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* Mark Maxwell…
In the race for governor, two very wealthy men are proposing two very different ideas for how to solve the single most elusive, expensive financial problem plaguing the state.
J.B. Pritzker, the Democratic challenger, is focused on how to pay the burden down; incumbent Republican Governor Bruce Rauner wants to change the way it piles up.
“What I have agreed with the Senate Democrats, Senate President Cullerton,” is to do what is called a consideration model,” Rauner said on Tuesday. “Basically, go to our hard working state employees and say ‘Let’s tie your salary increases to the type of pension that you choose to be in, either Tier One or Tier Two or Tier Three, and customize compensation to fit depending on what the employee would prefer for a pension and a pay structure.’ […]
While he has not yet said how high he would go in raising the annual pension payments, Pritzker says he would prefer a dramatic increase all at once instead of the continually upward sliding scale that puts increasing year-over-year pressure on the legislature to make spending cuts elsewhere.
“There is really only one good way to do it and that is to step up payments, Pritzker told Crain’s. “Think about the principal payments on your home. Step up principal payments earlier than they are due and try to flatten out the amortization schedule on an annual basis. Flatten it. The result of that will be that we can manage the budget of the state. Because that is really what is at stake here.”
Pritzker’s plan sounds a lot to me like Ralph Martire’s idea.
By the way, Pritzker said he’d pay for it with a progressive income tax. He says that about a lot of things. But it’s all magic fairy dust until we see the actual plan, and maybe even then it’ll still be magic dust.
* In related news, here’s a small excerpt from Democratic congressional candidate Brendan Kelly’s “Save Southern Illinois” plan…
Put failing pension plans back on solid ground to ensure they can meet their commitments to retirees today and workers for decades to come, in part by setting up a Pension Rehabilitation Administration (PRA)
The Southern Illinoisan followed up…
“If we as a country bailed out Wall Street, bailed out Detroit, we can take care of the American worker who did what they were supposed to do,” Kelly said, adding that, “They earned it. They deserve it.”
But I didn’t see anything in the article about whether this idea is for both public and private pension systems.
So, I checked with the campaign and was told that this is only about private pension plans. The Illinois pension system is Illinois’ responsibility, the spokesperson said.
posted by Rich Miller
Thursday, Jul 19, 18 @ 2:23 pm
Sorry, comments are closed at this time.
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Pay the pensions first, in full, each budget year.
Comment by DuPage Thursday, Jul 19, 18 @ 2:33 pm
Rauner’s idea is not legal by any stretch of the imagination and I doubt if Democrats had any real input. Cullerton’s idea was totally different from what Rauner is proposing here.
Comment by A Jack Thursday, Jul 19, 18 @ 2:37 pm
On a positive note, as long as Rauner keeps spouting such nonsense, union membership will continue to grow.
Comment by A Jack Thursday, Jul 19, 18 @ 2:42 pm
Rauner’s idea of consideration is a forced choice between raises and pensions. He wants you to agree to a lower pension in exchange for counting the raise in the pension formula. Right now, you have no guarantee of a raise, but if you do get a raise, it is included in your pension formula; it is not conditional on anything else.
Rauner’s forcing you to choose a different pension system in order to count future raises towards the pension (the Cullerton proposal as modified by Rauner) will be found unconstitutional faster than you can say SB-1.
And if Rauner refuses to give raises to just Tier 1 employees who won’t pick a different pension system, he opens himself and the State up to both an unfair labor practice filing and a class action lawsuit. He’ll lose that also, costing the State many more millions in unneeded legal expenses.
If Rauner refuses to give raises to everyone in State employment, then what is left of the State workforce will totally self-destruct.
Comment by RNUG Thursday, Jul 19, 18 @ 2:42 pm
Here’s a few of mine. Don’t allow overtime to count towards pension. Don’t allow people to count unused time towards service time. Make EVERYONEs pension based on highest 48 over 10 years. Tier 3 is there. Put the teachers and university employees on that…shifting the costs back to the school.
Comment by Anonymous Thursday, Jul 19, 18 @ 2:43 pm
A Jack, while I agree it probably won’t hold up I don’t think you can say it’s “not legal by any stretch of the imagination”. The lawyers want to split hairs and argue about what compensation gets counted in the pension formula. I agree it’s a distinction without a difference but I also think it holds enough water that the SC probably needs to say so.
