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* There’s been a lot of umbrage, particularly on the Chicago Tribune’s editorial page, about how the pension reform legislation doesn’t touch the benefits of current employees. But Progress Illinois makes a very important point…
It’s important to remember that these cuts do not effect current employees; opening those contracts (the benefits are outlined here) would likely violate the state’s constitution.
The state can’t just open up a union contract and change it. But that doesn’t stop people from demanding that magic ponies be found.
More misinformation…
Mr. Madigan also apparently decided not to mess with Mr. Daley, who likely could have scuttled the deal. So he added a clause that allows Chicago Public Schools to reduce its required pension contribution by $400 million a year for each of the next three years.
As a fiscal matter, that’s stunningly irresponsible. As of June 2006, on a market-value basis, the Chicago teachers retirement fund only had 54% of the assets needed to pay its eventual liabilities, according to the fund. To get back to where it should be, around 90%, it needs more money, not less.
As of January 4th of this year, the system was almost 74 percent funded.
* This, however, is a keen observation…
But given that schools chief Ron Huberman had been threatening to lay off hundreds of teachers to close a budget gap of nearly $1 billion next year, he now has an extra $400 million. Which means that, though the Chicago Teachers Union isn’t happy, the need for huge layoffs has dropped. Which means that it’s much less likely that teachers will go on strike just before Mr. Daley gets ready for his presumed re-election bid next winter.
* I’m not sure twenty-somethings who have a burning desire to teach really think all that much about pensions…
“If this bill becomes law, Illinois will have the highest teacher retirement age in the country,” Illinois Federation of Teachers President Ed Geppert said. “New teachers will think twice before teaching in a state that makes them teach kindergarten or PE until age 67 to get a full pension.”
If they get into teaching at 22 for a pension, then maybe they shouldn’t be teaching anyway. But, this is a valid argument…
One main problem the teachers union has with the bill is the change in retirement age, Stanley said. If teachers have to work until age 67 to earn their full pension, local school districts will spend more money paying their salaries than if they retired earlier and younger so less experienced teachers could be hired to replace them.
“While you attempt to save more money the state pays in pensions … you once again add an additional, significant cost of salaries for local school districts,” Stanley said.
It’s a burden-passing solution, which is never good.
* Related…
* Answers to questions about pension overhaul
* Can we change pension deals going forward for existing state employees?
* Applause for Madigan, Cullerton
* At last, lawmakers step up to the pension plate
* State pension reform pleases local officials
* Quinn: Pension Reform “Mother Of All” Spending Cuts
* Quinn says he’ll be conservative with pension savings
* The speedy sweep to a pension plan
* Governor Defends Pension Bill From Criticism
* Teachers Union President Blasts Pension Bill
* Watchdog: Illinois Pension Bill Doesn’t Go Far Enough
posted by Rich Miller
Friday, Mar 26, 10 @ 9:55 am
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Previous Post: Statehouse lobbyist says he cooperated with feds
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The idea that they can’t change pension benefits for current employees isn’t strictly true. The state can’t modify pension benefits already earned (or being collected), but it can modify benefits not yet earned. Likely it would require “terminating” employees and rehiring them immediately.
Politically, however, it’s virtually impossible to pull off such a coup.
Comment by John Bambenek Friday, Mar 26, 10 @ 9:59 am
It’s a burden-passing solution, which is never good.
But Rich, local control has been the hallmark of the Democratic Party in Illinois for, what, at least three days.
Comment by Michelle Flaherty Friday, Mar 26, 10 @ 10:01 am
- Likely it would require “terminating” employees and rehiring them immediately. -
So you’re a big fan of upholding the constitution, but when it comes to the unions you’re open to using loopholes like that? Great principles John.
Comment by Small Town Liberal Friday, Mar 26, 10 @ 10:17 am
The issue of whether or not state employee benefits can be frozen (something that is occurring in the private sector all the time)is a matter of interpretation, I suppose.
The state would have to try it and let the courts decide. That doesn’t seem likely to happen in the foreseeable future.
But those who base their financial planning on absolute certainties should remember that there are none.
Meanwhile, has Quinn caved on free retiree health benefits. That outrageous perk actually could save some money. And eliminating it is hardly going to cause a great uprising among the taxpaying general public.
Comment by cassandra Friday, Mar 26, 10 @ 10:18 am
I heard a discussion on Chicago Tonight last evening with some folks on the panel insisiting that current employees must realiize and accept the fact that they cannot collect the pensions they thought they were entitled to because the Legislature has consistently fallen down on their responsibility to adequately fund the system…the Indians on the reservation are not happy that they are in line to be the fall guys for a lack of financial discipline by our esteemed duly elected reps.
