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* House Republican Leader Tom Cross and Rep. Elaine Nekritz have filed a new pension reform bill, HB 3411. Video of the press conference, via BlueRoomStream.com, is here.
It appears to have a sorta kinda cost shift in it. From the press release…
• Creates Tier 3 defined benefit/defined contribution plan for SURS and TRS members who start work after January 1, 2014. Local Employers and employees will be responsible for funding these plans.
* Moving on to the fact sheet, this is for public employees hired before 2011…
Members (public employees hired before 2011)
• Cost-of-living adjustments apply only to the first $25,000 of the employees’ pensiono That limit is reduced to the first $20,000 for employees eligible for Social Security
• COLAs are delayed until the employee turns 67 or five years after retirement, whichever comes first
o This applies to all employees and retirees who are currently receiving COLAs
• Retirement age is increased by:
o No increase for employees age 45 and older
o One year for employees age 40 to 44
o Three years for employees age 35 to 39
o Five years for employees age 34 and younger
• Employees would be required to contribute more toward their pensions by:
o One percent starting July 1, 2013
o Two percent starting July 1, 2014• Pensionable salary – the amount of salary that counts toward a pension – is limited to the higher of the Social Security wage base or the participant’s salary when the legislation becomes law
* For public employees hired since 2011…
• All new employees in the Teachers Retirement System and State University Retirement System are placed in a stacked hybrid plan (combination defined benefit and defined contribution plan)
o Employees are guaranteed a minimum defined benefit
o Employers and employees contribute an additional amount in to a 401(k) style benefit plan
o Local school districts can negotiate the generosity and cost of the 401(k) benefit with employees• TRS and SURS employees hired before the effective date can choose to remain in Tier 2 or join the stacked hybrid plan (Tier 3)
• COLAs for General Assembly Retirement System members will match those of Tier 2 members in the other pension systems
* For TRS and SURS members who start work after January 1, 2014…
• Hybrid Defined Contribution, Defined Benefit plan
• Defined Benefit component:o Employee contribution is 4% of pay
o Final Average Salary = Highest 8 out of last 10 years
o Unreduced retirement at 67 and 5 years of service
o Reduced retirement at 62 and 10 years of service
o 1.1% annual accrual rate
o COLA is lesser of 3% or ½ CPI, simple starting at age 67• Defined Contribution component:
o Employee contribution is 5% of pay
o Local employer can make optional matching contribution (pursuant to local contracts) of between 3% and 10% of pay
o Ability for the DC plan to be invested in existed investments in the system and managed by the system for employees.
o 5 years to vest in the employer contributions.
* More…
• Employer contributions will be on a 30-year level-funding plan to achieve 100 percent funding
• State contributions will be enforced through court action or intercept of other state funds
• Revenue currently being used to repay pension obligation bonds will be used to pay down our unfunded liability once the pension obligation bonds are paid off
* From the bill’s synopsis…
Amends the General Provisions, General Assembly, State Employee, State Universities, and Downstate Teacher Articles of the Illinois Pension Code. In the Downstate Teacher and State Universities Articles, creates a Tier 3 composite defined-benefit, defined-contribution retirement plan for employees hired on or after January 1, 2014 and certain others. Makes corresponding changes in other parts of those Articles and in the Retirement Systems Reciprocal Act. Increases the retirement age for certain Tier I members and participants. Changes the conditions of eligibility for, and the amount of, automatic annual increases for Tier I retirees. Increases required employee contributions for Tier I members and participants. Limits pensionable salary for Tier I and Tier 3 participants. Changes the required State contribution to each of the affected retirement systems so that those systems are 100% funded by 2043. Adds State funding guarantees. Makes other changes. Amends the Illinois Public Labor Relations Act to provide that this amendatory Act takes precedence. Amends the State Finance Act. To the list of standardized items of appropriation, adds “State retirement contribution for annual normal cost” and “State retirement contribution for unfunded accrued liability”. Defines those terms. Amends the Governor’s Office of Management and Budget Act. Adds those terms to a list of classifications to be used in statements and estimates of expenditures submitted to the Office in connection with the preparation of a State budget. Amends the State Mandates Act to require implementation without reimbursement. Includes an inseverability provision. Makes other changes. Effective immediately.
*** UPDATE *** SJ-R…
The latest plan does not give employees a choice of retirement benefits, something Senate President John Cullerton, D-Chicago, has said is essential for a pension reform plan to be found constitutional. Cross and Nekritz said they believe the plan is constitutional anyway.
“We feel very strongly that there are legal opinions that support this as constitutional,” Nekritz said.
“Anything is going to end up in the courts,” Cross said. “The reality is nobody knows (how the courts will rule).”
posted by Rich Miller
Wednesday, Feb 27, 13 @ 10:55 am
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Nice simple bill.
