Tuesday, April 30, 2013

Madigan makes pension move, submits own plan by Greg Hinz (Crain’s Chicago Business)

After months of preliminary maneuvering, Illinois House Speaker Michael Madigan today finally unveiled a plan for state pension reform that he’s sponsoring and that he will seek to push through the House as soon as Wednesday, [May 1].

In a 271-page proposed amendment to a pending Senate bill, Mr. Madigan calls for workers employed by the state, Illinois universities and school districts outside of Chicago to pay more, get reduced retirement benefits, and retire later if they’re younger than 45. In exchange, unlike in the current law, the state’s five major pension funds would be authorized to go to court to collect what they’re owed if the state fails to make its required annual contributions.

Various elements of that proposal have passed the House in recent weeks with Mr. Madigan’s backing and are similar to a proposal sponsored by Rep. Elaine Nekritz, D-Northbrook, and Illinois House GOP leader Tom Cross. But up to now Mr. Madigan has not put together all these elements into one bill. Of equal importance, the amendment puts Mr. Madigan on a different path than Senate President John Cullerton, who sponsored the measure, SB 1, that Mr. Madigan wants to amend.

Mr. Cullerton would allow retirees to choose between keeping state-provided health insurance and full benefits, saying the Illinois Constitution requires such “consideration.” Mr. Madigan disagrees, and his amendment would ban the use of pension funds to subsidize retiree health care.

Steve Brown, Mr. Madigan’s spokesman, said the bill definitely will be called for a hearing and, presumably, a vote, by the House Personnel and Pensions Committee at 8:30 tomorrow morning.

Asked if the speaker will ask for full House action tomorrow, Mr. Brown said, “It will be called at some point. But I don’t know whether the timing is set.”Mr. Cross told me his staff still is reviewing the proposal but indicated that with a couple of exceptions, it appears similar to measures he has backed in the past.

According to a fact sheet that Mr. Madigan is giving House Democrats this afternoon, the measure would require the pension systems to reach 100 percent funding by 2044. The size of payments would be much more level than under the prior funding scheme, which delayed the heaviest payments until decades into the future. Under the new scheme, the state would be required to pay an extra $1 billion a year above and beyond the required actuarial level starting in 2019.

Retirees would still get a cost-of-living allowance, but the COLA would be capped, applying only to the first $1,000 of income for each year of state tenure ($800 for those who get Social Security). That’s slightly different than an earlier bill, which applied the COLA only to the first $25,000 of a person’s annual pension. Of note, the change is modeled on a proposal pushed by Senate GOP Leader Christine Radogno.

Pensions also would be capped initially at the first $109,971 of salary. The figure would rise at one half the consumer price index for urban consumers. Retirement ages would go up on a sliding scale, with those younger than 35 today allowed to retire with full benefits five years later than they are now, generally at 67. Those over 45 would be exempted. Workers of all ages would be required to pay an additional 2 percent of salary for their benefits.

In one reform aimed at abuses by some labor leaders, “non-governmental” organizations would be banned from participating in funds that cover teachers, university employees and municipal workers. And all new employees of all state systems no longer could count sick time or vacation time in calculating their annuity…

Continue reading more at Madigan makes pension move, submits own plan

Monday, April 29, 2013

Dear Legislators: Repeal Government Pension Offset and the Windfall Elimination Provision

Senator Durbin
Senator Kirk
Representative Foster

As an educator and a constituent, I urge you to co-sponsor and support immediate passage of the bipartisan Social Security Fairness Act (S.  2010/H.R. 1332), which would repeal the unfair Government Pension Offset (GPO) and Windfall Elimination Provision (WEP).

“Some 300,000 individuals lose an average of $3,600 a year due to the GPO - an amount that can make the difference between self-sufficiency and poverty. Impacted people have less money to spend in their local economy and sometimes have to turn to expensive government programs like food stamps to make ends meet. Individuals who worked in other careers are less likely to want to become teachers if doing so will mean a loss of earned Social Security benefits. The GPO and WEP are also causing current educators to leave the profession and students to choose courses of study other than education" (IEA).


glen brown

I just took action on this issue and thought you might find it important too.
Please click on this URL to take action now:

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from Barack Obama:
February 2004

Dear Friends:

As I have traveled around our state during the past year in my campaign for the U.S. Senate, I have heard from many Illinoisans about the problem of Social Security offsets.  They have told me how these offsets, specifically the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO), create a hardship for many retired teachers, government employees and state university and community college employees who receive state pensions.

