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* Governing has published a long piece by my old buddy Dan Vock entitled “Who Ruined Illinois?”…
However bad you think government might be,” Bruce Rauner tells an audience, “it’s worse.” Rauner, a Republican governor seeking reelection, has plenty of reasons to portray his state as fundamentally broken. It’s a way to explain why he hasn’t been able to make the big changes in Illinois he promised when he ran four years ago. But it’s also a great line for a knowing audience, and the crowd of call center workers in Moline, on the Mississippi River, laughs appreciatively.
Illinois voters have endured a lot from their state government. It hasn’t been just one recession or one administration that’s done the damage, either. It’s been nearly a generation of political upheaval and dysfunction at the state Capitol. “Springfield has not been working for them, and I think voters, residents of Illinois are frustrated and angry. They should be,” Rauner tells me after his Moline event. “Always unbalanced budgets. Not paying pensions. Not growing the economy and creating good-paying jobs. Massive corruption, cronyism and patronage. And four of my nine predecessors have gone to prison. It’s a broken system.”
Nearly everyone agrees with Rauner that the system is broken, but there’s no consensus about why the system is failing. Pick your favorite culprit — legislators, unions, pensions — and you may have a case. But the one thing that current and former elected officials, academics and Springfield insiders cite most is perhaps the most painfully obvious: “Illinois government did work,” says former Gov. Jim Edgar, a Republican who presided over what now looks to be the state’s heyday in the 1990s. “But then we had bad luck with a couple of governors.”
Illinois governors are powerful. They have many executive tools at their disposal that their counterparts in other states don’t possess. As chief executives, they have the biggest say on the state’s financial situation and the biggest platform to tend to the state’s economy. But over the last two decades, public confidence, financial stability and economic growth in Illinois have all suffered.
During that time, Illinois has had four governors: two Republicans and two Democrats. George Ryan came first, starting in 1999, and despite substantial achievements in Springfield, erased the public’s trust in state government with a corruption scandal that landed him in prison. Rod Blagojevich swept into power in the wake of Ryan’s scandal, promising reform and renewal, but exited in disgrace after an FBI arrest and subsequent impeachment trial, leaving a state woefully unprepared for the Great Recession. Illinoisans breathed a sigh of relief when Pat Quinn stepped in, but the relief died quickly, as a major tax increase failed to steady Illinois’ finances, and low-level patronage scandals undercut his reputation as a reformer. Rauner capitalized on Quinn’s unpopularity and defeated him in 2014. But Rauner saw his own standing collapse last year when rank-and-file GOP lawmakers abandoned his cause after a two-year budget standoff.
* It’s most definitely worth a read, but our troubles started far earlier than 1998.
Four crucial decisions were made during Gov. Jim Thompson’s tenure that we’re still feeling today: 1) 3 percent compounded pension COLA; 2) Exemption of retirement income from the state income tax; 3) Exemption of food and medicine from the state sales tax; 4) Reduced overall state support for K-12.
We vastly widened our spending base while greatly narrowing our revenue base. And by not adequately funding K-12 (because of that widening/narrowing), property taxes were forced up (which legislators responded to by approving exemptions, which made everyone else pay more). Not to mention that as the state was beginning to transition from a manufacturing-based economy to a service economy, services were not (and still aren’t) taxed.
* I happen to admire Gov. Thompson very much and hindsight is 20/20, as they say. Way too many state pensioners in those days were dirt poor, so that 3 percent compounded interest was a lifesaver to many. Helping senior citizens every way possible was all the rage everywhere back then and they weren’t nearly the percentage of the population they are now, so the income tax exemption wasn’t as big a budget issue as it is today. Sen. Richard M. Daley fought hard for those very popular sales tax exemptions and overrode Thompson’s veto ahead of his first mayoral bid. And the state just didn’t have the money (until it approved a temporary tax hike) to adequately fund K-12.
Gov. Jim Edgar passed a bill to make the pension payments, but he backloaded the schedule until after he was safely out of office. Edgar famously left George Ryan with a billion-dollar surplus instead of putting that into the pension funds. Ryan spent that billion dollars almost before he finished taking the oath of office.