Comment by Nieva Wednesday, Feb 27, 13 @ 11:01 am
How many poison pill amendments will be added to this bill?
Comment by foster brooks Wednesday, Feb 27, 13 @ 11:02 am
How is changing the COLA not an unconstitutional diminishment of benefits?
Comment by retired and fed up Wednesday, Feb 27, 13 @ 11:06 am
First, I can’t imagine how this gets past the pension clause. Clearly it is diminishment on its face. And don’t give me the argument that this will fly “because the funding is such a mess.” It’s been bad for over 40 years!
Second, this will put Illinois universities at a distinct disadvantage when recruiting faculty. As bad as it is now this will be worse.
Finally, what kind of management mess would this create for K-12?
How is this better than the unconstitutional mess of a bill filed earlier? I am beginning to think that Nekritz and company really have no idea what they are doing and are just throwing things against the wall to see what sticks!
Comment by Old and in the Way Wednesday, Feb 27, 13 @ 11:15 am
what retired said
Comment by wizard Wednesday, Feb 27, 13 @ 11:18 am
What is the “consideration” that is to be given when a benefit is diminished? A guarantee that the pension will be paid when requested?? Already have that avenue. Pass it and let’s go to court, people’s lives are on hold waiting for the GA to do something.
Comment by huggybunny Wednesday, Feb 27, 13 @ 11:19 am
Oh yeah, sign me up for that state job! I can work for a measly salary for years and be impoverished in my retirement. Or die on the job waiting to retire. Why wouldn’t any professional jump at that?
Comment by qaz Wednesday, Feb 27, 13 @ 11:20 am
Another bill, that if it becomes law, will be ruled unconstitutional and a waste of tax payers money and law makers time.
Comment by Billy Wednesday, Feb 27, 13 @ 11:24 am
—What is the “consideration” that is to be given when a benefit is diminished? A guarantee that the pension will be paid when requested??
…or the “choice” to retire or to not retire.
Comment by Steve Earle Wednesday, Feb 27, 13 @ 11:25 am
There are a lot of retirement systems, why only SURS and TRS?
Comment by Sgt Schultz Wednesday, Feb 27, 13 @ 11:26 am
This is will not avoid a court challenge…nor will it survive it. The state deducts my pension contribution based on ALL my salary…not just the first $20,000. This is CLEARLY a substantial reduction of benefits. I will go along with this IF every Illinois Legislator and elected official forfeit their pensions.
Comment by Soon to retire Wednesday, Feb 27, 13 @ 11:26 am
Waste. Of. Time.
Comment by Arthur Andersen Wednesday, Feb 27, 13 @ 11:26 am
I’m sure this bill will rely on the police power of the State - just as HB98 does - when it comes to defending it in court. If the court finds it is a constitutional exercise of police power, the State can break the contract (and the Pension Clause in the consitution). Nothing new there.
The interesting component is the “cost shift” is only for new hires after 01/01/2014. The full cost of these to schools and universities. that would seem less objectionable than the cost shift for current employees.
Comment by archimedes Wednesday, Feb 27, 13 @ 11:27 am
COLAs aren’t your pensions people. It’s something extra like health insurance. It’s important I agree but we can’t afford the current system as it is now. We can’t allow it to get worse.
Comment by Downstate Illinois Wednesday, Feb 27, 13 @ 11:28 am
I think Nekritz was put on earth to solve the state’s pension woes. Does she really have a clue?
Comment by Soccertease Wednesday, Feb 27, 13 @ 11:28 am
Why do these guys continue to target 100% funding? A private business needs 100% funding. Government only needs 80% or so.
Comment by Anonymous Wednesday, Feb 27, 13 @ 11:28 am
The COLA is part of the pension benefit and that change effects all systems.
Comment by retired and fed up Wednesday, Feb 27, 13 @ 11:30 am
The Social Security wage base for 2013 is $113,700. I think they need to include ALL systems including the Judges.
Comment by He Makes Ryan Look Like A Saint Wednesday, Feb 27, 13 @ 11:31 am
The bill’s sponsors’ contention that Illinois’ finances represent a police state emergency could end up in the U.S. Supreme Court even if (a big IF)the bill would makes it through the Illinois courts.
In previous cases the U.S. Supreme Court has ruled: “Contract Clause of Constitution limits otherwise legitimate exercise of state legislative authority, and existence of important public interest is not always sufficient to overcome that limitation; moreover, scope of state’s reserved power depends on nature of contractual relationship with which challenged law conflicts”
At any rate, a bill such as this will be in the courts for years if it passes the GA.
