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Thompson: Stop demonizing unions

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* Matt Dietrich writes about a forum and panel discussion hosted by World Presidents’ Organization…

The big finish, though, was an impassioned, hour-long speech by former Gov. Jim Thompson. He took Biss’ plea a step further: “I agree with Sen. Biss that we have to stop demonizing public employees. Without the public employees we wouldn’t enjoy the life we do in the state of Illinois. We would not have the education of our children and grandchildren in the state of Illinois. We would not have a decent business climate in the state of Illinois without good, honest, hard-working public employees.. We have to get away from the idea that they are the enemy. They are not the enemy. We need to make them our allies.

“And I’ll add one more: We need to stop demonizing unions. You can disagree with AFSCME, you can disagree with the teachers, you can disagree with other public employee unions without demonizing unions as some who want to be governor are wont to do.” Thompson said.

The last line probably was intended for Chicago businessman Bruce Rauner, the first candidate to officially enter the 2014 gubernatorial race and who has been an outspoken critics of public employee unions.

Probably? Heh. Rauner just got schooled. Not that he’ll care or anything. He’s the, um, “outsider,” remember?

Thompson was endorsed by AFSCME in his last campaign against Adlai Stevenson.

* But Thompson does agree with Rauner and Ty Fahner that Cullerton’s hybrid pension reform bill shouldn’t be adopted…

Thompson was critical of a bill backed by Senate President John Cullerton that combines two reform bills into a single bill. “What we need to do is pass the Nekritz/Cross/Biss bill, let them take it to court. If the Supreme Court finds it unconstitutional, start over, responding to the opinion of the court. Putting the two together is just a terrible risk that you will lose the benefits of the best pension legislation.”

Thompson said combining two bills in one is an “open invitation” to the Supreme Court to find the better bill unconstitutional and leave state government with a bill that potentially could leave it in worse financial shape.

So, Thompson agrees that Cullerton’s half of SB1 is more constitutional, which is why it shouldn’t be combined with the Nekritz/Cross/Biss measure.

Hmm.

* Meanwhile…

The Illinois House passed pension reform measures Thursday that would cap “pensionable” salaries at Social Security wages and would increase retirement ages on a sliding scale for employees under age 45.

Following another series of “test-votes” as part of House Speaker Michael Madigan’s (D-Chicago) “weekly order of business” process, the House passed its first pension reforms of the 98th General Assembly. The measures now move to the Senate.

The measure capping salaries - $113,700 indexed for inflation - upon which pension benefits can be based passed in the chamber by an overwhelming 101-15 margin. The change would apply only to employees hired before Jan. 1, 2011.

The bill that raises the age at which state employees can begin collecting benefits passed by a closer 76-41 vote; however, the measure would not include Illinois judges. Retirement ages for employees hired before Jan. 1, 2011 would increase by one year for those ages 40-45, three years for those ages 35-39, and five years for employees under age 35.

Neither bill changes retirement benefits for state employees hired after Jan. 1, 2011, according to Rep. Elaine Nekritz (D-Northbrook), who presented the bills on the House floor. Nekritz said the bills are identical to measures included in a comprehensive bill she has been working on with House Republican leader Tom Cross (R-Oswego). […]

House members also debated a measure that would increase the amount employees have withheld from their paychecks for pension benefits by 3 percent. But questions surrounding the plan’s constitutionality prompted the chamber to vote it down by a 37-79-1 vote.

* And the Nekritz/Cross/Biss bill was sent to the House floor yesterday…

A comprehensive pension bill was sent to the floor of the Illinois House Thursday, the third such plan now awaiting a final vote in either the House or Senate.

But as with the two proposals sent to the Senate Wednesday, there is no indication when a final vote might occur.

Rep. Elaine Nekritz, D-Northbrook, is the co-author of House Bill 3411, which was approved by the House Personnel and Pensions Committee on a 9-1 vote. […]

Only Rep. Raymond Poe, R-Springfield, voted “no.” Poe’s district includes large numbers of state workers, and he’s opposed to any measure that reduces pension benefits.

posted by Rich Miller
Friday, Mar 15, 13 @ 11:58 am

Comments

Nice rhetoric about not demonizing public employees and unions but the bottom line is Thompson still thinks it’s ok to steal their pensions.

Comment by qaz Friday, Mar 15, 13 @ 12:06 pm
Is there any public source where you can see the savings from each possible pension reform element being considered? COLA has to be part of the solution, says Madigan–I say show me. For example, there is no rule that says that this has to be solved over a 30 year time frame. Mayor Daley’s commission–back in 2010– considered a 50 year time frame.