That aside, this is one of the least offensive descriptions of the consideration model I’ve heard. Whatever writer/PR person came up with that description earned their pay for the month. The Stat’es not making them choose between a raise and their pension, it’s just tying them together so that your total compensation stays the “same”. Completely misleading, but not technically a lie.
Comment by Perrid Thursday, Jul 19, 18 @ 2:43 pm
RNUG, THANK YOU AGAIN! If only Rauner and the Legislators would read your posts, we would waste time and money on an unconstitutional proposal. Consideration requires you get to keep what you have and then you can make a choice of a proposal, such as: pay an additional 5% pension contribution and the state will lower the retirement age by 3 years? That is a proper consideration.
Comment by Frank Ambrose Thursday, Jul 19, 18 @ 2:47 pm
==we can take care of the American worker who did what they were supposed to do,” Kelly said, adding that, “They earned it. They deserve it.”==
A politician proposing our state government pay what it owes instead of welshing on the debt? Well he won’t get any votes at all from Illinois republicans this November. That kind of idea is krypyonite as far as the Rauner party is concerned.
Comment by Lester Holt’s Mustache Thursday, Jul 19, 18 @ 2:47 pm
Right on, RNUG.
That’s gonna be one heckuva tax to pay for all of JBs big ideas. At least he’s offering a workable pension solution, unlike Rauner’s unconstitutional bag o’ baloney.
Speaking of baloney, I guess Kelly has never heard of the PBGC.
Comment by Arthur Andersen Thursday, Jul 19, 18 @ 2:49 pm
Here’s a few of mine. Don’t waste more time and resources playing games. Pay what you owe. Restructure if you need to, but make it binding. End costly games and sweetheart deals like Rauner and other’s have given their pals.
Comment by Deadbeat Conservative Thursday, Jul 19, 18 @ 2:50 pm
>“There is really only one good way to do it and that is to step up payments,
It is legitimately exciting to hear a candidate advocate for financial responsibility and sacrifice now to leave things better for those who come after us. However, he has yet to convince me that a progressive income tax will increase state revenue to such a magical extent.
Comment by Earnest Thursday, Jul 19, 18 @ 2:55 pm
Anonymous 2:43 - fine ideas, but could only be applied to new employees per every ruling on the issue so far since the rules in place at time of hire, plus any enhancements, can’t be rescinded on a whim. Pension for overtime work could be solved in the short term only by not offering or forcing overtime on existing employees.
Comment by Six Degrees of Separation Thursday, Jul 19, 18 @ 2:55 pm
==Pritzker’s plan sounds a lot to me like Ralph Martire’s idea.==
Pritzker’s plan never mentioned extending your home mortgage 14 years, unlike Martire’s plan that “would replace the current 30–year plan to pay down the state’s unfunded pension liability with a 44-year plan.” I’m fine with stepping up payments, but money is finite. JB has already spent his same progressive tax money multiple times.
Any extension of pension debt is merely a form of inter-generational theft, forcing those furthest away from the accrued service to pay the bills. No thanks.
Comment by City Zen Thursday, Jul 19, 18 @ 3:05 pm
The actuarial issues with the pensions were mostly solved with Tier 2. Now they need to work on a restructuring of the liability payment.
Comment by LTSW Thursday, Jul 19, 18 @ 3:08 pm
== I guess Kelly has never heard of the PBGC. ==
Problem with the PBGC, as I’m sure you know, is it doesn’t make you whole. If you are lucky, you get about half of what was owed to you.
Comment by RNUG Thursday, Jul 19, 18 @ 3:14 pm
Yup. Martire proposed extending the amortization of the pension debt.
That talk was in 2010? 2011? I’d sure like to know how much MORE debt we’ve added since doing nothing in the years that have passed. Things don’t get better by doing nothing.
Comment by Anonymous Thursday, Jul 19, 18 @ 3:20 pm
I don’t know if JB’s plan will come to fruition but he offers a plan that has the potential to reduce our debt obligations which it critical to our fiscal health.
Rauner’s plan is just continuing to kick the can down the road, continuing to run up our debt until which time that it’s thrown out by the court.
Comment by The Dude Abides Thursday, Jul 19, 18 @ 3:21 pm
If you take Martire’s plan and adjust the total annual pension payments for inflation, my math shows us paying what we are paying today (~$8.2B) through 2049 which seems manageable even without a tax increase.