Surviving spouses who are state employees have told me of their need to work well into their 70s because to retire would mean losing a huge portion of their Social Security benefits -- since their state pension would trigger the GPO.  Others have told me that, because they worked in both the private sector and the public sector, Social Security benefits they earned were reduced significantly by the WEP.

I also understand that many people who have private sector positions -- and significant pension benefits as a result of those positions -- receive full Social Security benefits without suffering offsets.  This seems discriminatory to me.  In fact, it seems all too reflective of the policies of the Bush Administration, whereby the most fortunate receive preferential tax breaks and loopholes and the less fortunate are deprived of the benefits they have earned and deserve. 

Therefore, I pledge that, if elected to the U.S. Senate, I will support legislation designed to eliminate these Social Security offsets, which adversely affect retired state and government employees and future retirees, and I will work with my Senate colleagues to introduce such legislation.

We need a government in Washington that rewards hard work and promotes fairness and equal opportunity for all people – not just a favored few.  I look forward to carrying on that fight on behalf of all the people of Illinois.

Barack Obama

Sunday, April 28, 2013

Speak Out for Social Security Fairness: Repeal Windfall Elimination Provision and Government Pension Offset

A bipartisan bill was introduced in the House this week to repeal the Government Pension Offset (GPO), which reduces public employees’ Social Security spousal or survivor benefits by two-thirds of their public pension, and the Windfall Elimination Provision (WEP), which reduces the earned Social Security benefits of an individual who also receives a public pension from a job not covered by Social Security. This week, Representatives Rodney Davis (R-IL) and Adam Schiff (D-CA) introduced a bill that would amend Title II of the Social Security Act and repeal GPO and WEP. A bipartisan bill is expected to be introduced in the Senate the week of May 6.

GPO and WEP penalize people who have dedicated their lives to public service by taking away benefits they have EARNED. Nine out of ten public employees affected by the GPO lose their entire spousal benefit, even though their spouse paid Social Security taxes for many years. The WEP causes hard-working people to lose a significant portion of the benefits they earned themselves.

Urge your Representative to support and co-sponsor the bill to end GPO and WEP, and restore Social Security fairness. TAKE ACTION!
E-mail Congress — Tell your Representative to support and co-sponsor the bill to end GPO and WEP and restore Social Security fairness.  
More about WEP & GPO here:
Windfall Elimination Provision and Government Pension Offset


“WEP and GPO are federal laws, which can only be changed by votes of the US House and US Senate. Right now, majority support doesn’t exist in either branch to move any sort of Social Security bill forward. But, that does not mean we’ve stopped trying or that those federal officials on our side have given up. We will all stick with this cause until we’re successful in getting deserved relief for our members.”


Stop Virtual Charter Schools for a Year/Support HB0494

“Please join the parents and educators from across the region in contacting the Illinois Senate President and your state senator, asking for their SUPPORT of HB 494 for the following reasons:
  • Virtual/online charter schools were not in existence at the time the current law was created.
  • The current funding formula for charters is not applicable, since virtual/online charter schools do not require brick-and-mortar buildings, transportation, food services, security, etc.
  • Research is inconclusive as to the effectiveness of these schools…”
from D300 Supt. Michael Bregy Off to Springfield to StopVirtual Charter Schools for a Year

Click on the "ed reform" tab (above posts) for more information about charter schools.

Bill Status of HB0494

Education Hearing Apr 30 2013 1:00PM Capitol 400 Springfield, IL
Last Action

Assigned to Education

Statutes Amended In Order of Appearance

from Ch. 122, par. 32-1.3

Synopsis as Introduced
Amends the School Code. Makes a technical change in a Section concerning special charter districts.