And none of the three governors since Ryan have managed to get a handle on our stark fiscal and economic problems.
posted by Rich Miller
Friday, Apr 27, 18 @ 10:47 am
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The answer- every governor and legislative leader who adopted budgets not really balanced and granted employee benefits without securing the means to pay for them. Bruce Rauner came after the crimes against the people were already committed
Comment by Sue Friday, Apr 27, 18 @ 10:51 am
As soon as I saw Edgar’s quote I was gonna come in and start screaming about Thompson and Edgar’s actions on pensions, but you covered it all pretty well, Rich.
Had we had Governors without the personal moral failings of Ryan, Blago, and Rauner, or who weren’t as manifestly hapless as Quinn, could we have responded to these problems better? Maybe. Probably. But the question was how these problems started, and, well, you nailed the answer.
Comment by Arsenal Friday, Apr 27, 18 @ 10:52 am
All of this makes it that much more mind boggling that Rauner has been able out do all of that damage in just 3 years.
Comment by Concerned Dem Friday, Apr 27, 18 @ 10:56 am
Who ruined Illinois?
It was me. I confess. All I wanted was great public services, like education and healthcare, safe streets and nice communities with good roads and safe bridges. But I also wanted low taxes even though I knew the cost of services tends to go up over time. I wanted taxes and fees to go down.
So I voted for legislators who promised me we could have it all without higher taxes. From the mid-1990s onward, that’s how we rolled in Illinois. Our higher education system in the 90s was the envy of other states, our pensions were getting funded (somewhat), and we had Build Illinois and Illinois FIRST and other building programs that invested in our infrastructure. Life was good.
And then it went bust. It’s like Hemmingway said when he was asked how people go bankrupt. He said it happens gradually, then suddenly.
Illinois raised the income tax to 3% in 1988 and kept it level at 3% until 2010. For 22 years we had a great time by stealing from the pension funds. It’s what we wanted, and the voters elected the people who gave us what we wanted. Like I said, I blame myself. I ruined Illinois.
Comment by 47th Ward Friday, Apr 27, 18 @ 10:57 am
So it’s not all Madigan’s fault after all. Who knew?
Comment by anon2 Friday, Apr 27, 18 @ 10:58 am
Anon- I guess we all overlookedMadigan being Speaker for every year but 2 since 1982
Comment by Sue Friday, Apr 27, 18 @ 11:00 am
Agreed, every governor Since Thompson and every legislative leader, so basically Madigan, and every legislator who voted for that leader and those budgets. Oh, that’s right, just about everyone is to blame.
Comment by NeverPoliticallyCorrect Friday, Apr 27, 18 @ 11:01 am
The other element that came into play in the Thompson era was public employee unions. They did a much better job negotiatin’ with employer. 3% COLA was not a big deal for a teachers makin’ $25K and lookin’ for a pension of about $12K. But when that gets doubled or tripled look out. The pensions were not helped by the hustlers on Wall Street and Bankers Row when the plunged the worldwide economy into the gutter several times.
Comment by Annonin' Friday, Apr 27, 18 @ 11:01 am
– Illinoisans breathed a sigh of relief when Pat Quinn stepped in, but the relief died quickly, as a major tax increase failed to steady Illinois’ finances,…–
No, it did steady Illinois finances. Spending was cut, pension payments were made, debt was paid down.
From a fiscal standpoint, it was a bonehead move by Madigan and the Dems to put a sunset on it.
Couple that with the squeeze-the-beast misanthropy of Rauner, and you run up $12B in unpaid bills in 2.5 years, and gut higher ed to boot.
Comment by wordslinger Friday, Apr 27, 18 @ 11:01 am
And the one constant throughout this downward spiral? Mike Madigan.
Comment by Ned Friday, Apr 27, 18 @ 11:02 am
There’s been a constant through all those decades of Illinois’ dysfunction and mismanagement. Wait, wait, it’ll come to me… just give me a second…
Comment by JB13 Friday, Apr 27, 18 @ 11:03 am
Mad points to 47th Ward at 10:57AM. Well said, sir.
Comment by Linus Friday, Apr 27, 18 @ 11:05 am
Two days ago, in the midst of another budget crisis and without a funding mechanism, the Illinois Senate voted along party lines for an 800 million dollar pay raise for SEIU home health care workers.