Comment by funny guy Friday, Mar 15, 13 @ 12:14 pm
Does the salary cap also make a cutoff for payment into the pension plan? Are you only paying into the plan on the first $113,700 of your salary?

I assume they’re going to reimburse anything extra that people paid in past years, right?

Comment by Stuff happens Friday, Mar 15, 13 @ 12:15 pm
It makes sense for Republicans to push the Democrats to pass a draconian, unconstitutional pension bill. It is the best of all possible worlds for the R’s. A substantial proportion of the members of the pension systems will probably never forgive the D’s for passing such a bill. Then it will be found unconstitutional and the D’s will have to impose spending cuts and tax increases anyway. Until the problem is properly fixed with a constitutional solution, the uncertainty will affect bond ratings and the financial health of the State, for which the party in power will be blamed.

Why the D’s are failing to pursue a constitutional solution from the start is difficult to understand.

Comment by east central Friday, Mar 15, 13 @ 12:18 pm
Nice to hear from the remaining Big Tent Republicans. There used to be a lot of them in Illinois when the GOP was in power.

I wonder if there is a connection….

Comment by wordslinger Friday, Mar 15, 13 @ 12:19 pm
@east central:

If you have some insight as to what a “constitutional solution” would be we are all ears.

Also, I’m not sure about this whole passing the buck on to the Democrats on this thing. If the Democrats could win the last election cycle, increaasing their majorities even, then I’m betting that the whole blame game isn’t going to get the Republicans very far.

Comment by Demoralized Friday, Mar 15, 13 @ 12:22 pm
Nice to hear from the remaining Big Tent Republicans. There used to be a lot of them in Illinois when the GOP was in power.

I wonder if there is a connection….

Word, I like to think there are still a lot of us, we need to get better organized.

Comment by OneMan Friday, Mar 15, 13 @ 12:23 pm
What’s the bill number for the one raising the retirement age. I’ve read through similar language in a bill before, and it didn’t seem to affect the rule of 85 at all. I’m curious if this bill is different.

Comment by Jimbo Friday, Mar 15, 13 @ 12:26 pm
Never mind. I should have checked the link before asking. It’s HB1166

Comment by Jimbo Friday, Mar 15, 13 @ 12:28 pm
It would’ve been nice to hear Big Jim take responsibility for underfunding pensions during his record-setting reign.

Comment by reformer Friday, Mar 15, 13 @ 12:34 pm
And it raises the rule of 85 depending on your age. Anyone under 35 would have to meet the rule of 95. I don’t understand how not allowing someone to draw their for 5 additional years doesn’t diminish their pension. Average pension is 27k, so that diminishes their lifetime pension benefit by $137,000 not including COLA.

Comment by Jimbo Friday, Mar 15, 13 @ 12:36 pm
Constitutional Solution: Support movement towards a 1) Graduated Income Tax; 2) Reamortize (Martire); 3) Close Ridiculous Corporate Tax Loopholes; 4) Extend Sales Tax to more Services; 5) Increase employee contribution 2% through contract principles.

Comment by Meaningless Friday, Mar 15, 13 @ 12:58 pm
Cullerton’s “Choice” plan most likely will not pass constitutional muster either.

“At the same time, the plain language (of the pension clause)also indicates that an employee’s pension payments and other membership entitlements are “contractual” rights that may be presumably altered through mutual assent via contract principles. Further, the Clause’s
prohibitory language against the diminishment or impairment of pension benefits is cast in absolute terms and lacks any exceptions.”
excerpt from Pg 26 of “IS WELCHING ON PUBLIC PENSION PROMISES AN OPTION FOR ILLINOIS?
AN ANALYSIS OF ARTICLE XIII, SECTION 5 OF THE ILLINOIS CONSTITUTION”
By Eric M. Madiar
(For those of you who may not know, Eric Madiar is Senator Cullerton’s Chief Legal Counsel.)

According to this the contractual nature of the pension clause implies changes can only be made by “mutual” assent. In other words, both parties must agree to the changes. Under contract law, if I am a party to a contract, and the other party wants to modify the contract, I always have the option to say no and keep the terms of the original contract. In other words the integrity of the contractual relationship remains only if each party has the right to maintain the status quo.

