Friday, August 24, 2012

Lawmakers’ state pension debate misleading (by Bill Knight)



Most Illinoisans seem torn between anger about state pensioners supposedly getting rich off taxpayers, and concern about state-worker neighbors caught between incompetent lawmakers and greedy credit agencies in cahoots with big banks. The real debate should be one timid type in Springfield (or Washington) to avoid: What do citizens want government to do and how will it be funded?

Gov. Quinn called a one-day legislative session [last] Friday, [August 17]. House Speaker Mike Madigan [did not] call House Bill 1447 for a vote… (Full disclosure: I earned a modest pension for 22 years of service as a state university teacher, so I’m affected; that’s why I’ve been reluctant to comment. But I’ve recognized private-sector workers screwed out of pensions by companies exploiting bankruptcy laws or busting unions, and most Illinoisans are affected in some way, so I’m weighing in.)

Legislators failed to come up with a way to “reform” state pensions this spring. Top lawmakers this summer met to discuss a compromise but failed...

The systems are about 40 percent funded, but that’s misleading. Actually, Illinois wouldn’t have enough to pay its pensions ONLY if every state employee retired NOW — if every state cop, clerk, transportation worker, university professor, prison guard, judge, etc. retired TODAY. But pension benefits are distributed over decades. The money is not due all at once any more than a mortgage must be paid the day a new buyer moves in.

Other overlooked points:

• It’s the responsibility of the legislature and governor to fulfill promises the state’s made, whether paying bills, funding schools, building roads or protecting communities. If that requires changes — decreases to discretionary spending or increases in taxes — do so.

• The situation was created by lawmakers and administrations for years. Since 1994, the state contributed its required pension share just once (in 2004). Four times (1994, ’95, ’96 and 2006), it paid less than one-third of the necessary amount.

“Governors and legislators of both parties have been skipping or shorting the state’s share of pension payments for decades,” agreed Koehler, a Peoria Democrat. “The [Republican Gov. Jim] Edgar administration kicked the can down the road during the boom years of the 1990s to avoid making tough decisions and spending cuts at a time when the state could have better afforded it.”

Pension funds aren’t just missing state contributions; they’re missing the investment returns and interest that money would have earned.

State pension recipients — whose median benefits are less than $24,000/year — cannot collect Social Security for years employed by government — also saving government (and taxpayers) money since those employers don’t have to pay FICA.

• Whether state pensions, guaranteed by Illinois’ constitution, or private pensions, they’re part of a pay package pledged in exchange for services performed, only deferred compensation paid later. It’s an asset, sort of a promissory note. Compare your finances. If your lender on its own hiked your monthly house payment, your company unilaterally cut your pay, or your bank on its own decided your savings account was worth two-thirds of what your passbook says, would that be “reform”? Technically, yes; it’d be wrong, too.

• Plus, it’d be bad for the economy, particularly in rural areas.

“Pension expenditures may be especially vital to small or rural communities, where other steady sources of income may not be readily found if the local economy lacks diversity,” says the National Institute for Retirement Security’s recent report. “Additionally, reliable pension income can be especially important in stabilizing local economies during economic downturns, because retirees know they are receiving a steady check despite economic conditions.”

• Balancing budgets on the backs of workers (who pay taxes too) reduces consumers’ spending and hurts morale since it pits workers against the public they’re serving.

As far as public opinion: Most robbery victims would sympathize with other people about to be held up, but right-wing media and wrong-headed legislators have created scapegoats to cover their own failures. Bill Fletcher, Jr., author of “They’re Bankrupting Us!” and 20 Other Myths about Unions, explained the disconnect: “What the right wing has managed to do is get workers who have been crushed angry at somebody else. It is easier for regular working people to start blaming someone that they can physically identify — someone that cannot penalize them — rather than actually taking on the real powers, the people in Wall Street who have walked away with billions.”

This article was originally posted on www.PekinTimes.com. It is posted here with Bill Knight's permission. Contact Bill Knight at Bill.Knight@hotmail.com.

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