he said. […]
That option, he said, was not available in Detroit, which is why the city eventually filed for Chapter 9. “It is very hard to see Illinois ever approving Chapter 9,” Fabian said. “Chicago is the heart of the state, and it is in no one’s interest to fall into bankruptcy.”
Detroit, on the other hand, was a drag on the state of Michigan and bore the brunt of much antipathy, said Fabian.
“The Supreme Court’s decision confirms that benefits earned cannot be reduced. That’s fair and right, and why the governor long maintained that SB 1 is unconstitutional. What is now clear is that a Constitutional Amendment clarifying the distinction between currently earned benefits and future benefits not yet earned, which would allow the state to move forward on common-sense pension reforms, should be part of any solution.”
Thoughts?
*** UPDATE *** Perhaps some wishful thinking from Mayor Rahm Emanuel?…
“Since taking office, our goal has been to find a solution to Chicago’s pension crisis that protects taxpayers while ensuring the retirements of our workers are preserved — something we achieved with Chicago’s pension reform for the Municipal and Laborers funds. That reform is not affected by today’s ruling, as we believe our plan fully complies with the State constitution because it fundamentally preserves and protects worker pensions rather than diminishing or impairing them. While the State plan only reduced benefits, the City’s plan substantially increases City funding which will save both funds from certain insolvency within the next ten to fifteen years and ensure they are secured over the long-term. Further, unlike the State plan, the City’s plan was the result of negotiation and partnership with 28 impacted unions to protect the retirements of the 61,000 city workers and retirees in these funds and ensure they will receive the pensions promised to them.”
*** UPDATE 2 *** Eric Madiar, the former legal eagle for Senate President John Cullerton who predicted years ago that this law would fail, reacts…
I feel fully vindicated by today’s Illinois Supreme Court decision and gratified by it. The decision clears the way for using a modified version of Senate President Cullerton’s contractual approach to achieve savings.
*** UPDATE 3 *** From Moody’s…
“Moody’s is currently reviewing the Illinois Supreme Court pension reform decision and analyzing its potential impact on the credit condition of the State of Illinois, the City of Chicago, public universities, and other Illinois municipalities and school districts. For the state, Moody’s current rating and outlook did not factor in the proposed pension reforms, but the ruling provides additional evidence that pension benefit reductions will not be permitted.”
Newly sworn in as Mayor of Springfield, Jim Langfelder ripped into the Steppenwolf classic [”Born to be Wild”].
Mayor Jim Langfelder joined other citywide officials and the new City Council in taking the oath of office Thursday afternoon at Sangamon Auditorium on the campus of the University of Illinois Springfield.
According to sources close to the Mayor, Langfelder rehearsed the song with the band After Sunset the week leading up to the performance.
* I always pegged Jim as a bit of a geek, but check out the video taken by a friend…
* The Illinois Supreme Court gave us a sort of road map for what pension reforms would be acceptable. Emphasis added…
The General Assembly may find itself in crisis, but it is a crisis which other public pension systems managed to avoid and, as reflected in the SEC order, it is a crisis for which the General Assembly itself is largely responsible.
Moreover, no possible claim can be made that no less drastic measures were available when balancing pension obligations with other State expenditures became problematic. One alternative, identified at the hearing on Public Act 98-599, would have been to adopt a new schedule for amortizing the unfunded liabilities. The General Assembly could also have sought additional tax revenue. While it did pass a temporary income tax increase, it allowed the increased rate to lapse to a lower rate even as pension funding was being debated and litigated.
That the State did not select the least drastic means of addressing its financial difficulties is reinforced by the legislative history. As noted earlier in this opinion, the chief sponsor of the legislation stated candidly that other alternatives were available. Public Act 98-599 was in no sense a last resort. Rather, it was an expedient to break a political stalemate.
