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Look past the theatrics

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Illinois

* My weekly syndicated newspaper column…

Gov. Bruce Rauner blew a perfect opportunity last week to finally drive a public wedge between Senate President John Cullerton and House Speaker Michael Madigan, clearly put Madigan on the defensive and maybe finally make progress on an important issue which might save the state a billion dollars a year.

But he badly bungled the rollout of a deal with Cullerton on pension reform. Instead of describing the agreement for what it really was, Rauner greatly exaggerated its scope and portrayed it as a big defeat for AFSCME and other unions.

In reality, the deal with Cullerton (and there is still a deal with Cullerton, despite what you may be reading elsewhere) is narrow in scope and elegantly designed to put Madigan in a truly tough position.

The plan, negotiated over months, is to use most of Cullerton’s bill to offer employees a choice. If they want to keep their compounded 3 percent annual cost of living increase, then their pay hikes going forward won’t be pensionable. If they want their raises to be pensionable going forward, then those raises would be subjected to the “Tier 2″ pension law – annual simple interest pension increases which are either half the Consumer Price Index or 3 percent, whichever is less.

Cullerton has long maintained that if employees are offered a legitimate choice then the state’s constitutional pension contract language would be satisfied. Others note that the constitution also declares that pension benefits cannot be diminished or impaired.

To maybe make this work, however, the law would have to be changed to forbid public employee unions from negotiating on this particular, narrow topic. Pension rights are individual legal rights, so only individuals can make the choice about whether to apply their pay raises to their pensions or not.

And in a brilliant move, the Cullerton and Rauner negotiators deliberately included some important language from Speaker Madigan’s own pension proposal on this very topic: “Employers shall not be required to bargain over matters affected by the changes, the impact of changes, and the implementation of changes” made to state pension law.

So, Rauner had Cullerton on board and Madigan in a tight box. Not a bad day’s work.

But when he explained it to reporters, Rauner went way over his skis. To be constitutional, he said, “salary increases have to be taken out of collective bargaining.”

“This is a key point,” Rauner wrongly continued. “Salary increases come out of collective bargaining. So the union has nothing to do with it in the future.”

That’s just not even close to being true. Under this proposal, the unions can still negotiate salary increases, they just can’t negotiate over what part of those salary increases are pensionable.

And Rauner just couldn’t resist taking another shot. “What we’d like to do in the future is to take other things out of collective bargaining at the state and at the city levels.”

As if things aren’t already on edge during this aggravating months-long impasse, Rauner let his longtime hatred of unions get in the way of what could’ve been a triumphant day. Everything quickly blew up, with Speaker Madigan shooting down the whole idea and a confused Cullerton (who had prepared a supportive, bipartisan press release in advance) claiming “It’s not my plan.”

The problem here is that trust is almost nonexistent. Nobody at the top trusts anybody else. So, Cullerton immediately assumed that Rauner had double-crossed him.

Later, staff members from the governor’s office explained what the governor actually meant, and Cullerton’s people said they were still backing the deal they had made with Rauner – but only that deal.

If the governor had quickly corrected his obvious error, this whole thing would’ve been easily cleared up. But no way would Rauner’s people even consider admitting a problem with what the boss said, instead blaming it all on Cullerton and claiming the press coverage was clearly going their way. And then late in the evening, with the media coverage going against them, Rauner’s office finally, grudgingly admitted that “Perhaps the governor was not as precise in his word selection as the Democrats would have liked.”

Even so, last week marked an important turning point.

Rauner finally got Cullerton to triangulate Madigan. Once the craziness dies down a bit, Madigan will be forced to take sides. Will he back language his own staff wrote for another bill, or will he just say “No” and begin fighting with Cullerton?

Forget the temporary blowup. That’s the real thing to watch here.

Cullerton will hopefully clear up this mess during a lunchtime address to the City Club of Chicago. We’ll have live coverage.

