Tuesday, July 31, 2012

A Cheap Trick Editorial from the Chicago Tribune by Richard Palzer

"Want to talk about cheap tricks?" you ask in Tuesday's editorial, "August 17," (July 31). Yes, I certainly do, and I have candidates in addition to your examples of Illinois' pension systems being the nation's worst-funded. Let's start with the causes: the raiding of the retirement systems' funds over decades by legislators and other public officials, who diverted those funds for other uses, decided to underfund required contributions and, at times, even didn't contribute at all by taking so-called "pension holidays" – all of which led to the subsequent borrowing at higher interest rates to compensate for those inadequate and missed payments.

The victims of these cheap tricks, of course? The average employees and retirees relying on their promised benefits. At this point, let's make special mention of those who used their clout and position, unethically if not illegally, to game the system by writing and manipulating rules to enhance their own retirement. (Look no further than your own "Watchdog" series and most recently, Monday night's WGN – Tribune-owned – "Pension Games" expose, both of which point fingers and name names.)

Your readers and those who viewed the program – indeed, anyone paying attention – must be outraged at the mismanagement, the irresponsibility, and the self-serving machinations that have caused this financial crisis.

Want to talk outrage? How about those same rank-and-file employees and retirees who had their retirement funds stolen and, yet, are now being targeted as the ones to close the funding gap by having their benefits reduced? That double-theft should certainly meet your definition of cheap trick as well. I find it outrageous that the "solutions" being proposed by the politicians – and sadly, not just supported but heartily endorsed by the Tribune – center on diminishing benefits of the victims.

Once again, you urge the Governor and the lawmakers not to "leave Springfield until you've fixed pensions." But what does such "fixing" entail? Higher employee contributions, COLA reductions – whatever politicians can agree to that will extract from people's benefits? And these after your own investigative reports have exposed the real culprits?

More outrage – despite documented information arguing that Illinois has a revenue problem, that it's not the cost of benefits that is fueling the debt crisis. No mention is made that these alternatives to solving the problem even exist, let alone are recommended and may well be preferred. Only a glancing reference in reporter Mark Suppelsa's "Pension Games" to the infamous back-loaded repayment schedule – the so-called "ramp"—suggests that there is a focus besides benefit reduction.

Analyses, conclusions, and recommendations from the Center for Tax and Budget Accountability's Executive Director Ralph Martire and the Center on Budget and Policy's Iris J. Lav and Elizabeth McNichol detail tax structure changes that they maintain can put us on a path to solvency. If, indeed, such views have been considered – even dismissed – it's outrageous that in all of your coverage, your readers have been steered to benefit reduction as the only solution available. That's not accurate; that's not balanced. And not even making your readers aware that alternative solutions have been presented also qualifies as a cheap trick.

 –Richard Palzer

Sunday, July 29, 2012

Pension Issues (a letter from Senator Linda Holmes and response from John Dillon)

Dear John,

Thank you for contacting me with your concerns regarding the ongoing pension debate in Springfield. This is a serious problem that has been growing for decades due to previous underfunding by governors from both parties and Republican and Democrat-controlled legislatures as well as the current pension structure in place, which was passed decades ago.

Although nothing has come before the Senate at this time, House Speaker Madigan has introduced a bill in his chamber that would divert money promised to local governments to be put towards the state's pension obligations. I have always been an advocate for local governments and, as far as I'm concerned, this proposal is a non-starter. Taking money away from local governments during a time when many are already facing deficits themselves is irresponsible. I fully support ensuring that the state's pension systems are sustained, but I do not support "robbing Peter to pay Paul," so to speak.

Another reason for our current pension crisis is that people are living longer. The earned benefits structure that was designed decades ago was not crafted in a way that's sustainable for our current retirees. Simply put, if we do not make some responsible, fair reforms, the system will not be around for current employees' retirements.

The state's pension contribution for this fiscal year was $5.7 billion and next year it's estimated to increase by more than $1 billion. The increasing costs put pressure on other vital aspects of the budget, like education, health care and economic development, which means less money can be put back into the classrooms or for efforts to bring businesses to our State. Further, if we do not take any action, our state's bond rating will be downgraded again - costing Illinois even more millions in interest payments.

While we clearly need to address our pension crisis and I will support measures to do so, I am firmly opposed to shifting costs to local governments or local school districts. A fair and equitable solution must be achieved by bringing all stakeholders to the table: teachers, firefighters, police officers, etc. I do not support reforms that are unfair to Illinois working families and I am committed to preserving the pension system for current and future employees.