The United States Supreme Court has made clear that the United States Constitution “bar[s] Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole [citations].” (Internal quotation marks omitted.) United States v. Winstar Corp., 518 U.S. 839, 883 (1996). Through Public Act 98-599, however, the General Assembly addressed the financial challenges facing our State by doing just that. It made no effort to distribute the burdens evenly among Illinoisans. It did not even attempt to distribute the burdens evenly among those with whom it has contractual relationships. Although it is undisputed that many vendors face delays in payment, the terms of their contracts are unchanged, and under the State Prompt Payment Act, vendors are actually entitled to additional compensation in the form of statutory interest if their bills are not paid within specified periods. 30 ILCS 540/3-2 (West 2012). In no sense is this comparable to the situation confronted by members of public retirement systems under Public Act 98-599, which, if allowed to take effect, would actually negate substantive terms of their contractual relationships and reduce the benefits due and payable to them in a real and absolute way. Under all of these circumstances, it is clear that the State could prove no set of circumstances that would satisfy the contracts clause. […]
The State protests that this conclusion is tantamount to holding that the State has surrendered its sovereign authority, something it may not do. The State is incorrect. Article XIII, section 5, is in no sense a surrender of any attribute of sovereignty. Rather, it is a statement by the people of Illinois, made in the clearest possible terms, that the authority of the legislature does not include the power to diminish or impair the benefits of membership in a public retirement system. This is a restriction the people of Illinois had every right to impose.
As the ultimate sovereign, the people can, “within constitutional restrictions imposed by the Federal constitution, delegate the powers of government to whom and as they please. They can withhold or [e]ntrust it, with such limitations as they choose.” … The powers they have reserved are shown in the prohibitions set forth in their state constitutions. Munn v. Illinois, 94 U.S. 113, 124 (1876).
Reamortize the debt, raise taxes, spread out the pain evenly, and/or pass a constitutional amendment that doesn’t violate the Federal constitution’s “contract clause.”
If there is an attempt by the governor at passing a constitutional amendment, I’d bet it would be challenged in federal court. This thing is nowhere near over.
City Hall and the Rauner administration had no immediate reaction to the decision, but it implies bad things for them.
Emanuel last year negotiated reductions in benefits with unions covering about half of city workers and is working with police and firefighters for further changes. But the language of today’s decision appears to allow no exception for “negotiated” reductions in benefits. Rather, the benefits are owed, as in any contract.
Rauner, in turn, has proposed shifting all current workers into a new system with reduced benefits. But the court decision suggests that a worker is entitled to accrue benefits at the old rate until he or she leaves the payroll.
* “Illinois Gov. Pat Quinn smiles during the signing of the pension overhaul legislation bill Thursday, Dec. 5, 2013, in Chicago. Looking on from left are: Sen. Bill Brady, R-Bloomington; Senate GOP leader Sen. Christine Radogno; Rep. Darlene Senger, R-Naperville; Rep. Jim Durkin, R-Western Springs; House Speaker Michael Madigan and Sen. Kwame Raoul, D-Chicago”…
“A bad bill in Springfield would raise our electricity bills to protect Exelon’s bottom line. The Legislature should either rewrite it significantly or flick the off switch altogether.”
“There is a feeling here of a company trying to socialize the risks while keeping the profits private.”
“Though solar, wind and other generators of low carbon energy would supposedly qualify for the credits, the legislation is written to give a big advantage to Exelon’s nuclear plants. Yes, this legislation would hike your electric bill.”
“…Problem is, Exelon hasn’t provided much evidence that the plants are financial losers and it hasn’t promised to keep the plants open…”
“Good old Exelon. The company has come up with legislation to subsidize its nuclear reactors, get electric users throughout the state to pay for it and claim it’s in the interest of clean energy.”
“State lawmakers need to see this bill for the dirty trick it is and kill it.”
Just say no to the Exelon bailout. Vote no on SB1585/HB3293.
BEST Coalition is a 501C4 nonprofit group of dozens of business, consumer and government groups, as well as large and small businesses. Visit www.noexelonbailout.com.
* I’ll be updating this as we go along. The first one I’ve received is from Ty Fahner…
“There are no winners today. If there’s any good news, it’s that Chicago and Illinois are resilient, and we’ve responded to great challenges before. The Civic Committee stands ready to work with Governor Rauner and the General Assembly to craft a bipartisan solution to rescue the state from financial collapse and restore Illinois as a compassionate and competitive state.”