Comment by Joe M Wednesday, Feb 27, 13 @ 11:33 am
I have read articles that Nekritz believes these changes will pass the courts. I find that very hard to believe when you read the Pension Law Handbook. I cannot imagine the courts ruling the power of the state can be used as a justification to break the contracts just because they ran the bill high. The case to watch is the retiree insurance. If retirees win that, the politicians couldn’t get anymore of a warning they are barking up the wrong tree. Interestingly it was reported that one argument for retiree insurance being a retirement benefit and not a gratis benefit is they took it away from George Ryan under pension law….
Comment by Liberty_First Wednesday, Feb 27, 13 @ 11:33 am
Legally, COLA changes to existing Tier 1 employees is a non-starter.
Comment by RNUG Wednesday, Feb 27, 13 @ 11:33 am
This is the definition of insanity. Time to take away their calculators.
Comment by Makandadawg Wednesday, Feb 27, 13 @ 11:34 am
Why do they bother with one re-hash after another of the same old stuff? With the possible exception of the hybrid for new employees this is all in other bills. Just go ahead and pass one, any one, and let the courts decide. And then let the voters determine the consequences at primary time.
Comment by Bill Wednesday, Feb 27, 13 @ 11:34 am
The so called excessive COLA has just about kept up with inflation. I worked for the State for 30 years and waited until age 66 to retire. That’s when I could afford it based on the benefits promised to me. I made all my pension payments and paid income tax too. It’s too late for me to go back to work and since my wages were much lower as an attorney than one in private sector I could not provide for my retirment on my own.
Comment by retired and fed up Wednesday, Feb 27, 13 @ 11:35 am
Downstate- COLAs are as much a part of the pension contract as any other provision. They are not gratis.
Comment by Liberty_First Wednesday, Feb 27, 13 @ 11:36 am
A lawyer signed his name to sponsor this? Please Tom, did you leave your JD at the door? How does this help in an conversations? where are the grownups in the room? Let’s start moving to something everyone can support and not this useless waste of everyone’s time. and YES, the State doesn’t need to be at 100%. That is crap.
Comment by frustrated GOP Wednesday, Feb 27, 13 @ 11:37 am
Two points:
(1) Nekritz strongly thinks the bill is constitutional. I, on the other hand, even more strongly think it isn’t. So what?
(2) Cross’ Republican talking point about anything that is passed ending up in court is irrelevant. While he may be right, the point is you don’t want to make it as easy for the courts to strike down as this bill and its previous iterations do.
Comment by PublicServant Wednesday, Feb 27, 13 @ 11:45 am
From the Dem Senate web site: “At the time of the Convention, the Pension Laws Commission reported that the General Assembly Retirement System (GARS) was 68.5% funded, while the State University Retirement System (SURS) was 47% funded.94 The remaining state-funded retirement systems had the following funding percentages: State Employees Retirement System (SERS) 43%; Judicial Retirement System (JRS) 32.3%; and Teachers Retirement System (TRS) 40%.95 The five State pension systems had an aggregate funding ratio of 41.8%. By comparison police and firemen pension funds were respectively only 33.8% and 19.1% funded.96 As noted at the outset, the five systems currently have a combined funding ratio of 43.3%.”
Comment by Liberty_First Wednesday, Feb 27, 13 @ 11:46 am
==COLAs aren’t your pensions people. It’s something extra like health insurance==
The Illinois courts have already ruled back in the 1980s against lowering the COLAs of Illinois judges retirement system. And the Arizona courts have more recently ruled that their states pension protection clause in their Constitution, also protects COLAs.
http://tinyurl.com/7ctnced
Comment by Joe M Wednesday, Feb 27, 13 @ 11:46 am
I have to believe that most positions in the state are better compensated than their private counterparts. I have been on both sides of the employement picture. The major problem with the pension plan as I see it is that it is a defined benefit plan. I propose converting the entire pension plan to the deferred compensation plan already available to state employees and keep the state out of it. Give everyone, Merit Comp employees included since they have not had a pay raise in years and years, a 4% one time increase with annual COLA adjustments so the employee has a “defined giving” amount to pay into the deferred comp plan if they choose to, or place in some other private investments either into another investment plan or into their own pocket. Make each state employee responsible for their own retirement plan much like the vast majority of private sector employees have been for years. It will go to court probably because labor unions do not believe their memebers are intelligent or responsible enough to do this, and it is something they cannot point to when helping their membership understand how important the union is to them.
Comment by Anonymous Wednesday, Feb 27, 13 @ 11:47 am
I suggest the GA begin pension reform starting with their own. One of the sweetest deals for a part-time gig around. GARS gets the highest percentages for years of service of all five pension systems are the only one that “earns” 3% each year if they serve more than 20 years and are over age 55. In other words, the 55 y/o GA with 20 years served, serves another 5 and retires at age 60, that GARS retiree receives 18% as their first COLA.
Since GA is the first to say, theirs is the smallest and least consequential financial interest of the five systems, let’s start with them and see how constitutional it is.
