Monday, February 11, 2013

Summit on Illinois pension woes ends with no new plan

(Reuters)

"A union-led summit to address Illinois' unfunded pension liabilities ended on Monday without any deals or significant breakthroughs, according to elected officials from both sides of the aisle who attended the event. The summit, organized by a coalition of unions that represents public workers, drew Democrat and Republican state lawmakers to an AFL-CIO office in Burr Ridge, Illinois, but ended after three hours without a statement of consensus or a commitment to meet again. Daniel Biss, a Democratic state senator from Chicago's northern suburbs who as a state representative co-authored a plan to address the state's pension mess, said 'no substantive breakthrough' was made during the meeting.
"In Illinois, five state pensions are in the red by a staggering $97 billion - or more than $20,000 for every household in the state. Inaction by lawmakers has prompted rating agencies to downgrade the state's credit rating and raised fears of service cuts, tax increases and other hardships for the residents. 'I'm glad that everyone was in the same room,' Biss said. 'But at some point, you have to stop talking about talking and start crafting a solution. That didn't happen.'
"Biss, who came up with a proposal with Democratic state Representative Elaine Nekritz to reduce the unfunded liabilities of the state's five public pension plans, said he came away from the meeting unsure whether the parties would even meet again. 'It's not even clear whose court the ball is in,' Biss told Reuters.
"Tom Cross, the Republican leader in the state House, said the union coalition, We Are One Illinois, remained committed to fixes it proposed late last year, which rely largely on new taxes to address sky-rocketing pension liabilities. 'All five systems are receiving a benefit they are not adequately paying for,' Cross said. 'The unions need to recognize that fact - and the fact that there is not an appetite among the general public to fix the problem just by raising more revenue.'
"In a joint statement, the nearly two dozen unions that belong to the We Are One Illinois coalition said the summit was designed to demonstrate organized labor's 'ability to work together constructively with all parties.' By that measure, the coalition said, Monday's meeting was a success and the unions challenged lawmakers to 'use the momentum from today's summit to finally, seriously, negotiate a fair and constitutional solution that all parties can support.'
"Although Monday's summit drew a number of state lawmakers, Michael Madigan, a Democrat and the powerful speaker of the Illinois House, did not attend. Many analysts view Madigan as the most powerful politician in the state and look to him for leadership on pension reform. Illinois has contributed less than needed to restore its public pension systems in nine of the last 10 years, according to a state report. Last month Standard & Poor's Ratings Services cut the state's credit rating and said it may downgrade it again, citing the state's inaction on pension reform.
"The state's leaders have stalled for years in fixing the pensions shortfall, in part because of fierce opposition from public sector labor unions. Democrats have a stranglehold on state government and depend on unions for significant political and financial support."
(Reporting by James B. Kelleher; Editing by Lisa Shumaker)


Commentary

Public employees are tired of incompetent, skewed coverage regarding the Illinois public pensions’ unfunded liability. They are tired of hearing about credit ratings from liars and thieves who blame the public pensions for the state’s next downgrade. They are tired of the media’s omission of the most significant facts about public pension debt and anyone who talks or writes about cuts to services and the siphoning of the state’s money from education, public safety and human services because of “failed pension reform.”

And they are tired of those members of the Illinois General Assembly who lack ethical responsibility and moral courage and who are willing to challenge the State and U.S. Constitutions. These so-called representatives and senators are incompetent cowards.

Every article, every interview, and every legislative session about Illinois public pension reform should begin with these statements: The public pension systems were not and are still not the cause of the state’s budget deficits. The state’s budget deficits were triggered by past policymakers’ corruption, arrogance and irresponsibility, and because of them the State of Illinois has a revenue problem and pension debt to resolve.
 

Past Illinois General Assemblies have created the severe unfunded liability for the five public employees’ retirement systems over several decades, and the legitimacy of the current Illinois General Assembly is also doubtful. The current state government is attempting to isolate and offer up one group of people for hardship and, for many of these public employees, create a dispossession by way of intentionally-diminishing laws while perpetuating special exceptions and windfalls for the wealthy elite. This is a mockery of justice.
 
It is critical that today’s policymakers protect legitimate expectations and concerns for all the state’s citizenry, especially for people who must be defended against those with excessive economic clout and inequitable schemes to pass prejudicial legislations that benefit the financial elite at the expense of everyone else.

If you want to "craft a solution," Senator Biss, get rid of the "flat, low-rate income tax that does not adequately capture income growth... [A flat, low-rate tax causes] income revenues [to] routinely lag behind economic growth" (the Center on Budget and Policy Priorities).  Consider that Illinois also "relies heavily on state and local sales taxes that are almost exclusively applied to goods and excludes almost all services… Because Illinois is chronically short of the revenues it needs to cover its expenses, it has engaged in a number of poor fiscal practices over the years. It has postponed payments to vendors, failed to make adequate pension contributions or borrowed money to make the contributions, securitized or sold assets, and taken other dubious actions” (the Center on Budget and Policy Priorities).

Besides the Center on Budget and Policy Priorities, Illinois revenue restructuring is recommended by the Chicago Metropolitan Agency for Planning, the Institute on Taxation and Economic Policy, the National Council of State Legislatures, the Economic Policy Institute, the Center for Policy and Economic Research, the National Association of State Retirement Administrators, the National Institute on Retirement, United for a Fair Economy and the Center for Tax and Budget Accountability.

If you want to solve the pension debt, Representative Cross, consider what Executive Director Ralph Martire of the Center for Tax and Budget Accountability recommends: There needs to be a required annual payment from the state to the pension systems; the debt needs to be amortized for a longer frame of time (a consistent payment) just like a home loan that is amortzed.


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