House Floor Amendment No. 2
Deletes reference to:
105 ILCS 5/32-1.3
Adds reference to:
Replaces everything after the enacting clause. Amends the Charter Schools Law of the School Code. Provides that, from April 1, 2013 through April 1, 2014, there is a moratorium on the establishment of charter schools with virtual-schooling components in school districts other than the Chicago school district. Provides that this moratorium does not apply to a charter school with virtual-schooling components existing or approved prior to April 1, 2013 or to the renewal of the charter of a charter school with virtual-schooling components already approved prior to April 1, 2013. Provides that on or before March 1, 2014, the State Charter School Commission shall submit to the General Assembly a report on the effect of virtual-schooling; sets forth what the report must include. Effective immediately.
Dear Senator Connelly,
Please support HB 494, which is the Virtual Charter School Moratorium.
As you’re aware, the District 203 Board of Education, along with seventeen other districts, voted overwhelmingly against granting a charter to Virtual Learning Systems (VLS), which is associated with for-profit K12 Inc. There is good reason the application was denied. According to District 300 Superintendent Michael Bregy, “Our Board strongly opposed this proposal from VLS because of its severe flaws and deficiencies, such as the lack of support for students with special needs and absence of extra-curricular opportunities.”
Multiple studies have verified that students who attend full-time virtual charter schools fall behind their peers enrolled in regular brick-and-mortar schools. For example, a Western Michigan University study found:
· Only 27.7% of K12 Virtual Charter Schools make Adequate Yearly Progress versus 52% of other schools.
· Reading scores for K12 students (grades 3 – 11) are 2 – 17 percentage points behind; math scores lag by 14 – 36 points.
· K12 students have a 49.1% on-time graduation rate opposed to a national average of 79.4%
Additionally, it’s alarming that VLS would charge District 203 approximately $8,000 per pupil.
VLS would have no costs for transportation, maintenance, security, food services, etc. Instead, VLS (and K12) would use part of their budget for advertising, recruiting, paying dividends to investors, and paying outrageously high salaries to executives. This inefficient use of taxpayer money would shortchange our students.
We need to take more time to become informed of all the issues surrounding virtual charter schools so we are sure to provide the highest quality education to our state’s children. Please vote YES on HB 494. (I was happy to see that Representative Senger helped pass HB 494 through the House by voting “YES.”) Thanks for your time and consideration.
Dave Madsen
IEA Region 39 GPA

Saturday, April 27, 2013

Illinois Politicians: Uphold the constitution and address the state’s debt crisis

Breaking a constitutional contract with public employees is not the solution.

Consider these solutions for the state’s "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 state’s pension debt (money that legislators stole from the public pension funds for decades and used for other services and pet projects) 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 all of 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); (read HJRCA0002)

·        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 (perhaps) 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 improve, 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…;
·        Eliminate the tax loophole for “Tax Increment Financing Districts” to pay the state’s debts;

·        Eliminate “Edge Tax Credits” and other tax loopholes for large corporations in Illinois to pay the state’s debts;

·        Increase taxation on the wealthy to pay the state’s debts: 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);

·       Create a Speculation Sales Tax to pay the state’s debts: a $1 per transaction on contracts traded on Chicago derivative exchanges (Dr. William Barclay);

·       Tax services. Broaden the sales tax base to pay the state’s debts: 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);

·       Shifting the state’s “normal costs” for the public pension systems to school districts will have negative consequences and will not pay the state’s debts. “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).  Furthermore, “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;

·       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);

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


Friday, April 26, 2013

Illinois Pension Reform: My address to members of the State Universities Annuitants Association, April 26, 2013

For decades, Illinois policymakers have consistently failed to make the annual required contributions to the state’s pension systems, primarily because they could pay for services and their “pet projects” without raising taxes; in 1995, policymakers created a flawed re-funding schedule, and they have refused to correctly amortize the pension systems’ unfunded liabilities since then. Instead they have favored corporate interests rather than the interests of their citizenry and; thus, they have seriously sabotaged the public employees’ retirement plans and the State of Illinois’ future economic solvency through mismanagement and fiscal irresponsibility. Past state policymakers left us with a fiscal disaster.

Current Illinois policymakers are not trustworthy or competent either. They are equally as reckless in employing the old cost-avoiding tactics as their predecessors. They continue to use an ineffective and “cheaper” actuarial cost method (a projected-unit credit which back loads required contributions) instead of using an entry-age normal cost method for determining pension funding and benefits earned. (According to the Center for State and Local Government Excellence, “This [the entry-age normal cost] method recognizes a larger accumulated pension obligation for active employees than the projected-unit credit [does] and generally requires larger annual contributions”).  

Furthermore, Illinois policymakers continue to issue obligation bonds with the assumption that they will reap high investment returns, and they continue to be concerned more about Bond-Rating agencies than the protections of their public employees’ constitutional guarantees and retirement security.