Theirs are among the higher pensions folks.
Comment by yokoOHno Wednesday, Feb 27, 13 @ 11:47 am
Downstate—-Just try taking away that average (from 19970 to present) of 4.1% COLA away from anyone collecting Social Security and see how acceptable all of those folks would find it. After all, it’s just something extra, isn’t it?
Comment by DisgustedOne Wednesday, Feb 27, 13 @ 11:48 am
===The Illinois courts have already ruled back in the 1980s against lowering the COLAs of Illinois judges retirement system. ===
Which is one reason why nobody wants to include judges. lol
Comment by Rich Miller Wednesday, Feb 27, 13 @ 11:48 am
===I suggest the GA begin pension reform starting with their own.===
Well, the House did pass a bill that eliminated GA pensions going forward. The Senate refused to even take it up and several editorial boards dismissed it as a gimmick.
Comment by Rich Miller Wednesday, Feb 27, 13 @ 11:49 am
And by the way, Social Security was never intended to be the money people live on in retirements. It was a supplement. State pensions ARE the life savings for retirement!
Comment by DisgustedOne Wednesday, Feb 27, 13 @ 11:50 am
No, Cross didn’t leave his JD at the door. He and fellow legislators have been immersed in this stuff for months, years even. They know what’s likely to be ruled constitutional and what isn’t.
This is about getting the judges to take responsibility for deciding a risky political issue while giving the impression that the legislature is trying to fix it. It’s so transparent. They aren’t even trying to hide it.
Although it’s possible the cost shift could slip through while everybody is talking legal strategy. Are the towns and suburbs paying attention?
Comment by cassandra Wednesday, Feb 27, 13 @ 11:53 am
A lot of hand wringing about the constitutional aspects of this (and HB 98 for that matter). This is the same thing Rhode Island has done (take away the COLA, RI also embroiled in court right now) and it relies on the same legal theory as Rhode Island - that it is a legitimate use of police power. This is why Nekritz and Cross can say (with a straight face) that it is consitutional. It has to be necessary, important (resolving an emergency), and proportional (you can’t take away more than you really need to solve the emergency).
It is precedent setting and pushes the envelope -but not without some legal theory behind it.
The skeptic in me says you could just as easily say the State won’t pay vendors what it owes (right now, they are paid - just paid late), or won’t pay on bonds with the same legal theory. That is the danger of using police power as a defense - what damage are you doing to your credibility and credit with this.
It helps, politically, that the press and other sources have set the stage that pensions are gold plated, abused, unfairly gained, politically bought, etc., and therefore not truly earned by the public employee. Breaking that contract will incur less public wrath than breaking contracts with vendors (which the press and public would likley condemn).
Comment by archimedes Wednesday, Feb 27, 13 @ 11:56 am
Throw in all the re-definitions and changes that seem reasonable. The employees are still getting shorted what was contractually agreed to through their time of employment which means eventual court time. The dollars to make up the difference will probably come from funds that go for other state services or more taxes. I don’t see any good solution to this regardless of how the logic gets twisted. On a different spin, at least this is not a bankruptcy where pensions and benefits are just more costs that get whacked as has happened with many large corporations.
Comment by zatoichi Wednesday, Feb 27, 13 @ 11:57 am
Looks like the “Die at Your Desk” pension plan has a head of steam.
Comment by So. ILL Wednesday, Feb 27, 13 @ 11:57 am
Hmmm, this is starting to get like a Wimbledon match, since if they pass two or three bills relating to this issue, we’ll have the best seats in Center Court!
Comment by Captain Illini Wednesday, Feb 27, 13 @ 11:59 am
I know I’ve said this before, but 32 states have higher individual income tax rates than Illinois’ 5%. An argument that Illinois is in a financial police state emergency — when there are 32 other states with higher tax rates, is an iffy argument at best. But who knows what the courts will rule.
Comment by Joe M Wednesday, Feb 27, 13 @ 12:04 pm
- archimedes - Wednesday, Feb 27, 13 @ 11:56 am:
“A lot of hand wringing about the constitutional aspects of this (and HB 98 for that matter). This is the same thing Rhode Island has done (take away the COLA, RI also embroiled in court right now) and it relies on the same legal theory as Rhode Island - that it is a legitimate use of police power. This is why Nekritz and Cross can say (with a straight face) that it is consitutional. It has to be necessary, important (resolving an emergency), and proportional (you can’t take away more than you really need to solve the emergency).”
The problem is that RI lacks the constitutional guarantee that Illinois has. In addition you have to have an emergency. No payments have been missed. The funding level is the same as it was, roughly, in 1970. You cant claim a future or possible emergency as justification. Finally, the cause of the emergency is the legislature itself! Sorry, but this argument is DOA.