* Related…

* Senate President John Cullerton: School funding reform must be top priority for 2016

posted by Rich Miller
Monday, Jan 25, 16 @ 9:10 am

Comments

Well here we go. I imagine the betrayal of labor is at hand. I so wish we would just run our own Labor candidates. Yes, it would be expensive to do but a lot better than throwing money at Dems who ultimately don’t have our back. Maybe I’m just bitter and angry. Anybody think this might work or would putting together a Labor Party be insurmountable?

Comment by Honeybear Monday, Jan 25, 16 @ 9:19 am
I can’t see how this proposal is constitutional. Cullerton’s previous legislation would have allowed employees to trade pension increases for guaranteed health benefits. That was before Kanerva v. Weems, and health benefits had not yet been established by that case as a benefit which cannot be diminished under Article 13, Section 5 of the Illinois Constitution. The previous Cullerton plan thus was reasonably seen as providing real consideration in a contract law sense. The current plan gives employees a choice of either cutting their wages or benefits. That is not contractual consideration.

Comment by Quiet Sage Monday, Jan 25, 16 @ 9:25 am
=== Citing Kanerva v. Weems, Justice Karmeier writes, “We held in that case that the clause (Pension Protection Clause) means precisely what it says: ‘if something qualifies as a benefit of the enforceable contractual relationship resulting from membership in one of the State’s pension or retirement systems, it cannot be diminished or impaired.’” ¶45. ===

Comment by forwhatitsworth Monday, Jan 25, 16 @ 9:27 am
Can someone explain to me why by including Madigan’s language on a different pension bill puts him in a box now? I just don’t see why that makes that big of a difference. I see the Governor and Cullerton agreeing on something putting pressure on him but I don’t see why that language makes that big of a difference.

Comment by Anonymous Monday, Jan 25, 16 @ 9:30 am
Both options are less the current standard for retiring employees. Thus, How can they not be considered “diminished”? I agree with RNUG - Courts will strike down.

Comment by Rufus Monday, Jan 25, 16 @ 9:30 am
What am I missing? Didn’t the IL Supremes find that salary caps for figuring pensions were an unconstitutional diminishment? Didn’t the IL Supremes find that lowering the AAI for those already part of one of the pension systems was an unconstitutional diminishment? So how are some like Rauner and Cullerton now figuring that adding only these two together and giving one a choice of one diminishment or the other is suddenly constitutional?

Comment by Joe M Monday, Jan 25, 16 @ 9:33 am
@Honeybear… I have been an advocate for Labor finding and running good quality candidates against both D’s & R’s who do not support working class families. Labor has to help themselves and not always rely on what is “promised” by “our” so-called political allies.

Comment by UnionLeader Monday, Jan 25, 16 @ 9:33 am
Merit comp employees have seen one raise in the last decade-plus. So, arguably, giving merit comp employees the option to: (1) keep their pensions intact or (2) get raises, puts them in a better position than they are now. An employee with only a couple years of service might want raises, while en employee within a few years of retirement may want to keep his or her COLA.

Comment by SAP Monday, Jan 25, 16 @ 9:49 am
I’m sure most agree that this is another exercise in futility. Let’s spend the money on fighting in court rather than addressing the debt in any logical, responsible, adult way. But this continues to stir the pot of anger toward public employees, further moving along the call for banishing collective bargaining rights. If the debt were simply paid, not only would taxes need to be increased (only a few decades late for that thought) but the entire crux of Rauner’s “movement” of eliminating unions would fall apart. Can’t have that! This governor operates on outrage.

Comment by Anonymous Monday, Jan 25, 16 @ 9:49 am
As others have pointed out, the plan as presented, without a “status quo” option, is an unconstitutional diminishment. Rauner, Cullerton, et al. should “collectively” (lol) quit wasting everybody’s time and money with yet another untenable plan for the state to skate on its pension obligations.

Comment by Crispy Monday, Jan 25, 16 @ 9:58 am
***deliberately included some important language***
Has either side put this “plan” in writing yet?

Comment by Person 8 Monday, Jan 25, 16 @ 9:59 am
Rauner wants merit pay for AFSCME so tier one employees will never be awarded another penionable raise. That is what’s happened to long standing MC employees…the few that haven’t been driven out.