Ty Fahner
President
Civic Committee of The Commercial Club of Chicago
* Speaker Madigan’s spokesman said his boss will “take it under review” and continue to work on the issue, which he said was of vital importance to the state’s future.
* Senate President John Cullerton…
“From the beginning of our pension reform debates, I expressed concern about the constitutionality of the plan that we ultimately advanced as a test case for the court. Today, the Illinois Supreme Court declared that regardless of political considerations or fiscal circumstances, state leaders cannot renege on pension obligations. This ruling is a victory for retirees, public employees and everyone who respects the plain language of our Constitution.
That victory, however, should be balanced against the grave financial realities we will continue to face without true reforms. If there are to be any lasting savings in pension reform, we must face this reality within the confines of the Pension Clause. I stand ready to work with all parties to advance a real solution that adheres to the Illinois Constitution.”
* From the twitters…
State Sen. Linda Holmes, a union backer: "I really do think we have to start from scratch." http://t.co/qT1YFjYhUG
“Our goal from the beginning of our work on pension reform has been to strike a very careful, very important balance between protecting the hard-earned investments of state workers and retirees and the equally important investments of all taxpayers in education, human and social services, health care and other vital state priorities. In its ruling today, the Supreme Court struck down not only the law but the core of that balance. Now our already dire pension problem will get that much worse and our options in striking that balance are limited. Our path forward from here is now much more difficult, and every direction will be more painful than the balance we struck in Senate Bill 1.”
* Illinois Policy Institute…
Today the Illinois Supreme Court struck down Senate Bill 1, the pension reform law enacted in 2013 by former Gov. Pat Quinn. Illinois Policy Institute CEO John Tillman released the following statement on the state Supreme Court’s ruling:
“Illinois’ political elite have devised a pension scheme that is excessive, bloated, corrupted and was never affordable for Illinois taxpayers. While Senate Bill 1 did not solve the pension crisis, the legislation at least took a first step toward achieving parity between government workers who receive pensions, and the taxpayers who fund them.
“But with today’s ruling, the state’s high court says that state government’s No. 1 financial responsibility is paying the retirement of people who no longer work for state government. Pension costs are first in line, ahead of funding for public safety, education, helping the poor and disadvantaged, and all core services provided by state government.
“The court’s ruling suggested that raising taxes is a way to pay for pensions. Raising taxes will not fix a broken system. The pension system is beyond repair, and there will never be enough money to fund it. Case in point: The 2011 tax increase. That tax increase generated more than $31 billion, and 90 cents out of every $1 collected from the tax increase went to pensions. Yet it still was not enough to make the pension system whole.
“Ultimately, the only way Illinois can break the cycle of siphoning more and more tax dollars and sacrificing more and more state programs to pay for pensions is to follow the lead of the private sector and move new employees to a 401(k)-style system. In the short term, it will not be surprising to see calls to change the state constitution or allow Illinois to file for bankruptcy.”
* We Are One Illinois union coalition…
Illinois AFL-CIO president Michael T. Carrigan issued the following statement on behalf of the We Are One Illinois coalition of unions that represent public employees and retirees:
“We are thankful that the Supreme Court has unanimously upheld the will of the people, overturned this unfair and unconstitutional law, and protected the hard-earned life savings of teachers, police, fire fighters, nurses, caregivers and other public service workers and retirees.
“The Court’s ruling confirms that the Illinois Constitution ensures against the government’s unilateral diminishment or impairment of public pensions.
“Because most public employees aren’t eligible for Social Security, their modest pension—just $32,000 a year on average—is the primary source of retirement income for hundreds of thousands of Illinois families. While workers always paid their share, politicians caused the debt by failing to make adequate contributions to the pension funds.
“Public service workers are helpers and problem solvers by trade. With the Supreme Court’s unanimous ruling, we urge lawmakers to join us in developing a fair and constitutional solution to pension funding, and we remain ready to work with anyone of good faith to do so.”