Comment by Old and in the Way Wednesday, Feb 27, 13 @ 12:07 pm
Rhode Island doesn’t have a pension clause in the constitution and their state court still held up cutting the COLAs.
Comment by Bill Wednesday, Feb 27, 13 @ 12:09 pm
Wonder if Cross will hold a press conference in front of a bunch of groceries representing what the increased contribution or loss of COLA would mean for the average state worker. My guess is no.
Comment by So. ILL Wednesday, Feb 27, 13 @ 12:22 pm
Social Security is already offset because of TRS in the form of GPO and WEP by the Federal Government. Now the State of Illinois is going to offset TRS because of Social Security. Somebody needs to do homework. How many times can penalize a person for what they have worked and payed for.
Comment by Griz Wednesday, Feb 27, 13 @ 12:26 pm
Joe M says “32 states have higher individual income tax rates than Illinois’ 5%”.
In fact, since Illinois raised the income tax to 5% we are now in the top ten of highest total tax burden per taxpayer. The total rate in 2010 was 10.2%. Remember you pay taxes on your cell phone, etc, etc, etc, etc, etc……
http://taxfoundation.org/article/state-and-local-tax-burdens-all-states-one-year-1977-2010
Comment by Caveman Wednesday, Feb 27, 13 @ 12:31 pm
The state employees always seem to have an answer when any issue regarding their collecting their pensions at 100% disregarding that the financially strapped taxpayers feel that they can handle no more. May I suggest instead then having mass firings and then hiring replacements with a different set of benefits.
It can be done. Ask any of the old PATCO members if their so called “couldn’t be replaced” jobs actually were under the Reagan administration.
Comment by Another Patriot Wednesday, Feb 27, 13 @ 12:32 pm
I’m guessing with this new proposal, the benefits for the new employees are so low, that they are basically paid for with the employee contributions, and thus there is no employer contribution. The employer would be on the hook down the road for investment returns being less than assumed, and everything else, but that won’t be an issued for years. Then the employer can negotiate the contribution to the 401(k), along with wages. So they can tell teachers, take a 3% pay hike or 3% contribution. So in my opinion, there doesn’t seem to be much of a cost shift.
Comment by Other Wednesday, Feb 27, 13 @ 12:34 pm
It seems like Rep. Cross and Rep. Nekritz have difficulty with the concept that benefits of existing employees cannot be diminished. So far, every plan they have proposed, including this one, is clearly unconstitutional. It’s almost as if they think that if they say it is constitutional enough it will magically make it so. I suggest they start finding a way to simply pay for the unfunded liability as that appears to be the only option.
Comment by M Wednesday, Feb 27, 13 @ 12:36 pm
Legally speaking if it comes down to police powers and breaking a contract that is guaranteed in a Constitution, one might ask what other expenses can be cut that do not require breaking a contract.
Ugly I know, but we are talking about a pretty powerful legal option.
Comment by mid-level Wednesday, Feb 27, 13 @ 12:36 pm
Article XIII, Section 5 of the Illinois Constitution:
“Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”
This language is unqualified and not subject to the State’s police power or any other State power.
Comment by Quiet Sage Wednesday, Feb 27, 13 @ 12:37 pm
- Another Patriot - Wednesday, Feb 27, 13 @ 12:32 pm:
The state employees always seem to have an answer when any issue regarding their collecting their pensions at 100% disregarding that the financially strapped taxpayers feel that they can handle no more. May I suggest instead then having mass firings and then hiring replacements with a different set of benefits.
It can be done. Ask any of the old PATCO members if their so called “couldn’t be replaced” jobs actually were under the Reagan administration.
Lets see…..first we fire 30,000 state workers…..then we hire Another Patriot to handle employee hiring and relations…..yeah that will solve everything! Get a clue and try reading your history instead of watching Fox News. There is no comparison in the two circumstances.
Just for grins let me ask this, “lets say you have a million dollar contract with the state. The state says you know what I’m feeling broke, i spent all my money on tax breaks for CME and Sears, how about you taking about 60 cents on the dollar! Oh, if you don’t agree you are just being selfish.”
Comment by Old and in the Way Wednesday, Feb 27, 13 @ 12:46 pm
I like the new eco friendly names for changes “hybrid” Tier 1 pension could be called “squeezy” tier 2 “global warming” COLA could be called “IOU”
Comment by pension is a promise Wednesday, Feb 27, 13 @ 12:46 pm
I have a feeling that the reason these things are being considered is because GA members are tired of considering them and want to kick this can down the road so they can focus on what they like to do: solve our problems by taking our money and spending it on bills written to favor their friends.
This may sound pretty cynical, but I haven’t really see anything else coming out of our General Assembly that could really be called
problem solving.
