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* This Blagojevich quote is neither true nor helpful to finishing anytime soon…
“We could finish this yesterday, if Speaker Madigan would simply come back and work with Senate President [Emil] Jones and me and pass a budget that reflects the values and the priorities of the Democratic Party.”
The Senate can’t pass gas, let alone a budget. And the Republicans are now at the table. He’s using Madigan to obscure the fact that he couldn’t get anything done before May 31st, and that blame game is not helping move the ball forward now.
* Remember yesterday when Madigan said that the governor had worked out a deal with the Senate so that its members could stay home yesterday but House members got no such deal? Here’s the Senate census…
As a result, the Senate met briefly Sunday and took no action. Only 18 of its 59 members showed. Just 79 of 118 House members did the same.
* More woes…
Finally, there’s a number on the table for the budget. Unfortunately, lawmakers still can’t agree on what the number is.
The budgeteers submitted a report to the governor and the legislative leaders at the leader’s meeting today at the governor’s mansion. Legislators also were invited to attend.
“The report from the budgeteers appeared to be inconclusive,” House Speaker Michael Madigan said. “My expectation is that the governor will continue to work with the budgeteers to make the report more definitive, more concrete, which will better able us to move forward on this budget.”
While budget negotiations appeared to move forward, legislators still aren’t on the same page. “There was a piece of paper with numbers, and the numbers are the numbers, but in terms of the discussion, there was disagreement,” Madigan said.
Sen. Donne Trotter, his chamber’s budget expert, said so far, there’s an $874 million hole in the budget.
* This story was originally in Capitol Fax and caused a storm of comments on the blog last week. It was converted into my syndicated newspaper column. Please try to read the whole thing before commenting…
Some may disagree, but I believe that this pension “crisis” the state finds itself in right now is almost completely bogus. And since Gov. Rod Blagojevich has called what looks to be a never-ending special legislative session to deal with this problem, I figured I’d weigh in.
The 1994 law that supposedly “solved” the pension funding issue is not some holy writ handed down from on high. It was originally designed to make sure that the state’s various pension systems were 90 percent funded by 2045. Both of those numbers are viewed by editorial writers, political reporters and many politicians as somehow sacred. They aren’t. They’re simply figures essentially pulled out of a hat 13 years ago by a governor, Jim Edgar, who knew he wouldn’t have to pay the price during his tenure. […]
If Illinois were a small, private corporation in danger of eventually going out of business, then the 90 percent funding levels would be a good thing. The 90 percent level would ensure that no matter what happened to the company, worker pensions would be almost perpetually self-funding.
But Illinois is neither a small corporation nor in danger of going out of business. And the Illinois Constitution requires that state employees receive their promised pension payouts no matter the condition of the state’s finances. A more reasonable figure of 75 or 80 percent would likely still guarantee a reasonable level of health, while not breaking our bank accounts now.
And what’s with this 2045 number? Well, it looked good in 1994. The bill took effect in 1995, so a 2045 goal was exactly 50 years away. That’s a nice, round number, to be sure, but as far as I can tell it has no real actuarial validity.
What we need right now is not necessarily a Lottery lease nor a new pension bond scheme, as the governor has proposed. Instead, that 1994 law ought to first be revisited and revised. Is a 90 percent funding rate prudent or is it a Cadillac dream on a Hyundai budget? Does the 2045 payoff goal truly make sense or could it conceivably be put off by another 10, 20 or even more years?
* More budget stories, compiled by Paul…
* School funding reform unsettled
* Chambers: Under pressure, gov clinging to morsels of safety
* Editorial: Pressure will not translate into budget support
* Statehouse Insider: On the developing special session drama
* State’s budget discrepancy hits schools
* Lawmakers still far apart after special Sunday budget meeting
* Progress begins on the budget
* $40,000 later and little to show
* No shouting in Springfield- ‘call it progress’
posted by Rich Miller
Monday, Jul 9, 07 @ 9:37 am
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Why are Blagojevich and Democratic legislators having such a hard time passing a budget? The people of Illinois have already shown, time and time again, that they overwhelmingly support a tax-swap; and we already have a model in House Bill 750.
Ultimately the constitution needs to be amended in order to allow a progressive system of taxation in Illinois, like Adam Smith preferred; however, short of that, House Bill 750 is the best thing going. Elected officials not supporting this reform are in direct opposition to public will.
Incidentally, according to the U.S. Census Bureau, approximately 157,021 households in Illinois have an income of more than $200,000/year. At the absolute minimum, if there was even a 1% higher income tax bracket for these households, that would result in at least an additional $314,042,000/year in revenue from the state; and that’s a highly CONSERVATIVE estimate, as it assumes that all 157,021 households make only $200,000/year. In case you are wondering, this is only about 3% of total households that would be affected, which means 97% would not be affected.
Comment by Squideshi Monday, Jul 9, 07 @ 10:11 am
What kind of Democratic Party values is the Governor promoting when he proudly boasts of voting for Reagan two times?