* Senate Republican Leader Christine Radogno…
“Illinois has the nation’s worst-funded pension system and the biggest pension deficit of any state. Nearly a quarter of our budget goes directly to pensions or to pay off past loans used to cover short-term pension costs.
I am committed to working with everyone to find a solution that adheres to the Constitution. We must to work together in bipartisan cooperation with Governor Rauner – who has demonstrated his commitment to tackle the most difficult problems facing Illinois.”
* Sen. Gary Forby…
“I made a promise to the thousands of union members in my district that I would not support a pension reform plan that punishes working families,” said Senator Forby, Chairman of the Senate’s Labor Committee. “Now is the time to give labor a seat at the negotiating table so we can strike a fair balance between finding financial solvency and honoring our promises to workers.”
* Sen. Daniel Biss…
“Today the Illinois Supreme Court ruled that Senate Bill 1 is unconstitutional. While this is not the opinion the authors of SB1 had hoped for, we must respect the Court and strictly adhere to this ruling. The Pension Clause of the Illinois Constitution provides important protections, and today’s ruling proves the depth of those protections.
The state of Illinois and many of its local governments are still facing serious fiscal problems, including significant pension debt. I look forward to working with all parties to find ways to ensure that adequate resources are available to properly fund our pension systems, in the context of a responsible budget that funds crucial services. Our public employees, our government bodies and our taxpayers deserve nothing less.”
* Twitters…
Rep Nekritz on pension ruling "My overwhelming emotional reaction is I feel very sad for the future of Illinois. I feel very sad about that"
“I respect the Illinois Supreme Court, but disagree with the ruling. I am prepared to continue working on meaningful legislative reforms to save our public pension systems.”
“We are delighted that today’s Supreme Court opinion recognizes and ensures the pension rights of State employees, as required by our Constitution. And we trust that the General Assembly will address the State’s fiscal difficulties, in a manner consistent with the Constitution, and in a way that is fair to all the citizens of Illinois.” — Gino DiVito, attorney who argued state employees’ legal challenge to the Illinois Supreme Court.
* Charles A. Burbridge, executive director of the Chicago Teachers’ Pension Fund…
“While CTPF members were not directly impacted by the ruling on Senate Bill 1, the Illinois Supreme Court’s landmark decision to strike down this legislation is a welcome development for our members. This ruling clearly establishes that pensions are a promise to be kept, which is important to our members since they do not receive Social Security benefits and depend on CTPF pensions for their retirement security.
“Unfortunately, our Fund has been devastated by decades of underfunding by our employer. As a result, CPS faces significant challenges as it makes up for the impact of its past decisions. We hope that this ruling helps move forward the conversation about fully funding pensions for CTPF members.”
* Sen. Kwame Raoul…
Today, the state’s highest court affirmed that, as in all matters, we are bound by the plain language of the Illinois Constitution on the question of public employee benefits. This is not surprising news, nor is it an unwelcome reminder; constitutional limits protect us all – especially in times of fiscal crisis. The Court effectively illustrated the cyclical nature of economic fortunes, noting that Illinois faced a pension funding emergency at the time our current constitution was drafted. The rule of law remains a guiding constant.
This decision is a call to go back to the negotiating table and get serious about the range of options available to us to repair the state’s finances and meet its obligations in ways consistent with the constitution, sustainable for the future and fair to all concerned.
A number of approaches remain open to us, but the Court has made clear that the constitution’s prohibition on unilateral modifications applies to the lifetime of the contract made at the time of employment, not merely to benefits already accrued.
We return to our task aided by the insights of the Court, fully aware of our constitutional responsibilities as well as the severity of our fiscal condition, in partnership with all affected and open to new ideas.
* Linda Brookhart, Executive Director of the State Universities Annuitants Association…
”SURS member Henry Green introduced the Pension Clause to the 1970 Constitution to ‘guarantee [pension] rights.’ We are grateful that the Supreme Court recognized and affirmed those Constitutional protections.