Our General Assembly doesn’t seem to know how to do anything else but throw borrowed money at a friend with connection making claims that they can solve a problem.
We need intelligent reformers, but instead have salesmen wanting political careers.
This bill kicks the can down the road. 30 years? When we see how far this state has fallen over the past 30 years, how can anyone believe this bill will solve our pension problems in 30 years. Worse, we have passed legislation that was intended to fix this problem, but the actual coat of fixing it threatened to undermine the current legislators goals of easy money.
The General Assembly has no credibility after clearly demonstrating a refusal to implement previously passed legislation.
You stop believing in this government after watching it for years demonstrating contempt for it’s own laws.
This bill is a other can kick, so legislators can go back to being poor political hacks striving for a public works building with their names on them, and a fat pension.
Comment by VanillaMan Wednesday, Feb 27, 13 @ 12:56 pm
- So. ILL - Wednesday, Feb 27, 13 @ 11:57 am:
Looks like the “Die at Your Desk” pension plan has a head of steam.
You win-best post of 2013.
Comment by Tsavo Wednesday, Feb 27, 13 @ 1:11 pm
To another paytiot - Illinois already has the low per capita ratio of state employee of all 50. Further, firings need to be for cause.
Comment by retired and fed up Wednesday, Feb 27, 13 @ 1:13 pm
That’s lowest per capita ratio.
Comment by retired and fed up Wednesday, Feb 27, 13 @ 1:14 pm
No matter what they do, it’s going to go to the courts. Illinois has the most restrictive pension firewalls in the country, between the constitution and existing case law. The only other alternatives are getting the unions to agree to changes or massive cuts to services.
==This bill kicks the can down the road. 30 years?==
VanillaMan, the state’s pensions are almost $100 billion underfunded. That’s about three years worth of general revenues. Without shutting down the state completely, reaching full funding in 30 years is actually going to be difficult.
Comment by whetstone Wednesday, Feb 27, 13 @ 1:25 pm
“Ask any of the old PATCO members” Reagan fired PATCO because they were on strike illegally, not to save money. Besides, if you fire 30,000 people, you need to pay them their severance, their unemployment benefits, and guess what…what pension benefits they’ve earned up to that point. Then you have to hire 30,000 more people and train them (and just who is going to train them? One of the 30,000 people you just fired?) and now you have … 30,000 people accruing pension benefits. So far, all I see is that State winding up even worse off than before. Good thing Another Patriot isn’t running this state.
Another thing, Another Patriot, this “100% attitude” is not unique to State employees. No doubt you have retirement savings somewhere…401(k), Social Security, investments, a pension, cash stuffed under your mattress…I’d be willing to wager that you’d be pretty darned upset if at the end of your career someone said, “So sorry, we don’t have all of your money. Tough luck.” Just ask the people who worked at Enron.
Comment by Skeptic Wednesday, Feb 27, 13 @ 1:25 pm
=This language is unqualified and not subject to the State’s police power or any other State power.=
QuietSage: police power *could* allow the state to abrogate the contract–even if it’s unconstitutional–to protect the heath and welfare of citizens. So in theory the court could look at the pension mess and the amount of money required to fix it without cutting pensions, and determine that doing so would cause too much harm.
It’s a huge longshot and has been shot down before in Felt v. Board of Trustees. It’s unlikely, but it gets more likely as things get worse.
Comment by whetstone Wednesday, Feb 27, 13 @ 1:43 pm
=Illinois already has the low per capita ratio of state employee of all 50. Further, firings need to be for cause.=
What you’re missing is that many leave being “public employees” to do the same, or very similar, jobs as before int 4h public sector, then they don’t count as “public employees” any more.
Case in point.; I knew one manager for CPS who was making about $110K and took an early retirement for about a $75K pension. He “retired” on Friday and came back on the next Monday as a “private” employee “providing services” through a politically connected consulting firm. His new pay, for the same job, was $120K, but the consultant charged CPS $330K per year for his services. Over one weekend, the cost of that job to the taxpayers skyrocketed from about $126K, including benefits, to $405K per year including pension.
TRS teachers can “retire” as full time substitutes one term, take full pension, then subsitute teach doing the same job for pay the next term while collecting FULL pension benefits.
I honestly don’t know how much of this goes on for state employees, but its RAMPANT in suburban and city schools.
BTW, the GA gave teachers receiving pensions the right to keep working for their district under the scam that there was a “teacher shortage”, when we graduate about three times the number of education school graduates in Illinois than available teaching jobs. I believe we now have about 75,000 certified K-12 teachers not teaching in Illinois because of oversuppy of “educators” in our state.
To quote Fast Eddie V., “Hocus Pocus Dominocus!”
