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Pension distractions and scholarship attacks

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Illinois

* If there’s any evidence of politicized actuarial assumptions at the pension systems, I think Rep. Brauer probably ought to be more specific. So far, this looks like a distraction to me…

State Rep. Rich Brauer, R-Springfield, is calling for the creation of a new constitutional office to get “partisan politics” out of Illinois’ five pension systems.

Modeling the new office after that of the auditor general, Brauer said the actuary general would do the calculations involved with figuring out how much the state owes to the pension systems.

While each of the five pension systems has its own actuary, Brauer said an outside agency examining the pensions would be free of political pressure.

“There’s political pressure you don’t see with those numbers,” Brauer said. When asked, Brauer said he could not name a particular incident in which he believes something has been hidden from the General Assembly and the public.

* Partially agree and partially puzzled…

Leaders in Illinois have said this is the year for pension reform.

Unit 5 Superintendent Gary Niehaus said he’s not so sure. He told WJBC that lawmakers may talk about it a lot this year, but doesn’t think they’ll act until there’s a lame duck session.

“It’s so hard to understand why we haven’t been able to take on this in a way that makes sense,” Niehaus said. “And, I think now that they’ve had more people involved, I think the governor is going to try and push this thing through this spring. I don’t know if he has enough coalition to pull that off.”

If pension reform was easy, it would’ve been done years ago. It ain’t.

But Gov. Pat Quinn hasn’t really said what he wants to do about pension reform, other than the bill has to be constitutional. And his pension reform commission isn’t given much chance of success. Quinn just doesn’t have a track record of getting things done on his own initiative. He’s shown he can kill things, but not pass them.

* In other news, the always controversial legislative scholarship program is showing up in legislative campaigns…

Avon Township Supervisor Sam Yingling has called on his Republican opponent in the 62nd House District, incumbent Sandy Cole of Grayslake, to not participate in the legislative scholarship program. Cole voted to eliminate the program last year, but has awarded the scholarships.

“With our state government in financial distress, I commend Reps Sullivan and Gaffney in their effort to save money. This is why I call on Rep. Cole to follow suit and suspend her participation in this program.” said Yingling, a Round Lake Beach Democrat.

From a Yingling press release…

“Leadership takes action and Cole needs to be held accountable,” explained Yingling, “for too long she has operated under the radar, saying one thing to our constituents and doing another in Springfield. This isn’t a stunt; it’s a way to ensure she does the right thing.”

Yingling’s website attacking Rep. Cole on the issue is here. The BGA has also launched an online petition to end the program.

posted by Rich Miller
Tuesday, Jan 24, 12 @ 11:05 am

Comments

From a recent talk with my State Senator, he doesn’t believe much will happen on the pension issue this year. Same for another Senator I talked to about a month ago.

As far as Rich Brauer’s specific claim, I think the numbers generated / used by SRS are generally fact based. Same for most the COGFA stuff although I check them a bit closer. Numbers from other sources, maybe not quite as objective and could be perceived as having a political basis. The biggest issue in any future numbers is disclosing the various assumptions used to generate the projections. Minor tweaks in assumed rates of retirement and assumed rates of return can produce major differences in conclusions when projected out many years. The thing I always look at is are the assumptions what is the general consensus or are they outliers?

The major point I see Rep. Rich making with a new board is it might be perceived as not having any axes to grind in either direction.

Comment by Retired Non-Union Guy Tuesday, Jan 24, 12 @ 11:23 am
Great call. Eliminate the GA Scholarship program and out that $10 million a year towards something else.

How about keeping Jacksonville or Tinley open?

Simply offset the ed. funding and send those funds to human services.

How about that?

Comment by Shock & Awww(e) Tuesday, Jan 24, 12 @ 11:26 am
===that $10 million a year towards something else.===

It’s not appropriated money, so there are no state budget savings.

Comment by Rich Miller Tuesday, Jan 24, 12 @ 11:33 am
I stand corrected: ILGA undergraduate & graduate tuition waivers totalled $13,508,800 in FY 2011, not $10 million.

There’s solution #1, right there.

How’s that for making “tough” choices? Many other such funding solutions exist as well.

Comment by Shock & Awww(e) Tuesday, Jan 24, 12 @ 11:38 am
Rich: the cost of the tuition waivers are covered by the university which the student attends.

So, we’re talking about $13 million that the schools used to spend covering these waivers.

Since those waivers will no longer exist, simply offset university funding from the General Revenue fund by $13 million (since the schools will no longer be covering those waivers).

Take that $13 million and put it towards DHS (or some other priority) instead.

Didn’t mean to oversimplify. And thank you for responding, and for all the work you put into this.

Comment by Shock & Awww(e) Tuesday, Jan 24, 12 @ 11:43 am
Or take the 13 million in savings and reduce tuition for all the students!

Comment by Irish Tuesday, Jan 24, 12 @ 11:57 am
In effect other students through their tuition have been subsidizing the scholarship students. The same is true of Illinois Veterans Grants. The state declares the free tuition, but the schools (students) pick up the bill.