“This is a victory for retired and current members of the State Universities Retirement System and the other public employee retirement systems. But, it is more than that. It is a victory for anyone to whom the State of Illinois owes a debt. As the Court noted in paragraph 85 ‘today it is nullification of the right to retirement benefits. Tomorrow it could be a renunciation of the duty to repay State obligations.’ Indeed, in oral argument we specifically noted that Illinois’ $50 Billion general revenue bond market could be put in jeopardy. And the court took it a step further ‘If financial markets were rational, this prospect would not buoy our economy, it would ruin it.’
“As the court noted, the underfunding of pension benefits has a long history that goes back well before the pension protection clause was adopted. The clause was intended to apply pressure on the legislature to meet its financial obligations to fund retirement benefits for employees who have spent their lives working for the state. That the State insisted on pursuing its policy of under-funding in the 44 years since the clause was adopted cannot now serve as an excuse for the State to renege on its obligation to pay pensions.
“Our attorney stated in oral argument that this was akin to the Lizzie Borden defense – ‘I killed my parents. Have mercy on me. I’m an orphan,’ a defense which every grade school child recognizes as preposterous. We are grateful that the Supreme Court did not buy into this defense. As a result of this opinion, employees retiring from the State of Illinois should have confidence in their pensions. And our members, members of the State Universities Retirement System can take comfort in knowing that their service to the students of this State did not deprive them of their retirement benefits.
“At SUAA we are committed to protecting the rights of retired and current public university and community college employees and will continue to do so.”
Rep. Elaine Nekritz, a Northbrook Democrat and one of the lead pension-law negotiators in the House, said that those other provisions were an attempt to strike a balance between employee benefits and the overall health of the state.
But the court’s action negates that balance, she said.
Nekritz also pointed to a section of the opinion that said “[a]dherence to constitutional requirements often requires significant sacrifice, but our survival as a society depends on it,” calling it an off-point summary of the circumstances.
“The goal of Senate Bill 1 was to put Illinois on more sound fiscal footing so that we could survive as a society,” she said. “So I found it odd that they made that statement, when what they’re really doing is making it more difficult to fund education, more difficult to fund competing demands … That one hit me pretty hard.”
The solution proposed by the [state Constitution] drafters and ultimately approved by the people of Illinois was to protect the benefits of membership in public pension systems not by dictating specific funding levels, but by safeguarding the benefits themselves… The purpose of the clause and its dual features have never been in dispute
* Clear cut…
The first issue, whether Public Act 98-599’s reduction of retirement annuity benefits violates this State’s pension protection clause, is easily resolved. The pension protection clause clearly states: “[m]embership in any pension or retirement system of the State *** shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.” (Emphasis added.) Ill. Const. 1970, art. XIII, § 5. This clause has been construed by our court on numerous occasions, most recently in Kanerva v. Weems, 2014 IL 115811.We held in that case that the clause means precisely what it says: “if something qualifies as a benefit of the enforceable contractual relationship resulting from membership in one of the State’s pension or retirement systems, it cannot be diminished or impaired.”
This construction of article XIII, section 5, was not a break from prior law. To the contrary, it was a reaffirmation of principles articulated by this court and the appellate court on numerous occasions since the 1970 Constitution took effect. […]
Retirement annuity benefits are unquestionably a “benefit of contractually-enforceable relationship resulting from membership” in the four State-funded retirement systems. Indeed, they are among the most important benefits provided by those systems. If allowed to take effect, Public Act 98-599, would clearly result in a diminishment of the retirement annuities to which Tier 1 members of GRS, SRS, SURS and TRS became entitled when they joined those systems. As described earlier in this opinion, the new legislation directly reduces the value of retirement annuities for those members in no fewer than five different ways. While we presume statutes to be constitutional and must construe enactments by the legislature so as to uphold their validity whenever it is reasonably proper to do so (Wilson v. Department of Revenue, 169 Ill. 2d 306, 310 (1996)), there is simply no way that the annuity reduction provisions in Public Act 98-599 can be reconciled with the rights and protections established by the people of Illinois when they ratified the Illinois Constitution of 1970 and its pension protection clause. Those provisions contravene the clear requirements of article XIII, section 5, as set forth in the provision’s plain and unambiguous language and construed by the legion of cases we have just discussed. In enacting the provisions, the General Assembly overstepped the scope of its legislative power. This court is therefore obligated to declare those provisions invalid.
