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* My weekly syndicated newspaper column…
Several members of the Illinois General Assembly’s special pension reform committee told me last week that they believed a final proposal would emerge within the next week to 10 days.
The conference committee has been working since June on a solution to the state’s nearly $100 billion long-term pension funding shortfall, after Gov. Pat Quinn urged members to find a way around the spring legislative session’s gridlock on the issue.
For the past several weeks, the committee, made up of three Democrats and two Republicans from each chamber, has been working on “tweaks” to ideas that they’ve discussed behind closed doors.
As I write this, there was no word on what the final proposal would look like, but there was real concern among Democrats I spoke with that the Republicans might decide not to go along. While the Republicans on the committee have strongly indicated they’re committed to finding a solution, three of the four GOP members are running for higher office — Sen. Bill Brady (governor), Rep. Jil Tracy (lieutenant governor) and Rep. Darlene Senger (U.S. House).
The Democrats fear that any strong objections from traditional Republican allies, particularly in big business, could spook those GOP members into opposition. And, as is usually the case with this sort of stuff, the chaos created by no solution could be more politically beneficial to the Republicans in next year’s election than getting this monster off the table now.
Despite their super-majority status in both chambers, it’ll be impossible for the Democrats to pass a reform bill without significant Republican assistance. Democratic members are just too closely allied with union interests.
Plus, as long as there is no pension reform proposal for Chicago (and none is on the horizon), Mayor Rahm Emanuel has little or no incentive to lobby his Democratic members to pass a bill and billions of dollars in budgetary reasons to quietly oppose it until he gets what he wants.
In the House, a majority of Republicans sided with the public employee unions last spring when they voted against Speaker Michael Madigan’s pension reform bill. That bill passed with just two votes above the bare majority, so there are few to spare.
And while Madigan (D-Chicago) probably has some votes in his back pocket that he can bring out to cushion the roll call a little more (depending on what Emanuel does, of course), it’s doubtful that any of the House Republican “no” votes will flip to “yes” once the compromise is unveiled.
That means that about all of the House Republicans who voted for the business-backed Madigan bill in May will have to vote for the pension reform committee’s report when it gets a vote, likely during the upcoming veto session.
Aside from the politics, there are some legitimate concerns being raised by Republicans about what they know of the proposal so far. They believe the savings assumptions are based on what they view as a too-low projection of the inflation rate.
Despite three straight decades of low inflation, there are those who insist that a wave of high inflation could return with a vengeance, blowing those savings projections out of the water.
Another concern is the back-loaded nature of the savings. About $94 billion of the $146 billion the bill is projected to save the state will occur between fiscal years 2045 and 2050. It’ll be tough to allow most of the income tax hike to expire in 2015 if more pension savings can’t be found upfront.
The details leaked out of the committee so far add up to a savings of $1.14 billion in fiscal 2015 — not nearly enough to ensure that crucial programs could be spared from the ax if most of the income tax increase goes away.
And make no mistake, achieving the expiration of the higher income tax is the reason behind much of the public demands by business groups for cutting the pension benefits of state workers, teachers and university employees.
About the only recourse the Democrats will have to prevent this from getting out of hand is to threaten to run the Senate-passed, labor-backed reform bill, that’s opposed by business, if Republicans refuse to go along with a compromise.
That possibility is already being floated. Such a vote would get the unions off the Democrats’ backs, and the GOP most certainly knows this.
The vote wouldn’t stop the demands for more reform, however, and the New York credit ratings agencies might not love it either. The Democrats clearly know this as well. So we could end up with a high-stakes game of “chicken” next month.
posted by Rich Miller
Monday, Sep 16, 13 @ 9:22 am
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Politically and for good policy reasons the Republicans should insist on more of the savings upfront. The Democrats don’t have, as strong of a hand here. If nothing passes or the senate bill passes, the credit agencies will not be happy.
Comment by Downstater Monday, Sep 16, 13 @ 9:39 am
–The vote wouldn’t stop the demands for more reform, however, and the New York credit ratings agencies might not love it either.==
The credit ratings called for a tax increase. They got it and were still unhappy.
