Monday, November 12, 2012

Dear Retired Public Employee

Meet with your legislators before the veto session begins on November 27 and have this discussion with them:

·         Regarding the diminishment of the COLA, currently-proposed “pension reform” offers retired and current public employees no ethical and lawful alternatives except to consent to the Illinois General Assembly’s demands by choosing between two illicit choices;

·         It is unlawful to induce undue pressure upon retired and current public employees to make an unfair choice;

·         It is a breach of contract for retired and current public employees to receive less than what the original vested right and benefit guaranteed.

There are practical alternatives that will enable the State of Illinois to uphold its contract with retired and current public employees, and they are also constitutional. We cannot forget that Illinois legislators have diverted nearly $15 billion intended for the pension systems over the past decades. General Assemblies have created approximately one-half of the pension systems’ unfunded liabilities and, as a result, the State of Illinois has a serious REVENUE DEBT PROBLEM that must be resolved. So-called “pension reform” does not address the current unfunded liability. It is irresponsible and unethical to place the burden upon those people who did not create the pension debt problem.

·         According to the National Association of State Retirement Administrators, legislators must “keep in mind that state and local pensions accumulate and pay out assets over decades. They have an extended investment horizon.”  Therefore, the focus should be on structural tax reform in Illinois and not “pension reform”;

·         There needs to be a modernization of state and local budgets and their revenue systems, not “pension reform”;

·         “The structural problems that have built up over time in these systems need to be addressed, [not ‘pension reform’]” (The Center on Budget and Policy Priorities);

·         With a constitutional amendment, “given an appropriately designed graduated-rate structure, Illinois could cut the overall state income tax burden for 94 percent of all taxpayers—on average providing a tax cut to every taxpayer with less than $150,000 in base income annually [and] raise at least $2.4 billion more in revenue…  Illinois taxpayers with the bottom 94 percent of base income collectively would receive an annual tax cut of $1.06 billion… [T]he combined effect of this policy would be a stimulus to the economy from tax cuts and additional state spending (assuming that the additional revenue is used to fund current public services that would otherwise not be funded) that would create at least 36,000 private sector jobs in communities across Illinois…” (The Center for Tax and Budget Accountability);

·         “At the core of the budget crisis facing [Illinois] is [its] regressive state tax structure… that is, low-and-middle-income families pay a greater share of their income in taxes than the wealthy…  [A regressive tax] disproportionately impacts low-income people because, unlike the wealthy, [low-income people] are forced to spend a majority of their income purchasing basic needs that are subject to sales taxes” (United for a Fair Economy);

·         “Since the rich are able to save a much larger share of their incomes than middle-income families – and since the poor [can] rarely save at all – the taxes are inherently regressive” (The Institute on Taxation and Economic Policy);

·         Illinois is in the top 10 of regressive state tax systems where the wealthiest taxpayers do not pay as much of their incomes in taxes as the poorest and middle-income wage earners. Increase taxation on the wealthy to pay the state's debts (The Institute on Taxation and Economic Policy);

·         Illinois is one of five states with sales taxes on fewer than 20 services. Tax services to pay the state's debts (The Center on Budget and Policy Priorities);

·         Broaden the sales tax base to include selected consumer services to pay the state's debts;

·         Implement a more timely system of payments (cash management practices are greatly affected by budgetary practices in relation to deferred liabilities which place additional pressures particularly in the first and second quarters of the year to pay those expenses; timing of tax payments also affects the state's cash flow and should be adjusted accordingly);

·         “Pension reform” does not change the current unfunded liability! The current Pension Ramp is a significant problem. It entails larger payments today as a result of the 1995 funding law – Public Act 88-0593 – to pay the pensions systems what the state owes. There needs to be a required annual payment from the state to the pension systems. The debt needs to be amortized for a longer frame of time (a flat payment) just like a home loan that is amortized;

·         Legislators are expected to pay the state's debts responsibly and to honor their oath of office (in other words, uphold the State and U.S. Constitutions and safeguard legal and moral commitments). They are not voted into office to renegotiate contracts, thereby impairing constitutional obligations. 

Glen Brown

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