Comment by thechampaignlife Thursday, Jul 19, 18 @ 3:27 pm
Gotta start by stopping the bleeding, that means changing the pension formula. If they don’t do that then we’ll never get out of this hole. This means the state has to adopt the view that they are accountable to the citizens of Illinois not the unions. No more sweetheart pension deals. Then, and only then, ensure that all pension commitments are paid every year. Really not that difficult if your priorities are right.
Comment by NeverPoliticallyCorrect Thursday, Jul 19, 18 @ 3:28 pm
Anon @3:20.
Need to correct you.
The state has been paying billions toward the pension systems per the funding plan over those years. More dollars have gone into the pension systems in the last 7-8 years than probably in the previous 40 years. The state hasn’t been doing nothing.
The reason you would extend the amortization plan would be to get lower payments now to make managing the budget easier. But the effect would be a dramatic increase in the overall debt because you would be accruing interest over those extended years.
It’s not that different from a home or car debt. If you can afford the high payments, you can pay it off faster and reduce the total debt you pay. But if you want lower payments, the trade off is you are financing that debt over a longer period and paying more in interest.
Comment by Michelle Flaherty Thursday, Jul 19, 18 @ 3:39 pm
NPC at 3:28. They have already changed the pension formula, (benefit), with tier 2 which has been in effect since 2011. Union was opposed to tier 2 by the way and it passed pretty easily.
Comment by Just A Dude Thursday, Jul 19, 18 @ 3:45 pm
RNUG, true on the PBGC, but it’s in place, and funded, unlike pie in the sky ideas with no framework or budget tossed out pre-election.
Comment by Arthur Andersen Thursday, Jul 19, 18 @ 3:48 pm
Why not start small with targeted incentives for current members to forego their COLAs after retirement? I’m a tier I employee who still has student loans, come up with a fair offer to pay off the loans and I might be sold. I might be dumb to do so, but I might be dead at 50 too. We’ve also got a lot of tier I folks with kids in college or heading there, maybe waive tuition at state schools, might be some takers there too.
For the past who knows how many years the answer keeps coming back to the realization that the pensions are going to have to be paid, so what is there to lose in coming up with different types of consideration to try to get at least some people out of tier 1 status.
Comment by Reserved Thursday, Jul 19, 18 @ 3:49 pm
The folks in Springfield need to stop wasting their time by attempting to cut the states very large unfunded pension liability. It is time start doing what should have been done years ago. There are three options: 1) cut spending for the current year while keeping taxes unchanged and sending the dollars cut to fund the pensions. 2) increase taxes while keeping current year spending unchanged with the extra income going to the pension fund or 3) do some combination of both option #1 and #2 at the same time. What is owed for past promises “shall not be diminished or impaired”, it is that simple. It is simply time for the state to pay up. As to the state workers voluntarily agreeing to a smaller pension, the chance is almost zero for all but a very few people due a pension.
Comment by Small town taxpayer Thursday, Jul 19, 18 @ 3:50 pm
The PBGC is about as well funded as is TRS.
Comment by Sue Thursday, Jul 19, 18 @ 3:54 pm
STT hit it squarely on the head. Illinois has been behind the eight ball for a long, long time. Yet, year after year the state finds new ways to spend. Given what is more a crisis than many care to acknowledge, Illinois should cap spending as much as possible (considering legal judgments or similar) and put an absolute freeze on new spending initiatives. And, that’s only a start.
Comment by Keyser Soze Thursday, Jul 19, 18 @ 3:58 pm
There are only two roads I can see to addressing the pension obligations of Ilinois. Number one, enact a significant income tax increase, including a progressive tax that starts at 6% at the lowest level and increases to 12% at the high end. All income, including retirement income would need to be included as taxable.
Option two, let the incompetent state leaders kick the can down the road while waiting for the federal government to authorize states to declare bankruptcy. At some point those in the federal government may decide they don’t want to be on the hook for the mismanagement of a fiscal nightmare such as Illinois.
I don’t like either option but if forced to choose I would have to go with door number two.
Comment by SSL Thursday, Jul 19, 18 @ 4:02 pm
“This means the state has to adopt the view that they are accountable to the citizens of Illinois not the unions.” Pensions are not a Union benefit.
Comment by Skeptic Thursday, Jul 19, 18 @ 4:02 pm
== Gotta start by stopping the bleeding, that means changing the pension formula
Please keep up. This was done in 2011 when Tier 2 was created.