Comment by Palos Park Bob Wednesday, Feb 27, 13 @ 1:45 pm
Until the local school boards can negotiate pension benefits, the cost shift is nothing more than that, a cost shift. If local boards and property tax owners are funding the pensions, then they should be negotiating locally with the teachers what those pension benefits are.
Comment by Shemp Wednesday, Feb 27, 13 @ 1:49 pm
The only way a bill like this would pass through the courts would be if the State wins the argument for police state powers because of its finances - and can single out who it does or does not want to honor contractual relationships with. That is a very slippery slope.
The State also owes money to bond buyers, vendors, and many others. The State could also then declare financial police powers and say that it doesn’t want to pay vendors or bond holders what it owes them.
However, if I were a bond buyer or a CEO looking for a place to locate my company - I sure wouldn’t want to deal with a State that uses such an extreme measure as a police state to get out of paying its bills or living up to the contractual relationships it makes.
Comment by Joe M Wednesday, Feb 27, 13 @ 2:07 pm
whats all this talk about police powers? Did the GA lose their ability to raise taxes and close loop holes?
Comment by foster brooks Wednesday, Feb 27, 13 @ 2:13 pm
For another Patriot. You must have a problem with state employees for some reason. Also we sure have a lot of Patriots around here. Funny how we didn`t have this many during the Viet Nam war. Sure changed with no draft didn`t it. As a combat tanker of the Viet Nam war I could run around yelling I`m a patriot too. Don`t think so. State employees should receive every dime they have coming to them. Harry Wasko.
Comment by Anonymous Wednesday, Feb 27, 13 @ 2:20 pm
And why in the world would your retirement age be increased depending on your current age? Should be based on years of service. Seriously who elects these people?
Comment by Currently in the System Wednesday, Feb 27, 13 @ 2:24 pm
Well said VanillaMan.
Comment by Anonymous Wednesday, Feb 27, 13 @ 2:28 pm
What would the result be if we stopped all this stuff and simply extended the income tax to cover retirement income, then put the increased funds into the retirements systems with no changes to the systems. Simple and you avoid the constitutional issues completely.
Comment by Publius Wednesday, Feb 27, 13 @ 2:55 pm
Publius @ 2:55 pm
The “tax retirement income” pile isn’t that big.
If you pull the 2010 Federal Census of Illinois, take the 65 and over stats, allow for the standard deductions, and multiple ALL the remaining income by the current 5% rate, you’ll raise between about $1.5B and $2.3B depending on some other assumptions on things like property tax deductions.
That’s enough money to cover between 1 and 2 year’s increase of the pension fund payments.
If you start to exclude the average Social Security level of retirement income, then it drops way off to peanuts.
Comment by RNUG Wednesday, Feb 27, 13 @ 3:23 pm
If this proposed legislation is constitutional why not include the Judges?
Comment by JJM Wednesday, Feb 27, 13 @ 3:37 pm
The thought of taxing retirement income isn’t that far off base - other than polical suicide.
The annual cost savings from the Nekritz bill (all of the pension changes) is about $2.4 B. So the retirement income of $1.5 B+ would go a long way to cover it. The remainder might be able to be made up with more reasonable changes - or pay off the unfunded liability over 45 years instead of 30 years.
Or - make the income tax 4.3% instead of the 3.75% it is going down to in 2015 - that would work, too.
But to solve it like that isn’t going to happen.
Comment by archimedes Wednesday, Feb 27, 13 @ 3:45 pm
I have a shocking proposal. Why not ask TRB, formally or informally, what they think is both do-able and constitutional? My understanding is that the major pension funds staffs have been asked to crunch numbers for various schemes, but NO ONE HAS ASKED THEM WHAT THEY WOULD RECOMMEND.
This is too important not to ask the experts what they think!
Comment by Capitol View Wednesday, Feb 27, 13 @ 4:00 pm
Another disgusting example of politicians like Nekritz and Cross complete disregard for their oath of office and “serving” their state. I want to throw up! By the way, where’s “Buckets” Biss in this whole discussion now that he’s in the Senate? Maybe he’s off in a quiet corner recalculating his math formulas after getting embarrased by Ralph Martire at Niles Monday night. The same for Nekritz. She was awful at Niles and didn’t listen to a word Ralph presented. She was in a big hurry to get out of there as soon as possible and off to Springfield to ready herself for this new piece of destructive legislation. I don’t know how some of these people can even look at themselves in the mirror.
Comment by Meaningless Wednesday, Feb 27, 13 @ 4:10 pm
The reforms have to start somewhere. The GA reforming theirs alone will not solve a darn thing. It will be all of us. Can be as angry as we want, but when it comes down to it. If it is a choice between keeping several thousand state employees happy while the rest of the state drowns in debt - and yes I know it was bargained for and the Madigan forces went along with not paying into the system, they are at fault blah, blah, blah - and rescuing the millions of people who live here from certain financial ruin, the courts will rule in favor of the state. Why - because they owe their living to Mike Madigan too.
