Is Illinois' Fiscal Crisis Due to an Outdated Tax System? by Ralph Martire, Center for Tax and Budget Accountability

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Please also read A View of the Illinois Public Pension Dilemma, Pt. III: http://teacherpoetmusicianglenbrown.blogspot.com/2012/04/view-of-illinois-public-pension-dilemma_16.html

“Waiting for Super [Legislators]” to Address the Budget Problems of Illinois: http://teacherpoetmusicianglenbrown.blogspot.com/2011/09/part-3-of-waiting-for-super-legislators.html

Not Quite a Sonnet on the Divisibility of Kinetics and Infinite Bisection (or a Theory on Yard Work)

I cannot help musing like the ancient
Philosophers, such indolent meta-
Physicians with nothing to do each day:
Hulking Heraclitus with both feet sub-
Merged in the same river, soaking bunions
In a flux to prove his Logos; drunken
Zeno, denying motion by proving
Non-divisibility in goblets
Of wine.  All this when there’s work to be done:
The grass needs mowing, the hydrangeas need
Trimming.  No doubt about this collision
Of leaf and blade.  I think I’ll leave the lawn
  Half-cut, the boxwoods half-pruned, and ponder
  Other dialectics in my backyard.

Pension Cost Shift: a superintendent’s (retired) perspective by Roger Sanders

Governor Quinn’s position is that “the taxpayers of Illinois should not be just there to subsidize the retirement costs of every single school district.” House Speaker Madigan says, “You have a situation where local school districts get a free lunch. They make spending decisions that they don’t have to pay for.” According to Quinn, “the new data showed that 478 out of 864 school districts across the state carried cash reserves as of June 30, 2011 that would fund at least 180 days of operating expenses - the equivalent of a full school year.”

Perhaps Governor Quinn should be looking at these school districts to learn how to effectively manage a budget instead of vilifying their superior management capabilities. One-term Quinn just has no idea of how to lead or how to solve complex problems, and he clearly has no idea of the important role of cash reserves. He’s more interested in pushing his problems off on to others rather than finding real solutions to problems created by 60 years of mismanagement by the Illinois General Assembly and state governors.

As a superintendent of a school district that maintained cash reserves that could carry the district through dramatic swings in funding, I think it would be helpful to consider the many variables outside the control of district management that can negatively impact operating funds. Local tax assessment, collection, and distribution practices can have a dramatic impact on district finances.

A number of years ago, the county in which my school district received its primary property taxes experienced a series of significant changes including delayed property assessment, delayed tax bills, and delayed distribution of taxes to the district. This resulted in over one-third of the district’s local revenues reaching the district 60 days past their normal date of receipt. This sequence of events occurred over three consecutive tax years. The district did ultimately receive all the tax revenues due eventually.

Nonetheless, this series of events created substantial cash-flow issues and resulted in great swings in the year-end balance sheet. My district had sufficient cash reserves to deal with the change in cash flow, but several districts needed to borrow money to pay bills, thus costing taxpayers more in interest that was paid on borrowed funds. In this case, the cash reserve saved taxpayers money.

State funds in recent years have proven to be extremely volatile with some grant funds coming as late as six months, with categorical funds dramatically reduced in districts not receiving funds as promised, and with general state aid delays or skipped payments. For districts that rely heavily upon state funds, this type of income volatility can result in districts borrowing money to meet payrolls and to pay bills.

Further, volatility in energy costs, particularly diesel fuel for buses, has resulted in dramatic increases in transportation costs at the same time the state is cutting transportation funds to schools. Diesel fuel costs have increased 54% since 2009. Moreover, there are those unanticipated emergencies or planned initiatives to consider.

The State of Illinois could take a lesson from districts that have established cash reserves. They know how to prioritize expenditures and focus their resources on planned initiatives; they know how to manage resources and set aside funds to carry them through difficult financial times brought on by external factors; they know how to restrain spending with an eye toward responsible management of resources, and they know how to work with their communities to raise funds and address local priorities.

Not once did I ever ask the state for extra help. In fact, over the years, I saw my district’s general state aid drop due to changes in the school aid formula, the shrinking of grant funds, payments of promised funds delayed, and the outlandish demands on professional practice that were intensified through No Child Left Behind and Race to the Top. We took care of business, set priorities, and did what was needed to be done to ensure an excellent educational experience for students, a high degree of professional practice, and prudent fiscal management.

Frankly, the Illinois General Assembly and the Governor could learn a lot from well-managed districts. If the state had exercised prudent fiscal management over the years, we would not find ourselves with the economic difficulties that have become characteristic of Illinois. Because of the state’s inability to set proper priorities, manage resources, and solve the culture of corruption and collusion, Illinois state government is seeking to push more costs onto local taxpayers. This is with no guarantee that the state will meet its obligations to existing pension liabilities that have amassed due to the legislatures’ and governors’ failures over decades to make the necessary pension payments… My suggestion is that the state seeks the counsel of the school administrators that have been successful at resource management and put them in charge of the state resources for a few years…

from http://rogersanders.tumblr.com/

It’s about Keeping a Promise by Roger Sanders

The “automatic annual increase in annuity” prescribed by Illinois statute (see below) for retirees in the Teacher Retirement System is intended to ensure that the purchasing power of retirement benefits is not eroded by inflation. The federal government uses the Consumer Price Index for Urban Wage Earners (CPI-W) as the index for calculating Social Security Cost-of-Living Adjustments (COLA).