The credit ratings called for deep spending cuts. They got it and were still unhappy.
The credit ratings called for pension rule changes for new hires. They got it and were still unhappy.
They can pound sand.
Like Phil Rock used to say: “I don’t have any constituents on Wall Street. My constituents are on Madison Street.”
Comment by wordslinger Monday, Sep 16, 13 @ 9:40 am
The GOP wants the state to tank. That’s what passes for campaign strategy these days.
Comment by too obvious Monday, Sep 16, 13 @ 9:43 am
Anything to get the court case started would be an improvement. I don’t think we’ll avoid a court challenge since I don’t think the legislature will pass anything that is completely constitutional…unfortunately.
I’ve said before…benchmark those in different situations hiring wise, and change the system for those after.
Comment by Captain Illini Monday, Sep 16, 13 @ 9:44 am
So many issues and so many twists and turns.
Regardless of what Madigan and big business want, it still has to get out of the Senate. And there is far less sentiment in the Senate to gut retirees let alone current employees.
Thus, the comment about the previous Senate and labor backed bill being the only thing that can really pass seems quite plausible.
I have been observing the politics of the key issue of separating out those already retired and saying we will not go after you vs. current employees. So far the unions, and AFSCME is the real player (not AFT or SEIU) have not even tried to separate out these two groups. It appears to me that they don’t want to. The union backed bill that Cullerton was supporting made no such distinctions. It was ‘everyone’ in the same basket regardless.
To me this seems that AFSCME specifically does not want to carve out those already retired. They want them in the same category for their own political purposes in order that more heat will be turned on the members of the legislature. Besides that retirees are a very small portion of AFSMCE membership.
Thoughts? Comments?
Note that in the health insurance issue, AFSCME did nothing for those already retired. Basically they pay the same as current employees. And starting next year those retirees who are not yet 65 will pay double the amount of current employees. Something else that at least I never see mentioned by anyone.
Comment by Federalist Monday, Sep 16, 13 @ 9:47 am
Federalist, you nailed it. There is definitely a misdirected interest in making the “old folk” (retirees) suffer.
Comment by Former State Employee Monday, Sep 16, 13 @ 9:52 am
One other aspect of the pension committee bill that also leaked out, is that the starting pension amount would be based on the average salary of the employee over their whole career, rather than the highest 4 of the last 10 years. I know this was put in there to prevent salary boosting at the end of a career, but that doesn’t happen with MOST state employees. If this bill would happen to pass, you would see a mass exodus of state employees before it is enacted, to avoid this aspect of it. That would create a huge, immediate burden on the pension system. I wonder if the pension committee has considered this?
Comment by Rusty618 Monday, Sep 16, 13 @ 9:53 am
Right now I think no pension “solution” this fall.
Comment by steve schnorf Monday, Sep 16, 13 @ 9:57 am
Said early on that those running for higher office would be a risk to this committee’s reaching consensus. Then it was just Brady. Now it’s three of them.
Maybe they can rise above.
Comment by walkinfool Monday, Sep 16, 13 @ 9:57 am
As with everything, It’s the art of the possible.
If after the announcement, the press releases contain language like reject, rights, “taxpayers” and bogus, then IMHO the votes won’t be there. That goes for everyone involved- civic committee, unions and Tribune editorial board.
We can either get a bill, or we can see a plethora of press releases, action alerts, and speeches about how some group is still being wronged for whatever reason.
Comment by low level Monday, Sep 16, 13 @ 10:03 am
@Federalist
Im not taking a position either way, but ive read that the COLAs (for retirees) is the single biggest cost driver for the systems. So maybe the retirees arent necessarily being hung out to dry by the unions. Instead, the GA is going after them for the same reason robbers rob banks. Its where the money is.
Comment by Abe the Babe Monday, Sep 16, 13 @ 10:05 am
If they are they still talking about reducing current state employees health care contributions by 1%, how do they justify what is a pay increase for legislators in effect?