* Police powers…
That the annuity reduction provisions of Public Act 98-599 violate the pension protection clause’s prohibition against the diminishment of the benefits of membership in a State-funded retirement system is one the State has now all but conceded. After this court reaffirmed in Kanerva v. Weems that the pension protection clause means precisely what it says, the State shifted its focus to an argument it did not raise and we did not consider in Kanerva. The State’s position now rests on its affirmative defense that funding for the pension systems and State finances in general have become so dire that the General Assembly is authorized, even compelled, to invoke the State’s “reserved sovereign powers,” i.e., its police powers, to override the rights and protections afforded by article XIII, section 5, of the Illinois Constitution in the interests of the greater public good. This argument must also fail.
The circumstances presented by this case are not unique. Economic conditions are cyclical and expected, and fiscal difficulties have confronted the State before. […]
While these principles sound expansive, legislation impairing contracts has actually been upheld against contract clause challenges only rarely. George D. Hardin, Inc. v. Village of Mount Prospect, 99 Ill. 2d at 104. When the legislation has been directed at reducing pension benefits of State employees, this court has expressly held that it is “not defensible as a reasonable exercise of the State’s police powers” and declared it invalid under the contracts clause, as well as for other reasons. […]
In addition, because the state’s self-interest is at stake whenever it seeks to modify its own financial obligations, the United States Supreme Court has made clear that it is not appropriate to give the state’s legislature the same deference it would otherwise be afforded with regard to whether the impairment is reasonable and necessary to serve an important public purpose. “A governmental entity can always find a use for extra money,” the Court observed, “especially when taxes do not have to be raised. If a State could reduce its financial obligations whenever it wanted to spend the money for what it regarded as an important public purpose, the Contract Clause would provide no protection at all.” […]
The State protests that this conclusion is tantamount to holding that the State has surrendered its sovereign authority, something it may not do. The State is incorrect. Article XIII, section 5, is in no sense a surrender of any attribute of sovereignty. Rather, it is a statement by the people of Illinois, made in the clearest possible terms, that the authority of the legislature does not include the power to diminish or impair the benefits of membership in a public retirement system. This is a restriction the people of Illinois had every right to impose. […]
Under the State’s reasoning, the only limit on the police power would be the scope of the emergency. The legislature could do whatever it felt it needed to do under the circumstances. And more than that, through its funding decisions, it could create the very emergency conditions used to justify its suspension of the rights conferred and protected by the constitution. If financial markets were rational, this prospect would not buoy our economy, it would ruin it.
* Man, is this ever a strong statement…
The financial challenges facing state and local governments in Illinois are well known and significant. In ruling as we have today, we do not mean to minimize the gravity of the State’s problems or the magnitude of the difficulty facing our elected representatives. It is our obligation, however, just as it is theirs, to ensure that the law is followed. That is true at all times. It is especially important in times of crisis when, as this case demonstrates, even clear principles and long-standing precedent are threatened. Crisis is not an excuse to abandon the rule of law. It is a summons to defend it. How we respond is the measure of our commitment to the principles of justice we are sworn to uphold.
* Severability…
We come, then, to the third and final issue presented by this appeal: are the invalid annuity reduction provisions of Public Act 98-599 severable from the remainder of the statute? […]
Among the 39 sections deemed “inseverable” are some of the specific provisions which impermissibly reduce retirement annuity benefits in violation of the pension protection clause. These include sections 2-119.1(a-1), 14-114(a-1), 15-136(d-1), and 16-133.1(a-1) (40 ILCS 5/2-119.1(a-1), 14-114(a-1), 15-136(d-1), 16-133.1(a-1) (West Supp. 2013)), which adversely affect the value of annual annuity increases. Under the express terms of section 97 of the Act itself, all 39 of the “inseverable” provisions must therefore fall with the provisions we have declared unconstitutional. When one eliminates those 39 provisions along with all the other annuity-reducing portions of the law that are void and enforceable under the pension protection clause, Public Act 98-599 all but evaporates.