Again, thank you for contacting me and if you have any other questions, please feel free to call my district office or visit my website at www.LindaHolmes42.com.


Senator Holmes

Dear Senator Holmes,

Thanks for your response email. I'm sorry that I cannot support cuts to middle-class working people as a means to balance the budget, especially the cuts that would be made to the public servants of Illinois who (like me) forsook social security and received a less-than-generous starting salary to teach, etc.

You write that you cannot endorse "robbing Peter to pay Paul." In fact, we who worked as public servants in the State of Illinois are truly Peter, and you would rob us of what we had been promised now because "people are living longer"? So to speak. Where is your honor and vow to follow the Constitution of the State of Illinois?

Senator, your action, attitude and decisions will cause pain for hundreds of thousands of middle-class workers in the State of Illinois. Your ability to rationalize cutting cost-of-living increases and/or healthcare will certainly work toward lowering that longer life span for the late life and medically-needy pensioners. Have you considered this?

You understandably remained concerned about the increasing percentage of the annual budget eaten up by the necessary payment to the unfunded liability brought to us by Thompson, Edgar, Ryan, Blago, etc. In actuality, the increasing costs of meeting the ill-designed ramp-up will never be met by merely cutting costs to those who gave their working years to public service. Do the math, Senator, and you will find that once you start with COLA's or increased contributions, it will never be enough to satisfy the terrible debt created by earlier political thieves - NOT the people who paid in, gave up social security, and delivered honestly to the State of Illinois.

In the greatest affront to those who would work to make Illinois educated, safe from fire or harm, ready for after-college employment, etc., you would tell new hires that they cannot have anything unless they sacrifice more for what those in the Illinois government had done to all of us beforehand. Are you serious? Do you really think that Illinois can continue to attract great or even good candidates in education or service positions for these important positions with this penalizing requirement?

Senator, real solutions would require restructuring the debt to an amortized schedule instead of the steadily and exponentially increasing debt payment. The foolishness of such a design as in 1995 cannot be met - let's all face it. You write the laws - change it! In fact, the General Assembly has always had the power to force itself to make the necessary payment for the public sector, but they failed to pass that law too.

In addition, a restructuring of the tax codes in Illinois to a graduated system rather than an antiquated flat tax would provide billions in additional revenue for the state.

The only real foes to these two ideas are the corporations, like Motorola or Sears who get big breaks and then dump on the state anyway....

The other foe is the GA itself, where no one has the courage to do what almost every other sensible state in the union has already done. We are now one of only six states that hold on to the medieval method of tax collecting: even New York came around this last year. Look to a graduated system of taxing people and services for the sake of the people, Senator.

In addition, your insistence on cutting will make more than just a ripple in the middle-class economy of which hundreds of thousands are/were teachers. The middle class struggles through this recession, Senator. Will you cut the incomes of hundreds of thousands of middle-class workers now? What impact will that have on the local/state economy? And the cuts will never be enough. Have you really thought about this?


John Dillon

Friday, July 27, 2012

“Plaudite, Amici, Comoedia Finita Est”

"Applaud my friends, for the comedy is finally over"               
--attributed as Ludwig Von Beethoven’s last words

Shall it be Goethe’s, “Light, more light!”?
Though, Voltaire could hardly distinguish 
Between a candle and the flames of hell.
I might be more inclined to say something
Like Enrico Fermi’s, “I hope it won’t take long,”
Or maybe Douglas Fairbanks’ quip will do:
“I’ve never felt better.”

But what about, “So little done; so much to do”?
C.J. Rhodes was certainly correct.
And who has done so much in life to believe
Dylan Thomas's “Death shall have no dominion”?

“Dying [of course] is a very dull, dreary affair,”
W. Somerset Maugham said but only once,
And I agree.  Indeed,
There will be no fog rising in the distance
Or light at the end of some mysterious tunnel.

I can only imagine that great ending lines
Come with vision and revision
Like Hamlet’s “O, I die, Horatio! …the rest is silence,”
Or Louis the 14th's “Why are you weeping?
Did you imagine that I was immortal?”

Or perhaps Socrates’, “Crito, I owe a cock
To Asclepius, will you remember to pay the debt?”
Ah, to be so honorable and just at once.

But why should I worry about it after all? 
I still have enough time to get it right.  Though lately,
Pancho Villa’s “[Please] don’t let it end like this.
Tell them I said something!”
Might do in a pinch.