Comment by Tom Joad Monday, Sep 16, 13 @ 10:10 am
Abe the Babe,
There is no question that the Governor and the GA are the prime movers in this.
I am just saying that the unions are playing along with no real attempt to stand up for those already retired and have no option to stay on the job.
Comment by Federalist Monday, Sep 16, 13 @ 10:13 am
Wordslinger -
Telling the people that are helping you to finance you to finance your operations to “pound sound” is never a good idea.
My guess is they are too far away from Springfield to be tricked by Springfield’s smoke-and-mirror games.
What we need is a ratings agency located in Springfield that is run by former Illinois political insiders that can market these Illinois success stories a little more effectively.
Comment by Kilroy Monday, Sep 16, 13 @ 10:20 am
ah - another phrase, “no real attempt”. (And it doesn’t have to apply to just current retirees health care premiums as Federalist is using it.).
“No real attempt” ? Really? I find that difficult to believe, on any aspect of this issue.
Comment by low level Monday, Sep 16, 13 @ 10:22 am
“crucial programs could be spared from the ax if most of the income tax increase goes away.”
This is why I hope that at the very least, the income tax increase stays. I would prefer that we go to a graduated tax, but that will be very difficult.
We read and hear that people are leaving Illinois because of the income tax increase. Why don’t people ask the opposite question, how many people from neighboring states move to Illinois because we have a lower state income tax?
Comment by Grandson of Man Monday, Sep 16, 13 @ 10:26 am
The tax increase and spending cuts were smoke and mirrors, Kilroy? Gee. It seems real to me. Not you?
Comment by low level Monday, Sep 16, 13 @ 10:26 am
–Telling the people that are helping you to finance you to finance your operations to “pound sound” is never a good idea.–
How do they help “finance operations?”
You might be content to toe the line for the reckless and greedy gangsters who tanked the world economy, but count me out.
Comment by wordslinger Monday, Sep 16, 13 @ 10:27 am
“you would see a mass exodus of state employees before it is enacted, to avoid this aspect of it. That would create a huge, immediate burden on the pension system.”
There are that many current state employees we are eligible to, and would, start collecting pension payments immediately after quitting their job?
Huh.
Comment by Chris Monday, Sep 16, 13 @ 10:35 am
Schnorf has it right…everyone will be too busy gearing up for the primaries etc. to make this happen. Additionally, IL is officially out of the recesssion, so the pwoers that be might be waiting for the additional revenus and taxes this will bring to State coffers. Methinks the the can will be kicked down the road yet again…sorry about your paycheck GA members…you must play to get your pay…
Comment by Loop Lady Monday, Sep 16, 13 @ 10:37 am
Kilroy, by your logic, the oil companies are “helping” me drive by letting me give them money when I buy gas.
Comment by Soccermom Monday, Sep 16, 13 @ 10:43 am
“taking the savings upfront” is one of the ways we got into this mess.
Comment by steve schnorf Monday, Sep 16, 13 @ 10:46 am
“Right now I think no pension ’solution’ this fall.”
That is sad. I heard that California has Democratic super-majorities, and the state is turning its finances around by way of spending cuts and tax increases. Gov. Brown said he will continue to hold the line on spending. The state is also ready to increase its minimum wage to $10 per hour. That to me is some good politics right there.
Comment by Grandson of Man Monday, Sep 16, 13 @ 11:08 am
There is likely to be little or no movement until the ISC hands down its decision on retiree health care. Look for access to health care to be a ‘consideration’ if the ISC allows the current law to stand. However, based on strict contract law I think that not only will the health care premium law be scuttled but also the current pension cut proposals. No matter the outcome, this is just round one……..
Comment by Old and In The Way Monday, Sep 16, 13 @ 11:13 am
I lost all union representation when I retired. As a retiree, I pay no union dues, so why would the unions want to spend its political capitol on us retire? I see no advantage for the unions to try and get the retirees excluded from any pension reform bill and a reason to leave the retirees in.
All past court cases have rules in favor of not changing the retirement for the retirees. Depending on how the bill is written, wouldn’t it be better to leave the retirees in the bill with the thinking that the courts would then rule the total bill unconstitutional?