Severability principles would doom the statute in any case. Under Illinois law, severability clauses are not conclusive. That is because a court’s authority to eliminate invalid elements of an act and yet sustain its valid provisions derives not from legislative fiat, but from powers inherent in the judiciary. The practice of holding statutory provisions severable from those that are found to be invalid originated in the courts long before severability clauses were adopted by legislatures. Although the use of severability clauses has now become common practice, we have noted that they are regarded as little more than a formality. […]
Applying these principles to the case before us, there can be no serious question that, with invalidation of those provisions of Public Act 98-599 which reduce the retirement annuities Tier 1 members of the GRS, SERS, SURS and TRS are entitled to receive, the entire statute must fall. As noted earlier in this opinion, the legislation’s proponents described its numerous provisions as “all part of an integral bipartisan package.” The overarching purpose of the law was to shore up State finances, improve its credit rating and free up resources for other purposes by reducing, i.e., diminishing, the amount of retirement annuity benefits paid to Tier 1 members of GRS, SERS, SURS, and TRS, particularly annual annuity increases, which the speaker of the House of Representatives himself referred to as the chief cause of the financial problems the Act was intended to address. 98th Ill. Gen. Assem., House Proceedings, Dec. 3, 2013, at 7 (statements of Representative Madigan). The annuity reduction provisions are therefore not merely central to the statute, they are its very reason for being. Without them, the legislature would not have enacted the law at all. To leave those remaining provisions standing once the core sections are stripped away would, under these circumstances, yield a legislation package that no longer reflects the legislature’s intent. The circuit court was therefore correct when it concluded that Public Act 98-599 is void and unenforceable in its entirety
* Nothing yet from the governor’s office. From the Illinois AFL-CIO…
Just received word that the Rauner anti-worker agenda has been pulled from the Adams County Board agenda for May 12. We will keep you posted if it comes back.
Alert for upcoming Rauner anti-worker agenda activity: Saturday, May 9 – Henry County Board Executive Committee, 8 a.m., 307 West Center Street, Cambridge
* Meanwhile, parsing the Speaker’s decision to call the governor’s “right to work” proposal for a vote next week…
“The message may well be that if they want to accomplish anything this session, then Rauner had better get off a couple of things that have almost no chance of passing,” said Mike Lawrence, a longtime statehouse journalist, former aide to Gov. Jim Edgar and retired director of the Paul Simon Public Policy Institute.
While cautioning he had no inside scoop, Lawrence said, “I think it will be clear after this vote that right-to-work has virtually no chance of passing. I have a difficult time seeing where anything on the union front is going to happen.”
One by one, Madigan is addressing issues that Rauner has raised, Lawrence said. And by showing the governor where he seriously lacks votes, Madigan might be saying it’s time to shift focus.
Political scientist Chris Mooney said the message from Madigan to Rauner may be one of “who’s for what and who’s not.”
Although enormously accomplished in business, Rauner might also be getting a lesson from the speaker on the legislative process, said Mooney, director of the University of Illinois’ Institute of Government and Political Affairs.
They’re both right, plus more.
…Adding… I gave a speech last night and I wasn’t able to post House GOP Leader Jim Durkin’s response to Madigan’s right to work vote plan…
“I believe the working groups, particularly the one dealing with this issue, need to continue their work negotiating consensus. That is a better approach to take.”
* And from the University of New Mexico’s Tamara Kay…
The most rigorous research study available–published in 2011 by the nonpartisan Economic Policy Institute and conducted by Heidi Shierholz (now the chief economist of the US Department of Labor) and Elise Gould–controlled for 42 variables. It found that right-to-work laws result in lower wages and a lower likelihood of health care and pensions for union and non-union workers. It also shows right-to-work laws have no impact on economic growth.
Right-to-work proponents, however, have used “research” reports that control for few if any variables, to suggest that right-to-work states have done better on a variety of growth measures, predicting that their state would similarly benefit by passing a bill.