Instead of protecting public pension rights and benefits, which have a legal basis under Illinois State Law; instead of restructuring the state’s revenue base to pay for the state’s growth in expenditures and its recklessly-accumulated debts and obligations, current policymakers have chosen to diminish the public employees’ constitutional rights and their benefits, even though revenue restructuring and pension debt re-amortization are the best legal and moral solutions.

To defraud a person of his or her guaranteed rights and earned benefits violates a most significant interest in morality and ethics, and in basic legal principles of both the State and U.S. Constitutions that protect every citizen. Politicians’ attempt to find ways to renege on any citizen’s rights and benefits that are earned is a costly and dangerous effrontery and precedent to set in motion.

The significance of any modification of Article XIII, Section 5 of the Illinois Constitution is “the extent to which [public employees] will be deprived of the benefits [they] reasonably expected; the extent to which [public employees] can be adequately compensated for benefits  of which [they] will be deprived; […and] the extent to which the behavior of the [Illinois General Assembly] failing to perform or to offer to perform [or] comports with standards of good faith and fair dealing” (Claude Rohwer & Anthony Skrocki, Contracts in a Nutshell).

Let’s not forget how this economic catastrophe was created. The state’s unfunded liability has increased to approximately $100 billion. Nearly 50 percent of that figure was machinated by Illinois legislators. Today’s fiscal predicament is not the result of a financial problem that was unforeseen at the time of the 1970 Illinois Constitutional Convention. The unfunded liability is a consequence of continual legislative negligence, dishonesty and ineptitude.


Recently, University of Illinois president Robert Easter, a member of the Civic Committee of the Commercial Club of Chicago, supported pension reform or, as it is called, Six Simple Steps for reforming the Illinois State Universities Retirement System. Here are four of the six reform steps from the Institute of Government & Public Affairs:

·         University presidents and chancellors agree to change the compounded annual-cost-of living adjustment and link it to the consumer price index (despite a COLA guarantee for Illinois judges as filed in the Jorgensen v. Blagojevich case in 2004);

·         University presidents and chancellors agree to replace the Tier-2 plan for new employees with a hybrid defined–benefit and defined-contribution savings plan (even though a defined-benefit plan is more cost efficient than a defined contributions savings plan, is less expensive for taxpayers than Social Security, offers disability and survivor benefits, and provides a guaranteed monthly benefit for life);

·         University presidents and chancellors agree to increase the employees’ contributions from 8 to 10 percent (which are already one of the highest rates in the country) in exchange for granting the appropriate legal rights to participants to hold the state accountable for its funding commitments  (even though this funding guarantee “can be circumvented if a court finds it significantly imperils broad categories of other funding priorities…” and would “not give employees a separate right to civil action, and only provides permissive authority for the retirement system to sue for payment”) (We Are One, on HB 3411);

·         University presidents and chancellors also agree to shift responsibility for paying a portion of the annual pension cost of SURS to universities and colleges. (Shifting the state’s normal costs to universities and colleges and school districts throughout the state will have negative consequences. According to the Center for Tax and Budget Accountability, “Property tax bases would not be sufficient to absorb any shift in the state’s normal cost for teacher pensions… [Universities, colleges and school districts] are demographically and financially varied, and it would be difficult to impose a uniform normal cost shift on them… While shifting the state’s normal cost obligations may provide some relief to the state’s budget, it will not mitigate the state’s financial obligations…” Furthermore, other negative consequences may include raising students’ tuition and fees, distressing resources and programs, increasing class sizes, eradicating teaching jobs and freezing contractual enhancements for those who remained employed).

These so-called pension reforms jointly diminish and impair the public employees’ contract with the state.


So what can we do about this injustice?

A better alternative is to defend and not relinquish any of our rights and benefits. Pension reform does not address the causes of the state’s pension debt and insufficient revenue base. Besides Madigan, Cullerton, Nekritz, Biss, Cross and others have made it quite evident by their proposals that they want the courts to decide…

We can never become complacent in our belief that policymakers, university presidents, chancellors, and even our unions' leadership can be trusted to make ethical and legal decisions for the rest of us. We can never become indifferent to political power and what exorbitant wealth can buy. As Bill Moyers once said, a “democracy is on the auction block, [when it is] subject to the highest bidder.” The Civic Committee of the Commercial Club of Chicago’s “We Mean Business” shows us what money can buy. Media also perpetuate the fallacious reasoning of the Civic Committee, the Civic Federation and the Illinois Policy Institute, and their ilk.