Illinois teachers do not earn Social Security credits while teaching and, thus, are not eligible for Social Security benefits from their teaching. Starting in 1969, the Illinois General Assembly established the TRS COLA at 1.5%. It increased to 2% in 1972 and was established at 3% in 1978. The TRS COLA has remained at 3% and is calculated upon the prior year’s retirement benefit, i.e. compounding. This is the same compounding process used by Social Security.

SB1673 proposed major changes for both active and retired TRS members. The legislature adjourned without acting upon SB1673; however, it continues to be a real threat to TRS member benefits.

• SB1673 applies to both active and retired members

• The bill requires active and retired members to choose between two options (1) accept a change in annual COLA that is capped at 3% or one-half of the CPI, whichever is less in order to retain “access” to state-supported health insurance through the Teacher Retirement Insurance Program (TRIP), and active teachers could then use future salary increases in calculating their retirement benefit, or (2) reject the COLA change, keeping it at 3% and lose “access” to TRIP. Active teachers would not be able to use future salary increases in calculating their retirement benefit.

• The bill also establishes a new COLA start date where TRS members agreeing to Option 1 would first see the new COLA on January 1 in the year after turning 67, or in the year after the fifth anniversary of the member’s retirement, whichever is earlier. If a retired Tier I member now eligible for the current COLA accepts Option 1, the current COLA would be suspended until eligibility for the new COLA (See http://trs.illinois.gov/).

Illinois Pension Code: 40 ILCS 5/16-133.1) (from Ch. 108 1/2, par. 16-133.1) Sec. 16-133.1. Automatic annual increase in annuity.

Each member with creditable service and retiring on or after August 26, 1969 is entitled to the automatic annual increases in annuity provided under this Section while receiving a retirement annuity or disability retirement annuity from the system. An annuitant shall first be entitled to an initial increase under this Section on the January 1 next following the first anniversary of retirement, or January 1 of the year next following attainment of age 61, whichever is later. At such time, the system shall pay an initial increase determined as follows:

(1) 1.5% of the originally granted retirement annuity or disability retirement annuity multiplied by the number of years elapsed, if any, from the date of retirement until January 1, 1972, plus

(2) 2% of the originally granted annuity multiplied by the number of years elapsed, if any, from the date of retirement or January 1, 1972, whichever is later, until January 1, 1978, plus

(3) 3% of the originally granted annuity multiplied by the number of years elapsed from the date of retirement or January 1, 1978, whichever is later, until the effective date of the initial increase…

For more Information, read http://rogersanders.tumblr.com/

Also read COLA: Is It Guaranteed in Illinois? http://teacherpoetmusicianglenbrown.blogspot.com/2012/03/cola-cost-of-living-adjustment-is-it.html

Senator Dave Syverson’s Form Letter Regarding “The Pension Problem” and Roberta Rebb’s Personal Response

To Roberta Rebb:

The pension problem should not come as a surprise to anyone. This has been a problem that began in the early 90’s, but became a real issue starting after the 2003 election.  In 1995, realizing there was a problem, I sponsored legislation that would mandate the state to fully fund its pensions every year. That mandate was in effect from 1995 until 2003. When Blagojevich and Madigan took over the legislature one of their first actions was to negate that law mandating fully funded pension payments. From that point on they were using budget gimmicks and skipping pension payments which just compounded a system that was already actuarially unsound.

The bottom line is that the system is not sustainable and is collapsing. As I have mentioned for years, the system was built on a lot of faulty and misleading data compounded by irresponsible leaders not funding the program. End result: Illinois’ pension system is in the worst shape in the nation with unfunded liabilities over $100 Billion and growing. The major reasons for the pension system’s instability and overall underfunding can be summed up in five areas:

1. Underfunding of the State’s obligation – This translates to about one-third of the systems underfunded liability. By itself it is not the cause of the crisis. It just moved the crisis date up. (As a reminder, I voted against every budget that did not fully fund the obligation)
2. Market returns lower than projected – The pension funds have, and are, performing at rates lower than projected in their models.
3. Actuarial projections – The good news is people are living longer; the bad news is the funds did not update systems to account for increased actuarial life spans.
4. Larger than expected end-of-career pay raises and overtime across systems – The system does not collect enough money or have to time-compound funds to recover from large end-of-career pay raises and overtime paid.
5. Pension enhancements – There were 16 pension enhancements added to the system since 1970. The most costly being the 1990 COLA compounding, including survivors. The increased contributions for adding that benefit was not close to covering the actuarial liability it added to the system.

It angers me that knowing that, if the legislative and union leaders had heeded our warning and concerns ten years ago, we would not be sitting here having to face these painful decisions.

The bottom line – We can blame a lot of people for this problem; I have and we all should. However that does not change the fact that the system is now unsustainable.

