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* ABC7’s Ben Bradley scored a rare interview with House Speaker Michael Madigan yesterday. Madigan spoke mainly about pensions. And it’s becoming ever more clear that MJM is zeroing in on the cost-shifting plan. Madigan focused on the fact that 75 percent of the state’s pension costs cover teachers and universities.
* From Ben’s story…
“There’s just too many people in the legislature that don’t want to do the heavy lifting of legislating,” said Madigan. “They want to go there and talk among themselves. They want to talk to people you and say the right things for your consumption; but then when it comes time to cast a difficult vote they’re in the bathroom somewhere.”
House Speaker Mike Madigan, like almost every other state official, admits there is a real need for pension reform.
What they don’t agree on is how to do it.
Democrats think the state’s universities, community colleges and local school districts should pay for the pensions of their own employees. Currently, the state does, and Madigan says it account for 75 percent of the state’s annual pension payments.
“People are spending the money and sending the bill to someone else. It’s not a good policy anywhere, especially in government,” said Madigan.
posted by Rich Miller
Thursday, Oct 25, 12 @ 1:36 pm
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I agree that the schools should pick up the cost of the pensions they offer, but not until the state make up for missed payments in the past. Right now, they’re saying, “Here, you pay this bill that we agreed to pay, but had better things to use the money for.”
Comment by Homer J. Simpson Thursday, Oct 25, 12 @ 2:10 pm
How does MJM keep a straight face when he says this stuff? Some of those “people in the legislature” (aka Representatives) have not yet been told by your staff to vote for this abomination.The comments about accountablity - well now I am having a hard time keeping a straight face.
Comment by Obamas Puppy Thursday, Oct 25, 12 @ 2:22 pm
They don’t have any prolbem sending unfunded mandates to the local school districts then expecting local taxes to pay for them. Property taxs are at their max. A average house cost homeowners in some counties as much as a third of their mortage. If you shift the cost they will just spend the money on their pet projects.
Comment by nieva Thursday, Oct 25, 12 @ 2:25 pm
“People are spending the money and sending the bill to someone else. It’s not a good policy anywhere, especially in government,” said Madigan.
It is also not good policy to say “We are going to give you X” then give someone Y instead..
Also the illusion the legislators have free will is very entertaining…
Comment by OneMan Thursday, Oct 25, 12 @ 2:26 pm
“People are spending the money and sending the bill to someone else. It’s not a good policy anywhere, especially in government,” said Madigan.
What a croc. This makes the lottery school funding shell game to shame. The State was to properly fund all elements of operation with the income tax and ancillary fees. They spent decades of underfunding the pensions and want to hand many of the obligations back to other entities, who will have to develop new funding opportunities (taxes) to handle the load. In the meantime the State will receive a windfall of available cash because they no longer have the obligation to fund the disbursed pensions.
What assurance will we get that the ’saved’ money will be used wisely?
Comment by Plutocrat03 Thursday, Oct 25, 12 @ 2:26 pm
And lets remember who benefitted when the state used the missed pension payments for state programs instead of raising taxes on their constituants to pay for those programs over these last 40 years. Here’s a hint: It wasn’t state employees. Let’s do some just and legal heavy lifting, while we’re getting legislators to do the heavy lifting here and reform the tax system, which is the real problem.
Or…See ya in court. You won’t be getting my earned, deferred compensation without a fight.
Comment by PublicServant Thursday, Oct 25, 12 @ 2:27 pm
This education pension issue did not just suddenly develop 6 months ago or 8 years ago. This is decades in the making. If “It’s not a good policy anywhere, especially in government” where was Madigan putting the LBJ squeeze on the people who retreated to the bathroom in 1995, 2003, or 2009? He knew who they were. Someone OKed the vote to skip the payments.
Comment by zatoichi Thursday, Oct 25, 12 @ 2:28 pm
I understand the concept of the cost shift for local school districts and community colleges and I have never read why the State took on this obligation but Universities have no other funding source for pensions or anything else. If the State is choosing the Boards of Trustees, then they University employees are state employees. Without increased revenues, either services, staff or the pensions are not going to be funded.
Comment by Bourbonrich Thursday, Oct 25, 12 @ 2:28 pm
Homer, the so-called “cost shift” is for current and future pension costs only. The state is still on the hook for the past unfunded liability.