The majority of Illinois legislators have been unable to comprehend for decades the only solution to our problems is economic growth.
They have been too busy dividing the shrinking pie among their special interest groups instead of working on making a bigger pie
Comment by Lucky Pierre Friday, Apr 27, 18 @ 11:08 am
“Four crucial decisions were made during Gov. Jim Thompson’s tenure that we’re still feeling today: 1) 3 percent compounded pension COLA; 2) Exemption of retirement income from the state income tax; 3) Exemption of food and medicine from the state sales tax; 4) Reduced overall state support for K-12.”
I would add one more item to your list — 5) the state started entering into consent decrees.
Many people do not realize that a huge chunk of the state budget is subject to federal consent decrees that were entered into by Thomson’s administration, and these have been continued under the all subsequent administrations. The state ends up powerless to reduce costs or make significant changes because of these legal maneuvers.
Comment by trooth Friday, Apr 27, 18 @ 11:09 am
This certainly puts our present circumstances in the proper perspective.
Facts do matter, but the political polemics of our candidates appear to be the only thing that voters chose to remember. Sad.
Comment by illini Friday, Apr 27, 18 @ 11:10 am
47th Ward clarified it for us. +1!
Comment by Out Here In The Middle Friday, Apr 27, 18 @ 11:13 am
==- Sue - Friday, Apr 27, 18 @ 11:00 am:
Anon- I guess we all overlookedMadigan being Speaker for every year but 2 since 1982==
There is this concept called separation of powers that Madigan, of all people, has been a staunch supporter of for his entire tenure. If you study policy and the history of interactions between the Governor and the General Assembly, you’ll see that generally Madigan has supported letting Governor’s operate the executive as they see fit, provided that operation didn’t get in the way of his people or priority of getting his people elected.
All of the items Rich so rightfully points to were policy initiatives of the Governor, not Madigan.
Comment by trooth Friday, Apr 27, 18 @ 11:13 am
Every name associated with the budgets that were passed over the past 20 or so years. Big pension promises secured support from the union lobby while relatively low taxes kept the business community complacent (despite their vocal complaining). Not even sure if it’s fixable at this point. Revenue needs to go up significantly - even more than the recent unpopular income tax increase. The problem is that doing so encourages more people to leave and more businesses/employers to locate somewhere else. Literally can’t win. Damage is already done.
Comment by California Guy Friday, Apr 27, 18 @ 11:17 am
=Bruce Rauner came after the crimes against the people were already committed=
And Bruce Rauner made the conscious choice to make thing worse. It was willful and deliberate. Now I get that its easier to simply yell “Madigan” instead of taking responsibility. But we elect the governor to be in charge and Rauner abdicated that responsibility. Madigan didn’t tell me that, Rauner did.
Comment by Pundent Friday, Apr 27, 18 @ 11:17 am
We have a system that taxes the poor. A quarter of all income goes to those making over 250000 a year. This was national and even global so it is not only a ruined Illinois.
Comment by Not a Billionaire Friday, Apr 27, 18 @ 11:17 am
Mr/Ms Sue et al
You may recall it is Governors not speakers who sign bills into law, appoint pension board members, hire pension fund managers, etc.
So, no, it wasn’t about Madigan.
Comment by Annonin' Friday, Apr 27, 18 @ 11:23 am
And let’s not forget the Cutback Amendment, which reduced the possibility of legislative coalitions and helped create the conditions for Speaker Madigan’s share of the blame.
Comment by Keyrock Friday, Apr 27, 18 @ 11:24 am
==The answer- every governor and legislative leader who adopted budgets not really balanced and granted employee benefits without securing the means to pay for them. Bruce Rauner came after the crimes against the people were already committed==
Even if you want to ignore the fact that Bruce Rauner both proposed unbalanced budgets and literally went to court to fight to keep paying state employees even though there was no budget-
-And I know you *do* want to ignore those facts-
-we’re still left with the fact that Rauner did nothing to solve those crimes, and in fact, has made everything worse.
You want Illinois history to end in 2014. It didn’t.