Comment by pizzajohnny Wednesday, Feb 27, 13 @ 4:30 pm
I am okay with this except for the COLA being limited to the first $20,000, which won’t even be the poverty line in a few years. I think this might pass if they raised the income limit to $30k or so.
Comment by Jack Wednesday, Feb 27, 13 @ 5:05 pm
Gee I can’t understand why there would be any talk of a strike.
Comment by Leave a Light on George Wednesday, Feb 27, 13 @ 5:07 pm
After having time to go through some of it, all the Tier 1 proposals are non-starters. There are exactly on point IL court cases about changing the age or salary calculation; not allowed for existing employees. And there are IL cases that apply to the COLA. If you also look at other States with the same (or even weaker) Pension Clause, changing the COLA is clearly not allowed.
If they removed Tier 1 from the bill, it would be a bill that may well pass constitutional muster.
Comment by RNUG Wednesday, Feb 27, 13 @ 5:24 pm
- Meaningless - Wednesday, Feb 27, 13 @ 4:10 pm:
I was wondering if anyone was going to mention the performance by Biss and Nekritz on Monday. I must say I have lost a great deal of respect for Nekritz in particular. She seems to be determined to be dumb about the facts. Martire made both Nekritz and Biss look downright stupid…….very sad.
Comment by Old and in the Way Wednesday, Feb 27, 13 @ 5:37 pm
RNUG @5:24 pm
If they removed Tier 1 from the bill, it would be a bill that may well pass constitutional muster.
It has an inseverability provision so all or nothing, right? So even if they found the COLA stuff unconstitutional, it could still be upheld? And how many states, if any, have used this police power to modify pension benefits? Wouldn’t they have to at least do something major on the other side of the issue, drastic cuts, raise taxes, close tax loopholes to business, etc. before they could justify using police power?
Comment by huggybunny Wednesday, Feb 27, 13 @ 6:07 pm
huggybunny,
I was suggesting the GA remove the Tier 1 changes from the bill before passing it. But that loses a good chunk of the “savings” …
Generally, if the GA specifies all the provisions are inseverable, then if any part is found illegal, the entire bill is voided.
A state use of police power to avoid paying debt is an order of magnitude beyond bankruptcy or even more dire straits. Without looking it up, I believe such as claim has been used successfully only once in the past 60 or so years across all 50 of the states.
If it was to end up in court with that claim, the court would first look to see if other actions, such as cutting spending and raising revenue either through taxation or selling assets, had been done or could be done before the court would even consider breaching a legally binding contract, let alone a constitutionally protected contract. Since the State pension funds are around the same level they were 50 years ago and 40 years ago and have never missed a payment, you can’t claim a pension fund emergency with a straight face.
As currently written, it’s just one more “Hail Mary” pass.
Comment by RNUG Wednesday, Feb 27, 13 @ 7:34 pm
Hike! I’m tired of the endless pension threads. Unfortunately, given the prevailing theft-condoning nature of the climate in Springfield, we’re being forced to rely on the protection of the courts. Do your worst. See you…for years, in court.
Comment by PublicServant Wednesday, Feb 27, 13 @ 7:58 pm
What about the General Assembly Retirement system.what are they doing to THAT pension plan?? THEIR insurance….I am not seing anything about THOSE changes!
Comment by ben10 Wednesday, Feb 27, 13 @ 8:58 pm
What will the constituitional aspects of the current system mean if the state goes bankrupt??
What will the benefits then look like? pennies on a dollar, participants (including myself) must get realisttic, this is a decent plan that most should be able to live with. Most non government workers only get a COLA on their Social Security income, not on private pensions which are becoming increasingly rare, therefore limit the COLA to 25m an average SS payment another good ideal. The Nektritz-Cross Plan is the best plan anyone has presented for the unions and the state, it should warrant a vote.
Comment by Slow Eddie Thursday, Feb 28, 13 @ 3:35 pm
If you added the IQ of Cross, Radogno, their “Whips” and all other Repubs in leadership in this state, you wouldn’t get a usable HAT SIZE.
The Democrats made this mess and these clowns should have made the Dems clean it up. SAy what you will, Madigan has been Speaker for 30 of the last 32 years, so HE owns this mess.
Well, he DID until his “opponednts” across the aisle decided they should accept ownership…
“Strategic decisions” like this one are why the Republicans are a permanent minority in Illinois. And, as always, lone party rule is both inefficient AND corrupt…
Comment by Republican Thinker Thursday, Feb 28, 13 @ 4:29 pm
Geez,now the pension benefits will only be twice as good as the typical private sector tax payer. Yet the whining has started.
Comment by chisoxfan Thursday, Feb 28, 13 @ 4:51 pm