Comment by Michelle Flaherty Thursday, Oct 25, 12 @ 2:30 pm
—“People are spending the money and sending the bill to someone else. It’s not a good policy anywhere, especially in government,” said Madigan.—
Um, we local types are spending the money you tell us we have to spend. Shift the cost local, then I say again, we’d better let the locals set all the pension benefits.
Comment by Shemp Thursday, Oct 25, 12 @ 2:37 pm
“You won’t be getting my deferred compensation without a fight”
Unless you are talking about Deferred Compensation, and not recklessly referring to pensions, don’t toss gas on the fire, please.
Comment by Anonymous Thursday, Oct 25, 12 @ 2:38 pm
Sounds like a House Dem position is being solidified.
Comment by wordslinger Thursday, Oct 25, 12 @ 2:42 pm
Well, there’s a first. I’ve never heard Speaker Madigan throw down a gauntlet like this. In effect, he’s calling legislators “chicken” when it comes to tough votes. While the statement is too often true, since I equate a present vote or a “just say No” vote to hiding in the WC, I can’t recall Mr. Madigan being so blatant about it.
Comment by Commonsense in Illinois Thursday, Oct 25, 12 @ 2:44 pm
Pensions are earned, deferred compensation, anonymous 2:38. It’s as simple as that. Nothing reckless about telling the truth. But I’m more than willing to prove that simple fact to you in court, if you’d prefer.
Comment by PublicServant Thursday, Oct 25, 12 @ 2:46 pm
I would concur with some of the comments about funding. It would be fine for universities to assume costs for pensions — IF they state chooses to adequately fund the universities to begin with. One cannot claim to have a state-supported educational system if one then refuses to provide that support. Furthermore, if the state is going to abdicate its responsibility for adequate funding, then it must also relinquish its regulatory hold on them as well.
Comment by ToferManiac Thursday, Oct 25, 12 @ 2:52 pm
Shemp,
Yes, the state sets the qualifying parameters for pensions, but one of the driving factors for what a pensino will actially be is salary, which is determined solely by the locals.
So, in reality, the locals already do have control of pensions. Historically they’ve done all they can to increase those pensions right before handing the tab off to the state. (google: 20 percent raises and TRS)
Comment by Michelle Flaherty Thursday, Oct 25, 12 @ 2:53 pm
Mixed emotions on this one. As a property owner, I don’t think I’m going to like the end result. As a SERS retiree, I’m glad they are looking elsewhere for the savings.
Still think there is a state level tax increase / expansion coming even after the legislature dumps the future TRS pension costs on the school districts, since you still have to tackle the backlog of unfunded pension liabilities.
And a good chuck of the SERS / SURS / GARS / JRS health insurance costs aren’t going away either since I’m assuming the State is going to lose one or more of the current lawsuits. At best, the State will manage to get retirees to pay most of the dependent coverage that now has a relatively low cost.
Finally, the State isn’t going to stand by and let the actual Universities double their tuition, so the State funding at college level will go up by almost the same amount as the University’s assumed pension costs … no savings there, just a different label on the same money so the GA can claim the Universisites are now paying the pensions.
Bottom line; I predict is both higher property taxes AND higher State taxes.
Comment by RNUG Thursday, Oct 25, 12 @ 3:08 pm
All this fighting about how to get around giving schools money……. state stiffs them, locals don’t want to pay……….I don’t understand how anyone can talk about excellence and quality in the same breath as they say not with my dime!
Comment by geronimo Thursday, Oct 25, 12 @ 3:08 pm
There is a law already on the books that makes school districts liable for the pension costs for any increase over 6% in an employee’s pension calculable years.
The “skin-in-the-game” argument goes both ways. Once the cost shift is complete, the GA will be able to increase pension benefits for which the schools will have to pay. Ask municipalities how that has worked out.
Just for the record, only 2.3% of the unfunded liability is due to higher than anticipated salaries according what Eric Madiar, Sen. Cullerton’s point person on pension reform, told school administrators just last Friday. 43% is due to the GA’s failure to make its payments, 23.5% because of stock market losses, 10% because of benefits increases and 4.5% because of actuarial misses. The rest, he said, is for miscellaneous reasons.