Comment by Arsenal Friday, Apr 27, 18 @ 11:24 am
=== Bruce Rauner came after the crimes against the people were already committed ===
May be true but he has done nothing to fix the problems.
Comment by Anonymous Friday, Apr 27, 18 @ 11:25 am
== when Pat Quinn stepped in, but the relief died quickly, as a major tax increase failed to steady Illinois’ finances ==
I take exception to that statement. With the income tax increase to 5%, the State was slowly correcting their finances under Quinn. The combination of the temporary increase expiring and Rauner’s ignoring the budget process / no budget / sueeze the beast but keep spending on pet projects is what destoryed the progress Quinn made.
Comment by RNUG Friday, Apr 27, 18 @ 11:26 am
== 1) 3 percent compounded pension COLA ==
Rich, I have to nit pick you; you know better.
It’s not a COLA, it is a fixed and compounded AAI (automatic annual increase). They do behave somewhat differently.
Comment by RNUG Friday, Apr 27, 18 @ 11:29 am
–The majority of Illinois legislators have been unable to comprehend for decades the only solution to our problems is economic growth.–
What decades are you talking about when there wasn’t economic growth?
https://fred.stlouisfed.org/series/ILRGSP
Comment by wordslinger Friday, Apr 27, 18 @ 11:36 am
==Bruce Rauner came after the crimes against the people were already committed==
A bit of hyperbole, but to use your term, Bruce Rauner continued to commit “crimes against the people.” I don’t know why some of you ignore the events of the past 3+ years and act as if the Govenor is blameless in this continuing mess we find ourselves in. It’s dishonest.
Comment by Demoralized Friday, Apr 27, 18 @ 11:38 am
== our troubles started far earlier than 1998 ==
Yep, more like 1917, when the governor and legislature were first warned they were dangerously underfunding pensions:
http://www.sj-r.com/article/20140925/Opinion/140929651
Comment by Roman Friday, Apr 27, 18 @ 11:38 am
==Illinois governors are powerful. They have many executive tools at their disposal that their counterparts in other states don’t possess. As chief executives, they have the biggest say on the state’s financial situation and the biggest platform to tend to the state’s economy.==
This has been made clear many times on this blog. Yet the Raunerbots never want to acknowledge that. Their poor fella is still failing to understand how to use all that power the constitution gave him.
Comment by Henry Francis Friday, Apr 27, 18 @ 11:44 am
Edgar, Thomson and Madigan ruined illinois. Along with anyone that voted for the current state Constitution.
Comment by Ron Friday, Apr 27, 18 @ 11:47 am
For the “It’s Madigan’s fault” crowd:
In 2002 (Blago’s first year), for the fiscal 2003 budget, Republican senators (Brady, Dillard, Geo-Karis etc) voted Y on third reading, and many Democrats (Obama, Madigan, Jones, etc) voted P.
The House voted 84-32-1 to approve the budget. There were 62 Democrats in the chamber and 56 Republicans. If all the Ds voted Y (party isn’t shown in the vote list), 22 Republicans voted for the budget.
Where has the political will been to do the right thing about the fiscal situation in Illinois? I think this example shows the problem can be assigned to both parties for a long time.
Rauner was given the opportunity to use the power of his position to fight the good budgeting fight, and he blew it. Who’s next? And will they do what’s right for the state, or will they keep kicking the can down the road?
Comment by Lefty Lefty Friday, Apr 27, 18 @ 11:47 am
===From a fiscal standpoint, it was a bonehead move by Madigan and the Dems to put a sunset on it.===
Especially in the middle of a fiscal year, instead of on a June 30. That, I did not understand at all.
Comment by Nick Name Friday, Apr 27, 18 @ 11:47 am
==“Illinois government did work,” says former Gov. Jim Edgar…==
We just need to ramp things up a bit, right, Jimmy?
Comment by City Zen Friday, Apr 27, 18 @ 11:54 am
== Especially in the middle of a fiscal year, instead of on a June 30. That, I did not understand at all. ==
It was all politics. Intended to handcuff the next Governor if they turned out to be a Republican instead of a Democrat.
It as just their good fortune that Governor-elect Rauner called for it to expire. That was his second mistake after winning the election.
