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* We’ve discussed this topic here more than once, but Gov. Pat Quinn is still getting away with it, so I decided to raise the issue’s profile by putting it in my Sun-Times column…
Numbers are hard. People hate math. People really hate reading about numbers and math.
This is why politicians are so successful at using numbers to confuse people. The media too often just accept the numbers and move right along.
But there is a number sticking in my craw these days, and it’s driving me nuts that nobody else is really challenging the governor about it, so I’ve decided to talk about it here.
Wait! Don’t turn the page! It won’t be that bad. I promise. This stuff may look hard at first, but it’s really pretty simple.
Gov. Pat Quinn keeps saying the state goes $12.6 million further into the hole every day that a pension reform law isn’t passed. The additional debt is added to the overall unfunded pension liability. That’s a fancy phrase that describes the money the state should’ve paid into the pension systems over the years and didn’t — and still doesn’t. Every day that goes by without catching up on that unfunded liability means a day that the unfunded liability has a chance to grow.
The media has endlessly repeated this $12.6 million number, and some newspaper editorial pages have used it to demand an immediate pension fix.
The trouble is, the number is really misleading.
“We’ve said repeatedly that every day that goes by, $12.6 million is added to the pension liability,” the governor said this week. “Between now and the election, that’s about a billion dollars.”
Quinn wants the General Assembly to pass a pension-reform bill during a special session he called for Aug. 17. Quite a few legislators want to wait until after the election to pass a bill. They’d rather not have big-time money spent against them by public employee and teachers’ unions this fall. And don’t let anybody kid you, this sentiment is widespread on both sides of the aisle. Republicans as well as Democrats would rather just wait.
What Quinn doesn’t say, partly because nobody has pinned him down on it yet, is that none of the pension reform bills currently on the table will immediately stop that $12.6 million from adding up every day.
And since it’s summertime, any bill with an immediate effective date will require a three-fifths majority to pass. There’s no way the state’s legislative leaders can find that many votes.
They’re having real trouble coming up with simple majorities.
So because our state Constitution has a super-majority requirement for bills passed after May 31 with immediate effective dates, no reforms can conceivably take effect until at least June of next year.
Also, the green eyeshade types who run the state’s pension systems want any reform bills to include a July 1, 2013, implementation date to give them time to get everything ready.
In other words, it doesn’t matter if the Legislature approves a bill on Aug. 17 or waits until after the election because that $12.6 million will still accrue every day regardless of what happens.
The very real problem is the danger of a major downgrade from a credit ratings agency. A major downgrade could push the state’s debt into “junk bond” status, and then a whole lot of big institutions that buy government bonds wouldn’t be able to buy any more of ours. One such threat has apparently been issued already.
So, yes, there is a good reason to pass pension reform sooner rather than later. But this $12.6 million number the governor keeps talking about is, in reality, just scare tactic propaganda, and it should be treated as such.
Discuss.
*** UPDATE *** Gov. Quinn was finally asked today about his $12.6 million a day figure and he dodged the question, pointing instead to the last couple of paragraphs in my Sun-Times column. Listen…
posted by Rich Miller
Friday, Aug 10, 12 @ 9:29 am
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As I was reading your analysis I was struck by a thought —- perhaps Quinn actually just doesn’t realize that his facts are wrong. He tends to react to information, not analyze it. He grabs info that supports his pre-conceived ongoing narratives and then repeats, repeats, repeats. Then being very thin-skinned he bristles if anyone points out that he is wrong.
Comment by Cassiopeia Friday, Aug 10, 12 @ 9:44 am
I have been trying to follow this issue closely, both the bills and the politics and the press. Today’s Trib is hysterical over the possibility that the legislature will “only” reform the University pension system in August, instead demanding that it “all” be done comprehensively.
I guess what both the Trib and Quinn are trying to do is to create a sense of urgency, when a staged, step by step approach may be both more rational and more doable politically.
Two political points - this issue has made Quinn look strong and decisive like almost no other. It is the first time he has gotten his political legs underneath him. Why should he change what he is doing? Point two - The Madigan assault on the out-state pension boondoggle, paying for ALL of their teachers pension contributions, has made the Republicans look absolutely ridiculously hypocritical.
But I do not see how the majority of votes can be put together if it says in. Can someone explain that one to me?
Comment by Elder Friday, Aug 10, 12 @ 9:45 am
Gee Rich the Gov using scare tactics really? So unlike him. So can we expect Good Pat to come riding in on the white horse on the 17th?