So what is next? Great question and the answer are – no one knows. I am disappointed that the Speaker and the Governor have not kept ALL parties involved in negotiating a real solution. As you know there are still many unanswered questions and concerns with the different proposals currently on the table. I hope that before any final vote is taken on any reform legislation all parties affected have the time to review proposals and give their input.

At this point nothing will be done unless the Governor calls a special session. Without a special session the soonest action would be taken is after the November election, when we go back into our late fall session. As more details become available, we will post information on our website, www.senatordavesyverson.com

Warm regards,

SENATOR dave syverson

Dear Senator Syverson:

I want to thank you for your attempt to explain Illinois' pension difficulties. From what I am reading, however, it appears that you believe part of the problem was caused by teachers receiving cost-of-living increases and being paid too much before they retired. Actually, as I see it, had the state properly paid its share of pension payments over the last 50 years, we'd have no difficulties at all given the rate of market return that boomed in the 1990s.

In 1995, I was forced to incur an over $15,000 debt to pay more money into the pension system to cover the state's indebtedness, and that, I was told, was going to "fix" the system and enable me to collect my pension benefits. That was 2.2 percent more of my pay being taken away when I was only receiving a one percent pay increase from my school district. By working extra jobs and longer hours, I never failed to meet my responsibilities and make my payments into the system. It took me five years to completely pay this debt off. Additionally, I was assessed a payroll deduction to fund insurance for retired teachers in the Teachers’ Retirement Insurance Plan and was never asked whether I wanted to do that either. The money was just withdrawn from my paycheck each pay period once again to cover the indebtedness of the State of Illinois.

I'm certainly no fan of Mike Madigan or Rod Blagojevich but, if memory serves me, I believe it was Jim Thompson, a Republican governor who repeatedly took "pension holidays" and reallocated pension funds for other uses. George Ryan, another Republican governor, also provided a little over 60 percent of the payment to the fund. [Democratic Governor Rod Blagojevich’s funding to the TRS pension fund was as low as 35 percent].  What I see is a problem created by greedy legislators and incompetent governors—a good number of which occupy federal prisons today— rather than a problem caused by teachers. It's easy to point fingers and fix blame on others—a good way to cleanse the conscience of guilt—but it does nothing to solve the real problem.

That very real problem is obviously the ability of Illinois to generate revenue to meet its expenses. This problem results from giving huge tax breaks to CME stockbrokers who find it inconvenient to pay sales taxes like the rest of us, or to Sears, UAL, The Museum of Public Broadcasting, and others, particularly when Illinois taxpayers have received NOTHING of value in return for the benefits provided to these corporations. Since December, 2011, more than $160 million have been given out in tax breaks. When was the last time that teachers took trillions of dollars in taxpayer-funded bailouts, gave themselves billions of dollars in bonuses and then paid no taxes?

When millions of dollars are so freely-given away without thought to the current budget deficit Illinois faces, surely there must be some recognition for the consequences. There is a very real need to redefine and restructure the current income tax so that it is a PROGRESSIVE one that allows ALL citizens in Illinois to pay their appropriate share of taxes into the system, rather than allowing that burden to rest solely on the middle class. Yet, I see no mention or discussion either by the Governor, the legislature or you about the need to generate revenue to cover expenditures. That's a basic accounting principle.

It's always easy to tromp on the rights of those who cannot defend themselves, like the elderly, children, and the poor and take away the assistance a civilized society provides for those in need.  They don't make big political donations, so who cares. It's quite another thing to create a new genre of disadvantaged people by depriving those who've faithfully paid for their benefits and relied on the promise given by the State of Illinois to provide those benefits to them once they retire. I believe what we have here is the offer of benefits for the offer of payment which is a benefit for a detriment, and in any legal book that creates a contract. That's what the teachers have with the State: a contract and a constitutional guarantee that these benefits are sacrosanct.

I respectfully suggest, Senator, that you begin to fulfill your oath of office to defend the constitution and protect the citizens of Illinois, in this case the teachers, and create a REAL solution for the unfunded liability and the state's potential breach of contract—a real solution that goes beyond ridiculous party loyalties and egomaniacal maneuvering, and a real solution that provides for the restructuring of Illinois' income tax to be a progressive, revenue generating instrument instead of using pension money to subsidize the corporations and the wealthy. Thank you for your consideration.

Sincerely,

Roberta L. Rebb

Response to Fareed Zakaria’s “Why We Need Pension Reform,” (Time Magazine, June 25) by Richard Sasso

I write in defense of my pension and that of my fellow public employees. The late Senator Daniel Patrick Moynihan famously quipped that people were entitled to their own opinions, but not their own facts. In the recent debate surrounding public pensions, I have noticed that many people desperately want to have their own “facts,” especially those who want to “reform” public pensions. Here are the facts about how we got to where we are today in Illinois, with an emphasis on the Illinois Teachers’ Retirement System (TRS).

Because they work on the power of compounded interest, pension systems only work when all payments to them are made in full and on time. This is how small, regular payments create large amounts of wealth. While I cannot speak about other states and how their pensions got to be the way they are, virtually every honest observer notes that the Illinois General Assembly has not made its contributions to the Teachers’ Retirement System and to other public pensions.