Comment by When will it end Monday, Sep 16, 13 @ 11:13 am
In the end, the legislature will not be able to take money away from current and retired pension members. The courts will decide that they have a vested property right to their pension benefits. Do you want the government to take away your property any time they want? Watch the court cases in other state.
Comment by Makandadawg Monday, Sep 16, 13 @ 11:14 am
Grandson of Man
Illinois has already done pretty much everything that California has done. New employee pensions have been cut back so far they may not even be legal and we have increased taxes. The difference is one of perception as opposed to reality. It also helps if your tax increase was not a flat tax and your economy is growing. Finally it’s even better when your business community is not trying to sandbag you with the ratings agencies!
Comment by Old and In The Way Monday, Sep 16, 13 @ 11:17 am
Will be interested in the specifics but these sentences caught my eye: “Another concern is the back-loaded nature of the savings. About $94 billion of the $146 billion the bill is projected to save the state will occur between fiscal years 2045 and 2050.”
Err … I know that costs keep increasing, but that -does- sound rather backloaded, doesn’t it? I know, art of the possible, but how the heck is anyone reliably projecting savings that may or may not occur in 2045?
Comment by ZC Monday, Sep 16, 13 @ 11:22 am
Rusty618
Can’t the legislature prevent an exodus of state employees by making the effective date of the legislation when enacted? If the legislation is enacted October 15th, no state employee can retire until Nov. 1st. and would stuck under the new law.
Comment by Martin Monday, Sep 16, 13 @ 11:22 am
Always appreciate your comments old and in the way. Any knowledge of when the SC will hear or decide the health insurance case? Wasn’t it supposed to be this SC session?
Comment by boat captain Monday, Sep 16, 13 @ 11:24 am
@When will it end
There are AFSCME Retirees chapters that you can join and be represented. Are you aware of that?
For the record, I am not a union representative.
Comment by Ready To Get Out Monday, Sep 16, 13 @ 11:30 am
@Martin…would need more than a simple majority. Unlikely the votes are there.
@boat captain…I believe the SC hears the case this Wednesday.
Comment by Ready To Get Out Monday, Sep 16, 13 @ 11:35 am
Ready To Get Out
I am aware of retirement groups that are affiliated with certain unions. However, I don’t believe that they have any legal representation of any retirees. The majority of state employees are not members of any of the organizations.
Comment by Where will it end Monday, Sep 16, 13 @ 11:39 am
Thanks, Old and In The Way, for putting some perspective into my thoughts, and correcting me. I dig your last two sentences.
I want Illinois to succeed, very badly. I cop a sad when I read that we can’t get past this pension issue.
Comment by Grandson of Man Monday, Sep 16, 13 @ 11:51 am
We also need to see what happens in the summary judgment hearing this week in Chicago. The legislative leaders are taking the salary freeze issue very seriously. How the judge rules will have a significant impact on any future pension legislation.
Comment by GA Watcher Monday, Sep 16, 13 @ 12:05 pm
==Can’t the legislature prevent an exodus of state employees by making the effective date of the legislation when enacted? If the legislation is enacted October 15th, no state employee can retire until Nov. 1st. and would stuck under the new law.==
That would require a supermajority in both houses.
Comment by Anon. Monday, Sep 16, 13 @ 12:21 pm
What is the rush? What is the worst that would happen if this doesn’t get done now?
Comment by Cheswick Monday, Sep 16, 13 @ 12:39 pm
This is Illinois
Comment by Ghost Monday, Sep 16, 13 @ 12:43 pm
@When will it-end 11:39
Good point on the “legal” representation. I will soon be under that umbrella so it would be nice to know what their representation consists of. According to the website they do lobby legislators on the behalf of retiree benefits.
Comment by Ready To Get Out Monday, Sep 16, 13 @ 12:44 pm
@Chris, let me clarify. There are many state employees (about 25% in my office, and I would think close to that statewide)) who would meet the state’s requirements (basically the rule 85) to retire, and would obviously jump ship with their current starting pension level, rather than stick around for one that would start at about half that amount, under the pension commission plan.