Comment by Johnnie F. Monday, Jan 25, 16 @ 10:06 am
With regard to pensions — I’m surprised — constantly surprised — that no one designs these “pension saving” plans with something that employees *want*.

Okay — and just to get this out of the way: no employee wants phony empowerment with a 401K. No one wants that.

What employees want is money and time. That’s it. Money and time — money or time — whatever.

But if someone comes up with a plan that leaves the status quo and then offers either additional money or additional time for pension adjustments — it’s a done deal.

Time? Maybe work slightly fewer hours for full salary — but with a reduced pension at the end.

Money? Maybe get a short-term bonus for a long-term cut. Not a dumb $1k bonus. A serious, corporate-like bonus — 5K, 10K — immediately for a reduction at the end.

The problem — and Rauner and Cullerton both know this — is that nothing they’ve offered thus far is compelling. It doesn’t compel someone to think, okay, the status quo is one thing — and it’s nice — but this is even better.

And — again — 401K “empowerment” is not better. No one wants to be empowered with a crappy 401K.

Comment by Frenchie Mendoza Monday, Jan 25, 16 @ 10:09 am
My question is if this is a one time designation? Say you are 25 and start working, they ask you when you’re hired if you want raises or pension? You say raises ….you’re just starting after all. Now you’re 40 years old and still working. Can you change your designation and say now I want pension and not raises? How about at 50 or 55?

Comment by NoGifts Monday, Jan 25, 16 @ 10:13 am
-NoGifts-

Since it is dealing with pensions, Federal IRS regulations will require it to be an irrevocable choice. No do-overs if you choose wrong.

Comment by RNUG Monday, Jan 25, 16 @ 10:18 am
the annual 3% isnt a cola…. AND state employees pay a seperate contribution for it. i.e it is its own vested right. Also the current oension system is based on 100% of salary. If you stop covering 100% of salary you are diminshing benefits.

The tax increase actually benefitted much of the middle class because it added money to the economy. i.e when the state spend the money on things like Lutheran, contrsution projects, medical providers etc the money goes to salaries which are then spent buying things which improves sales and the economy.
we need miney being spent and people w/ wages…. not a few wealthy people who park their money in the markets. A tax payment is not a harm if the moeny is coming back to you and your buisness in the form or people purchasing your goods and services. you may save a weeks salary and lose a mo ths profit…. the State is spending the money, so thats money removed fromthe economy. For example, Minnestota increased taxes and increased the minimium wage, and thier economy and middle class ate booming.

Comment by Ghost Monday, Jan 25, 16 @ 10:18 am
This is clearly unconstitutional. They should not

waste time and resources on it. Rauner should

listen to what Jim Edgar said about the pension

debt, “we have to pay this”.

Comment by DuPage Monday, Jan 25, 16 @ 10:23 am
Good column Rich. Even if people think its unconstitutional, what does the State have to lose now? It’s going to be decided by a court no matter what. Just pass it and see if it can work.

Comment by NixonHead Monday, Jan 25, 16 @ 10:25 am
Continuing on the loophole theme …

The courts have hinted they would allow diminishment if it was incidental to the main purpose of a bill. In other words, you can’t set out to diminish pensions with a bill but if it is a side-effect, then MAYBE it would be OK, depending on the impact.

And the impact is where is gets tricky. The courts have previously ruled over gross amounts as low as $20 or less a month … so anything with significant impact is going to be closely scrutinized. So bywhile there may be a loophole, it may not be a useful one.

Comment by RNUG Monday, Jan 25, 16 @ 10:27 am
**NoGifts**
**25 and start working**

This most likely wouldn’t concern you since your are most likely in tier 2. If you are tier 1, then what RNUG said.

