Monday, May 30, 2011

An Open Letter to All Teachers and Retirees in Illinois

Challenges remain before us. We must never become complacent in our belief that justice exists for those who simply “fight the good fight”; nor should we become indifferent to political power and what exorbitant wealth can buy: a “democracy on the auction block, subject to the highest bidder” (Bill Moyers).  

Although we can infer that legislators will often pass laws for their own advantage, most of us still adhere to the belief that the legislators’ duty to act justly stems from their duty to keep a promise.  Perhaps we should recall that despite their pledges, the legislators’ criteria for justice are their consideration for what is most expedient for them—their re-election, which is concealed often by a counterfeit concern for the general welfare of their constituency and the state’s financial situation.   

Undoubtedly, our pension is not generally viewed as in the best interest of the welfare of a legislator’s entire electorate.  Our pension serves no purpose, except solely for our enviable, financial promise. How should we argue then for the expediency of our rights and benefits?  Is being just to a minority of citizens beneficial as a means for the majority’s attainment of happiness? Conversely, how can we argue that it is morally right that a minority of people should suffer so there is a net gain for the majority?  Should not “the minority [of individuals] possess their equal rights, which equal law must protect” (Thomas Jefferson)? 

There are no easy answers to these questions.  All of us claim certain beliefs as truths. Nevertheless, what we must remember is that we, both retired and working teachers, cannot abdicate our right to representation in a decision-making process that affects only us, and although our entitled pension conferred to us by the State and U.S. Constitutions is not “an inalienable right,” for most of us, it is our final and only source of income.   

It is up to us to secure what we have earned by opposing the wealthy influences of the Civic Committee of the Commercial Club of Chicago and their unethical legislators.  We must defend our dignity with stubborn resolve.  Our primary task is to enlist every teacher and every other public employee in a unification of wills to protect our “alienable” rights and benefits that we deem fair and equitable because they are earned, incentive payments for our life’s labor. This undertaking perhaps forestalls our pro-active and continual engagement with the bankrollers’ marionettes in the Illinois General Assembly. 

Indeed, our fortitude and knowledge give us power, and this power must motivate us to action.  Our pensions will continue to be attacked in the future.  We are intrinsically bound to one another in this regard.  As Martin Luther King eloquently stated, “We are caught in an inescapable network of mutuality, tied in a single garment of destiny.”   Let us heed King’s message of “direct action” and unify our efforts to confront wealthy interests and unethical legislation; let us “arouse the conscience of not only our colleagues but our communities” by proving that our right to a defined-benefit pension is not to be "diminished or impaired" because it is the solution and template for the preservation of justice and dignity of all workers in Illinois.  

A demanding call for engagement will intensify for us in the future. We cannot remain on the sidelines. "Indifference is not an option," even though “It is so much easier to look away… so much easier to avoid such rude interruptions to our work, our dreams, our hopes” (Elie Wiesel). With concerted determination and indomitable courage, let us meet these challenges before us.  “What is required of us is a new… responsibility…; that we have duties to ourselves [and to others]; that there is nothing so satisfying to the spirit, so defining of character, than giving our all to a difficult task” (Barack Obama). Truly, “We Are One,” but only if we demonstrate a willingness to organize and to act upon principles that we believe are so valuable that to do nothing would be an injustice. 

Glen Brown



Saturday, May 28, 2011

SB 512

“This legislation seeks not only to increase the membership contribution one time, it seeks to put the membership contribution on an escalating scale that is recalculated every three years… It is important to stress that once a member has ceased participation in Tier One, he or she cannot rejoin that tier. If a member fails to make a selection, the member shall participate in Tier-Two. These periodic member choices every three years will result in increasing migration from the Tier-One Plan because of the rising cost. If a large amount of members migrate to the Tier-Three Plan, then contributions will not flow into [Tier-One and Tier-Two plans] and possibly endanger the solvency of these funds” (IFT).