Forcing two negative choices without my assent is by default a unilateral change by the legislature which was exactly what the framers of the pension clause wanted to prevent.

Under Cullerton’s plan, choice 1 does not maintain my current benefits. Even though the COLA remains intact, it changes the salary base used in calculating my final benefit by not including future raises in the final average compensation formula. This is a clear and blatant diminishment & impairment of my benefit. They can use semantics to define what is and is not compensation, but it would be easy to demonstrate in court that the changes will directly diminish and impair current benefits. That’s choice 1. Choice 2 would give me the same benefits as Tier 2 for new hires.

Why in the world would I “assent” to either one of those choices?

Benefits and the COLA are not the cause of the liability nor are they contributing to it. Consider the IMRF. It is well funded and the benefits are almost identical. If it were only benefits or the COLA causing the crisis, the IMRF would be in the same sorry state as the other funds. We don’t have a pension crisis. We have a debt crisis.

There are other more reasonable and better solutions to the Pension DEBT crisis.

One: The problem is underfunding. Common sense indicates the solution must involve some form of funding guarantee with the ability to bring court action against the state if they don’t fund it properly.

Two: Divert Bond payments to the pension fund as bonds are paid off. As anyone who has paid off debt knows, not only do you keep paying your required payments, but you need to pay extra to get out of debt faster. (This obviously isn’t my idea, but it’s one of the better proposals.)

Three: The Terms of the pension ramp and the large pension debt payments are self-imposed. All the legilature needs to do is to rewrite the stupid pension ramp bill and make the debt payments a fixed amount every year starting the day the bill becomes law, say $6 Billion as Ralph Martire suggested. That solves the pressure the future debt payments would put on the state budget.

With these consitutional reforms in place, we would no longer have squeezy the snake constricting the Capitol.

Comment by KurtInSpringfield Friday, Mar 15, 13 @ 1:00 pm
I still think a 40 year reamortization of the UAAL with an inflation-leveled payment would solve this problem with little additional pain for all parties. But, beyond that, maybe just put it to a referendum asking people if they’d rather pay an additional 3% (or whatever the number would be) in income taxes or cut pensions by 10% (or whatever the number) with a specific plan such as SB1.

Comment by thechampaignlife Friday, Mar 15, 13 @ 1:05 pm
@Demoralized

RNUG has posted here a couple of times in the past few weeks a fairly comprehensive list of what the elements of a constitutional solution might include.

Comment by east central Friday, Mar 15, 13 @ 1:05 pm
Anything that changes the rules for existing state employees in such a way it causes a diminishment is in direct conflict with previous rulings by the IL SC that the rules in place at time of hiring, plus enhancements granted by the General Assembly, are protected. They’ve ruled on changing the age, they’ve ruled on changing the amount the pension is calculated on, and while not the main focus of one case, they’ve also had testimony the COLA/AAI was intended to be protected. In a related case, not under the pension clause, they ruled the COLA for sitting judges was protected.

Unless the current court starts ignoring previous decisions, I’m not seeing much that can pass those hurdles …

Comment by RNUG Friday, Mar 15, 13 @ 1:14 pm
“thechampaignlife”
People would pay an additional 0.6% income tax to equal the cuts (30% of the unfunded liability cost) - one raises $2.4 billion and the other reduces cost $2.4 billion. So - do you want to raise income taxes 0.6%? Or cut pension benefits 30%?
Or - stated another way. Instead of reducing the 5% income tax to 3.75% in 2015, reduce it to 4.35%.
By the way - the Civic Federation report 02-25-2013 provides the basis for these numbers.

Comment by archimedes Friday, Mar 15, 13 @ 1:14 pm
I won’t repeat it all but there is a whole shopping list of clearly legal changes that can be made. And I’m sure I didn’t include every possibility on the lists.

There are several problems with the list:

1) No ‘magic bean’ solutions to just make part of the debt disappear like is being attempted with the COLA change. One way or the other the debt has to be actually paid.

2) It has to include making the 2% temp tax permanent just to stay somewhat even and no one seems to want to vote for that “tax hike”

3) In addition to #2, it has to include the ‘normal’ cost shift to the districts just to pick up the extra money needed to move to a flat payment like Martire and no one seems to want to vote for that “tax hike” either

4) Even if all the items on the list were approved, it only addresses most of the pension debt and does not free up money for other State spending. The State would still have a spending / revenue problem that would require deep cuts in programs or yet another revenue increase.

The above is not really an opinion, its the result of doing the math.