I can’t say I disagree with their outrage…they should not bear the brunt of their fiscal irresponsibility.
I think a way out of this is to offer early retirement at expected levels to those eligible to do so ASAP…I’ve been hearing rumours to this effect, and IMHO this needs to be offered before session is over…
Comment by Loop Lady Friday, Mar 26, 10 @ 10:21 am
==I’m not sure twenty-somethings who have a burning desire to teach really think all that much about pensions…==
Though I am not a teacher, tt has been my experience in talking with very many state employees, that pension benefits and retirement are surprisingly (to me) high priorities on the list of work-related topics in their conversations, all age groups included. In my private sector life, most of my industry circle put off much of that conversation until their 50s.
Comment by Captain Flume Friday, Mar 26, 10 @ 10:23 am
I thought that last early retirement binge in 2002 cost the state a gadzillion. Seems like it would be politically risky.
Besides, why would the state’s management classes retire? They aren’t that busy now. And work is entertainment for many–better than sitting home and watching tv.
Comment by cassandra Friday, Mar 26, 10 @ 10:28 am
Where’s the editing at the Trib? The difference between 74% funded and 54% is huge. How can you miss that on your editorial page?
Comment by wordslinger Friday, Mar 26, 10 @ 10:32 am
==tt has been my experience in talking with very many state employees, that pension benefits and retirement are surprisingly (to me) high priorities==
Agreed, Captain. You’ll find people commuting fairly long distances in central Illinois for clerical/secretarial positions. These aren’t $100K — more like 1/4 that. Commuting costs nearly eat their take-home pay but they do it for health coverage & a pension.
Comment by bcross Friday, Mar 26, 10 @ 10:33 am
Just how many does one honestly think would take the state up on early retirement incentive if we’re presently looking at the possible boost of retiree insurance going to roughly $300 to $500 pre medicare age? For many who might have thought of exiting given the opportunity at any time soon, they’d be afraid to when they see a big chuck of their pension might be flushed right away that was going to be there a few minutes ago.
There is no quick fix easy answer. While you’re dangling a carrot in front of them, you’re holding a hammer over their head if they chance the carrot so to say.
Comment by Cindy Lou Friday, Mar 26, 10 @ 10:33 am
==accept the fact that they cannot collect the pensions they thought they were entitled to because the Legislature has consistently fallen down on their responsibility to adequately fund the system==
Which of course makes those same State employees REALLY NERVOUS about any proposal that has the words “guaranteed contribution” in the description!
Comment by bcross Friday, Mar 26, 10 @ 10:35 am
==If they get into teaching at 22 for a pension, then maybe they shouldn’t be teaching anyway.==
Hmmm Rich. Not so sure about this drive by statement. Why would thinking about retirment/pension disqualify someone from teaching? Does someone need to have a purely selfless heart to teach? Why can’t it be both? I want to help kids and look out for myself in later years. Seems like a natural way to feel, even at age 22.
Comment by Cosmic Charlie Friday, Mar 26, 10 @ 10:41 am
–I’m not sure twenty-somethings who have a burning desire to teach really think all that much about pensions…–
It would be sad it they did. You’re only that age once, to my increasing surprise.
Comment by wordslinger Friday, Mar 26, 10 @ 10:44 am
Free health care insurance is not what I get from TRS. I pay a monthly premium for my HMO which is what I selected from the options offered for my county.
I will say that the cost has been subsidized by the state and no doubt my premium is less due to that state contribution.
I fully expect to pay more for my insurance in the future like everything else. I won’t qualify for Medicare for a few years so TRS is my main insurance until that time.
Comment by Nearly Normal Friday, Mar 26, 10 @ 10:54 am
Despite the fact that changing benfits for current members is clearly and undeniably unconstitutional, this point of view only exposes those who believe public employees should be punished for devoting their life to public service. It is never enough for these people. Its like saying my house was robbed because my 401(k) went down so its ok for yours to be robbed too because you work for the “evil government”. The fundamental difference is Social Security, it is time to mandate coverage for all government employees!!!
Comment by Obamas' Puppy Friday, Mar 26, 10 @ 11:03 am
=those who believe public employees should be punished for devoting their life to public service.=
It’s a job with wages and benefits. What makes it different is it comes with insurance in the form of the government treasury. In exchange for the employment insurance, they accept the socialization of their gains and losses.
