Thursday, October 18, 2012

Constitutional Amendment on the Illinois Ballot by Courtney Eccles


It is unfortunate that so little light has been shed on the amendment to the Illinois Constitution that will be on the November 6 ballot. That ballot initiative reads:
“If you believe the Illinois Constitution should be amended to require a three-fifths majority vote in order to increase a benefit under any public pension or retirement system, you should vote YES on the question. If you believe the Illinois Constitution should not be amended to require a three-fifths majority vote in order to increase a benefit under any public pension or retirement system, you should vote NO on the question. Three-fifths of those voting on the question or a majority of those voting in the election must vote “YES” in order for the amendment to become effective on January 9, 2013.”

We have been reading for months, if not years, about exploding public pension costs that are looming in Illinois, ready to further eviscerate all other state services. That being the case, at first glance we may think that we would not want any governing body, such as the General Assembly, to increase future benefits—and costs—for state workers or teachers, thereby leading us to vote for this amendment to help solve the problem. Right? Wrong!
Let us not be confused. This amendment does nothing, not one jot, towards solving the public pension problems of our state by decreasing our unfunded liabilities, $83 billion worth. It only seems to address the problem, as may have been, in fact, the General Assembly’s motive in putting this on the ballot. Perhaps many members of the General Assembly thought it was harmless window dressing. Wrong again! It could have serious unintended consequences.

Some background is required. The General Assembly did pass co-called pension reform in 2010 for new hires for all public retirement systems in Illinois by creating a reduced benefit tier, Tier II. The bill was rushed through in one day. All indications are that it went too far, cutting future benefits so severely that anyone retiring on this pension would be impoverished and have a lowered standard of living. The bi-partisan Center for Tax and Budget Accountability (CTBA) in a striking example, based on information from the Teachers Retirement System, estimates that the total value of Tier II retirement benefits for newer and future teachers outside Chicago would be approximately one-third the total value of the Tier I benefit for other teachers when they retire.
So how much money are we talking about?

To put this into perspective, the Illinois Retirement Security Initiative at CTBA tells us that the average fiscal year 2010 pension benefit for current retirees was $44,844 for teachers outside Chicago, and $31,981 for state employees. It is obvious these are not large sums. But we also need to know that 80% of these public employees in Illinois do not have Social Security. That being the case, as CTBA has stated, the state’s public pension problems are not due to overly generous pensions, but to the state’s long-standing practice of diverting payments to public pension funds to pay for other services, such as education, public safety, and human services, thus masking the true cost of pensions.
Moreover, as quoted in the State Journal Register on December 25, 2010, consultants to the Teachers Retirement System have said that it is probable that, in as little as eight years, these new hires won’t be accruing a benefit that meets the minimum standards for the state to be exempted from Social Security. If that were to happen, school districts across the state and these teachers might each be paying half of the 12.4% FICA payment. This would be in addition to the 9.4 % of salaries that teachers must contribute to their pensions. Not only could this be an expensive unintended consequence, but as it has never happened before in the history of Social Security that a state has lost its exemption, we do not know what action the federal government would take.

Conclusion: The pension reform already enacted for new hires is seriously flawed, and Constitutional Amendment 49 will make it extremely difficult—if not impossible—to repair the damage. The General Assembly cannot often get a majority vote on controversial issues, and a three-fifths vote requirement would make it that much more difficult.
To protect recent and future public employees and the quality of public services, vote NO on CA 49.

Courtney Eccles is the Assistant Director of Outreach and Policy at Protestants for the Common Good, an education and advocacy organization advancing justice in public life.

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