The General Assembly has skipped close to $15 billion in payments over the last decades to TRS alone, $11.2 billion since 1990. By foregoing these payments, the General Assembly not only denied the value of the initial contribution to the fund, but forced the fund to forfeit the earnings that these contributions would have garnered over time had they been invested.

These gains would have been considerable: the Teachers’ Retirement System has averaged 9.83 percent annual returns since 1982. Arguments that pensions are set on unrealistic earnings is not accurate in Illinois’ case; actuarial studies show that the pension fund has made its projected earnings like clockwork. Therefore, the Illinois General Assembly did not skip payments based on over exaggerated rates of return. It did so simply because it was convenient and legal to do so.

In contrast, each teacher pays 9.4 percent of his or her income from each paycheck, supplemented by a .58 percent contribution from each school district. Both teachers and districts have made 100 percent of their contributions on time, every time. They have no choice, in fact.

This cannot be said for the Illinois General Assembly, however. It often balanced its budget by skipping pension payments, using the money for everything else – except the pensions for its public employees: roads, bridges, even building a now empty prison. In a bitter irony, some of the money even went to K-12 schools, forcing teachers to cannibalize their future pensions to secure the state’s commitment to school children.

We should note that taxpayers benefited from this diversion of funds – they got more government services than they paid for, since the money that should have gone into pension funds went to other expenditures. Essentially, public pension funds became an easily-used “credit card.” (It might also be noted that Illinois has among the lowest ratios of state employees to the general population; it has outsourced services for decades now, having been in the vanguard of privatization. One cannot argue that these expenditures simply went back to public employees in terms of salaries and benefits.)

Nor can one argue that the state simply could not afford to make its payments. If it were not for the pension debt, the State’s contribution would be about 6.3 percent to 8.6 percent. It is true that this is a bit more than the standard FICA/Social Security contribution employers make (6.2 percent), though it is less than the defined-contribution approach, which would involve the cost of FICA and maintaining thousands of individual 401(k) accounts and matching each individual employee’s contributions. In the private sector, this usually averages 4 percent of an employee's income. Hence, the average retirement costs for employers in the private sector are approximately 10-11 percent of employee salaries, much more than TRS.

Nor is the cost to taxpayers excessive: the “normal” cost (without the debt) of last year's contribution to TRS from the General Assembly would have only been $715 million, a mere $55 per Illinois resident each year – a cost similar to purchasing the Sunday newspaper each week. Even a teenager who spends $10 or $15 a week on bubble gum and video games will pay that much in sales taxes in year, as will a retiree who dines at a restaurant once a week.

The cost is not exorbitant for the taxpayer – that is simply a lie told by too many editorial writers, politicians and others who should know better. Hence, with the system running properly and with full contributions from both teachers and the State, the Illinois Teachers’ Retirement System would have had 16-18 percent of teachers’ salaries to invest at 9 percent at compound interest for 35 years – enough to pay the modest pensions promised to teachers. That is, if the Illinois General Assembly had done the right thing.

But instead of doing the right thing, the Illinois General Assembly skipped payments and enjoyed “pension holiday” after “pension holiday." ("Pension holiday" is the horrid euphemism used for skipping pension payments.) This created a gigantic debt of over $40 billion in unfunded liabilities for TRS, thus, driving up the cost of the state’s contribution to the retirement fund. Last year, the state's total contribution was $2.2 billion instead of $715 million, two-thirds of which is accumulated debt.

Granted, the recent economic crisis hurt TRS, as it did all investment funds across the world. Nevertheless, a recovery is underway. According to a recent press release from TRS, “the Teachers’ Retirement System Board of Trustees reported total assets of $37.3 billion at the end of March 2011, a 23 percent increase over the assets held by TRS in 2009 during the depths of the world financial crisis. During the first nine months of fiscal year 2011, the investment rate of return for TRS was 21.38 percent, besting the current target investment rate of 8.5 percent.”

Mr. Zakaria, you also seem uninformed about one simple reality as well: the Illinois General Assembly DID pass pension reform for all new public employees in March of 2010. This law applies to every new hire after January 2011 and is much less generous than the current system. Legislators wrote, passed and sent a bill to the Governor's desk in under twelve hours. (I'll leave it to you to decide how democratic such a process was.) The recent debate centers on benefits for current public employees, which have special status due to the "Pension Protection Clause" in the Illinois Constitution.  For this and other reasons, teachers believe that pension “reform” is an injustice.  Can you perhaps see why?

--Richard Sasso

"Why We Need Pension Reform" by Fareed Zakaria: http://www.time.com/time/magazine/article/0,9171,2117244,00.html

Bubbie

(August 19, 1895 – June 19, 1987)

I can imagine her escaping Ukraine,

like a small bird breaking formation
over unfamiliar terrain,
carrying her belongings in a wooden wagon
under a roof of vagrant stars
and sleeping beneath shawls of leaves.

She bartered away all her possessions
salvaged from her hotel in Odessa
ransacked by the Cossacks
during the Revolution.
She gave up an old world to find a new one
more than five thousand miles away.

It was the prelude of a new life,

and the world lay before her like a matryoshka.
In America, she gave up her surname.
And though she spoke no English,
she learned the language of a new place
while keeping the old one alive.