Comment by Decaf Coffee Party Thursday, Oct 25, 12 @ 3:10 pm
Mr. Speaker,
The free lunch was something that was agreed to long before you took office. These systems were created during WW2, when K-12 school districts needed financial help from the State, and the State didn’t haven’t money. So to help them out, the State put themselves on the hook for the employer contribution. The problem is funding to the Systems have been a joke from their inception until FY 12. At some point the state is going to have to pay the piper for all the debt they have racked up making good on pork projects, “global” social programs, etc. 66% of the State’s payments towards the pension funds are to pay off the debt, you can’t escape it.
With that being said, I do support the plan to shift normal cost. It will require schools to act more prudently in the structuring of pay schedules and the impact on TRS’ liability. For years, K-12 school districts used TRS to subsidize their compensation packages and to trim the bottom line. This component should stop that.
Comment by Dirt Diver Thursday, Oct 25, 12 @ 3:14 pm
“People are spending the money and sending the bill to someone else”
You mean like the legislature spent the money that was supposed to go into funding pensions and instead spent it on ????????? Sending the bill now to the workers and retirees who have been stiffed to pay for what was given to someone else? Is that what he means?
Comment by geronimo Thursday, Oct 25, 12 @ 3:16 pm
–state stiffs them, locals don’t want to pay………–
Locals in Oak Park, River Forest, Hinsdale, Winnetka, etc., don’t want to pay the pensions driven by the salaries they established, especially the ramp-ups they gave administrators on their way out the door.
I’ve often wondered how folks in Marion, or Danville, or Decatur, view their income taxes paying for the sweet life on the North Shore or Western Suburbs.
Comment by wordslinger Thursday, Oct 25, 12 @ 3:21 pm
Here’s a question (for Schnorf?) — The ramp was established in 1995, but the multiplier for teachers was increased in 1998. Was the ramp revised to reflect the increased multiplier? (And if I’m getting any of this wrong, please correct.)
Comment by soccermom Thursday, Oct 25, 12 @ 3:25 pm
Whatever you do, please do not balance this on the backs of retired State workers. Start today and let it take effect from now until forever. But do not punish people who have no reason to be punished for decades of financial mismanagement. Thank you.
Comment by Have a Heart Thursday, Oct 25, 12 @ 3:31 pm
The salaries and pensions of North shore and suburban workers are high because of what it takes to live there. Pretty shocking to see what your dollar will buy you around the state. Check out Sperling’s cost of living calculator.
http://www.bestplaces.net/city/default.aspx
Comment by geronimo Thursday, Oct 25, 12 @ 3:47 pm
–A average house cost homeowners in some counties as much as a third of their mortage–
Huh?
Comment by wordslinger Thursday, Oct 25, 12 @ 4:00 pm
Soccermom, I’ll try to answer your question. You are correct that the funding ramp started in 1995 for FY 1996 approps.
The TRS formula changed in 1998. The ramp was not changed, but (iirc) the law that changed the formula also raised TRS contributions by specified percentages of teacher payroll over the 10-year period following. Member contributions were also raised and school districts started making a contribution to TRS for the first time.
Comment by Arthur Andersen Thursday, Oct 25, 12 @ 4:06 pm
Madigan had the power to do something extraordinary with his power and instead he chose to win the small day to day battles and let the 500 pound gorilla in the room just sit there, completely ignored.
What an incredibly wasted talent and opportunity.
Comment by Sunshine Thursday, Oct 25, 12 @ 4:09 pm
geronimo @ 3:47 pm,
Back in the late 1970’s (pre-union civil service employees) when I actually managed people at the State, for a while I supervised basically identical operations in both Chicago and Springfield. People in Chicago had payroll titles that were two full grades higher just to kind of make up the cost of living difference. $X in Springfield got you top of the line talent; $X plus two pay grades in Chicago got you mid-range talent in the smae speciality. Plus in Chicago, the few really talented people didn’t stay around long. They could jump ship to a private firm, get a decent raise, and not even have to change their parking space or commute route …
Blago’s whole effort to make Chicago the pseudo State Capitol in terms of operation has done nothing but cost the State a ton of money in terms of office rental, lower talent levels, higher salaries, and the resultant higher pensions. And I’m not even including the cost of actually moving the offices to Chicago from downstate or the ridiculous amount of travel expenses being paid out because of the Chicago-centric approach.