Comment by Person 8 Monday, Jan 25, 16 @ 10:28 am
Once again, I’ll state the obvious….the State has to pay what it owes! PERIOD! Stop wasting time on the BS of trying to not pay what was taken from the pension funds that caused a 111 BILLION shortfall. The 35 year structural deficit is the problem here. ALL residents benefitted from Illinois being a low income tax State for decades and now it’s time to PAY UP! 5% individual income tax finally allowed Gov. QUINN to pay the full pension contribution (even with the bad the ramp increases) AND start paying down the 9 BILLION backlog of State bills. Gov. Grandstander wanted the reduction to 3.75% and where are we? 11 billion in State owed bills and a missed Pension payment. What more reality is necessary for Il taxpayers to tell their GOP legislators to ostracize the one term joke that was elected Gov.two years ago.

Comment by qualified someone nobody sent Monday, Jan 25, 16 @ 10:32 am
-NixinHead-

What the State has to lose is time. Every day the unfunded pension debt is increasing, so when the State is finally forced to pay it, the tax increase will have to be higher. The State is also losing the compounding effect of whatever monies are contributed sooner, rather than later. That is a bit amount; about 1/3 of the pension funding is supposed to come from the growth of the investments the funds hold. With lower holdings, the return is lower and the amount that must be covered by taxes is higher. It’s just like credit card debt; it doesn’t go away unless you pay it and the interest just keeps adding to the total that must be paid.

Comment by RNUG Monday, Jan 25, 16 @ 10:34 am
Cullerton was going to have a tough time selling this plan to his caucus under any circumstances. Even some of his previously pro-pension reform members have to be gun-shy after the SC decision on SB 1.

Let’s say they repair the damage Rauner did last week and Cullerton and the governor put an actual “consideration” agreement on paper. Can Cullerton put at least 11 votes on it? That’s what he’ll need, assuming McCann is a “no” and the rest of the Republicans are for it, which is no slam dunk.

Cullerton’s done a great job of holding the once rebellious Senate Dem caucus together, but he’ll really have to work some magic to get them to stand with Rauner and against labor on anything, let alone a constitutionally questionable pension bill.

Comment by Anon404 Monday, Jan 25, 16 @ 10:45 am
-Frenchie Mendoza-

The State won’t offer same salary for less time worked because that would undermine Rauner’s 40/hour versus 37.5 hour argument. It would also undermine his overpaid / underworked argument.

Ditto on pay. Rauner already seems to think state employees are overpaid except for his hand-picked Superstars.

And he has the 2002 ERI to point to as a reason not to offer a generous early retirement out.

So right now significant time and / or significant money won’t be on the table because it doesn’t fit the narrative.

Comment by RNUG Monday, Jan 25, 16 @ 10:47 am
This entire issue reminds me of folks who can’t bear the thought of having to pay their over the top credit card bills, so they bury them in the basement and refuse to acknowledge reality.

Every single day the debt mounts and the bill for taxpayers is higher. Does anyone live in reality?

Comment by Anonymous Monday, Jan 25, 16 @ 10:51 am
Regardless of the party in control, the state employee is being demonized with the intent of taking the pot of money called the pension fund. The very people who were taking the calls, plowing the roads, guarding the prisoners, etc are now expected to pay for the very programs for which they support through work. Whether it was Quinn, Madigan, Cullerton, or now Rauner, they expect the very people who supplied the labor to provide the funding for all those pet programs which were never properly funded. Stop the unnecessary welfare, corporate and individual, and put the tax rate back to 5%. A flat tax only works if everyone has skin in the game.

Comment by NobodysAccountable Monday, Jan 25, 16 @ 11:01 am
The politics of this are perplexing. Does the Democratic Party not care about losing this part of their base? They got a pass (from many) with the 2013 legislation. Coming back a second time is likely to cause permanent resentment on the part of their base that is affected.

And if the Democrats were going to support a Rauner pension proposal, why do it now and in isolation? Would it not be sensible to make it their concession in exchange for Republican support of a package of budget legislation that does not include the Turnaround Agenda?

Comment by east central Monday, Jan 25, 16 @ 11:07 am
I don’t see how Cullerton’s plan is any more constitution than the Madigan plan that the Supreme Court shot down unanimously. As someone else noted, Cullerton’s plan gives employees a choice between to alternatives neither one of which is as good or better than the current plan. Thus, it is not a valid “choice” under the Pension clause as it will necessarily result in impaired benefits. Why is that so difficult for Rauner or Cullerton to get?

