Thursday, March 28, 2013

Meet and talk to your legislators

Focus on the solutions for the problems legislators have created and perpetuated in Illinois: the state’s structural revenue deficit and pension debt. (Focusing on the legislators’ proposed “pension reform” keeps their message of challenging constitutionally-guaranteed benefits and on cutting teachers’ earned pension benefits in the forefront and reinforces their skewed conversation).

Change your legislators’ discussion from the "pension reform" focus to their need to “reform” the existing pension ramp, to eliminate tax loopholes for “Tax Increment Financing Districts” and for large corporations, to tax services and to broaden the tax base, to establish a graduated income tax (by 2015), to increase taxation on the wealthy, and to make the required payments to the pension systems instead of shifting the normal costs to school districts and colleges, to name a few solutions. In other words, legislators need to honor their contract with public employees and pay the state’s debts. Emphasize that “pension reform” will violate both the State and U.S. Constitutions that all legislators have sworn to uphold; moreover, “pension reform” will hurt the working middle class and not only negatively impact the state’s economy but increase unemployment. Tell your legislators your solutions are legal and moral and will help solve the pension debt and revenue debt problems that they have created.
    • Do not give your legislators’ insistence for “pension reform” any response; instead, turn your legislators’ attempt to discuss “pension reform” to ethical and legal solutions that will address the causes of the budget crisis and will not penalize public employees.
    • If your legislators bring up the Civic Committee’s "Illinois is Broke and its flawed argument, for instance, say, “Yes, Illinois is “morally and ethically broke” and, with your proposed pension reform, the state will be “legally broke” too.
    • If your legislators say, "Something must be done..." – Tell your legislators that every proposed bill, thus far, is seriously flawed and will have dire consequences; that pension reform will not resolve the state’s revenue and pension debt problems.
    • If your legislators say, “But we have to reform pensions to fix the state budget,” shift the conversation to the causes of the state budget's structural deficit and pension debt. Emphasize the decades of fiscal mismanagement, irresponsibility and incompetence that caused Illinois' continuing structural budget problem that led to the current budget "crisis." Emphasize that legislators who continue to ignore the factual problems by advocating the passage of “pension reform” will hurt middle-class workers who didn't create the problem and the people they serve; tell them how “pension reform” will make things worse for the Illinois economy; how legislators in Springfield who give tax breaks to corporations earning millions of dollars in profits will inevitably lead to cutting public services and laying off workers to pay for them.
Legislative Solutions instead of “Pension Reform” or Breaking a Constitutional Contract
·         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;
·         Make the 2011 income tax hike permanent. Designate the additional 2% in income taxes (approx. $7 billion per year) solely for paying down the unfunded liability… Secure enough funding through sale of pension bonds to erase the entire unfunded liability at a suitable rate ($100 billion at 6.5%). This will turn “soft” debt into hard debt and a guaranteed payment for (let’s say) 25 years in an amortized and consistent method to pay back bondholders… Bond companies will now have a commitment to timetables and repayments they do not have currently from Illinois. They may also be willing to assist in this re-amortization of expenses. The annual payment will be known and unchanging as the state moves forward. The economy in Illinois (5th highest GDP in all 50 states) will gear up, and there will be a lessening of expense and a growth in revenue. There will be no constitutional fight, and public sector employees’ contributions and good works would be honored…;
·         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, CTBA);

·         “The State shall provide for an efficient system of high quality public educational institutions and services… The State has the primary responsibility for financing the system of public education (Article X, Section 1 Constitution of the State of Illinois). There needs to be a required annual payment from the state to the pension systems;

·         Tax services. Broaden the sales tax base to include selected consumer services. Illinois is one of five states with sales taxes on fewer than 20 services (The Center on Budget and Policy Priorities);

·         Eliminate the tax loophole for “Tax Increment Financing Districts”;

·         Eliminate “Edge Tax Credits” and other tax loopholes for large corporations in Illinois;

·         Increase taxation on the wealthy: 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 (The Institute on Taxation and Economic Policy);

·         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);

·         Shifting the state’s “normal costs” for the public pension systems to school districts will have negative consequences. “Property tax bases would not be sufficient to absorb any shift in the employer normal cost for teacher pensions… School districts are demographically and financially varied, and it would be difficult to impose a uniform normal cost shift on them… Illinois ranks last in terms of state spending on K-12 education, and school districts are already relying heavily on local property taxes… While shifting the state’s normal cost obligations onto school districts may provide some relief to the state’s budget, it will not mitigate these financial obligations and will instead push them onto school districts that, on average, already derive the majority of their revenue from local sources” (CTBA). The state should continue to pay the normal costs for the five "public pensions";

·         Create a Speculation Sales Tax: a $1 per transaction on contracts traded on Chicago derivative exchanges (Dr. William Barclay);

·         Examine and improve the efficiency of the state’s government. This includes establishing term limits for Illinois legislators.


  1. This is Rep. Rene Kosel's response to my email asking if she was familiar with Ralph Martire's solution to the pension problem. I also asked why the General Assembly isn't looking at making corporations pay their share:

    Yes I am familiar with Ralph Martire's ideas -- they have been around for years and in my opinion will do more to hurt the states economy then help it .

    Illinois has one of the highest total tax burden of any state 45 of 50 -- Our economic performance is 48 of 50 -- Corporate Tax Rate 44 of 50 Out Migration (people running any place but Illinois) 48 of 50. State Liability System , costs of litigation etc. 45 of 50.

    Don't think we can afford to run more employers out of the state when we have one of the highest cost of doing business numbers in the country.

    Am I not understanding how she represents these statistics? She says Illinois has one of the highest tax burdens in the country: 44 out of 50. I would take that to mean there are 43 states that have a higher tax burden. The other stats also seem backwards. Anyone familiar with these stats?

  2. If Renee means that 43 states have a lower tax burden, there is a serious question as to what sort of incompetents we have been electing and why. The teachers have paid every penny they were asked to pay. Oops, th State of Illinois has not, rather, it has used the Teachers' Retirement Fund as a slush fund.