Comment by RNUG Friday, Mar 15, 13 @ 1:28 pm
Thompson has gotten very wealthy shilling for political class and is as responsible as any one for wrecking this state. I’d take his advice with at least a grain of salt.

Comment by Carlos S. Friday, Mar 15, 13 @ 1:33 pm
For Thompson it’s all about the money. The money guys want to change the pensions so he has to chime along.

He and his law firms were one of the first ones to the trough when Blago became governor. Lost any last respect I had for him then.

So he says nice things about me as he sticks his hands in my pockets. That doesn’t make me feel better. Shall we say, with friends like that who needs enemies. How ironic for the person who was a big player in the state’s mismanagement of the pensions.

Comment by Norseman Friday, Mar 15, 13 @ 1:40 pm
BTW: it’s not my list, just a consolidation from a lot of different people’s ideas that seem to be clearly possible without violating the various diminishment clause rulings. A lot of different people here have suggested at least one item …

Comment by RNUG Friday, Mar 15, 13 @ 1:41 pm
RNUG, in fairness, altering the current guaranteed COLA is not a “magic beans” thing. It’s about learning to stop digging when you’re in a hole. Limiting COLAs to inflation for example, would reduce the unfunded liability. As I understand it, current COLAs are 3% per year, automatic. Despite a recent uptick in consumer prices, inflation has been well under 3% for many years.

But COLAs are a relatively small part of this issue. The larger part, as you point out, is that more money (much more) has to be put into the pension funds. The question is who pays, and how much?

Comment by 47th Ward Friday, Mar 15, 13 @ 2:13 pm
I’m guessing that those who are complaining about the COLA at 3%, saying it’s too high and wanting to limit it to inflation, weren’t around in the late 70s and early 80s. Inflation was double digit! If the COLA is changed and inflation gets that way again you’ll be complaining that the GA should have left it alone.

Comment by Ready To Get Out Friday, Mar 15, 13 @ 2:33 pm
1998 a gallon of gas was .98. this summer it will exceed $4. I think the 3% cola is probably close to inflation over time.

Comment by foster brooks Friday, Mar 15, 13 @ 2:46 pm
The seminal question is stated by 47th Ward: “The question is who pays, and how much?”

The state constitution’s pension anti-impairment clause is formidable. Although lawyers distinguish themselves for finding a distinstion when none really exists, it seems doubltful that IL courts will offer much sympathy to substantive pension changes when the constitution seems fairly straight-forward, and the courts will act in accordance with their own pension self-interest.

Maybe the bigger question is what will the non-government employees do for retirement. 401ks have proved to be a failure because they do not enforce any savings discipline on the account holder. My reading indicates that most people 62 and over have little retirement savings. I hear the “work longer” mantra, but the human body may not cooperate.

So what does the state do with the 1.7 million residents that are 62 and over and wholly unprepared for old age? And what about those say in the 50 and above range who need to save like crazy? Are we going to increase taxes on this demographic?

The question truly is “who pays, and how much?”

Comment by Cook County Commoner Friday, Mar 15, 13 @ 2:53 pm
well said 47; I usually use the words “allocation of pain.” Yours are good.

Comment by steve schnorf Friday, Mar 15, 13 @ 3:04 pm
47th

When I use the ‘magic bean’ term, I’m using it in the context of a solution where you can make part of the liability ‘disappear’ with no pain to the GA or us taxpayers (ignoring the pain to the retiree).

As far as 3% being too high or low, the CPI averages since 1914 and 1970 have been 3.2% and 2.9% (or maybe the reverse per period, I’m not on the computer where I downloaded the whole table and calculated it for those periods). Anyway, long term is about 3% through both bust and boom cycles.

The current low rates are a combination of pretty much back to back recessions (2002, 2007) and since then deliberate loose monetary policy trying to jump start the economy, so I tend to discount the last decade when looking to the future. People selling financial wares love to say “this time it’s different” but if you live long enough, you learn it never is.

Regardless, personally I would have no problem with a COLA actually tied to the actual CPI with NO cap … I still remember years in the late 70’s and early 80’s when it went wild, over 13% one year and over 10% for several years. But every proposal I’ve seen to change the COLA is to something like the lower of 1/2 of the CPI-U or a max of 3%, which will leave the retiree losing buying power when inflation returns … and one thing history tells us is inflation WILL return.