If Quinn and Madigan really want to find some savings, move all those offices back downstate …
Comment by RNUG Thursday, Oct 25, 12 @ 4:10 pm
“People are spending the money and sending the bill to someone else. It’s not a good policy anywhere, especially in government,” said Madigan.
What a croc is right. What do you think Madigan has done for years - took the money that should have went to make the the pension payments and spent it elsewhere. Now he’s wanting to send the bill to someone else!
Comment by OMG Thursday, Oct 25, 12 @ 4:20 pm
RNUG
Agreed! But schools can’t be moved downstate and the people who work in them have to live in the radius. Why folks get nutso over the salaries paid to teachers in the suburbs (which, compared to their neighbors, are laughable) shows ignorance about simple economics.
Comment by geronimo Thursday, Oct 25, 12 @ 4:25 pm
Have a heart —- Current employees aren’t responsible for decades of mismanagement any more than retirees are. Yet you think its ok to dump on them?!
Comment by lincolnlover Thursday, Oct 25, 12 @ 4:37 pm
geronimo,
Yeah, I know about the costs in some of the burbs. Good people cost and you have to be competative in compensation (salary + benefits) if you want to keep them.
A slightly older cousin, now retired for a couple of years, started teaching in the Chicago School District but quickly ended up out in the high rent district (actually lives on the Warrenville / Naperville line). And a much younger niece graduated about a year and a half ago from North Central …
Comment by RNUG Thursday, Oct 25, 12 @ 5:03 pm
Just noticed the latest TRS pension fund report is out. According to the SJ-R, the return was only 0.76%.
http://www.sj-r.com/breaking/x2053814096/TRS-investment-return-falls-below-1-percent
Comment by RNUG Thursday, Oct 25, 12 @ 5:08 pm
RNUG -
What are you talking about? Which offices? Where were/are they “renting” these offices? Proof? Also, the State already pays people to move things, they are called laborers.
Please stop being a bitter downstater. Just because none of the Governors want to live in your mansion doesn’t mean you can blame Chicago for everything. And I don’t care for your ‘lower talent level’ comment. Without us, you people would be Alabama. And not the nice, coastal, manufacturing part of Alabama. I mean the northern, poor, Appalachia-style part of Alabama.
Comment by Lester Holt's Mustache Thursday, Oct 25, 12 @ 5:12 pm
Lester,
I’m just describing my personal experiences with State employees from 1970 through 2002 … it’s what I saw. I was signing their evaluations … which weren’t all that favorable in a lot of cases.
I used to deal with operations in State owned and leased sites in both Springfield and Chicago, so I saw the cost differentials.
One of my relatives has been running around the State for the past several years, consolidating offices and trying to get employees in only State owned buildings. You can find the various RFP’s and payments yourself on the government web sites.
And, last I knew, the laborers the State paid to move things are still private moving firms, companies like Mayflower and Allied Van Lines. I’ve seen those company’s equipment shuffling state offices here during the past couple of years.
Comment by RNUG Thursday, Oct 25, 12 @ 5:40 pm
Here’s what local schools and local taxpayers have to face: if they don’t want the cost shift, fine. then the state will cut GSA in order make the TRS pension payment.
It’s not a matter of if this happens. It’s a matter of how it happens.
Comment by Michelle Flaherty Thursday, Oct 25, 12 @ 5:50 pm
“People are spending the money and sending the bill to someone else. It’s not a good policy anywhere, especially in government.”
I spit on my screen. Did he really just say that? That’s what he does for a living. He does it every year. It’s his job.
Comment by Really? Thursday, Oct 25, 12 @ 6:12 pm
Decaf 3:10
2.3% is small, but it’s still got to go. Plus, I note your “higher than anticipated” qualifier. I don’t know who set that anticipated amount.
Also, maybe TRS is jumping on this bandwagon to distract from the lousy investment performance…
Comment by Original Rambler Thursday, Oct 25, 12 @ 6:47 pm
A new examination of Illinois’finances in the NYT yesterday: Illinois Debt Takes A Toll: http://www.nytimes.com/2012/10/25/business/illinois-debt-takes-toll-on-services-study-finds.html It’s the real state of the state.
Comment by Emily Booth Thursday, Oct 25, 12 @ 7:04 pm
RNUG -
Yes, you are correct in your arguments, and consistent with what would have taken place during those time periods. Even though the SOS have their own laborers nowadays, I have seen Mayflower do the moving for some of the offices myself.