Tier-One members must choose among the following if SB 512 is passed:

·         Remain in Tier-One with a contribution rate of 13.77 percent, an increase of 4.37 percent of salary

·         Select the Tier-Two option with a contribution rate of 6 percent, a retirement age of 67, a reduced COLA and a reduced final average salary (IEA); all service frozen as of June 30, 2012

·         Select the Tier-Three option, a Defined-Contribution Plan (401k), with a contribution rate of 6 percent; all service frozen as of June 30, 2012

Tier-Two membership must choose between the following if SB 512 is passed:

·         Remain in Tier Two with a new contribution rate of 6 percent, a retirement age of 67, a reduced COLA and a reduced final average salary

·         Select the Tier-Three option, a Defined-Contribution Plan (401k), with a contribution rate of 6 percent; all service frozen as of June 30, 2012

New hires will have to choose within six months of the date of employment between the following if SB 512 is passed:

·         Elect to participate in Tier Two with a contribution rate of 6 percent, a retirement age of 67, a reduced COLA and a reduced final average salary

·         Elect to participate in Tier Three option, a Defined-Contribution Plan (401k), with a contribution rate of 6 percent; all service frozen as of June 30, 2012

Sources: The Illinois Federation of Teachers (IFT) and the Illinois Education Association (IEA)

Wednesday, May 25, 2011

Defined-Contribution Savings Plan v. Defined-Benefit Plan

With a few exceptions, Defined-Contribution Savings Plans were not initially created as retirement vehicles but rather as supplementary savings accounts
--With a Defined-Contribution Savings Plan (401k, 403b, 457), only your contributions are defined
--A Defined-Contribution Savings Plan shifts all the responsibilities and all the risk from the employer to the employee; thus, your benefit is not guaranteed
--Your benefit is based upon investment earnings
--A Defined-Contribution Savings Plan does not have the “pooled investments, professional money managers, and shared administrative costs” that a Defined-Benefit Plan provides
--Your benefit ends when your account is exhausted
--There are no survivor or disability guarantees
--This plan does allow for portable assets
--Changeover costs to this plan would be significant
--Investment fees are paid by member
--On-going costs would be higher: in 2006, the expense ratio was 1.29%, 4.3x’s higher than a Defined-Benefit Plan; in 2004, the median cost was 1.4%, 4.7x’s higher than a Defined-Benefit Plan
--The State of Illinois will not “save money.”  Most of the State’s obligation to TRS is for contributions not paid during the past several decades; therefore, the deferred cost of underfunding cannot be eliminated by switching to a Defined-Contribution Savings Plan
--Shifting to a Defined-Contribution Savings Plan can raise annual costs by making it more difficult for Illinois to pay down existing liabilities. The plan will include fewer employees and fewer contributions going forward
--Even with Defined-Con­tribution Savings Plan option, States and localities are still left to deal with past underfunding
--“There is a $6.6 trillion deficit between what 401k account holders should have and what they actually have.”


Defined-Benefit Pension Plans are more certain
--You cannot outlive the benefit
--You are not affected by Market volatility
--Defined-Benefit Pension Plan’s assets are held in trust and managed by professional investors
--Survivor and disability benefits are part of this plan
--This plan encourages a long-term career and stable workforce
--Since most Illinois teachers have not paid into Social Security, it is perhaps their only retirement guarantee
--This plan is the best choice for middle-class retirement
--Teachers with a Defined-Benefit Pension Plan are more likely to be self-sufficient and less likely to need public assistance 
--Your defined-benefit pension plan is associated with far fewer households that experience food privation, shelter adversity and health-care hardship
--Because teachers understand the value of such a plan, they are willing to give up higher wages
--TRS performance is well-diversified; it is in top ¼ of all public funds for the last 10 years
--Since 1982, the average rate of return has been 9.83 percent
--The costs for this plan are not excessive or expensive: 0.3% of total assets, and these costs are paid for by TRS.

Sources: The Teachers’ Retirement System, the Illinois Federation of Teachers, the National Institute on Retirement Security, Center for Retirement Research at Boston College, National Conference on Public Employee Retirement Systems, and Center on Budget and Policy Priorities    


Thursday, May 19, 2011

"What we have already achieved gives us hope -- the audacity to hope..."

"Most working and middle-class... Americans don't feel that they have been particularly privileged... They've worked hard all their lives, many times only to see their jobs shipped overseas or their pension dumped after a lifetime of labor. They are anxious about their futures and feel their dreams slipping away; in an era of stagnant wages and global competition, opportunity comes to be seen as a zero sum game..."  from Barack Obama's Speech on Race, March 18, 2008

Wednesday, May 18, 2011

Antedated Court Cases: Challenging the Pension Clause, etc.