Comment by RNUG Friday, Apr 27, 18 @ 11:55 am
Thanks, Rich. I appreciate and enjoy the conversation, as always. Obviously, Illinois history did not begin in 1998, but I think it’s clear that the direction of the state changed right around the turn of the end of the 20th century. Many of the graphs bear that out.
It wasn’t just finances that took a hit there, but public trust in government. (One pollster told me he stopped asking right direction / wrong direction questions — a standard polling question — 10 years ago, because the answers were always overwhelmingly negative.)
And you might get a kick out of this outtake from an earlier draft of the piece: “Illinois was born into controversy. … When Illinois’ first governor, Shadrach Bond, was sworn in in 1818, he warned lawmakers that the state had no money and bad credit.”
Comment by Dan Vock Friday, Apr 27, 18 @ 11:59 am
Edgar’s state pension should be taxes at 100% for what he did to illinois.
Comment by Ron Friday, Apr 27, 18 @ 11:59 am
Yes, the sunset in the tax hike hurt the state, and that policy is on Madigan and Quinn. Yes, the Cutback Amendment made possible an all-powerful Speaker, as well as gerrymandering House seats.
Comment by anon2 Friday, Apr 27, 18 @ 12:00 pm
The Governor who perhaps is most at Fault is Thompson who signed the public bargaining bill to thank the IEA for its 1982 endorsement and who in 1990 put thru the 3 percent pension annual raise. The person who suggested that Governors with their pension Board appointments cause the underfunding is kind of obtuse. The Boards have zero to do with the pension code and benefit obligations. Having said that the State has been delerict in allowing the pension funds to be managed by lay boards of trustees who as we know from time to time have done some pretty outrageous things with their authority
Comment by Sue Friday, Apr 27, 18 @ 12:12 pm
==The Governor who perhaps is most at Fault is Thompson who signed the public bargaining bill to thank the IEA for its 1982 endorsement and who in 1990 put thru the 3 percent pension annual raise. ==
I nominate Ogilvie for not implementing a second tier of pension benefits once the pension clause was added to the state constitution. But Thompson’s compounded COLA gift is up there.
Comment by City Zen Friday, Apr 27, 18 @ 12:23 pm
Ty Fahner.
Comment by Driveby Friday, Apr 27, 18 @ 12:30 pm
“Spending was cut, pension payments were made, debt was paid down.”
I’m not saying Quinn was great, but he was way better that Rauner. Rauner should be kissing the ground on which the brave GOP GA members who overrode his vetoes walk. They saved the state from damage piling upon damage.
At face value, Rauner’s vetoes are affirmations that it was okay for the state to collapse. Rauner’s vetoes say holding the entire state fiscal infrastructure hostage and starving it of money is worth his war on unions and Madigan.
Would Rauner have done anything different in his first term?
“Hmm, no.”
Comment by Grandson of Man Friday, Apr 27, 18 @ 12:32 pm
=It was all politics. Intended to handcuff the next Governor if they turned out to be a Republican instead of a Democrat.=
And despite many other flaws Quinn had the courage to run on leaving the rates unchanged. Keeping the rate at 5% and getting budgets passed would have gone a long way towards righting the ship.
Comment by Pundent Friday, Apr 27, 18 @ 12:33 pm
@Ron is right about the framers of the 1970 constitution deserving a big chunk of blame.
The “impairment clause” was well intended, but misguided. Had they mandated the state meet annual pension funding obligations the same way it pays off bond holders, we wouldn’t be having this conversation right now. It would have discouraged the COLA increase and tax exemptions under Thompson that Rich mentioned, or the income tax rate would have been hiked to 5 percent much sooner than it was.
Comment by Roman Friday, Apr 27, 18 @ 12:34 pm
It may seem straightforward to blame the compounding cola for the problems, but it’s not so simple. For example the CPI over since 1982 has averaged in excess of 3% as has the market performance. That would suggest that the pension funds should have kept pace if the state had made complete and accurate payments to the pension funds. They didn’t, but that isn’t the fault of the compounding cola.
The cola does make the cost of shorting the pensions greater as it takes more to catch up. Only in that sense perhaps one can blame the compounding cola for creating a greater punishment on the state’s budget when the state chose other priorities than the required pension payment.
