Sunday, July 17, 2011

A Call for Caution for This Fall’s Veto Session in Illinois

Who are the “experts” on pensions? Is it the Commission on Government Forecasting and Accountability or the Center for Retirement Research at Boston College? Is it the Buck Consultant Reports or the National Association of State Retirement Administrators? Is it the Pew Center on the States or Fitch Ratings? Is it the Government Finance Officers Association or the Center for State and Local Government Excellence? Is it the National Institute on Retirement Security or the National Conference on Public Employee Retirement Systems? Is it the Center on Budget and Policy Priorities or the Illinois Retirement Security Initiative? Is it the Economic Policy Institute or the Teachers’ Retirement System? Indeed, there are many “experts” on defined-benefit pensions and their sustainability, and these organizations are just a few of them.

Is it possible then that we can draw different conclusions using the same or different sort of evidence provided by such groups? The answer is yes. Are all the “experts” in agreement? The answer is no. Should they be? It is quite impossible. Then how do we come to know matters of fact, and what is the distinction between relationships among beliefs and questions of fact?

When we begin to realize how uncertain and unreliable data-driven opinions sometimes are and that what we believe is true is often either indefensible or contradicted, especially when using various data grounded in a state of flux, we discover the elusiveness of the truth we seek.

Contemplate these variables: the State of Illinois’ current tax system and budget practices, revenue growth and long-term costs of benefits, methods for determining accrued liabilities and actuarial value of assets, unfunded liabilities and funded ratio, the historical rates of return and actuarially-required contributions, discount rates and asset smoothing, to name just a few.

Moreover, examine these considerations: the fact that pensions carry liabilities into perpetuity deserves special attention; long-term consequences of legislative policy decisions will be based on particular, changeable data; the immediate effects of any legislation passed will affect primarily middle-class citizens who are dependent upon an imperfect fact-finding and decision-making process; there must be a fair balance between the immediate financial losses incurred and the proposed long-term gains of any legislation imposed upon public employees and their families; the wealthy and corporations must pay their fair share of taxes, and the State must end their tax breaks, tax shelters, government subsidies, and out-sourcing of American jobs if it is truly going to be a “shared sacrifice.”

Claims are considered effective when supported by evidence that is sufficient, accurate, and relevant. Will all the stakeholders (legislators, union leaders, and public employees) agree about the evidence and resolution for the public pensions’ unfunded and future liabilities? Probably not, because disagreements about claims and their outcomes are generally about framed and selected evidence or underlying values and beliefs. Nonetheless, the aim of a consensual argument is to find common ground on an issue and a solution on which most everyone can reasonably agree.

Do we agree that outside, impartial “experts” or actuaries should be present at these summer and fall discussions? At best, final decisions made by all of the stakeholders (“non-experts”) are judgments based upon pension “experts” that can provide clarity of inquiry and logic of its reasons and support through research while appealing to sharable values, ethical beliefs and realistic assumptions of the principal decision makers. All stakeholders need to ask of their own and of others’ arguments and discourse: what is being emphasized, and what is being omitted? What are the unanswered and unstated questions? Who is using what data and for what purpose? Are all debates without bias, rationalizations, wishful thinking, causal over-simplifications, hasty generalizations, faulty analogies, tautologies, non sequitur, begging the question, and appeal to ignorance and fear?

It is equally essential to guard against questions that demand a choice between two answers which are, in fact, not exclusive or not exhaustive, (just read a few recent legislators’ letters to the editor). Questions about data should be open-ended and dictate the kinds of facts which will serve to solve the problem, without dictating the solution itself. Most noteworthy, the best answers to any questions we can ask about pension statistics and the concept of sustainability must be equitable and empirically verifiable, though these indicators remain invariably challenging. Finally, and most importantly, consider that there is not enough time in a short veto session to address these vital issues and to pass such significant pension legislation that will affect hundreds of thousands of people in Illinois. Perhaps a call for continued prudence by all of those involved in this dialogue is something that we might all agree to and, thus, create a more secure and desirable outcome for everyone next spring.

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