Thursday, July 26, 2012

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

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