Thursday, July 26, 2012

A Letter from a Professional Teacher by Kristine Hester

I have been a suburban public school teacher for eight years. I attended a top-tier university and made a choice to forgo the lucrative, and for me personally unfulfilling, world of business and become an educator because I love teaching. Igniting a student’s curiosity, enthusiasm, and motivation is what drives me to succeed in my profession, and I am not alone -- I work in an environment devoted to the value of learning for both students AND staff.
Where my colleagues and I are now increasingly isolated, however, is in our view that what we do is important and valuable to society.
Every day in the newspapers, a reader, a columnist, an editorial board, or a biased reporter tells my colleagues and me that our job isn't worth what we are paid, that compared to someone with my education, (for instance, Master's degree plus several additional hours), workload (60+ hours per week, plus hours of professional development over the summers), and job performance (only stellar reviews), it is worth a pittance in the private sector. We are also reminded every day by administrators and parents that anyone could do our jobs better than we do them.
The importance of a child's education has been threatened by policies like No Child Left Behind and Race to the Top. I've been told over and over again that what I do doesn't matter, that unless it can be measured by data, it has no worth. How in the world can you measure inspiration with a number?
Teachers are not considered professionals any longer, nor are we considered valuable to society for the work we do with our students. And now, we are devalued in the current pension debate. We're told, "Don't take it personally...the state is broke and something needs to be done. Sure, there was a contract, but we don't have the money; so tough for you."
Yes, something needs to be done about the lack of revenue, but the state IS NOT BROKE BECAUSE OF MY COLLEAGUES OR ME. It is broke because policymakers spent money irresponsibly, and they didn't consider the consequences (or, more subversively, didn't care about them). I fail to see how I should be blamed and punished for this neglect. I don't ask to be given special treatment; nor do I ask to be put on a pedestal. I simply ask that the promises made to my profession be honored, just as I honor my financial commitments every day.
As most people know, educators did not cause the pension problem. Nevertheless, we are willing to work with the leaders and citizens of Illinois to help fix it. Just as we would ask our students to be responsible, we also ask that those responsible for the state’s financial problems be held accountable and that any proposed solutions are constitutional, practical and fair.
My colleagues and I chose this profession knowing that we would have no company car, no expense account, no business lunches, no bonuses, and no company-funded trips (aside from those on a school bus). We knew we would make a decent but not extravagant wage; more importantly, we believed that upon retirement, we would have a secure pension plan for the rest of our lives. What we have discovered is the state has now started to dismantle our financial security to fund its gross negligence. A typical response from private sector detractors: "Well, my 401k took a dump when the economy crashed; so should your retirement plan."
But there's a big difference that people don't want to talk about: their retirement plan was not promised by the constitution of the State of Illinois, and they were allowed to pay into Social Security. We didn't because the state made a deal to save money.
Eight years ago, I was excited about becoming a teacher. I planned on helping a lot of children find their place in the world. Today, I sometimes believe this is a pointless endeavor. Why bother? High-stakes testing and the gradual devaluing of education in this state and elsewhere in this country are demoralizing my colleagues and me, and some of them have started looking for other careers now.
I love working with children. I know I'm good at my job, and I know that I've made a difference in a lot of children's lives. I give them a reason to be excited about learning; I instill passion in them to become the best they can be at whatever they love most. Unfortunately, teachers who are intelligent, qualified, talented, and hard-working are going to leave the profession. What will that do to our system of education in Illinois and in the rest of this country?

Pension talking points by Fred Klonsky/ On the pension cost shifts by MiC

As we have battled for our pension rights over the past year, we have used the basic talking points provided by the IEA:
  • Any changes to TRS must be constitutional.
  • Any changes must bring financial stability to the system.
  • Any changes must be fair to members.
These have been good, but they are not enough as we head into an August House session in Springfield and a veto session of the Illinois General Assembly following the November election.

The following discussions with many TRS members around the state suggest:
  • We reject any plan that treats this as a benefit problem. It is a revenue problem.
  • The attack on benefits will have serious consequences for the economy of the state. A cut to TRS benefits will negatively impact the living standards of all working people in Illinois.
  • We will prepare for a defense of our constitutional protections.
  • Illinois must end its regressive tax-the-poor system and replace it with a graduated income tax.
  • State elected officials must address the repayment of the $40 billion owed to our pension system. The debt can be restructured but must be paid back.
  • A cost shift of the pension responsibility to local school boards will unfairly punish active TRS members who work, and taxpayers who live, in cash-strapped districts.

    --Fred Klonsky

On the pension cost shift

“Because for over fifty years the state either hasn’t paid what it owes or used TRS funds to build bridges, roads and, ironically, schools without raising taxes.”