Comment by WazUp Friday, Aug 10, 12 @ 9:46 am
Like you say, Rich, there is no chance that any real reform will pass this summer. HOWEVER, saying something costs X dollars per day (or week or month, etc) is something that can be easily grasped by people at-large. If using this meme keeps the heat on the legislature and the Governor to do something, anything, as soon as possible, I’m all for the continued use of the phrase.
Comment by Cincinnatus Friday, Aug 10, 12 @ 9:54 am
Thank you Rich. Finally some serious comments from the media abut the numbers. Please do more.
Comment by Makandadawg Friday, Aug 10, 12 @ 10:01 am
Elder
Quinn has looked anything but strong on this issue. Madigan had a bill that he was going to pass then Quinn came out against the cost shift so Madigan dropped sponsorship of the bill. Cross took up sponsorship and the bill failed. Now later Quinn is back to supporting the cost shift. Typical Quinn dysfunction or lies the guy has no clue thier would of been a bill passed but Quinn screwed it up. He is costing the state 12 million a day if you chose to believe anything he says, and with his penchant for lying that would be silly
Comment by Fed up Friday, Aug 10, 12 @ 10:01 am
–A major downgrade could push the state’s debt into “junk bond” status, and then a whole lot of big institutions that buy government bonds wouldn’t be able to buy any more of ours.–
Those institutions would be mighty tempted to change their rules in order to buy such bonds. The returns derived from the artificially imposed risk factor would be too great.
Believe me, I’m in favor of a reasonable plan to get the state’s fiscal house in order, I just think rating agencies have lost all credibility (not in their research, but in their rating committees; their motives are suspect, to say the least).
Put it this way, S&P’s downgrade of the United States sparked a continued bull market in T-bonds that actually drove down the cost of issuing debt. Seems counter-intuitive, doesn’t it?
http://www.bloomberg.com/news/2012-08-05/rogoff-sees-world-wishing-it-s-america-year-after-s-p-downgrade.html
Comment by wordslinger Friday, Aug 10, 12 @ 10:05 am
Okay - so he’s like every other politician throughtout the ages. Manipulating stats towards their end goal. E.G. “The 1% is to blame for everything.” So what’s your point, Rich? Truth in Rhetoric.
Comment by Air-Is-Total Friday, Aug 10, 12 @ 10:10 am
===So what’s your point, Rich? Truth in Rhetoric. ===
Asked and answered.
Comment by Rich Miller Friday, Aug 10, 12 @ 10:30 am
In total agreement with Cincinnatus. I think there’s a whole host of people out here who fear the G.A. will kick the can down the road for yet another year or pass some watered down reform that barely scratches the surface. For all Quinn’s faults, this may be where his protecting the little guy side really kicks in where needed.
Comment by Shemp Friday, Aug 10, 12 @ 10:35 am
Its not as far out as Quinn’s claim that legislative scholarships cost the state $13.5 million a year. No one has shown that any teachers were hired to take care of the students getting the scholarships.
Comment by John Parnell Friday, Aug 10, 12 @ 10:44 am
you get 50 miles or more from the capitol (other than for a few local concentrations of state employees) and no one cares what happens to state employees or their pensions. to the extent the public is aware, cuts, layoffs, and givebacks sound great
we have seen this all time and again. madigan will put up one or two proposals, watch as everyone scurries for cover, and the bills fail. political theater.
the hard fact is there are not enuf votes to get 3/5 margin, so it has to be changed to only require a majority, and getting that margin is easier, tho certainly not guaranteed, later.
re quinn and the 12.6 M– big issues often get boiled down to a few numbers that get repeated over and over. doesnt make them right.
have we heard from ty fahner and company lately?
Comment by langhorne Friday, Aug 10, 12 @ 10:46 am
Thanks for the insight Rich. Agree that there is nothing to be saved in the near term. Wordslinger, I also agree with your points. Seems to me like any meaningful reform must address all five pensions. If healthcae is a great expense — and i agree it is — why not include both current employees and retirees in paying more toward healthcare — say 50%. I believe members of the Ga earn 3% toward there pension after 20 years of “service.” Haven’t heard of a plan or pending legislation to address that.
Comment by whatnext Friday, Aug 10, 12 @ 10:49 am
Uh, it is costing us $12.6 million a day. The fact is correct. He uses it as a rationale to get this done as soon as possible.
Rich, your obsession with this is hard to understand. He’s stating a fact that no one disputes.
Comment by LittleLebowski Friday, Aug 10, 12 @ 10:52 am
Uhh it’s costing $12.6 mim a day thanks in large part to years and years of unpaid payments. Does anyone really think sny of this “projected savings” will go to pay the bills or guarantee making payment obligations in the future. Where was this white knight the past 30 years? Why wasn’t this his mission as Lt. Gov.?