What about chasing down Richard Nixon for a photo and an autograph? How Democratic is that?
What about saying you are for reform but not enacting any ethics reforms and still handing out contracts like your convicted Republican predecessor?
Who’s the real Republican here?
Comment by Napoleon has left the building Monday, Jul 9, 07 @ 10:12 am
Everytime Milo opens his mouth, the process moves ten steps backwards. Now would be a good time for you and your pals to go to Cuba for a couple weeks.
You could even use Air Blago.
Comment by Zzzzz Monday, Jul 9, 07 @ 10:18 am
Rich: If you’re able to scare-up and post a copy of the budgeteers’ report to the governor and leaders, perhaps we could dissect exactly what that $874 mil figure is meant to represent. Key word being “perhaps.”
It sounds as though, simply put, it’s supposed to roughly reflect the FY08 $$$ needed just to keep up with current expenses and obligations, short of program expansion. But “roughly” and “current” are relative terms.
Thanks - you’re a victim of your own success!
Comment by Cap'n Crud Monday, Jul 9, 07 @ 10:41 am
I actually agree with Squideshi that the progressive income tax is the way to go, preferably with a surcharge on the wealthy. The $200,000 level is a little low, though. Families making that much get absolutely no government help with anything. I’d say $250,000 or even more.
The problem with 750 is that it is far less progressive; we shouldn’t settle for a less
equitable alternative because that makes a progressive income tax even more unlikely.
Even Obama, on the national level, has proposed
a surcharge on wealthy earners to fund health care, I believe. And California has a surcharge on the wealthy than brings in huge amounts for mental health care. The concept of a surcharge on the wealthy is not longer exotic and we should implement it in Illinois, the impact on our many wealthy state legislators, their contributors, and state agency execs notwithstanding. They can afford it. We can’t.
Comment by Cassandra Monday, Jul 9, 07 @ 11:01 am
Pensions should be fully funded. What right do we have to ask future generations to pay for services that we are receiving today.
Comment by Dollar USA Monday, Jul 9, 07 @ 11:06 am
Rich,
I beg to differ. The Senate can definitely pass gas and does so with great regularity.
Comment by Bill Monday, Jul 9, 07 @ 11:11 am
Rich - I’m going to dissagree about part of the pension crisis.
yesterday the TRS said they sold $2 billion in assests to pay obligations. they have some 40 billion in assests total.
that means they have a little over 20 years of selling off assests to pay obligations.
they even got a 17% rate of return last year on investments — pretty good.
but just by opening the doors in the fiscal year, they will be short almost a billion dollars, income vs expenses.
There has to be something done, or they will continue to sell assests, and thus reduce the investment income they will make and put them further behind.
real question is how much of an infusion of cash would they need to be able to meet current obligations — next 5 years, without selling assests based on a reasonable rate of return?
and some of these sweetheart deals on the way out are gonna have to stop the sytem can’t afford it.
Comment by Dozer Monday, Jul 9, 07 @ 12:00 pm
Cassandra….progressive and equitable don’t really match. I don’t feel that it is fair to punish the successful by asking them to pay a higher percentage of the tax burden than anyone else.
Comment by Kevin Highland Monday, Jul 9, 07 @ 12:46 pm
The only problem with a Tax swap is that no one actually believes that property taxes will go down. Income taxes will increase but property taxes will not get fixed. Everyone already has seen the Gov exposed as a liar multiple times.
Comment by FED UP Monday, Jul 9, 07 @ 1:22 pm
It’s a little late to now deny that there is a pension crisis. For the last few years Republican leadership attacked the Democrats for pension raids and not fully funding pensions. “Pension raid hearings” were held all over the state by Republican legislators about the pension crisis and alleging it was caused by the Democrats. State employees were treated to powerpoint presentations designed to scare the crap out of them and again blame it on the Democrats. The press did nothing to challenge these talking points. The press did nothing to point out that this has been a long brewing problem and that boths sides have failed to fully fund pensions for years. Now its too late to go back and say its not a problem. Democrats won’t give Republicans another campaign talking point. to use in 2008.
Comment by Marcus Agrippa Monday, Jul 9, 07 @ 1:30 pm
Depends on your definition of equitable.
However, given that Illinois is a plutocracy governed by wealthy politicians and their even wealthier contributors and increasingly wealthy upper echelon civil servants, the chances of a progressive income tax are minimal. These folks don’t want to pay more. They want somebody further down the income scale to pay.
Of course that means the second choice of many progressive, the somewhat less progressive tax swap, shouldn’t be implemented either. The tax swap’s effect is definitely not flat.
Comment by Cassandra Monday, Jul 9, 07 @ 1:58 pm
Am I just missing it, or has it been quite a while since we’ve heard anything on electric rates reform?
Comment by steve schnorf Monday, Jul 9, 07 @ 2:30 pm
Anyone else think Judy Barr Topinka is just sitting back at home, having her coffee, and laughing her a** off at the mess she could have been dealing with had she been elected and dealing with emil j. and mike m.