I’m going to disagree with this as any politician in office now will tell you that we need roads and bridges and schools too, and your pension just costs too much to afford these important bits of infrastructure. This is a straw-man argument used to divide Illinois voters.

The state largely didn’t build bridges, roads or schools with this practice, but instead cut funding to these projects or privatized them or diverted their costs to local tax payers. Toll roads were extended so now we have more miles of toll ways. Illinois residents have to pay ever increasing fees to drive on them. Bridges outside the toll roads were largely left to crumble or wait their turn for federal highway funds. Schools were also left to crumble or have renovations paid for by local tax payer funded referendums. If these referendums passed, the cost was transferred to local tax payers; if not, too bad for the students.

What the state did by shirking its responsibility to fund pensions was to keep tax rates artificially low to support a regressive fixed-rate tax structure: a tax structure that is only in a handful of states in the US still support; a tax structure that sees a family earning $40,000 pay the same tax rate as a millionaire making $4,000,000; a tax system that is outdated, favors the affluent, and creates a structural deficit in the Illinois budget that has resulted in the underfunding of roads, bridges and schools for decades.

What the state did by shirking its responsibility to people like teachers, firefighters and police officers was also subsidize corporate profit margins. Those in Springfield were able to divert pension funding to corporate giveaways and to businesses making nearly $1 billion in profits or businesses that threatened to cut a few hundred jobs at the expense of needed social services if they didn’t get their extorted tax breaks – which then cut jobs anyway. To pay for these subsidized profits, necessary and important public sector services were cut and the Illinois taxpayers who filled these jobs were laid off by the thousands.

Don’t make the mistake of thinking that pension funds were diverted because Springfield politicians wanted to do something the majority of Illinois residents needed and elected them to do. Springfield politicians diverted the money earned by pension recipients to keep their influential donors’ tax rates low and profit margins high and thereby advance their political careers.

- MiC

Wednesday, July 25, 2012

Do We Value Education? by Cinda Klickna

The difficult thing to do in tough times is to understand where you are while remembering where you want to be. We have seen the American middle class under attack. The fact that unions have stopped education and educators from being completely decimated is, we believe, something for which we should all be thankful.

We need to bring the American middle class back. A high quality public education system, capable of attracting top quality teachers to the profession, is instrumental to that goal. In today's world, teachers are not being spared any of the problems other middle-class Americans see in their workplaces. They're paying more for insurance while wages stagnate. Thousands of Illinois teachers receive RIF (dismissal) notices every spring because school boards need to hedge their bets as to whether they'll be able to afford to bring them back. While most who want to return get to do so, they're finding larger class sizes and fewer resources at the same time that expectations are rapidly rising.

Like everyone else, teachers are being asked to do more for less. Like everyone else, we don't like it. We do it because we want to make a difference for students. As Charles Blow wrote in the New York Times, teachers are, understandably, feeling under attack and disrespected. There is strong reason to be concerned about the ability to continue to attract high quality people to the teaching profession.

We all need to ask ourselves some important questions: Do we mean what we say when we praise education and educators? Do we truly value the work that takes place in our schools? Does envy, largely based on the constant focus on the outliers in public education, invalidate the work done every day, every year by so many wonderful, caring school employees? Do we value teachers? Are these people, who do not receive social security, entitled to a reasonable retirement after decades of service to students?

If the answer is "Yes," then we all need to act to make sure that we continue to have quality teachers along with the resources that students need to succeed. We believe that is reasonable.

Cinda Klickna
Illinois Education Association President

Tuesday, July 24, 2012

A Discussion We Do Not Want to Have: A State's Police or Sovereign Powers

In regard to the “diminishing or impairing” of a pension clause or contract that protects citizens’ rights, the United States Supreme Court has held “that the court must establish that impairment is reasonable and necessary to serve an important public purpose, such as ‘the remedying of a broad and general social or economic problem.’ To show that a change is necessary, the state must establish that no less drastic modification could have been implemented to accomplish the state’s goal; and that the state could not have achieved its public policy goal without modification” (Education Sector Policy Briefs).

A state’s option to exercise its police or eminent domain powers, however, has seldom been brought to the test, and for obvious reasons. To declare that Illinois is in an “emergency state,” without attempting revenue restructuring, for instance, will no doubt ignite litigation and an examination of the ethical motivations of policymakers and whether they attempted to exhaust every alternative available to them for resolving the state’s financial debts before attempting to circumvent a constitutional contract. Consider HB 1447, HB 4513 and HJRCA 49.  