I feel sadness now,

for her coming so far to everything
but having nothing,
bringing with her the voice
of an old country
that embarked with quiet suffering.

The Great War had murdered her family

with gas and guns, and for years
she stayed silent as a sleepwalker.
Her husband died too before I was born.
She seldom mentioned his name,
and I did not know how to ask.

I still remember her voice, unexpectedly

the way my son used to search in soft,
broken tones for the right word,
mispronouncing a vowel or consonant.
A long time ago, she called him Doll Face.
He is the only one to carry forth our name.

Bubbie

(19 серпня 1895 - 19 червня 1987)

Я можу уявити собі її уникнути України,

як маленький формування порушення птиці
по незнайомій місцевості,
проведення її речі в дерев'яній вагон
під дахом бродячих зірок
і спати під хустками листя.

Вона обмінювали геть усе її майно
врятувати від її готелю в Одесі
розграбований козаками
під час революції.
Вона відмовилася від старого світу, щоб знайти нову
більше п'яти тисяч кілометрів.

Це була прелюдія до нового життя,

і світ лежав перед нею, як матрьошки.
В Америці, вона відмовилася від свого прізвища.
І хоча вона не говорила по англійськи,
вона дізналася мови на новому місці
при збереженні старої живий.

Я відчуваю смуток зараз,

для її приїзду до цих пір всі
але не має нічого,
чого з нею голосом
зі старої країни
, Що почав з тихим стражданням.

Велика війна убила її родину

газ і зброю, і протягом багатьох років
вона мовчала, як сновида.
Її чоловік теж помер до мого народження.
Вона рідко згадується його ім'я,
і я не знаю, як запитати.

Я до сих пір пам'ятаю її голос, несподівано

як мій син використовується для пошуку в м'яких,
зламані тонн за право слово,
перекручуючи гласного або приголосного.
Колись давно, вона подзвонила йому Doll Face.
Він є єдиним винесе наше ім'я.

Playing to the Gallery (the Sinister Appeal of HJRCA 49) by John Dillon

“…cause that’s all you ever hear about in this country is our differences. That’s all the media and the politicians are ever talking about, the things that separate us, things that make us different from [one another]…They try to divide the rest of the country. They keep the classes fighting with [one another]…” - George Carlin

“…In fine, we thought he was everything/To make us wish that we were in his place./So on we worked and waited for the light,/And went without the meat, and cursed the bread;/ And Richard Cory, one calm summer night, / Went home and put a bullet through his head." – Edwin Arlington Robinson


Idiom: In brief, playing to the gallery means to seek popular acclaim. The expression’s origin is from the theater, and it describes the message or content of the play as written for the less intelligent or to those who could not afford the best seats in the house and, therefore, had to sit in the cheaper gallery. In later years, it became a way to describe the person who cheapens his own abilities while seeking the approval of the uneducated populace and appealing to base instincts and interests. And this brings us to House Speaker Madigan’s Constitutional Amendment HJRCA 49, passed by all but two senators in the General Assembly.

Madigan’s HJRCA 49 plays to the gallery by exploiting the very real anger and envy that can separate all of us, yet the amendment ironically does nothing to ameliorate any of the fiscal woes that our State and its citizenry face. On the surface, Madigan’s Constitutional Amendment promises to make it tougher to provide pension benefit increases by requiring a three-fifths vote by both houses. In fact, there is no part of the proposed Amendment that will assist in the paying down of the unfunded liability, which threatens to strangle the state’s financial budget.

There is nothing that works to relieve the state from the madness of an ill-designed ramp-up developed in 1995 (P.A. 88-0593), one which guarantees a tsunami of increasing payments into 2035. No attempt is made to alleviate or to address the possibly federally-prohibited forced payment of extra compensation by Tier-Two employees. In every sense, HJRCA 49 represents Madigan’s utmost cynical political gesture and his complete disdain for the people on all sides; thereby, as usual, we all become victims of his political intrigues.

HJRCA 49 is crafted to appease the “gallery” or for those who sorely seek revenge. Nearly half a decade into the Great Recession, the toll on the shocked middle class in this country and state has understandably rendered people permanently economically injured and justifiably angry.

A few examples:

“…the typical American family lost nearly 40% of its wealth between 2007 and 2010, shaving the median net worth to (lower) levels not seen since the early 1990’s” (See Los Angeles Times, June 11, 2012).

Median home equity for families owning homes fell nearly 43%, from $95,300 to $55,000. Incomes have likewise fallen nearly eight percent (See Business Week, June 11, 2012).

The numbers of children being born in the State of Illinois into poverty have increased to nearly 20% - that’s one in five children living in a family of four earning less than $22,000 per year (http://datacenter.kidscount.org/data/bystate/stateprofile.aspx?state=IL&loc=15).

One out of every seven households in Illinois has a zero or negative net worth, and increases in personal bankruptcy filings in the collar counties have exploded to an average of over 200% (See Heartland Alliance for Human Needs & Human Rights).
 
Indeed, this is fertile soil for sowing seeds of hate and anger, a perfect bedding for something like Speaker Madigan’s HJRCA 49. Add to that the emotionalism and strident catchwords of the corporate-owned media and the local power groups like the Civic Committee of the Commercial Club of Chicago.