Comment by muon Friday, Apr 27, 18 @ 12:36 pm
Roman -
The Impairment Clause was, and is, necessary as long as Home Rule exists.
Comment by Smitty Irving Friday, Apr 27, 18 @ 12:43 pm
===For example the CPI over since 1982 has averaged in excess of 3% as has the market performance. That would suggest that the pension funds should have kept pace if the state had made complete and accurate payments to the pension funds.===
When well-connected cronies get 2.5% plus 20% of profit to “manage” the pension funds, it should come as no surprise that it is woefully short of funds.
Comment by Ducky LaMoore Friday, Apr 27, 18 @ 12:44 pm
Now that the blame has been assigned, would it be helpful to discuss how to address the problem?
Comment by JackD Friday, Apr 27, 18 @ 12:51 pm
@Smitty Irving
Not saying the Impairment Clause isn’t necessary, just saying that if the framers required actuarially mandated employer contributions, the Impairment Clause would be almost superfluous. The framers thought the Impairment Clause would discourage underfunding — it most definitely has not.
Comment by Roman Friday, Apr 27, 18 @ 1:08 pm
No one gets unchangeable retirement benefits. Constitution should be be silent on this.
Comment by Ron Friday, Apr 27, 18 @ 1:13 pm
Ron-
Those unchangeable benefits have already been granted and vetted through the courts…thank you framers!!!
Move on to solutions. Sheesh
Comment by Maywoodian Friday, Apr 27, 18 @ 1:20 pm
A couple things-
Ducky, show me a contract between an IL pension fund and a money manager with 2.5/20% terms, and I’ll eat it. That’s plain wrong. 2/20 is the absolute top of the market and is found in well under half of the pensions’ contracts. Their most recent fee payments average around half a percent.
Secondly, the cost of the compounded COLA/AAI is a problem, but it pales in comparison to the cost of underfunding the systems. The latter comprises around a third of the growth in the unfunded liability over the past decade, while the former is well under ten percent. Read a COGFA report and a couple CAFRs before bloviating about complex pension issues.
Comment by Arthur Andersen Friday, Apr 27, 18 @ 1:27 pm
==the CPI over since 1982 has averaged in excess of 3% as has the market performance.==
The original deal for COLA was 0.5% of salary for 1.5% simple interest COLA. The problem is not doubling the rate and compounding the interest, rather not charging a higher price as we increased the benefit. The employee contribution should probably be 2% for compounded 3%, not 0.5%.
Comment by City Zen Friday, Apr 27, 18 @ 1:35 pm
Maywoodian, the post is asking what ruined the state. The answer is, the state’s illogical, math defying and unfair Constitution is a major culprit. Retirement benefits are changes all the time in the private sector including Medicare and SSA
Comment by Ron Friday, Apr 27, 18 @ 1:37 pm
JackD, there are no solutions. Zero.
JB can’t fix it either. Sometimes you just cry uncle and move on.
All those pensioners can watch the state go up in flames, and couldn’t care less as long as they get paid.
Pretty picture.
Comment by SSL Friday, Apr 27, 18 @ 1:39 pm
“Whose fault is it” is being covered very well here, all of the comments posted thus far contain many truths. But the other half of the question is, “Who’s going to foot the bill to fix it?” (or not fix it, if the “death spiral” is a real thing). What’s my Fair Share going to be, JB?
Comment by Stuntman Bob's Brother Friday, Apr 27, 18 @ 1:39 pm
My apologies Arthur. It is 1.5% plus 20%. My bad. And I’m not saying that the ridiculous management fee is the entire problem. But it makes the problems with the pension system much worse when taking into account the power of compound interest.
Comment by Ducky LaMoore Friday, Apr 27, 18 @ 1:42 pm
In the Heaton decision, the Supreme Court referred to a report on pension underfunding from 1916. That report could have been written in 2016 except the numbers need more zeroes on the end.
This has been building for over 100 years, at least on the pension side.
Then, it was all compounded when the 1970 Constitution included a strong pension guarantee, and we STILL did nothing to fix the funding. More promises for the future and no intent to pay for them.
There is something deeply wrong with the political culture in this state and it goes back a VERY long time.