We should know policymakers often pass laws for their own advantage, and we should remember that despite their pledges and duty to keep promises and to uphold both State and U.S. Constitutions, politicians’ criteria for justice include their consideration for what is most expedient for them—their re-election and, for many of them, their corporate connections for lucrative lobbying or other government jobs when they retire.

It is up to us to secure our future by opposing any pension reform and any modifications of contract principles from people who do not honestly represent us. It is our challenge to defend our defined-benefit pension plan with stubborn resolve. It is our primary task to enlist every teacher, fireman, policeman, and state employee in a unification of purpose to protect our rights, as they are guaranteed benefits earned for our life’s labor. This undertaking forestalls our pro-active and continual engagement with members of the Illinois General Assembly and edification of our colleagues and the misinformed public.

Indeed, teachers’ fortitude and knowledge remain our power, and this resilience and “knowledge must [inspire our] action” (Sophocles). Both active and retired teachers are intrinsically bound to one another in this regard. As Martin Luther King once eloquently stated, “We are caught in an inescapable network of mutuality, tied in a single garment of destiny.” Our solidarity is essential.

Let us follow King’s message of “direct action” and unify our efforts to confront the many liars and thieves in the Illinois General Assembly and the powerful interests of the wealthy who support them; let us “arouse the conscience of [our] community” and embolden our colleagues and the legislators who support us.

Our goal is the preservation of legitimate rights and moral concerns, not only for us, but for all workers in Illinois. To oppose unconstitutional pension reform and needless negotiations is to act upon principles that we believe are so valuable, that to do nothing would be an even greater injustice.

-Glen Brown

Wednesday, April 24, 2013

Are Unions and the Illinois Senate Close to a Pension Agreement? (from today's Capitol Fax)

“Senate President John Cullerton said yesterday that he believes he is close to an agreement with public employee unions on a new pension reform proposal. The proposal is reportedly at least loosely based on two bills that the Senate has already passed.

“Last May, the Senate approved HB 1447, which required members of the State Employee Retirement System and the General Assembly Retirement system to choose between continuing to receive their annual 3 percent cost of living raises or give up access to government subsidized health insurance and forgo any pension benefits from future salary increases. If they choose to keep those COLAs, the raises wouldn't be compounded and would be limited to 3 percent or half the cost of living index. Last month, the Senate approved a similar pension reform bill which applied only to the Teachers Retirement System, and didn't include any changes for retiree benefits.

“The combined bill under discussion right now wouldn't include retirees at all and just focus on active employees. Cullerton said yesterday that he has met eight times with union leaders and they've asked for some changes, which are now being looked at by actuaries. He estimated that the proposal would save the state $45 billion over the next 30 years, but he wouldn't talk about specifics. Union officials also refused to discuss details at all last night, although one did say that he believed the two sides are "very close" to an agreement.

“It's no secret that Cullerton loves nothing more than cutting deals on major issues. So far, however, he hasn't been able to get anything like this over the hump. But if he succeeds at bringing the unions on board for a real reform proposal that requires no new state taxes (as the unions have demanded in the past), that would be a huge leap forward. The big question, as always, is what House Speaker Michael Madigan will do. Nothing [is going to] get done until that guy decides it will get done.

“Madigan reportedly wants two things from the Senate. First, the bill has to be bipartisan. Madigan believes that both parties created this pension mess, so both parties must be involved in the solution. Beyond that, a bipartisan bill gives the majority party political cover if the final proposal isn't beloved by the business community. And if the unions are on board, you can bet that business won't love it.

“Secondly, Madigan reportedly believes that Cullerton's "consideration" proposal is just too costly. Cullerton's legal thesis is that employees need to be given a choice in order to change their benefits because the Illinois Constitution's pension language is so strict. But Madigan reportedly believes that putting health insurance into the mix doesn't save enough money. Instead, he believes that making sure the pension funds are solvent is enough of a "choice" to justify changing benefit guarantees.

“So it remains to be seen what will happen even if the unions come to an agreement. Right now, union leaders seem pretty sure that Madigan will run a far less acceptable bill if they don't find a way to reach an accord with Cullerton. Madigan held off doing anything on pension reform last week and the House is not in session this week, so the pressure is on to get something done in the coming days. It's a classic good cop, bad cop kind of thing, and it appears to be working so far.”

(This article was submitted by Roger Sanders)

The Illinois Education Association states, "There is no agreement at this time."