Yes, the current COLA is, in effect, a 3% cap per year, but on average the gains in the low inflation years offset the losses in the high inflation years. And although it does contribute to the pension debt, a fixed 3% is much easier to calculate and budget for compared to an unknown number every year.

Personally, I think the people who drafted the AAI bill and selected 3% were pretty smart when it is looked at in the context of history.

Comment by RNUG Friday, Mar 15, 13 @ 3:04 pm
“you can disagree with other public employee unions without demonizing unions”

I appreciate Thompson saying this.

“Nice to hear from the remaining Big Tent Republicans. There used to be a lot of them in Illinois when the GOP was in power.”

I think Gov. Christie was insulted by the chairperson of CPAC when he said the governor is too big for the Republican tent. He must have meant that Christie is poking around with Democrats and is too liberal. That’s too bad. Christie is real popular in his state. From what I’ve seen lately, I think Christie is a smart, fairly-decent person, even though I really disagree with him sometimes.

Comment by Grandson of Man Friday, Mar 15, 13 @ 3:09 pm
RNUG, you are an important and welcome part of this community. I have learned a great deal from your postings, and I, for one, am grateful.

Comment by LincolnLounger Friday, Mar 15, 13 @ 3:11 pm
RNUG…The rates are laid out in a table at:

http://inflationdata.com/inflation/Inflation_Rate/HistoricalInflation.aspx

Comment by Ready To Get Out Friday, Mar 15, 13 @ 3:15 pm
The feds maintain all the data here:

http://www.bls.gov/cpi/

Comment by RNUG Friday, Mar 15, 13 @ 3:19 pm
@lincolnlounger-3:11-I agree-I have learned much from RNUG’S posting’s and his research on topics and from this blog. And it is very much appreciated.

Comment by boat captain Friday, Mar 15, 13 @ 3:21 pm
This is something that the republicans, especially the tea-partiers, need to take a look at. Not all of us union people are the extreme left-wingers or socialists they want to portray us as. I am a former republican voter who switched sides because of their attacks on me, a union public employee.

“you can disagree with other public employee unions without demonizing unions”

Comment by AFSCME Steward Friday, Mar 15, 13 @ 3:30 pm
RNUG

I 2nd LincolnLounger’s comment @3:11 pm. I always look forward to your “take” on the issues, and your calm, concise explanations. Thanks to Rich also for providing this forum, it’s always first with the news, days ahead of my local media.

Comment by huggybunny Friday, Mar 15, 13 @ 3:34 pm
Ready,

In a former life, among other things, I used to crunch the CPI & census data & other stuff to try to predict future welfare and unemployment caseloads. At one time, I could SWAG that close enough for my needs on the back of an envelope.

I still crunch numbers when I get curious about a particular fact but, to be honest, I’m tired of doing the same ones over and over. I’ve saved a lot of it on my desktop but I don’t haul those files around with me or use one of the remote file access solutions; as a retiree, I’ve got other stuff I volunteer to do these days to keep me busy. In fact, I should be doing it instead of reading Rich’s blog … just means I’ll burn the midnight oil a few nights to hit the deadline.

Comment by RNUG Friday, Mar 15, 13 @ 3:35 pm
We all learn from each other. I’ve learned a lot here. And all you guys and gals have forced me to be more rigid in my analysis and double-check the facts and figures. I still get things wrong or off occasionally, but I try to correct that when I discover it. I also try to be clear when I’m just running off with a guess. Plus Rich’s rules have forced me to use cleaner language than I might in person. The one thing I still haven’t learned to do is edit my own writing to be terse.

Comment by RNUG Friday, Mar 15, 13 @ 3:41 pm
===The one thing I still haven’t learned to do is edit my own writing to be terse. ===

LOL

You have special dispensation to write as much as you want.

Comment by Rich Miller Friday, Mar 15, 13 @ 3:49 pm
No one has yet explained to me why having the Cullerton “back up option” in the Bill would weaken it.

Appelate and Supreme Court jusges are fairly sophisticated about things legal - why would they be unable to evaluate Plan A properly simply becuase the contingent Plan B is included?

Comment by titan Friday, Mar 15, 13 @ 3:54 pm
Is something being “more constitutional” anything like being “a little bit” pregnant?

Comment by girllawyer Friday, Mar 15, 13 @ 3:55 pm
titan, you really should subscribe.

Comment by Rich Miller Friday, Mar 15, 13 @ 3:55 pm
Rich,

Thanks, I think …

Comment by RNUG Friday, Mar 15, 13 @ 4:07 pm