Indeed, the Chicago Tribune often highlights its singular role in successfully assisting Madigan’s proposal for a vote in November. “The action (passage of HJRCA 49) comes as the state faces a yawning gap in public pension funding and follows Tribune reports that have exposed how public officials and union members have padded pensions with lucrative sweeteners. The measure also potentially serves as an attempt to channel voter anger over burgeoning costs of public pensions” (http://articles.chicagotribune.com/2012-05-04/news/ct-met-illinois-pension-perks-20120504_1_pension-proposal-pension-overhaul-pension-boards).

For years, the Chicago Tribune has been concentrating on the exceptional and unacceptable manipulators of pensions in the public arena (Chicago Labor Leaders, previous members of the General Assembly, the previous Mayor of Chicago, public school administrators seeking work outside the state after receiving a large pension...), and subsequently applying those spectacular sins to the “much too generous” pensions for public unions entirely.

After all, it’s neither the unique nor the extraordinary the Chicago Tribune is after: it is all of us in the public sector. On every opportunity, the Tribune decries the basic concepts of collective bargaining. Witness the drawing by their political cartoonist Scott Stantis a day after Scott Walker’s failed recall in Wisconsin. And, while the choice of images – a gorilla-like caricature in a zoot suit – is simple and puerile, it does echo the kind of anger we hear directed at collective bargaining across the board from the Tribune.

In short, like Speaker Madigan, the Tribune also plays (or screams) to the gallery. And who is the gallery? Why, it is of course all of us – people who live in a state awash in debt and burdened by bills that have grown to mountainous proportion – gifts from our political predecessors, some incarcerated and some walking blithely about. And in Springfield? Even our best politicians face daunting challenges to understand the basics of needed pension reform, intelligent changes in tax structuring, and a better methodology to tackle the unfunded liability.

It takes considerable time and mental energy to separate these items, much less make serious decisions about how to correct them. Instead, the legislators often find themselves coerced or coaxed to accept whatever appears before them. Representative Mike Bost (R-Murphysboro) made abundantly clear what many of his colleagues say in closed rooms to one another and their constituents (See YouTube video).

On the other hand, HJRCA 49’s four pages is seemingly simple, apparently commonsensical, and outwardly direct – very much the opposite of Speaker Michael Madigan and his political mind. It would be inspiring to imagine leadership in Illinois that makes changes to the fiscal policies of the State of Illinois to revolutionize and remedy the budget issues, the result of decades of underfunding the pensions' needed costs. The Speaker chooses not to do so.

Instead, Madigan chooses to play a deadly game pitting one group of workers against another, neighbor against neighbor, and possibly using the amendment to close the door on the state’s contractual pension obligations for all time.

HJRCA demonstrates the lowest and most vicious form of contemptuous political expression emerging from an assembly of the supposedly conscientious.

Vote NO on HJRCA 49!


This article was originally printed in Pension Education, "Pension Vocabulary of the Week," June 17, 2012):
https://sites.google.com/site/pensioneducationsite/

"Up In Flames" by Geoffrey Brown, "Frey Geoffreux"

15 Questions about Pension Reform and the Upcoming Born-Again Contract Clause from the Illinois General Assembly

Shouldn’t the state government sanction vested rights guaranteed in a contract? Can the state government pass an amendment to impair an original agreement? In other words, is it ethical and legal to limit public employees’ contractual benefits and rights both prospectively and retroactively without attempting other recourses? 

Is HJRCA 49 an abrogation of contractual rights (and a violation of Article I, Section 10 of the U.S. Constitution) for public employees who have worked, expected and planned for statutorily-promised government pension benefits? Is it not crucial for legislators to protect “legitimate expectations,” especially for people (like public employees) who must be defended against those with extreme economic clout and inequitable schemes that pass prejudicial state legislation?

Is it just for a state government that has been morally bankrupt for several decades to ignore the Fourteenth Amendment of the U.S. Constitution?  Are we to believe Due Process and Equal Protection of the laws guarantee contractual privileges?  Are we to believe legal and moral sense dictate that any bill proposed by the state should align with the U.S. Constitution?

What credibility do current Illinois legislators have when they can breach contractual obligations through a constitutional amendment when it was the legislators’ failure to fund the public pension systems for decades? Isn’t this a denial of due process of law under the Fifth Amendment of the U.S. Constitution? How can any legislator believe SB 1673 and HJRCA 49 will not be a diminishment or an impairment of current and retired teachers' earned and promised benefits?

How can a state government that has created a severe unfunded liability for the public employees’ retirement systems continue to isolate and offer up one particular group of people for sacrifice and dispossession because of bond agencies, the partiality of an unethical political process, and the Civic Committee of the Commercial Club of Chicago?

Is it fair that there are special exceptions and rules for the wealthy, but there are intentionally-limiting laws for public employees?  Are the public employees of Illinois going to allow today’s General Assembly to change the rules of the contract to benefit themselves and the wealthy? Furthermore, will it mean that any legislature can and will change the rules at whim, and that any contract of the State of Illinois is worthless when policymakers are the debtors?