Comment by Rusty618 Monday, Sep 16, 13 @ 12:45 pm
@Ready to get out @ 12:44
You may want to check into www.rsea4u.org or www.isearetireees.org Both organizations lobby to help the state retirees and are rather inexpensive to join. Both send out newsletters letting you know what’s going on with legislation relating to state retirees and monthly meetings.
Comment by Where will it end Monday, Sep 16, 13 @ 1:01 pm
Specifics on the health Care Premium Lawsuit.
The hearing will be held on the 18th Floor of the Bilandic Building, 160 N. LaSalle St. in downtown Chicago. The case will be listed as the Kanerva case.
Arguments before the court are set to begin at 9:30 a.m. Lawyers for each of the cases that were consolidated will be allotted time to make their case to the court. The hearing will likely go into the afternoon.
You will need to pass through security in order to enter the building.
- See more at: http://www.afscme31.org/news/retiree-health-care-case-heads-to-supreme-court#sthash.TWcRJAVL.dpuf
Comment by Old and In The Way Monday, Sep 16, 13 @ 1:10 pm
Rusty618…If that rumor is the case, it would reduce my pension 43.5%. I will be leading the exodus!
Comment by Ready To Get Out Monday, Sep 16, 13 @ 1:10 pm
Thanks to old and in the way.
Comment by boat captain Monday, Sep 16, 13 @ 1:13 pm
Oops! My phone screen is too damn small and I did not see that I omitted the hearing date…….
September 18th, 2013
That’s this week if you lost your calendar.
Comment by Old and In The Way Monday, Sep 16, 13 @ 1:14 pm
Rusty618: Thanks.
Seems like it is possible (probable?) that the actuarial ‘cost’ of more senior current employees (ie, 85′ers) is lower if they all retired today than if they they all stuck around for 5 more years. Perhaps not lower than if they stuck around and had their base-salary-for-pension-purposes reduced by 50%, but meaningfully lower than their current actuarial ‘cost’, so that seems likely to be a point of ’savings’, too.
Comment by Chris Monday, Sep 16, 13 @ 1:33 pm
@Chris at 10:35, as you can infer from some previous comments, the averaging of benefit over entire career vs. last four has a HUGE impact. So much so that people will retire “early” - by that I mean before they reach maximum percentage of salary under the retirement formula.
An employee who currently might need to work 7 more years to reach that maximum would retire right away and receive more under the current system than a career-long averaging system.
However, this is just another unconstitutional proposal.
Comment by Realist Monday, Sep 16, 13 @ 2:08 pm
Rich just can’t help himself throwing red meat to the Faithful:
“The Democrats fear that any strong objections from traditional Republican allies, particularly in big business…”
Because we all know the Democrats aren’t the party of big business, since it was the GOP controlled government that gave CME, CBOE and Sears a juicy tax deal…oh, wait!
Got some proof for that statement that it is only the GOP that are “big business” allies?
Didn’t think so. LOL
Comment by qcexaminer Monday, Sep 16, 13 @ 2:12 pm
===that statement that it is only the GOP===
You truly are an illiterate moron.
I never said any such thing.
Comment by Rich Miller Monday, Sep 16, 13 @ 2:20 pm
we love how rich tolerates a diversity of opinion on this site. he never comes across as thinking he is the smartest and most powerful person in the state.
Comment by skeptical spectacle Monday, Sep 16, 13 @ 2:38 pm
Rusty618…If that rumor is the case, it would reduce my pension 43.5%. I will be leading the exodus!
And I’ll be right behind you, can’t run anymore, but I’ll be walking out the door at a fast pace! Rich, thanks for giving us a place to keep up on the latest, your site is days ahead of other media outlets!