Comment by SIUPROF Tuesday, Jan 24, 12 @ 12:13 pm
Yeah, it’s not like the any funds come from some endowment. I went to a college that operated like that. Gave “scholarships” to deserving students that were not backed by an endowment. The college died in my senior year.

Comment by dupage dan Tuesday, Jan 24, 12 @ 1:04 pm
If only, Irish. If only.

Even if the state decided to fund higher ed like it did during the Ryan administration, I highly doubt they would lower tuition. Deffered maintenance, salary increases, and other pet projects that have been put off for the last 10 years would suddenly come off the shelf and gobble up the new cash flow. Plus, these institutions have to pay down a backlog of their own bills. There’s just no way. In any scenario they should lower tuition, but I just don’t see that ever happening.

Also: Whoever is in-charge of Yingling’s media presence should get a steak dinner for a week. His name is scattered all over the place. BGA, NBC 5, and Sun-Times have him on their call sheets.

Comment by Dirty Red Tuesday, Jan 24, 12 @ 1:19 pm
Good point, Red, although it’s important to recognize that Ryan understood how to put the greater good ahead of politics and partisanship.

You’re right about the steak dinner. But if I facts straight, Lowell Jaffe is helping with Yingling’s media and he’s a vegetarian. Maybe tofu for a month?

Comment by Truthb4partisanship Tuesday, Jan 24, 12 @ 1:51 pm
I’ll trump Brauer’s “Actuary General” with an “Actually,General” who would rule on all useless legislation, as in “Actually, your proposal is useless.”

Comment by wordslinger Tuesday, Jan 24, 12 @ 2:01 pm
Just a few thoughts, using our flagship (U of I) as an example:

- U of I’s net assets increased by $427.8 million in 2010.
They received $144 million in private gifts.
Their amount receiveable from IL’s General Revenue fund increased from $120,902,000 in 2009 to $265,624,000 in 2010.

- U of I’s net assets increased by $404 million in 2011.
They received $133.5 million in private gifts.
Tuition & fee revenues increased by $82.2 million, in large part due to a tuition increase.
Their amount receiveable from IL’s General Revenue Fund increased to $288,669,000 in 2011.

U of I currently has $3.2 billion in net assets. They’re also boosting tuition by another 4.8% this year.

The cost of these tuition waivers to U of I represents a miniscule portion of their annual operating budget. They also have $3.2 billion of assets in reserve to cover that difference. They would neither collapse nor close down if the savings from eliminating the Legislative scholarship fund were diverted elsewhere for a few years.

That $13.5 million (cumulative), however, may literally mean life or death to other programs and people until our economy gets back on track.

Everyone has different priorities. In this case, some may prioritize letting our universities keep the savings from elimination of the scholarship program. Others may prioritize maintaining the scholarship program itself. Others still may prioritize diverting those savings elsewhere by offsetting the savings through the general revenue funds sent to those universities.

Time will tell what order of priorities our state sets. In proposing these closures first, it appears clear where some feel these people should rank in our priorities.

Comment by Shock & Awww(e) Tuesday, Jan 24, 12 @ 2:34 pm
Word’s right. 7000 bills submitted, of which maybe 400 are worth the time to talk about. But who’s to say?

Wow! A new Committee with a Head, to review the pension actuaries? Now there’s a red-herring stall tactic! (In the absence of any evidence or even credible hint that there’s been any political influence on these professionals.)

Comment by mark walker Tuesday, Jan 24, 12 @ 3:25 pm
I can’t top Word for snark on Brauer’s idea, so to the merits of his ideer..there aren’t any. Sorry, old friend, but you are way out on right field on this one. As you acknowledge, you can’t point to any incidents of political pressure or abuse. Yes, there have been times when the actuarial estimates differed from the actual experience, most notably the State ERI from about 10 years ago. In that case, the proposal changed after the estimate was made, dramatically broadening the eligible pool of candidates for the ERI. This, coupled with the 2002 election results, caused a huge “behavior change” as actuaries call it and thousands more folks than estimated took advantage of the ERI, blowing the original estimate to pieces. Can’t blame that on the actuary.
I secondly would question the ability of the State to lure a qualified credentialed consulting actuary from the private sector to the State pay scale and take at least a 50% pay cut.
If there are any issues with the current stable of actuarial firms serving the State pensions and COGFA they might be that only a couple firms do most of the work and that they have had the jobs for years or decades. I see those as non-starters-there aren’t 10 or 20 firms that do this work any more, and the instituional knowledge built up is valuable with the complex benefit and funding structures we have in Illinois. Further, some of the funds, working in collaboration with General Holland’s staff, have instituted periodic independent acturial reviews by a third party actuarial firm. Enough about this bad idea.

Comment by Arthur Andersen Tuesday, Jan 24, 12 @ 4:17 pm
AA, we always learn something from you.

Comment by wordslinger Wednesday, Jan 25, 12 @ 8:21 am