Please read “Illinois Pension Reform, Senate Bill 1673, Is without Legal and Moral Justification”

http://teacherpoetmusicianglenbrown.blogspot.com/2012/05/sb-1673-is-without-legal-and-moral.html

and previous five posts about HJRCA 49.

House Joint Resolution Constitutional Amendment 49 Will Diminish Public Pensions

By now, most of us know what the “Pension Clause” or Article XIII (General Provisions), Section 5 (Pension and Retirement Rights) of the Illinois Constitution states:  “Membership in any pension or retirement system of the state or any local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”

“[This] Pension Clause serves as a bar against any unilateral legislative or governmental action to reduce or eliminate the pension benefit rights in place when an employee [becomes] a member of the pension system” (Eric Madiar, “Is Welching on Public Pension Promises an Option for Illinois” 21).

Nevertheless, House Speaker Michael Madigan's constitutional amendment (HJRCA 49) will “propose to amend the General Provisions Article of the Illinois Constitution. [This amendment] provides that no bill, except a bill for appropriations, that provides a benefit increase under any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall become law without the concurrence of three-fifths of the members elected to each house of the General Assembly…

“[Furthermore, HJRCA 49] provides that no ordinance, resolution, rule, or other action of the governing body, or an appointee or employee of the governing body, of any unit of local government or school district that provides an emolument increase to an official or employee that has the effect of increasing the amount of the pension or annuity that an official or employee could receive as a member of a pension or retirement system shall be valid without the concurrence of three-fifths of the members of that governing body…

“The term ‘benefit increase’ means a change to any pension or other law that results in a member of a pension or retirement system receiving a new benefit or an enhancement to a benefit including, but not limited to, any changes that (i) increase the amount of the pension or annuity that a member could receive upon retirement, or (ii) reduce or eliminate the eligibility requirements or other terms or conditions a member must meet to receive a pension or annuity upon retirement.

“The term ‘benefit increase’ also means a change to any pension or other law that expands the class of persons who may become a member of any pension or retirement system or who may receive a pension or annuity from a pension or retirement system. An increase in salary or wage level, by itself, shall not constitute a ‘benefit increase’ unless that increase exceeds limitations provided by law… This Constitutional Amendment [will] take effect on January 9, 2013.”

Of course, this amendment to Article XIII, Section 5 of the Illinois Constitution will be cast on a separate ballot. As stated, this amendment to the 1970 “Pension Clause” will need three-fifths of those voting on the amendment or a majority of those voting in the election in order to pass. However, it is important to note that Illinois citizens have been duped by the Civic Committee of the Commercial Club of Chicago, the Chicago Tribune, and others; therefore, this amendment may pass, unless public employees unite to re-educate the public to “Vote No.”

Most public employees understand the cause of the $83 billion unfunded liability to the pension systems: “The state’s decades-long practice of intentionally borrowing revenue from ‘promised’ contributions to the retirement systems in order to subsidize the cost of delivering public services” (The Center for Tax and Budget Accountability CTBA, June 2012).

Some public employees and the majority of the public do not realize, however, that “the top two drivers of underfunding were insufficient employer contributions and investment losses during the Great Recession; [that] insufficient employer contributions account for 44 percent of growth in unfunded liabilities, and investment returns account for 22 percent of total growth. In contrast, benefit increases account for less than 10 percent of the growth [in unfunded liability]. Given the small role benefit increases played in creating the problem, it is unfair to target benefits [through HJRCA 49] in order to reduce the existing unfunded liability” (CTBA).

Most public employees and the populace do not comprehend that “the funding plan under Public Act 88-0593 [the 'Ramp Up'] heavily back loaded repayment of the aggregate unfunded liability…; [that] HJRCA 49 does not reduce the state systems’ current $83 billion unfunded liability by even one cent. HJRCA 49 [also] fails to address the real fiscal issue caused by the state’s outsized pension debt—how to amortize the $83 billion debt owed to the five state-sponsored retirement systems in a feasible way.

“Second, implementing a Constitutional amendment that hinders the ability of legislators to institute benefit increases would make it nearly impossible to rectify the problems associated with the reduced benefit tier that lawmakers created in 2010 [by SB 1946]…

“The uncertainty surrounding language used in HJRCA 49 is of extra concern because once passed, changing any aspect of it would require yet another Constitutional amendment. Given that there are nearly 7,000 local governments in Illinois, the impact of the supermajority-voting requirement could be costly in both the amount of time legislators will have to spend on pension benefit analysis” (CTBA).

Most significantly, as stated by the State Universities Annuitants Association (SUAA), HJRCA 49 “would grant unprecedented powers to government that will undermine protections contained in the pension protection clause [Article XIII, Section 5] and eliminate the uniform laws that now exist for [all] state employee benefits and obligations in the Illinois Pension Code” (Letter from SUAA, April 25, 2012).

Will the Constitutional amendment (Section 5.1) to the Pension Clause nullify Article I, Section 16 (Ex Post Facto Laws and Impairing Contracts) of the Illinois Constitution and Article I, Section 10 (Limitations on Power of States) of the U.S. Constitution?