If that is unclear, perhaps their union is a horrible educator.
Comment by Brennan Friday, Mar 26, 10 @ 11:11 am
Cassandra, once again you have no clue about state employees and management. While there may be some political staff that are not busy the majority of state employees are extremely hard working and dedicated. Many have kept the state working in spite of all the garbage that has happened over the last 6 years.
Even with the constant bashing by clueless people that listen to stereotypes they contine to do a great job.
Our pensions are one of the lowest in the country. That is still not good enough for you, if you had your way we would work for below minimum wage, with no benefits at all.
Keep in mind it is not OUR fault that the Legislature did not fund the pension as they are required to do.
While you are looking into things ask why they exempted themselves from the pension reforms. Who abuses the pension system more, State Employees or Legislators?
Comment by He Makes Ryan Look Like a Saint Friday, Mar 26, 10 @ 11:14 am
Nearly Normal, my husband will be SERS, as his dependent I have paid my premium the same as if he were retired or active and will continue to do so even when he retires. I actually don’t have a problem with a retiree employee paying for their own premium as a active would do. And of course active/nonactive employee/retiree would expect to pay as the rates are increased for all.
The average retiree pension I’m speaking of is 20,000 a year, what I am saying is someone who expects to get 20,000 and then suddenly two months after retirement finds they now have to put 6,000 of that out for a new premium is not going to go racing out the door for any early retirement incentive.
Comment by Cindy Lou Friday, Mar 26, 10 @ 11:16 am
Rich, many young people are aware of their financial futures and do think about where they will be down the road.
Those of us who mentor new teachers tell them to put a little away each month even if it is $25 or $50 each month to start. Many of them tell us that they have had that conversation already with their parents and have set up an IRA or other retirement account.
Not everybody that comes out of college is clueles about the real world. Some of them have been working all along so their student loans are not sky high.
Comment by Nearly Normal Friday, Mar 26, 10 @ 11:17 am
Let me get this straight..most teachers only work 9 or 10 months a year so if you factor that in when figuring total time worked over a lifetime, age 67 would be like 60 in dog years to the rest of us!! I have to work until I’m 62 and (many have to work longer) and that’s 12 months a year. Also many moons ago when I was 22, I could care less about retirement - was just SO happy to get a job, any job and make some many, any money
Comment by Merit Comp Slave Friday, Mar 26, 10 @ 11:26 am
The government has no business whatsoever disturbing people’s existing contracts. Whether its employment or mortgage or whatever, the government should leave them alone unless fraud is involved.
Comment by dont tread on me Friday, Mar 26, 10 @ 11:46 am
Someone asked what the dopes at the bankrupt, fed probe target that runs the Countdown Clock would suggest the space wasted on their stunt takes up about +25,000 words. That’s is a lot of slop they will not have to spoon out over the next 8 months.
Comment by CircularFiringSquad Friday, Mar 26, 10 @ 12:32 pm
Maybe teachers shouldn’t get into that line of work for the pension. But even someone that goes into teaching on its own merits would be perfectly reasonable to consider the pension benefits offered when deciding in which state to look for work.
Comment by inpatient in il Friday, Mar 26, 10 @ 12:50 pm
JB, I know the world is a simpler place for those of you who always ignore the fact that in Illinois public employees can, by law, organize and bargain collectively. Most state employees are covered by both civil service and collective bargaining contracts, and/or tenure laws. I don’t think it would be all that simple to immediately terminate and rehire them. Another simple solution for a complex problem, again wrong.
Comment by steve schnorf Friday, Mar 26, 10 @ 1:02 pm
I’m not sure if this is place for this question…but…if it’s unconstitutional to alter pension benefits for existing state employees, can the constitution be altered via a constitutional amendment voted on by the electorate?
If given a choice of higher taxes or altering the existing state pension plan, I’m confident of the outcome.
Comment by Downstater Friday, Mar 26, 10 @ 1:28 pm
“If it’s unconstitutional to alter pension benefits for existing state employees, can the constitution be altered via a constitutional amendment voted on by the electorate”
The answer must be yes — isn’t that precisely the reason public employee unions were so strongly against con-con in 2008?
Comment by Secret Square Friday, Mar 26, 10 @ 2:28 pm
Rich Whitney will be giving his take on the Pension Bill in Carbondale at 3:30 today I believe.
Intermission Room, Varsity Theater 418 S. Illinois Ave. Carbondale, IL.