Comment by tominchicago Monday, Jan 25, 16 @ 11:14 am
= Even if people think its unconstitutional, what does the State have to lose now? It’s going to be decided by a court no matter what. Just pass it and see if it can work.=

RNUG 10:34 +1

Plus, why waste time and money litigating a “solution” that most agree is not going to pass constitutional muster? If you aren’t going to offer a status quo option, I don’t see how this can be proposed with a straight face. Or will it be done just so everyone can announce a so-called solution that will get everyone them the primaries before it bites the dust?

Comment by Archiesmom Monday, Jan 25, 16 @ 11:26 am
= Even if people think its unconstitutional, what does the State have to lose now? It’s going to be decided by a court no matter what. Just pass it and see if it can work.=

for one thing, it would make the pension funds even more underfunded unless the GA contributes to the funds based on the old formula rather than this one. And who thinks the GA would ever do that?

Comment by tominchicago Monday, Jan 25, 16 @ 11:38 am
An extreme example ––
Rauner and Cullerton to state workers: Sorry, but we’re going to cut your hand off because we think you’re takers. You won’t be able to take so much with one hand.
State worker: You can’t do that. It would be an unconstitutional diminishment.
Rauner and Cullerton: OK, we’ll give you a choice. Which hand? Right or left?
ISC: No go. That’s a choice between two diminishments.

This concept isn’t hard to understand. Rauner might be blinded by his ideology, or he might understand, but pretend he doesn’t, to shore up his accomplishments for his state of the state and to use savings from imaginary pension reform to balance his next budget proposal.

I still don’t get what motivates Cullerton. Does he like making deals and policy even when they have no hope of going into effect? Or is he really unable to understand what the court means by consideration?

Comment by X-prof Monday, Jan 25, 16 @ 12:44 pm
==Still don’t understand what motivates Cullerton==
He believes that people want pension members to foot the entire-full-complete-total bill of all the state’s debts rather than to ask non pension members to pay one more penny for all they got from those pension members for free. Cullerton keeps his name up front, working on behalf of those people. Madigan can then be painted as the enemy who is protecting the victims of pension theft by asking others to pay up for all their freebies. Cullerton is the victor!

Comment by Anonymous Monday, Jan 25, 16 @ 1:09 pm
Cullerton cares a whole lot more about labor than the Speaker ever has. The Speaker will use labor and take their money, but he is not their champion when it doesn’t serve him.

Comment by Lincoln Lad Monday, Jan 25, 16 @ 2:38 pm
No

Comment by Anonymous Monday, Jan 25, 16 @ 5:53 pm
The only thing the unions can do at this time is convince the public that IL needs to raise taxes.

Comment by Mama Monday, Jan 25, 16 @ 6:07 pm
It’s not the union or the state employee or state retiree’s job to convince the public the State needs increased taxes. That is the job of the Governor and General Assembly whose offices are collectively responsible for their past failure(s) since at least FY75 to match state expenses to state revenues.

Comment by RNUG Monday, Jan 25, 16 @ 8:31 pm
If an agreement regarding pensions which the IlSCt later rules unconstitutional is needed to break the budget impasse, the attorney fees spent litigating the constitutional issue will be money well spent.

Comment by future former Republican Monday, Jan 25, 16 @ 9:33 pm
ffR - I might agree if the new budget has enough revenue. But the reason Rauner wants pension reform, based on his performance a year ago, is to fake balance his budget balances with insufficient or no new revenue. Pension reform alone will not crush unions, so unless the governor caves on his core agenda, it will not lead to a budget agreement.

The main cost of fake pension reform comes from kicking the can down the road for another year or two while the state’s debt continues to climb and the its credit rating continues its decline. Attorney fees would be small in comparison.

Comment by X-prof Tuesday, Jan 26, 16 @ 12:32 am
RNUG@8:31. Agreed. But, so far, none of the responsible parties have been willing to act on that responsibility. I guess we’re left to wait and watch what happens.

Comment by X-prof Tuesday, Jan 26, 16 @ 12:52 am