Comment by Harry Friday, Apr 27, 18 @ 1:57 pm
Edgar also has some skin in the the pension game. In his “meeting the challenge” final state of the state Edgar says he “approved the most significant increase in pension benefits for state workers in a quarter century…boosting retirement pay by 50% …Illinois moved from last among states in pension benefits to near the national average.”
Comment by Captain Ed Smith Friday, Apr 27, 18 @ 2:12 pm
Rich, thanks for sharing the article. It looks good. I also think your analysis of the causes of the state’s problems hits the mark. I worked in the Edgar Administration and wish to shed some light on the 1994 Pension Reform bill and respond to some of the misinformed comments on this site.
Prior to the 1994 bill, the legislature was not required to make any contributions to the pension systems and, in fact, legislators appropriated zero funds some years. The 1994 bill mandated pension payments for the first time in the history. It further provided that, if the legislature failed to appropriate pension funds, the Comptroller was authorized to make the pension payments. It is true the pension plan had a ramp and today it is easy to criticize that approach; but at the time, legislators were not willing to immediately solve all of the problems caused by 50 years of underfunding. The 1994 bill was not a perfect solution, but it was an important first step.
When people criticize the 1994 bill, I pose one simple questions. “Would the legislature have contributed more money or less if the 1994 bill had not become law?” The answer is clear. The legislature would have contributed far less money (billions of dollars) to the pension systems had they not been under the obligations of the 1994 law.
It is also worth reminding people that when Jim Edgar left office, the pension systems were in remarkably better shape than at any point since the beginning of state pensions. While the pension systems had been terribly underfunded from their beginning 70 - 80 years ago, when Edgar left office pensions were funded at 73%, the highest rate of funding in the history of the pension funds. Total Illinois pension liability was $15 billion; today it is $130 billion.
With a pension payment plan in place and a good economy, those historic funding levels continued to improve during George Ryan’s first two years in office. Then 9/11 happened, and seven years later the banking crisis devastated the stock market and pension funding. The mistake was that the pension formula was not revisited and adjusted.
Regarding Governor Edgar’s tenure, the facts speak loudly. The pension systems were funded at their highest historic levels; the state had a surplus of $1.5 billion – the largest ever; state bills were being paid on-time; the state had enacted the largest school funding initiative in history; our universities were well funded and tuition was reasonable; and Illinois had an exemplary credit rating. The public understood and when Edgar left office, his job approval numbers were extraordinarily high. While some folks want to point fingers at past leaders (some fair and some not) for today’s problems, I suggest the focus needs to be on fixing our problems and making Illinois work again.
Comment by Al Grosboll Friday, Apr 27, 18 @ 2:19 pm
Remember when certain people laughed at the idea of Pensions causing big problems down the road? Just look at the US Birth Rate chart for 1945-1990. Explains the basic problem facing all US states. But, Illinois is uniquely tone deaf politically on this.
Comment by Uncle Woodford Friday, Apr 27, 18 @ 2:21 pm
“All those tax payers can watch the state go up in flames, and couldn’t care less as long as they get their taxes cut.” There, fixed it for you.
Comment by Skeptic Friday, Apr 27, 18 @ 2:28 pm
Al’s comments on Edgar are fair but fail to state the people who worked on the ramp legislation assumed the State’s overall revenue would be far higher as the larger payments were required. The early years of the ramp the pension payments absorbed less then -5 percent of tax receipts. Today it’s closer to 35. Illinois stopped growing, people left in the tens of thousands as the State became hostile to employers thru dumb union oriented mandates
Comment by Sue Friday, Apr 27, 18 @ 2:36 pm
I meant to say 15 percent not 5
Comment by Sue Friday, Apr 27, 18 @ 2:37 pm
==more promises for the future with no intent to pay for them==
And the reason anyone would choose to go into public service, particularly Education is?
Comment by Anonymous Friday, Apr 27, 18 @ 2:38 pm
Skeptic - spoken like a true pensioner. If Illinois had faced the music instead of kicking the can, Tier 2 would have been implemented far earlier. Would you have made the cut?