Comment by RNUG Thursday, Jul 19, 18 @ 4:03 pm
CZ is right that Pritzker has spent his new tax money a few times already, but reamortizing is a sound contribution to the solution, unless you want to see tax increases that are large enough to choke a horse. There is not enough fat in the budget to cut our way out of the current mess alone. Budget cuts, tax increases, reamortizing, bonding, and true consideration models are all probably going to be needed, but Rauner’s other ideas are simply not legal and are a waste of time. I’ll still bet that consideration saves very little, because only people not expecting to live long or under extreme duress will choose that route.
Comment by Jibba Thursday, Jul 19, 18 @ 4:10 pm
@Perrid. Salaries are a collective bargaining right, while pensions are an individual right guaranteed by the Illinois Constitution. The union can not legally bargain any kind of pension / salary swap. While Rauner cannot bargain with an individual union member regarding salary. So I don’t see how any sort of pay raise for pension benefit swap could be legal.
Comment by A Jack Thursday, Jul 19, 18 @ 4:13 pm
JB’s plan is sound, but would require a big influx of cash. It is the interest on the pension debt that is making it so unmanageable.
Comment by A Jack Thursday, Jul 19, 18 @ 4:19 pm
==SSL== I’m worried about option #2 coming to pass. With the Supreme Court going hard right, I think those activist Judges will find a way to diminish pension benefits and ignore the equal protection aspect…
Comment by Anotheretiree Thursday, Jul 19, 18 @ 4:21 pm
Folks- Edgar’s ramp also amortized the pension obligations of you mean extending the date when you would hit 90 percent funding. What no one knew back in 1994 was that Illinois revenue growth would be so God awful that in the back years payments would absorb 25 percent of the budget which is well on the way to 30 percent. All JB is doing is “remortgaging” the liability pushing the payments out further and costing more taxes. Why not figure out some cost constraints at the same time. God forbid Pritzker do something for the taxpayers as opposed to the unions
Comment by Sue Thursday, Jul 19, 18 @ 4:26 pm
== as opposed to the unions ==
The State has both union AND non-union employees. The pension is an individual benefit of employment with the State; it has nothing to do with union membership or the union contract.
Comment by RNUG Thursday, Jul 19, 18 @ 4:45 pm
==Sue== Wasn’t the underfunding the ramp addressedmade far worse by Blagos pension holiday bonds ? And one more time… what do the unions have to do with my pension ?
Comment by Anotheretiree Thursday, Jul 19, 18 @ 4:47 pm
Indeed, the Constitutional clause was there well before public employees were allowed to unionize.
Comment by A Jack Thursday, Jul 19, 18 @ 4:48 pm
RNUG- the non-TRS hit is peanuts. And how many non-union teachers are there?
Comment by Sue Thursday, Jul 19, 18 @ 4:51 pm
== the non-TRS hit is peanuts ==
Admittedly, GARS AND JRS are rounding errors. But SERS is about 24% of the total estimated pension debt.
Comment by RNUG Thursday, Jul 19, 18 @ 4:56 pm
-the non-TRS hit is peanuts-
Do you mean the annual cost of SERS and SURS? Half ain’t peanuts where I come from.
Comment by Arthur Andersen Thursday, Jul 19, 18 @ 4:57 pm
Michelle @ 3:39
Understood. But what has happened in the past 8 years of not making payments (or fractions of what is owed) to that debt? That was my point. It didn’t get to be less, did it? I guess for some people the more we ignore it and watch it grow, the more they can hate those in the pensions systems, who have nothing at all to do with the debt problem.
As for sweetheart deals? Drinking that KoolAid again. You truly believe that most people are living large? You read about a handful in the papers and believe that is everyone? When they passed out the million dollar pensions, they sure missed 99% of collectors.
Comment by Anonymous Thursday, Jul 19, 18 @ 4:58 pm
Rich,
I had a long post with a number of pension suggestions that hasn’t shown up. Maybe it got trapped by the automatic filters?
Comment by RNUG Thursday, Jul 19, 18 @ 4:59 pm
Yes, let’s just look at TRS for a second since they are the most underfunded. How does Rauner’s plan help here? He does not negotiate teacher’s contracts or set teacher’s salaries. I don’t think he can edict that no teachers can have a pay raise unless they give up pension rights.
Comment by A Jack Thursday, Jul 19, 18 @ 5:15 pm
== == the non-TRS hit is peanuts ==
Admittedly, GARS AND JRS are rounding errors. But SERS is about 24% of the total estimated pension debt. ==
I assumed Sue had lumped SURS in with TRS. If you break SURS out by itself, it is about 24% also, just like SERS.