“Budgetary relief is not a legitimate public purpose; for a severe financial crisis (Great Recession), courts [have been] split [on the issue]. Courts seem to be in consensus that the long-term fiscal health of a pension plan to assure receipt of future benefits is a legitimate public purpose…  If a pension benefit is diminished without ‘offsetting consideration or benefit to plan members,’ courts will typically find ‘substantial impairment’” (Pension Reform, Legal Principles and Consideration).  The plaintiff must prove the unconstitutionality of statute beyond a reasonable doubt. Once offered, historically and legally, promises that were made need to be kept. 

“[It is true that] at the time of the 1970 Illinois Constitutional Convention, the State pension systems were no better funded than they are today. This circumstance, coupled with the fact that the legislature already had a poor track record of making its actuarially-required pension contributions, caused public employee groups to lobby Convention delegates to include the Pension Clause. These groups reasoned that constitutional protection was necessary because the Illinois General Assembly would renege on its pension obligations to public servants during a financial crisis. Convention delegates agreed and included the Pension Clause to foreclose that result” (Eric M. Madiar, Chief Legal Counsel to Illinois Senate President John Cullerton and Parliamentarian of the Illinois Senate).

Ten states have constitutional provisions that specifically protect public pension benefits. They include Michigan, Texas, Louisiana, Arkansas, Hawaii, New Mexico, Arizona, New York, California, and Illinois. The last four states listed “provide contract rights to benefits in place on the day of hire” (Pension Reform Legal Principles and Considerations, Office of the General Treasurer in Rhode Island (April 10, 2012), the Federal Statutory Law, ERISA, 29 USC 1054 (g) (1).   

Though the least protected are new employees, non-vested employees, active and vested employees, active/eligible to retire employees, and retired employees– in this order, in the State of Michigan, the ruling declared “the legislature cannot expect to balance the budget on the backs of state workers” (State of Michigan in the Supreme Court, August 2011). Another recent ruling, in Arizona, proclaimed “that a law changing the contribution that state employees make to their pension funds [was] unconstitutional” (Arizona pension law ruled unconstitutional, February 2012). 

Whether any new piece of legislation is a diminishment of Article XIII, Section 5 of the Illinois Constitution, and is deemed “reasonable and necessary” in order to carry out a “legitimate public purpose,” will depend upon Illinois courts and their interpretations. “More moderate alternatives that do not violate a constitutional contract,” such as the ability to raise taxes [through revenue reform] or to cut services, must be considered initially, as well as whether a legitimate public purpose is “an exercise of police power for a broad societal issue v. benefits for a special interest” (Pension Reform, Legal Principles and Considerations).  

Illinois revenue restructuring is advocated by the Center for Taxation and Budget Accountability, the Chicago Metropolitan Agency for Planning, the Institute on Taxation and Economic Policy, the Center on Budget and Policy Priorities, the National Council of State Legislatures, United for a Fair Economy, and other organizations. Revenue reform and enhancement is also promoted by the Economic Policy Institute, the Center for Policy and Economic Research, the National Association of State Retirement Administrators, and the National Institute on Retirement.

Why is the Illinois General Assembly not listening to the aforementioned organizations? Pension reform is propagandized by the Civic Committee of the Commercial Club of Chicago (Illinois Is Broke), the Civic Federation, the Chicago Tribune, the Illinois Policy Institute, Americans for Prosperity and their ilk.  

Nevertheless, one might assume the government of Illinois would not want to prove that its promises are worthless, especially when the “most basic purposes of the impairment [of the contract] clause [Article XIII, Section 5] as well as notions of fairness that transcend the clause itself, point to a simple constitutional principle: government must keep its word” (Laurence H. Tribe, American Constitutional Law).  

-Glen Brown

[Looking back now four years later, a better title would have been: A Discussion We Would Love to Have with the Illinois Supreme Court of the State of Illinois].

Sunday, July 22, 2012

I'm On Your Side by Diane Ravitch

I asked Diane Ravitch to write a letter to teachers that I could post on my blog. This was her response on July 22, 2012:

In the spring of 2010, I went out to college campuses to talk about my new book. The book was unusual for me because it was not a history; it was not a policy book; it was not a memoir. It was all three. I wanted to explain why I had come to realize that many of the ideas I had championed were wrong. I wanted to explain how testing and choice policies were undermining education. Testing was ruining curriculum and instruction. Choice threatened the survival of public education.