Actually, I need to apologize. Usually, this is a place of higher minded arguments, and I brought it down a level. I have found a distinct level of mouth-breathing in these forums lately, and I released my pent up frustrations with the paid election-time trolls in response to your post.
I just get really tired of folks downstate acting like the opinions of Chicagoans doesn’t count for anything, considering we account for most of the Illinois population. I am sorry for jumping the gun here, and promise to be more patients in my future posts.
Comment by Lester Holt's Mustache Thursday, Oct 25, 12 @ 8:58 pm
I’m late on this thread but I thought the State Universities Retirement System (SURS) employees are State employees since they are paid primarily by General Revenue Fund appropriations. I know they are partially paid from university tuition and fees and local funds also but even those funds used to be appropriated-they aren’t anymore. It seems to me the cost shift should be for the TRS only - not the SURS.
Comment by Soccertease Thursday, Oct 25, 12 @ 9:33 pm
Lester,
Thanks for your reply.
I spent a couple of years early in my career working pretty much full time in Chicago. In fact, during that period I learned the downtown so well walking it where I could ignore one way streets and easily use the upper / lower levels, that I used to get frustrated driving it.
Even though I grew up downstate, I learned politics (or my cynicism thereof) listening to my parents discuss it and reading three newspapers every day, two downstate and one Chicago, whichever had Mike Royko’s column, every day from about age 13 or so. Must be part of the reason I enjoy this blog … plus, as you noted, the mostly well informed people.
Comment by RNUG Thursday, Oct 25, 12 @ 10:01 pm
Soccertease @ 9:33 pm
SURS is a bit funny; it includes both Universities and Community Colleges.
You are correct when talking about the actual Universities.
However, the Community Colleges actually having taxing districts, just like your local school district, that is their primary funding source. For example, if you live in Sangamon County, dig out your property tax bill and you will find a line for LLCC on it but you won’t find a line for UIS.
Comment by RNUG Thursday, Oct 25, 12 @ 10:08 pm
I was looking through this stuff in detail in the levy docs…since there is no maximum rates now for pension costs, most of this simply passes through to the taxpayer. Now the individual boards must still vote on the levy, but there is currently no maximum rate in the other pension lines such as IMRF. Yikes! An immediate hike with an undetermined rate! Doesn’t matter really, u just pay. Could be several hundred bucks per taxpayer. Thanks Mike!
Comment by Madison Thursday, Oct 25, 12 @ 10:56 pm
Arthur Andersen — Were those increases in contributions adequate to offset the increased liability?
Comment by soccermom Thursday, Oct 25, 12 @ 11:01 pm
Of course the Speaker doesn’t want to focus on who is responsible for creating the problem.
Comment by Just Me Thursday, Oct 25, 12 @ 11:21 pm
Madison:
Depends if the school district is a ‘capped’ tax district. If they are ‘capped’, the overall tax dollars and cents for the tax district really can’t increase very much - especially these days.
The increase for the ‘capped’ funds is limited to the CPI average, which is pretty low these days. So, they can’t get a whole lot more dollars.
But, what they can do is to have far more of the available money shifted from direct education purposed to education retirement funding. So, in effect what happens if that the funding for local education gets hollowed out and more and more money goes to fund educator retirement benefits, and less goes to actual education services.
But for those school districts that are not ‘capped’, well, yeah, it’s potentially going to see some substantial increases. First time a school district takes that route and jacks those taxes up big time to pay for retiree benefits, it’s going to be a fight to the finish - and the school district(s) and it’s employees are going to lose - LONG TERM.
We’re already starting (just barely) to see it happening out here in the far western suburbs. Too many people this year saw several hundred dollar increases in their property taxes, at the same time their property values decreased. Not sitting well, and in any case, the tax rates are just skyrocketing (even as property assessments are decreasing).
Comment by Judgment Day Thursday, Oct 25, 12 @ 11:59 pm
I don’t understand how anyone can agree that the property tax payer is supposed to pick up the unfunded liabilities of the state. The middle class is going to get slapped with huge tax bills. The wealthy are going to pay and the middle class is going to sell. Wake up! Its time for the State of Illinois to file BK.
Comment by Going Broke Thursday, Nov 8, 12 @ 2:59 pm