Comment by whatnext Friday, Aug 10, 12 @ 10:58 am
Mil and any. Sorry.
Comment by whatnext Friday, Aug 10, 12 @ 11:00 am
When I retired 2 years ago the state retirement system started cutting me a check for a set dollar amount with a raise after the first full year of retirement. I was furnished insurance and allowed to buy insurance for my wife.No one said plan on getting your cost of living cut or you will have to give up your insurance. With all the smart people running the state and SRS you would have thought somebody would have said you might not want to retire until your are social security age. Or you need to take the leveler because your going to need money to pay for your insurance. I planned for retirement but I guess it was asking to much for the state to do the same.
Comment by nieva Friday, Aug 10, 12 @ 11:05 am
Thanks for telling us the truth!! What I don’t understand in all this talk of pension reform, is why wasn’t the judges included. Just cuz they are judges? I like someone to post the truth about that. Thanks.
Comment by thunder Friday, Aug 10, 12 @ 11:11 am
Is this the bill they’re talking about voting on Aug.17th? How is any of this legal?? And if it’s not legal, (and they know it) then they’re just throwing it out there to keep the credit rating agencies happy, right? Whatever they do finally come up with better be legal, or it’s just a huge waste of time, so why not do it right from the start? Illinois will not get out of this fix without additional tax revenue, bite the bullet and get it over with.
http://www.ilga.gov/legislation/97/HB/PDF/09700HB6210lv.pdf
Comment by Huggybunny Friday, Aug 10, 12 @ 11:19 am
Rich you write: “What Quinn doesn’t say, partly because nobody has pinned him down on it yet, is that none of the pension reform bills currently on the table will immediately stop that $12.6 million from adding up every day.” You also note that there is a dispute over when, if passed, any of these bills would become effective.
But Rich I am not clear about something because your Sun-Times column does not comment on it. If and when any of the bills were passed and enacted how much would the 12.6 million a day drop? One way to read your column is that it would not drop at all because it is accumulated debt and still needs to be paid back, another way to read your column is that the 12.6 million every day that is added to the pension liability would decline at some point. Could you explain you thinking in relation to that issue?
Comment by Rod Friday, Aug 10, 12 @ 11:28 am
Thank you Rich!! Once again Cap Fax puts the reality out there. Yes, there is a problem. Yes it needs a solution. I believe the unions are ready to work on solutions as they were a couple of years ago when members took voluntary steps to reduce costs. Their agree,ment at that time was not honored even after they took the cuts. The Governor needs to get off the hard line attitude and work with people. But I guess he only does that with people who don’t work for him.
He is all for Vets unless they work for State Government then he cuts their pay. He is all for the strikers at Cat. Even giving them his personal money. But lies to and takes money from union workers that work for him.
Comment by Irish Friday, Aug 10, 12 @ 11:34 am
===Rich, your obsession with this is hard to understand. He’s stating a fact that no one disputes. ===
It may be a fact that it’s cost $12.6 million a day, but it will also cost us $12.6 million a day after the bill is passed. He’s using it to demand urgency, when the facts don’t back him up.
Sorry if you’re too dense to understand this simple notion.
Comment by Rich Miller Friday, Aug 10, 12 @ 11:37 am
The $12.6 million is interest on accumulated debt that is mostly constitutionally protected. How much of that accumulated debt is constitutionally protected will doubtless be settled in court (for example, current retiree health care), but that most of it will be found to be protected is hardly in doubt. It should also be noted that the principal of the debt is not increasing, since the legislature is currently fully funding their part of the payments into the pension fund for active employees. That is no thanks to Quinn, who urged a larger budget last year based on overly optimistic revenue projections.
Comment by jake Friday, Aug 10, 12 @ 12:21 pm
The news coverage on pension “reform’ has been disappointing for the most part- just regurgitating whatever talking points Quinn, Cross, or whomever spout out without any real fact checking by the reporters. Most stories read like press releases from the politicians office, not actual gathering of facts and analysis by the reporters.
The cynic in me tends to think the reason why the reporting is being done this way is because the editorial staff of many newspapers are all on board for sticking it to the workers and retirees (just follow any paper’s commentaries on their opinion page), and the lowly reporters are just doing their master’s bidding…
Comment by roadiepig Friday, Aug 10, 12 @ 1:13 pm
The only urgency we will see is if the GA passes some snippet of meaningful pension reform as to existing workers and retirees at a special session. The urgency to the courtroom by the unions to declare it unconstitutional will set land speed records. Except, of course, if a proposal to shift a portion of the suburban and downstate teachers’ pensions onto local school districts is passed. I presume the teachers’ unions are in favor of this because it brings additional pockets to the table.