Comment by SSL Friday, Apr 27, 18 @ 2:47 pm
Al makes some good points, but he omits one significant part of Edgar’s pension record. He wouldn’t approve the benefit formula changes for State workers and teachers without specified, and reasonable term, plans for paying off the unfunded liability created by the formula changes. In the case of teachers, there was a 10 year payoff period with the State paying a percentage of payroll each year sufficient to pay off the State’s share of the formula change over that period. Good work, huh? It was, until Blagojevich/Filan wiped it out as part of the pension bond sale legislation. The $500 million State share ballooned to $5 billion (AA estimate) in one fell swoop.
PS: Dan did yeoman work on this report and deserves our thanks. Kudos.
Comment by Arthur Andersen Friday, Apr 27, 18 @ 3:09 pm
SSL: I would have gotten what I would have gotten, whether it was Tier 1 or Tier 2. I don’t understand how your question makes any difference. Let me ask you this, are your property taxes too high? Do you want them lower even if your local school system suffers? If you answered “yes” to both questions (and you notice the word “pensions” is not part of the topic) then you’re the problem I’m talking about.
Comment by Skeptic Friday, Apr 27, 18 @ 3:18 pm
Sue, in your zeal to point fingers at everyone from those who worked on the 1994 pension bill (which would include AA) to “lay Boards of trustees” you always fail to mention major events which changed the course of pension funding trajectory. Like when Rod and Filan not only took a pension holiday in FY 06 and 07 (which I think was their intention from the day those bonds were sold-Filan said as much in an unguarded moment to a reporter) but reset the ramp to extend its expiration by 8 more years. That cost billions of dollars-how much have “lay boards of trustees” cost us, given that all the funds have outperformed the actuarial assumption over the long haul?
I remain convinced you were turned down for a job at a pension fund and that drives your bitter trolling.
Comment by Arthur Andersen Friday, Apr 27, 18 @ 3:22 pm
Tax retirement income at half the flat tax rate for retirement income over $50,000.
Sales tax on food, money going to public education.
Then elect a smart governor who believes in protecting all citizens regardless of their ability to pay.
Comment by VanillaMan Friday, Apr 27, 18 @ 3:40 pm
==Tier 2 would have been implemented far earlier.==
We should be on Tier 4 by now. A second tier should’ve coincided with the pension clause with adjustments in 20 year cycles. If we did that, Tier 4 would have better benefits than our current Tier 2. Small changes over time versus one large over-correction. We’d all have been better off. Well, everyone except Tier One’s.
Comment by City Zen Friday, Apr 27, 18 @ 3:41 pm
We shouldn’t have sales tax on food at all. Talk about reggressive.
Comment by Ron Friday, Apr 27, 18 @ 4:04 pm
Well Skeptic, I don’t have an issue with my property taxes so I guess I’m okay. And I don’t take issue with funding education, though that brick paver parking lot the high school put in last year for students did make me wonder a little bit. Does that make me a bad person?
I think what gripes many is the high tax burden in a state that ranks dead last.
I appreciate Vanilla’s recommendation. Retirement incone is going to need to be part of the solution, but not to a point where it drives more people out.
Comment by SSL Friday, Apr 27, 18 @ 4:05 pm
Hearing politicians moan about the “broken system” is extremely tedious. Please, give me just one who takes responsibility. For *anything*.
Comment by Ed Higher Friday, Apr 27, 18 @ 4:13 pm
If we’re pointing fingers, let’s not leave out everyone who voted to put the pension language into the Constitution in the first place, and everyone who decided to ban the possibility of a progressive income tax here.
It’s never a smart idea to carve into Constitutional stone policies and decisions that should be part of the normal budget process.
Comment by ZC Friday, Apr 27, 18 @ 4:20 pm
=brick paver parking lot==
Funny. When it’s your children in school, there is outrage at not having the latest computers and technology, textbooks that are more than a few years old and a school that looks out of date and not “kept up” to modern decor standards. Fast forward to after they’ve been out of college and there is now outrage at anything in keeping with modern civilized standards. That’s a fact. Everyone’s in favor of a much needed referendum when their kids are students and violently against that referendum after they’ve graduated. Fact. I guess many people only have their own personal benefits and interests in mind. I guess you’d say, selfish.
Comment by Anonymous Friday, Apr 27, 18 @ 4:25 pm