Wednesday, January 9, 2013

Why Will Some Legislators Continue to Assault Public Employees’ Constitutionally-Guaranteed, Earned Pensions?

According to Eric Madiar, "Pension benefits are under siege for two reasons: opportunity and political motives." Because Illinois has the worst funded public pension systems in the nation, "for proponents of pension reform, the window of opportunity is open."

Moreover, according to Eden Martin of the Civic Committee of the Commercial Club of Chicago and past president, "[This is] not about the law at all, it's about the politics and arm-wrestling over money."

"These two points [opportunity and political motives] are significant because they frame [the] larger discussion of whether the law provides states with a means to achieve a particular political objective: the unilateral reduction of public pension benefits to avoid painful tax increases, service cuts, or both."

According to Madiar, however, "in Illinois, the answer is unequivocally 'no.'"

(Eric M. Madiar (2012). Public Pension Benefits Under Siege: DoesState Law Facilitate or Block Recent Efforts to Cut the Pension Benefits ofPublic Servants? ABA Journal of Labor & Employment Law, V. 27, no. 2, 179-194.

Two “Non-Painful” Ways to Address the State’s Revenue and Pension Debt Problems:
The current “Pension Ramp” does not work for the five public pension systems. The “Ramp” 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. The pension debt needs to be amortized for a longer frame of time (a flat payment) “just like a home loan that is amortized.” Though the initial payment will be greater in the beginning, over the long term it will become a reduced cost and a smaller percentage of the overall Illinois budget as it is paid off throughout the years;
Raise revenue to pay the state’s debts. 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, raise at least $2.4 billion more in revenue, and keep the effective individual income tax rate for millionaires well below five percent… 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…” (Executive Director Ralph Martire, Center for Tax and Budget Accountability).

1 comment:

  1. Eric Madiar, you, and many other insightful persons see this exactly right: it is Naomi Klein's Shock Doctrine playing out here in Illinois for public sector workers now that the state has created a crisis. Ironically, as the Democratically super-majority General Assembly convenes, it is not ALEC but ourselves and our Democrats we must fear. Let's all promise to find real, moral, and honest solutions.