Comment by RNUG Thursday, Jul 19, 18 @ 5:18 pm
And certainly Rauner’s plan won’t work for GARS or JRS. Who on Rauner’s BTIA is going to tell the Speaker that he has to choose Tier 2 or forego a pay raise?
Each individual retirement system will likely need their own solution. Or of course if JB does manage to get the cash to pay off a chunk of the debt, that will work too.
Comment by A Jack Thursday, Jul 19, 18 @ 5:25 pm
By the way, Pritzker said he’d pay for it with a progressive income tax. He says that about a lot of things. But it’s all magic fairy dust until we see the actual plan, and maybe even then it’ll still be magic dust.
Yep, that pretty much sums it up.
Unfortunately Rauner just offers a different varirty of magic dust.
Comment by nonBeliever Thursday, Jul 19, 18 @ 5:28 pm
A Jack, none of the various “pension reform” proposals have included JRS or GARS, in part due to their small size and in part due to issues like you mention. Don’t want to mess with the Supremes’ pensions. Their financial position is terrible, though, especially GARS, which is going to need a cash infusion before too long to stay solvent. Add that to the list, JB.
Comment by Arthur Andersen Thursday, Jul 19, 18 @ 6:12 pm
A jack- it will never happen but a solution for TRS would be pretty simple- at the State level- ban employer pickups and require all teachers to pay their own employee contribution while requiring the Districts to continue paying the amounts they paid thru the pickup. You end up with billions of new dollars without asking taxpayers for a dime. Of course the State would need to keep paying what is currently required under the Ramp
Comment by Sue Thursday, Jul 19, 18 @ 7:48 pm
Sue, TRS’ total member contributions are about $900 million. If two-thirds of that is picked up (generous) that’s $600 million shifted. Federal law won’t let you end pickups and charge a full contribution, because it’s a contribution increase without a new benefit.
Nice try though.
Comment by Arthur Andersen Thursday, Jul 19, 18 @ 8:23 pm
==ban employer pickups==
In CPS’s latest contract, they stopped the 7% pick-up for new hires but gave them 7% increases to make up for it. In other words, total expenditures didn’t change. I’d guess the same would happen under your plan. Pick-ups are contractual. Your district penalty plan would never fly.
I agree that pension pick-ups are a bad idea. They are often given in lieu of something (raises) once, but then stick around every year after that on top of raises. The math shows they are money losers in the long run.
Comment by City Zen Thursday, Jul 19, 18 @ 9:12 pm
” …ban employer pick ups and require all teachers to pay their own employee contributions ……”
You are proposing a 10% every single teacher’s salary. You imply that this is all the teachers’ fault.
It’s been said here before…. “simple solutions” are usually neither.
Comment by ajjacksson Thursday, Jul 19, 18 @ 9:34 pm
“….a 10% cut in every teacher’s salary….”
Comment by ajjacksson Thursday, Jul 19, 18 @ 10:38 pm
==I agree that pension pick-ups are a bad idea. They are often given in lieu of something (raises) once, but then stick around every year after that on top of raises. The math shows they are money losers in the long run.==
You make it sound like they eventually get the skipped raise too. They don’t. That raise Is skipped and it’s never received, never figured into calculations.
Comment by Thoughts Matter Thursday, Jul 19, 18 @ 10:48 pm
I would like to see RNUG’s long post please. Thanks
Comment by Anonymous Friday, Jul 20, 18 @ 4:44 am
Why is it more important to continue to give money to non-citizens in Illinois than to fund pensions of retired state employees? Each illegal in Illinois costs the state $10,000/year or $3 Billion per year total.
Comment by Anonymous Friday, Jul 20, 18 @ 7:10 am
== That raise Is skipped and it’s never received, never figured into calculations.==
But in it’s place is a pension pick-up that never would have existed otherwise. Any amount you think you’re saving in a lower pension years down the road is eaten up by the cost of the pension pick-up. If you plot the numbers on a spreadsheet, you’ll see what I mean.
The only way a pension pick-up saves taxpayers money is if salaries remain frozen as long as the pick-up exists (assuming that was the original deal). I’m not aware of any district that offered a temporary pick-up.
Comment by City Zen Friday, Jul 20, 18 @ 7:41 am
I feel like its pretty simple. Figure out what you will have coming in, figure what you HAVE to pay. Then, dont add any new projects that will put you over your income. You cant go spend money on something by not paying something else.
Comment by Dman Friday, Jul 20, 18 @ 8:56 am