Chapter nine was about teachers and the research on teaching. For the most part, this research is written by economists, and it makes for dry reading. So I wanted to find a way to engage the reader and decided to look at the research through the eyes of my favorite high school teacher, Mrs. Ratliff. Suddenly it all came to life. I understood it better, and was better able to convey to readers how misguided the policies based on this research are. Without exception, the research judged teacher quality by teachers’ ability to raise standardized test scores. Since earlier chapters showed how the misuse of testing was warping instruction, all the pieces began to fit together. Standardized tests were being used and misused to make consequential decisions about students, teachers, and schools. 

Since the book was published, I have spoken to more than 200 audiences of all sizes across the nation, including the national assembly of the NEA and the national convention of the AFT. When I spoke about what I learned, I encountered a reaction I did not expect. Teachers came in droves, and many greeted me like a long-lost friend. In the question period, teachers got up to thank me for supporting them. When I was signing books afterwards, teachers came up with tears in their eyes and thanked me. On many occasions, a teacher said, “You have given me hope, and I’m not quitting.” Or, "you have given me the courage to keep going." When I was signing books in Denver, a woman stood about 15 feet away, watching. I called her over and asked her if she was all right, and she said, “I wanted to thank you, but I was afraid I would start crying.” 

For many months I was puzzled by the reactions I saw. I thought my account of what was happening was sobering, even depressing. How could anyone see in it a message of hope? A friend who is active in religious work listened to my puzzlement, and she said, “You are validating their truth. You tell them they are not crazy. You are on their side." 

I understood better, and I recognized that I have a mission to support teachers in a terrible time. I am doing that, and I will continue to do it, in articles, blogs, and whenever I am on a radio or television show. I will stand up and fight those who demean teachers. So many pundits and television documentaries and of course, that awful propaganda film “Waiting for ‘Superman,’” take potshots at teachers. Someone has to stand up for teachers, and I am glad to do it.

I do it because I admire teachers. I could not do for a day what teachers do every day. I could not manage a classroom of twenty-five five-year-olds. I could not teach thirty-five adolescents who wish they were doing something else. I could not tend patiently to the needs of children with disabilities. Teachers do it every day. 

There is no more important job in society than teaching. Teaching prepares for the future and preserves the past. Teaching is the one profession, as a now popular saying goes that makes all other professions possible. Teachers take on the most wonderful students and make them better, and teachers take on the most indifferent students and make them better.

But my admiration for teachers is not the only reason I am on the front lines, trading barbs with teacher-bashers. I support teachers because I am angered by the attacks on a noble profession. I am enraged that people who are wealthy and powerful attack teachers. I am angry that people who owe their station in life to teachers look down on those who educated them. I am angry that so many politicians are making policies that change teachers’ lives without consulting teachers. I am angry that politicians lay off teachers at the same time that they give tax breaks to corporations. I am angry when I hear about states passing legislation to take away tenure and seniority from teachers. I am angry that uninformed people say that experience doesn’t matter and that teachers don’t need academic freedom.

Having been in the field as a scholar for many years, I can’t believe that leading figures in our society think that a first-year teacher is just as good as or better than a teacher who has been in the classroom for ten or fifteen years. I want to ask every one of them, “When you go to a hospital with an emergency, do you want to be treated by an experienced doctor or a fresh resident? When you have a legal problem, do you want to see a lawyer or a law student? Next time you fly, will you feel better if they announce that your pilot graduated flight school a week ago?”

I can’t believe that so many disparage the value of a master’s degree. In what other field are people demanding that practitioners have less education and fewer credentials? 

I am astonished that federal policy now demands that teachers be evaluated by the test scores of their students. I have read the research. The results are predictable. Teachers will teach to the test. Schools will narrow the curriculum to only what is tested. States will play games with the test scores and move the goal posts to make themselves look good. Excellent teachers will lose their jobs unjustly. Teachers who know how to drill their students for the state tests will get bonuses and commendations.

I am on the side of teachers because most cannot defend themselves and speak out against for fear of losing their job. I speak because they can’t. And I won’t stop until a better day comes. A better day will come, because at some point the American people will realize that we cannot continue to beat up on teachers and to close public schools without endangering our children and our society.
And when that day comes, I look forward to giving a personal hug to every teacher I know.

Diane Ravitch 

Saturday, July 21, 2012

Maintaining the Long-Term Viability of TRS Benefits from Dick Ingram, Executive Director

During the first six months of 2012, the General Assembly’s on-going debate over teacher pensions and efforts to preserve the long-term stability of TRS took much of everyone’s attention. While I believe that change is necessary and will happen, it is impossible to know what will happen, or when, over the course of the next six months...