It appears we have a stalemate here. The GA is fearful of union backlash if meaningful reform of current employee and retiree pensions is attempted. The GA appears to be trying to keep the judicial pensions out of the fray so the Illinois judges can at least rule on whatever cases may arise from some minor tinkering legislators can applaud as monumental. But the judges may be worried about ruling on even a minor reform for fear of union backlash at election time. But the courts can bottle up pension reform litigation for years, keeping everyone happy, except the taxpayers. But who cares about them?
But those pesky bond rating agencies have none of these concerns. Maybe they are the saviors Illinos needs. A few more good and hard downgrades of Illinois state and municipal debt may be the cold shower this state needs.
Comment by Cook County Commoner Friday, Aug 10, 12 @ 1:15 pm
–But those pesky bond rating agencies have none of these concerns. Maybe they are the saviors Illinos needs. –
Kind of hard to envision the folks who gave AAA ratings to subprime mortgage backed securities as saviors.
Comment by wordslinger Friday, Aug 10, 12 @ 1:46 pm
This is nothing but a shell game. They’ll spend any projected savings, and then be further in the hole when the courts rule it unconstitutional. It’s no different than the myriad of other ways they kick the can into next year and skirt the constitutional requirement for a balanced budget.
Comment by Jimbo Friday, Aug 10, 12 @ 1:51 pm
Uh, it is costing us $12.6 million a day. The fact is correct. … He’s stating a fact that no one disputes.
Umm… not quite. Quinn has stated that not passing pension reform is, right now, costing $12.6M a day. That simply isn’t true.
They could pass the current pension reform plans today. Or they could pass those reforms on 12/31/12. And it would still have the same fiscal impact.
Comment by dave Friday, Aug 10, 12 @ 2:21 pm
When are they going to introduce some reform that is constitutional? All that the current crop will accomplish is add to the unpaid, interest-accruing debt when the courts throw it out and the state has to pay the cost of living or health insurance premiums they’re taking away here. The best thing we can hope for, if one of these bills becomes law, is that the judges throw it out quickly. Before election day would be nice, but I doubt that would do much good because the ones who voted for it would just say “we did our best, but those [golden] courts screwed it up!”
Comment by Anonymice Friday, Aug 10, 12 @ 3:42 pm
Amen, Rich.
A lot of politicians come up with numbers that ’substantiate’ THEIR positions & the media in general gobbles it up as fact.
Dear Media: Do your work: Fact Check It.
As Rich said, pols get away with this stuff time after time after…
And apparently a lot of folks just gobble it up too.
Comment by sal-says Friday, Aug 10, 12 @ 4:15 pm
The problem with current Illinois pension reform bills is they do not stop reduced/full retirement benefits before ages 62/67, with retired college professors collecting one million extra dollars or more each. Retired state employees, teachers, and judges also collect extra dollars instead of paying into the retirement and heath care systems.
Comment by IDOT Retiree Sunday, Aug 12, 12 @ 3:36 pm
Another problem with current Illinois pension reform bills is the proposed reduced COLA’s after retirement are based on only part of the truth. Senator Brady and Representative Nekritz are quoted in newspapers alleging that the urban onsumer Price Index (CPI-) is actually inflationary for senior citizens because most have their house paid off and are pretty well settled in their housing. However, The CPI-E which takes into account the type of spending more common among people 62 and older, such as medical care, continues to rise faster than other costs. The Governor and his legislators are not telling the truth, the whole truth, and nothing but the truth about pension reform, and are instead turning it into more political corruption.
Comment by IDOT Retiree Sunday, Aug 12, 12 @ 3:52 pm
Another problem with proposed Illinois pension reform bills is that they do not address the structural deficeit of the flat Illinois tax system, which has prompted legislators to rob and steal from public employee pension system fund contributions for decades, in order to fund other state programs and services benefitting taxpayers. Proposed pension reform bills are based on very questionable and inaccurate savings which are insignificant to the problem.
Comment by IDOT Retiree Sunday, Aug 12, 12 @ 4:03 pm
Another problem with the proposed Illinois pension reform bills are proposed shifting of teacher and university system pension costs to local school districts which will cause increase local taxes. This does nothing to correct past legislative robbing and stealing from these pension syatem fund contributions for other state programs and services for the benefit of Illinios taxpayers.
Comment by IDOT Retiree Sunday, Aug 12, 12 @ 4:13 pm