Comment by WalterGPW Friday, Mar 26, 10 @ 2:42 pm
SS,
Yes but con-con can only be considered every 10 years, and that opportunity was voted down last election.
But…can a constitutional amendment be voted on by the electorate between conventions?
Comment by Downstater Friday, Mar 26, 10 @ 3:01 pm
===only be considered every 10 years===
20
Comment by Rich Miller Friday, Mar 26, 10 @ 3:05 pm
The Illinois Constitution can be amended either by Constitutional Convention –if 3/5 of the members in each House of the General Assembly agree to it, which voters can approve or disapprove or by the General Assembly –if 3/5 of each house of the General Assembly approve the amendment, which is then submitted to the voters at the next general election. (quick google, likely better wording elsewhere)
Comment by Cindy Lou Friday, Mar 26, 10 @ 3:09 pm
==“If it’s unconstitutional to alter pension benefits for existing state employees, can the constitution be altered via a constitutional amendment voted on by the electorate”
The answer must be yes ==
True, but you still have to worry about the federal constitution’s prohibitions against states passing laws “impairing the Obligation of Contracts.” Federal courts have held that, when a state law is intended to create a contractual obligation (which is precisely what our constitution expressly says it is doing regarding “pension and retirement system” benefits), the state can’t back out of the contract by changing its laws. The courts could very easily hold that we cannot cut back on retirement benefits (including free health insurance) for current state employees even by changing our constitution.
Comment by Pat Robertson Friday, Mar 26, 10 @ 4:04 pm
Okay. One more question…if you’ll indulge me.
Since, the state has the ability to not impose a state income tax on state pension benefits (which I’m pretty sure is the present situation), do they also have the ability to impose a “super-tax” on excessive state pension benefits, if they so chose?
I’m not advocating this. Just want to know what limited options they might have.
Thanks!
Comment by Downstater Friday, Mar 26, 10 @ 4:39 pm
Downstater — an argument could be made that the existing exemption is “contractual,” although I think that is pushing it too far. Taxing higher amounts could be challenged as violating the constitutional prohibition against graduated taxes. On balance, I think they could, as long as they don’t tax a retired judge. It’s amazing how the constitution matches self-interest sometimes.
Comment by Pat Robertson Friday, Mar 26, 10 @ 4:51 pm
“I’m not sure twenty-somethings who have a burning desire to teach really think all that much about pensions…” But Rich, they should, and they do think about the viability of the profession. The perception here is that public sector employees are mostly uneducated patronage slugs that are somehow given too much. Educated professionals , like teachers, are taken for granted. Security and stability are the trade-offs for higher pay and mobility present in the private sector….that trade-off can be attractive to many. Do we want better teachers, better government financial people, better managers, better engineers, better lawyers, etc? Do we want the best and brightest in public service? Or, do we want the bottom of the barrel with low talent and without a work ethic? And, if the compensation bar is lowered for new professionals, what will the unions do in the long run? Bargain for more.
Comment by JustaJoe Friday, Mar 26, 10 @ 5:28 pm
Rich,
You’re wrong about allowing early retirement. It always costs the taxpayers more in the long run. There is no salary class making so little that paying someone new to do the work, while you also pay the old employee 60-80% of their last salary not to do the work saves money.
Part of the problem we have now is that local governments for years shunted expenses off into the pension system by making this flawed argument for early retirement. It may move around who makes most of the payment, but the overall outlay is larger if you allow early retirement.
Comment by irving & ashland Friday, Mar 26, 10 @ 7:04 pm
Operation Crooked Code Update: Petru Cladovan
The feds, prosecutors, and judge finally admit and conclude amid all set forth charges that Petru Cladovan is and was innocent AND ALL CHARGES WERE DROPPED today 3/30/2010. Petru Cladovan was found that he never had intent and/or knowledge of any bribes and all accusation were misinterpretation of twisted perfected lies by so called “expeditor”, who was forced to start operating, as a mole with the feds, and with whom orchestrated this entrapment only to reduce her possible charges sentence of 130yrs if convicted. This same “expeditor” ironically under oath admitted and testified that Petru Cladovan had no implication nor knowledge of her illegal business transactions and that all business between her and Petru Cladovan were 100% LEGAL and legit!!! It is only fair to say that after two long years of false accusations, wrongfully indicted, and defamation not limited to by the government and by media to Petru Cladovan and his family, the truth and innocent prevails.
Comment by the truth Wednesday, Mar 31, 10 @ 12:16 pm