How important is it now for public employees to educate the public about attacks on rights and benefits of middle-class citizens?  Shouldn’t public employees be proactive and enraged by the Civic Committee’s persuasive attempt to divide the middle class in Illinois through fallacious reasoning and distorted information? Shouldn’t public employees be provoked by the Civic Committee’s relentless priority on radical “pension reform” and their policymakers’ attempt to breach the contract of public employees while giving tax cuts to corporations and the wealthy, regardless of whether this inequitable “corporate welfare” produces more budget deficits? The Civic Committee has shrewdly and deceptively maintained the dialogue and focus on public pensions instead of needed revenue reform, and not much has been done about it.

This government by the rich and powerful, by a group that duplicitously states it is a “not-for-profit organization whose mission is to stimulate and encourage the growth of the area's economy and its ability to provide for its people,” is based upon the impoverishment of middle-class citizens. The Civic Committee’s and Civic Federation’s power is purchased. Their “current mission” is the wholesale destruction of the entire middle class and the pension systems in Illinois, especially the Teachers’ Retirement System.

Who is behind the vague and ambiguous laws by which Illinois government operates besides House Speaker Madigan? The Civic Committee and its legislative power brokers. Who will profit from pension reform and a diminishment of contracts and, thus, free up the state’s cash flow and increase its profit margin in Illinois? The Civic Committee and their ilk. Who could eventually lose their “only” retirement pension? Teachers and other public employees of Illinois.

There are no equal rights when there is inequity of wealth and when promises are made to underpin and to sustain the fortunes of a few at the expense and victimization of the many. Public employees know they have become victims of deregulation and tax reductions for the wealthy minority, resultant of organized political action by and in support of the wealthy sector.

Public employees know they will become victims of insidious financial “reforms” that do not resolve the state’s deficit problems but will continue to accommodate and reinforce the enormous inequality of organizational resources of these thriving egotistic profiteers among us, unless public employees choose to unite and fight against this injustice.

Public employees know they are victims of a tyranny by the few who lack accountability for destroying a representative democracy and a just economy in Illinois; public employees know they are victims of the corporate “We Mean Business” PAC and vast resources of money and influence committed to reforming the rules and policies that have and will continue to adversely affect the lives of middle-class citizens and the disenfranchised; moreover, most public employees know about the schemes to reallocate the state’s future liabilities to teachers and school districts and universities by way of procuring policymakers and about the attempt to circumvent Article XIII, Section 5 of the Illinois Constitution through House Joint Resolution Constitutional Amendment 49.

There is a simple synergetic balance to understand here. If the state’s policymakers impair the Pension Clause of its public employees, they will not only destroy the public employees’ financial security and their integrity, but they will also damage the communities that these people support, serve and protect.

A Synopsis of the Proposed Amendment 5.1 to Article XIII of the Illinois Constitution

On the November Ballot, Illinois voters will be asked if they believe the Illinois Constitution should be amended to require a three-fifths majority vote in order to increase a benefit under any public pension or retirement system. Please vote NO on the proposed Constitutional Amendment (HJRCA 49). This Constitutional Amendment would also require that any local collectively-bargained agreement be approved by a three-fifths majority if those agreements had incentives or additional compensation increases beyond salary.

Reasons to VOTE NO:

  It is mostly the legislators’ fault that the pension systems were poorly funded throughout the decades. That diverted pension money was used for other state services and legislators’ “pet” projects instead;

  The constitutional amendment will make public employees’ ability to fight for fair contracts much harder (Illinois Education Association, IEA);

  This constitutional amendment will limit the bargaining power of employers and employees (IEA); 

  There is the possibility of disagreement on what constitutes a benefit increase” (Jesse White, Secretary of State). The COLA and other “earned” benefits will most likely be reinterpreted in this regard;

  This constitutional amendment would make it nearly impossible to remedy the Social Security issues with the passage of Senate Bill 1946 in April, 2010 (IEA). This is unfair to any new teachers hired after January 1, 2011;

  This constitutional amendment will make it harder to attract the best possible college candidates for the teaching profession (IEA);

  This constitutional amendment “does not reduce the state’s pension systems’ current $83 billion unfunded liability” (caused primarily by the state’s legislators); “it fails to address the real fiscal issue caused by the state’s outsized pension debt—how to amortize the $83 billion debt owed to the pension systems” (Center for Tax and Budget Accountability);

  Most significantly, as stated by the State Universities Annuitants Association (SUAA), this constitutional amendment “would grant unprecedented powers to government that will undermine protections contained in the pension protection clause [Article XIII, Section 5] and eliminate the uniform laws that now exist for [all] state employee benefits and obligations in the Illinois Pension Code” (Letter from SUAA, April 25, 2012);

  Note: if you do not vote at all, your absent vote will make it easier for a majority “Yes” vote.

The question on the November ballot will ask, “…If you believe the Illinois Constitution should not be amended to require a three-fifths majority vote in order to increase a benefit under any public pension or retirement system, you should vote NO… on the question. Three-fifths of those voting on the question or a majority of those voting in the election must vote “Yes” in order for the amendment to become effective on January 9, 2013.” Please join us in voting NO against the proposed constitutional amendment on the November ballot.  "Reasons to Vote No" was prepared by Dave Madsen and Glen Brown.