Comment by huggybunny Monday, Sep 16, 13 @ 2:38 pm
@Rusty618:
I think your numbers are accurate (sorry Chris) and pretty close to other agencies (probably because there were a lot of hirings in the ’80’s). By me, management did an informal study and estimated a loss of about 30% of the personnel had SB1 or 2404 passed. This is not an employee scare tactic but management’s own estimate! Also,to make it effective immediately and not 6/1/14, I believe they need a super majority. To paraphrase Mr. Cullerton - 3/5?; we can’t even get 50%!
Comment by angelo mysterioso Monday, Sep 16, 13 @ 2:47 pm
Does anyone know what the % penalty is on your pension for each month short of age 60, or rule of 85 for SERS?
Comment by kimocat Monday, Sep 16, 13 @ 2:51 pm
kimocat
Check the SERS for all that information. This brochure should answer your question:
https://www.srs.illinois.gov/Tier1/pubbro17_sers1.htm
Comment by Ready To Get Out Monday, Sep 16, 13 @ 2:58 pm
None of the three GOP candidates has any political incentive to agree to a compromise that is sure to disappoint Ty, the Tribsters and the IPI. It would take a true statesman to rise above his or her immediate political benefit to seek the common good.
There aren’t many profiles in courage in Springfield. As Paul Green likes to remind us, all of JFK\s profiles in courage lost the next election.
Comment by reformer Monday, Sep 16, 13 @ 3:53 pm
A regular formula member can retire between the ages of 55-60 with 25-30 years of service with a pension reduced 1/2 of 1% for each month under age 60.
Comment by Tax Man Monday, Sep 16, 13 @ 3:56 pm
==One other aspect of the pension committee bill that also leaked out, is that the starting pension amount would be based on the average salary of the employee over their whole career==
I emailed Elaine Nekritz about that, and her reply was:
“The media is absolutely misrepresenting and misreporting on this issue. There is no change in any of the proposals put forward over the last two years to base pensionable salary on average career earnings.”
Comment by Anonymous Monday, Sep 16, 13 @ 4:38 pm
I agree with - steve schnorf - @ 9:57 am:
“Right now I think no pension “solution” this fall.”
Fortunately the stock market is coming to our rescue again with the S&P 500 near another all time high and returns of over 15%. This will be good for the state pension funds and for the 401k and 403b accounts of current and future retirees.
This is no longer the gloom and doom situation we had in 2008 or even last year, really!
Comment by Ruby Monday, Sep 16, 13 @ 5:54 pm
Plus, as long as there is no pension reform proposal for Chicago (and none is on the horizon), Mayor Rahm Emanuel has little or no incentive to lobby his Democratic members to pass a bill and billions of dollars in budgetary reasons to quietly oppose it until he gets what he wants.
$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$
Rahm’s internal polling shows he’s taking a nose dive. Labor and blacks in Chicago really dislike the man to the point hostility. If he thinks send a birthday card to Karen Lewis is all he has to do he is delusional. His Waterloo moment will start when the speeding cameras start sending out tickekets by the thousands every week. Bill Daley even has higher poll numbers than Rahm.
And could we get Ty’s position on this before he changes his mind?
Comment by Rollo Tomasi Monday, Sep 16, 13 @ 9:58 pm
Been busy today and didn’t get on until just now. IMO, both Old and In the Way & Steve Schnorf are dead on with their analysis. We just need to be patient a few more days until soem ruligns come down, and then we’ll know the landscape the GA can play on.
Comment by RNUG Monday, Sep 16, 13 @ 10:16 pm
Even if the pension committee comes up with a plan and even if the Ga passes it and the Gov. sign it, the ISC will have the last say. It is hard to see how the SC allows reductions in pensions given the “pension clause” and previous rulings unless you beleive they will accept a “police powers” type of argument. The “police powers” argument is a long shot given the many many options the GA and the Gov. have to deal with the pension problem before they would be have to reduce benifits. I beleive the only changes that will work are the legal ones. Perhaps, just perhaps the SC might try and walk a really thin line (really work at this) and say benifits earned to date can not be changes but might entertain future benift changes given fiscal issues. I don’t think that would be correct but I did not think the ACA was a tax either.
Comment by facts are stubborn things Tuesday, Sep 17, 13 @ 8:34 am