For example, the Wisconsin Public Research Institute, a member of the free-market-oriented State Policy Network, published such a report before the state passed its law that claimed that adopting right-to-work could increase per-capita income by 6 percentage points. But the study only controlled for eight variables, which isn’t nearly enough to control for all the different factors that affect changes in income.
In other words, the conclusions are meaningless. In the world of medical research, this would be like testing a cancer drug without using a control group that was not given the drug, ensuring that its pure effect could be isolated.
[Password protection removed and comments opened because the press release was finally issued.]
* House Speaker Michael Madigan has scheduled yet another committee of the whole for next Tuesday…
I have a call in to the Speaker’s office about the topic. Watch this post for updates.
Also, keep coming back to the blog today. Some big news is about to hit.
…Adding… I’m hearing the committee of the whole topic is tort reform. Still waiting on a call back.
*** UPDATE *** Press release…
Madigan Asks Full House to Discuss Illinois’ Civil Justice System
CHICAGO – House Speaker Michael J. Madigan on Friday announced the Illinois House will convene in a committee of the whole at noon Tuesday to discuss Illinois’ civil justice system and the protections it provides to victims and their families when killed or injured in accidents caused by severe negligence.
“Our justice system is often the last chance for victims and their families after their lives were torn apart by acts of carelessness,” Madigan said. “Even those who have never set foot in a courtroom are protected by our system because it allows any person to expose shoddy products and reckless actions that make our state less safe.”
As part of a discussion on Illinois’ civil justice system, the committee of the whole will hear from victims of medical malpractice and the family members of individuals killed in accidents or injured by dangerous products.
“When Illinois victims’ protections are discussed, unfortunately the bottom line sometimes is considered more important than what is fair and right. Special interests spend millions in attempts to change our court system to work against regular citizens. But too often it is our neighbors and co-workers – middle-class families – who need the court’s protections the most,” Madigan explained. “We must listen to the victims, their families and others who have seen firsthand how a strong civil justice system provides an avenue for their voices to be heard and fairness to prevail, and how a weak civil justice system leaves victims and their families traumatized several times over.”
Like the committee of the whole convened this week to discuss assistance for injured workers, Madigan cited the importance of the issue and the need for input from all House members as discussions on changes to the civil justice system continue.
* The new governor has meant more subscriptions and more advertising revenues, so this is no surprise…
According to a review of state lobbying records requested by the Quad-City Times Springfield Bureau, 1,733 lobbyists registered with the Illinois Secretary of State’s office from January through April.
The number is up from 1,700 during the same time period last year and up by nearly 100 lobbyists who registered in 2013. […]
The numbers also show a move away from companies having their own, in-house lobbying teams. So far this year, there are 1,973 lobbying entities or organizations, up from 1,763 five years ago.
When it comes to wining and dining lawmakers, the biggest spending lobbying organization so far in 2015 is the Ounce of Prevention Fund, which is headed by First Lady Diana Rauner. Reports show the group, which is a public-private partnership that prepares children for success in school and in life, has spent $132,415 to wine and dine lawmakers this year.
Interesting.
*** UPDATE *** From the Ounce of Prevention Fund’s Megan Meyer…
Hi Rich-
We saw that Capitol Fax picked up the Quad City Times story on increased lobbying activity this year, and wanted to clarify the information reported about the Ounce of Prevention Fund.
The expenditure reports we filed with the state included our annual luncheon at an expense of $130,000 (which includes all costs of the event – meals, on-site materials, etc.), which dramatically inflates the appearance of our spending on lobbying efforts. For 14 years, our It’s Good Business to Invest in Young Children Annual Luncheon has been our premier public education and fundraising event that brings together the business, philanthropic and civic communities in support of early childhood education. Of the more than 850 attendees, only two were affiliated with state government. That event is not a lobbying event.
Our new legislator breakfast that we held in January is typical of our direct lobbying efforts (and was reported on an earlier expenditure report), and we spent $336 on a breakfast for 36 people, including 11 elected officials.
Please let me know if you have any other questions.