Article XIII, Section 5 of the Illinois Constitution states:  “Membership in any pension or retirement system of the state or any local government, or any agency or instrumentality of either, shall be an enforceable, contractual relationship, the benefits of which shall not be diminished or impaired.” (Helen Kinney and Henry Green were the delegates who jointly “sponsored the pension clause proposal as an amendment to the proposed Legislative Article” at the 1970 Illinois Constitution).

To let the courts decide is a reckless disregard of a senator’s and representative’s duty to uphold the State of Illinois and the United States Constitution. Besides the datum that a State cannot pass any law “impairing the obligations of contracts” (Article I, Section 10, the Constitution of the United States of America), Appellate and Supreme Court cases are costly lawsuits at the taxpayers’ expense. 
1974       Peters v. City of Springfield… firemen filed suit
Pension rights are “earned.” There is no distinction between “earned” and “unearned” pension benefits… “The Clause protects pension benefit rights as an enforceable contractual relationship that is subject to modification through contract principles.”

1975       People ex. Rel. Illinois Federation of Teachers v. Lindberg
                …can’t force the General Assembly to fund the pension at a specific percentage
                (See McNamee ’96 and Sklodowski ‘98).

1979       Kraus v. Board of Trustees… Police Pension Fund, Niles
                Law existing at the time of “vesting” is incorporated into employee’s agreement…
Pension benefits commence at the time employee contributions begin… General Assembly cannot modify benefits.  “The Clause protects pension benefit rights as an enforceable contractual relationship that is subject to modification through contract principles.”

1982       Village of Sherman v. Village of Williamsville
                Record of proceeding of Constitutional Convention (21 July 1970)…
                Rights are fixed when an employee embarks upon employment.

1985       Felt v. Board of Trustees (Judges)
…can’t diminish terms of contract with pension system… Pension based upon salary of last day of service or last year. “The Clause protects pension benefit rights as an enforceable contractual relationship that is subject to modification through contract principles.”

1985       Taft v. Board of Trustees, Police, Village of Winthrop Harbor
                Employees have contractual rights regarding increases in pension benefits.

1987       Carr v. Board of Trustees… Police (Peoria)
Vested Case Issue: an employee acquires a “vested” right when he or she enters the pension system.

1987       Buddell v. Board of Trustees State University Retirement System (SURS)
                …can’t diminish terms of contract with pension system…
                Pension Code allows employees to purchase service credit for time in the military.
“The Clause protects pension benefit rights as an enforceable contractual
relationship that is subject to modification through contract principles.”

1988       DiFalco v. Board of Trustees… Fireman’s Pension of Wood Dale
Vested Case Issue: an employee acquires a “vested” right when he or she enters the pension system.

1991       Schroeder v. Morton Grove… Police
Vested Case Issue: an employee acquires a “vested” right when he or she enters the pension system.

1992       Hannigan v. Huffmeister
Vested Case Issue: an employee acquires a “vested” right when he or she enters the pension system.

1993       Barber v. Board of Trustees of Village of Barrington
Vested Case Issue: an employee acquires a “vested” right when he or she enters the pension system.

1996       McNamee v. State
Vested Case Issue: an employee acquires a “vested” right when he or she enters the pension system.
Asks questions whether “the Pension Clause mandates that the pension system be funded at a particular funding percentage or according to a funding schedule.”  The Pension Clause “creates an enforceable contractual relationship that protects only the right to receive benefits… a cause of action would exist if legislation diminished a person’s right to receive benefits or placed the pension system on the verge of default or imminent bankruptcy.”

1998       People ex. Rel. Sklodowski v. State
Vested Case Issue: an employee acquires a “vested” right when he or she enters the pension system.  (See Lindberg ‘75/McNamee ‘96) “Clause does not create a contractual basis for participants to expect a particular level of funding [unfortunately].”

1999       Doyle v. Holy Cross Hospital
Continued employment does not constitute supporting unilateral modification of an existing employment contract.

2001       Miller v. Retirement Board of Policemen (Chicago)
                …can’t diminish terms of contract with pension system…
“The Clause protects pension benefit rights as an enforceable contractual
relationship that is subject to modification through contract principles.”

2007       Ross v. May Co.
Continued employment does not constitute supporting unilateral modification of an existing employment contract. 

Added May 8, 2015:   Doris Heaton, et al. v. Pat Quinn, in his capacity as Governor of the State of Illinois, et al.
“…The judgment of the circuit court declaring Public Act 98-599 to be unconstitutional and permanently enjoining its enforcement is affirmed.”