In March the TRS Board of Trustees approved a landmark resolution. It calls for action now to maintain the long term viability of TRS. It acknowledges that due to the state’s overall poor financial condition, TRS cannot count on the General Assembly meeting the statutory funding requirements for your pensions. According to projections, the state’s backlog of unpaid bills is expected to grow from $9.2 billion this year to $34.8 billion by fiscal year 2017. Pension costs are expected to grow by 35 percent during this period of time to $7.8 billion. The new revenues required to close the gap just for TRS over the next three decades number in the tens of billions of dollars.

This harsh reality is putting real pressure on legislators to make substantial cuts in the state’s budget, now and in the future. One of the single largest line items in the budget is the state appropriation for TRS and the other public pension systems. If the state cuts or freezes its contribution to TRS next year and in subsequent years, our calculations show that under the worst scenarios TRS could become insolvent between 2030 and 2049.

Many of you have heard me speak about the simple equation that we have to keep in balance, C+I=B. Contributions (C) plus investment earnings (I) have to equal benefits (B) over time. That equation is too far out of balance to ignore any longer. In order to keep TRS solvent over the long-term, meaningful changes in the Pension Code must be enacted to better balance expected revenues and anticipated benefit costs. With an understanding that changes to the Pension Code are a highly volatile subject, the trustees identified five key elements that must serve as the foundation for pension change:

1.      Use only actuarially-based math to determine contributions and liabilities. Illinois pension math dictated by law artificially lowers the state’s cost of funding pensions (by about $1 billion for fiscal year 2013, for example) and makes it difficult to reduce the System’s unfunded liability every year.

2.      Illinois must enact funding guarantees for the pension systems into law. A statutory funding guarantee like those in other states would ensure that all future state government contributions are made in full, so that we never repeat the circumstances we are in now.

3.      Fix the financial inequities of the Tier II funding and benefit structure. Tier II members pay the 9.4 percent payroll contribution like Tier I members, but the value of their benefits is only worth roughly six percent of their pay. This is fundamentally unfair and will create a multi-billion problem within 30 years.

4.      Any solution enacted by the General Assembly must be uncomplicated and easy to understand and administer. 

5.      Any solution must adhere to the Illinois Constitution’s Pension Protection Clause.

To their credit, state officials have recognized the Board’s five key elements as a basis for legislation. But as you can imagine, the debate over solutions that fit within these elements has been wide-ranging and intense. Other than a consensus that changes must be made, an agreement on exactly what should be done has been elusive. State officials and legislators are being pushed and pulled in several directions at the same time.

This is where your activism has been important in shaping the discussion. Legislators recognize that the 362,000 TRS members are scattered throughout Illinois and that educators are politically active and fully understand the issue. Your telephone calls, emails, personal visits and letters will continue to influence the debate.

But legislators also recognize that it will be impossible to produce a solution that secures the long term finances of TRS and keeps the current Pension Code intact. The numbers that define the problem are just too big. Right now, the $44 billion TRS unfunded liability is larger than the state’s entire general fund budget of $33 billion. The TRS portion of the state budget, about 7 percent, totaled approximately $2.4 billion in fiscal year 2012. To simply keep TRS funding level at 7 percent of the budget over the next 30 years would add $64 billion to the unfunded liability. If TRS funding in the budget were to grow by 3 percent annually, the unfunded liability would still grow by $40 billion.

This is why the legislators are centering debate over a solution on changing benefits for active and retired TRS members, specifically the annual cost of living adjustment (COLA). The simple fact is that the COLA is the single largest component – about 21 percent – of the annual cost of TRS benefits. This year the COLA alone increased the cost of TRS retirement benefits by $900 million. That is why pension changes in other states have typically focused on changes to the COLA.

The Constitutional protections for pension benefits have been well reported. It is a certainty that if the General Assembly approves a change in the COLA, their actions will be challenged in court by organized labor and member groups. The outcome of any court case is uncertain. While changes to the COLA have received most of the attention, other changes have been discussed as well. While subject to change and clarification, here is the menu of major proposals:

A Benefit Choice for the Future: COLA and Health Insurance

This proposal calls on all active, inactive and retired TRS members to choose between two options in the make-up of their retirement benefits after July 1, 2013. As currently drafted, this irrevocable, one-time election would have to be made between January 1, 2013 and May 31, 2013. Whether these dates would hold in any final legislation remains to be seen. This proposal would save state government an estimated $33.4 billion to $37 billion over 30 years.