Comment by Concerned Voter Monday, Jul 9, 07 @ 2:34 pm
Good point about the prior Statute. Let me push it a bit further. Revise the old 50 year in concjunction with a chage to a 401k style pension. Grandfather in current employees, but put all new folks in the 401k style system. Thus reducing the long term liability. the current flaw (benefit for state employees, including myself) is the pension contributions do not reflect the generous formula based pay out. In a 401k style system the employer and employee contribute to an account, but the payout is based on the money in the account. right now the money in the account is far less then the payouts. Its a nice benefit, but it is expensive. This type of retirment system (formula based) has been all but elminated from private buisness.
Comment by Ghost Monday, Jul 9, 07 @ 3:57 pm
I don’t think a switch to a 401k is politically possible in a state dominated by unions and liberals. The votes just wouldn’t be there, especially since the legislators get all the stat e pension goodies too.
I would be happy with some adjustments similar to those the CTA claims they are making in some of their benefits (we’ll see…., the unions haven’t signed off yet) such as increasing the employee contribution, based on a percentage of employee salary, requiring longer service for a full pension, requiring retirees to pay more for their retiree health care (right now they pay 0 in insurance premiums).
To his credit, I think the guv actually tried some of these ideas but the unions and libs made him back down. It’s time for us taxpayers, most of us without these nice, cheap lifetime benefits, to speak up. Or not…and pay the billions without flinching.
Comment by Cassandra Monday, Jul 9, 07 @ 4:16 pm
Ghost 3:57-
The flaw in the system isn’t the larger payout vs. the smaller contributions. Defined benefit pensions depend on adequate and regularly-planned funding by employer and employee, and investment of those contributions to create a dependable revenue stream for amortized payouts. It is inherent in these type of pensions that the payout per employee will usually be larger than the employer/employee’s initial investment, due to inflation but also due to the power of compound interest and return on investment.
Don’t say it can’t be done properly in IL by the public sector, because the Illinois Municipal Retirement Systems (for local and county public employees) is nearly 100% funded, and they use the same basic model as the state retirement systems. Only difference is, IMRF has been diligent in collecting the employer/employee contributions and making good investments of those contributions, while the state has not. And they have even done some Early Retirement programs, and remained flush while the state has apparently mismanaged theirs.
All that being said, a 401k style program for new employees could be a solution, as long as it performs as intended and is fair to employees and taxpayers alike.
Comment by Six Degrees of Separation Monday, Jul 9, 07 @ 4:38 pm
One other little tidbit, in response to Rich Miller’s question on whether a “less than 90%” funding ratio could be acceptable. Time was, and not too long ago, the state was there without anything but a few years of the catch-up law.
According to William Holland’s audit, the State Employees’ Retirement System had a funded ratio of 81.7% at June 30, 2000.
Comment by Six Degrees of Separation Monday, Jul 9, 07 @ 5:00 pm
For all those upset with the “luvable” guv, here’s an interesting site, http://www.impeachblago.com/
Now I don’t know if any state employees would want to sign that for fear of retribution, but, oh wait a minute, we learned in our ethics course that they can’t hold things like that against us RIGHT!
Maybe some friends or relatives might want to see the site.
Comment by Concerned Voter Monday, Jul 9, 07 @ 6:27 pm
“I actually agree with Squideshi that the progressive income tax is the way to go, preferably with a surcharge on the wealthy. The $200,000 level is a little low, though.”
I only used $200,000 as an example because that’s the upper limit that the U.S. Census bureau reported in their last economic survey of Illinois. Assume for a minute that just 1% of these 157,021 households have an income of $1 million/year. These 1,570 households alone would generate an additional $15,702,100 in revenue. We’re talking about a reform that would only affect 1% of 3% of households in Illinois; and it wouldn’t affect them all that much, as with a 1% increase, they would still have 99% of what they were already earning in income.
Comment by Squideshi Monday, Jul 9, 07 @ 7:29 pm
“I don’t feel that it is fair to punish the successful by asking them to pay a higher percentage of the tax burden than anyone else.”
It’s not a punishment. It’s a recognition that a person who is successful under a system of government and within a society owes more to that society than the person who benefited proportionally less from it.
Read this report and explain to me how this is incorrect.
“It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.” –Adam Smith
Comment by Squideshi Monday, Jul 9, 07 @ 7:39 pm
Adam Smith discusses progressive taxation:
“The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be anything very unreasonable. It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.”
“The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state. The expense of government to the individuals of a great nation is like the expense of management to the joint tenants of a great estate, who are all obliged to contribute in proportion to their respective interests in the estate. In the observation or neglect of this maxim consists what is called the equality or inequality of taxation.”
Comment by game plan Monday, Jul 9, 07 @ 8:17 pm
The pension plan is not “generous”. 1.67% of per year of service means you get 50% of your salary after 30 years of service.
Comment by Diego Tuesday, Jul 10, 07 @ 4:53 am