• Option 1: Accept a change in the annual COLA – from 3 percent compounded to a COLA that is capped at 3 percent or one-half of the consumer price index, whichever is less. This COLA would not be compounded. The TRS member retains “access” to state supported health insurance through the Teachers’ Retirement Insurance Program. For active members, all future salary increases will be used to calculate the member’s future pension.

• Option 2: Reject the change in the COLA and it remains at 3 percent compounded annually. The TRS member loses “access” to retiree health insurance through TRIP. For active members, no future salary increases would count when the member’s future pension is calculated.

New Start Date for a COLA

Under this proposal, TRS members agreeing to Option 1 would first see the new COLA on the January 1 in the year after turning age 67 or in the year after the fifth anniversary of the member’s retirement, whichever is earlier.

Cash Balance Plan

This proposal creates a new “Tier III” that is commonly referred to as a “cash balance plan.” All new TRS members hired after July 1, 2013 would automatically be in Tier III. Existing Tier II members could elect to join Tier III.

• TRS members would pay a 9 percent annual contribution, and school districts would pay a 3.4 percent contribution. TRS would annually credit investment earnings to each member’s account.

• Upon retirement, TRS would calculate a guaranteed life-time annuity based solely on the nominal balance in the account that reflects contributions credited to each member and adjusted for estimated future investment earnings and the member’s anticipated lifespan.

Requiring State to Pay TRS Annual Contribution

Under this proposal, if the state fails to pay any monthly share of its legally-required contribution to TRS within 90 days, the TRS Board would have the right to seek a court order commanding the comptroller to pay TRS. Similar to other states, the goal of this provision is to guard against future underfunding that threatens the System’s ability to meet its obligations to members.

Shifting the Annual Cost of Pensions to Local School District

While not addressing pension costs, this proposal would make school districts responsible for paying an increased share of the annual costs of TRS pensions, and the state would pay less toward these costs. Eventually, school districts would be responsible for paying the entire annual cost of benefits being earned every year.

Under one plan, between 2014 and 2019 the share of the annual pension cost paid by local school districts would increase by 1 percent of payroll each year and then by 0.5 percent in each year after 2019 until the total annual pension cost is paid by the districts.

Under a second plan, school districts immediately would have to pay the added pension costs of any and all raises granted by school boards to TRS members. Current state law requires all school districts to pay an additional contribution to TRS to cover the increased pension cost for any raise used in a final average salary calculation that exceeds 6 percent in any one year. This proposal would lower the 6 percent threshold to zero percent.

I continue to believe that the central question surrounding changes in the Pension Code is “when,” not “if.” Discussions over potential legislation will continue. Governor Pat Quinn has discussed the possibility of a special legislative session this summer or fall to address the pension issue. If legislators are not called back to Springfield during the summer, the next opportunity for any action on pensions will be in November – after the election. The TRS Web site will continue to be a good source of information that can help you better understand what’s going on. TRS will remain closely involved in all discussions. I urge you to remain aware, informed and active as the future unfolds. Your voices do make a difference. (This article is from http://trs.illinois.gov/subsections/pubs/topics/summer12.pdf)

For perspectives on some of the aforementioned proposals,

“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

“Dear Illinois Policymaker: It's a State Revenue Problem, Indeed, Plain and Simple. So Raise the Money and Pay the Debts”: http://teacherpoetmusicianglenbrown.blogspot.com/2012/02/plain-and-simple.html

“Assumptions, Concerns and Questions Regarding TRS Insolvency…”: http://teacherpoetmusicianglenbrown.blogspot.com/2012/04/assumptions-concerns-and-questions.html

“A Foreshadowing of Illinois Pension Reform: An Analysis”: http://teacherpoetmusicianglenbrown.blogspot.com/2012/04/foreshadowing-of-illinois-pension.html

“COLA (Cost-of-Living Adjustment): Is It Guaranteed in Illinois”: http://teacherpoetmusicianglenbrown.blogspot.com/2012/03/cola-cost-of-living-adjustment-is-it.html

Pension Vocabulary, June 10, 2012, “Cash Balance Plan”:  https://sites.google.com/site/pensioneducationsite/pension-powerpoint/pension-word-of-the-week

Transferring the State’s “Normal Costs” to the Pension Systems to Illinois School Districts Will Have Consequences: https://sites.google.com/site/pensioneducationsite/updates-in-pension-education-1/normalcostsorthestatesfiscaltarbabybyjohndillon