Thursday, April 2, 2015

Attacking the Pension Protection Clause




Ruth,

"I have always supported eliminating the constitutional protection clause because it was snuck in years ago despite the fact that only seven states have a clause like that and no one understood what could happen. As you no doubt know, healthcare costs continue to go up and people continue to live longer lives so why would we have a clause that doesn't allow for us to make any modifications and guarantees people free health care for the rest of their lives.

"As I'm sure you are aware removing the clause also would not change anybody's current retirement if they are retired. We absolutely have to make some changes in order for future generations to actually have some sort of retirement. It is absolutely ridiculous that we have individuals retired from the state of Illinois making over $400,000 a year and we can't do anything to make modifications to correct what is outrageous.

"No one is against people retiring and having a fair income but for people to double dip, receive six figure salaries, and retire at age 47 there are way too many abuses in the system that need to be cleaned up. We may disagree on this issue, but we can't sit around and do nothing."

Joe Sosnowski

Joe:

On the contrary, many people understood what would happen if there were no protections in place for public employees. Article XIII, Section 5 of the Illinois Constitution was not “snuck in years ago.” The people of Illinois understood the need for a constitutional protection for public employees’ rights and benefits based on history and voted for it:

“[Furthermore], anyone following the pension-reform debate knows Illinois has long diverted the money needed to properly fund its pension systems to avoid tax increases, cuts in public services or both. Some may not admit it, but they know it. They also know this practice is the primary reason why the systems are under water” (Eric M. Madiar, former chief legal counsel to Senate President John Cullerton).

“In 1917, the Illinois Pension Laws Commission warned leaders that the retirement systems were nearing ‘insolvency’ and ‘moving toward crisis’ because of the state’s failure to properly fund the systems. It also recommended action so that the pension obligations of that generation would not be passed on to future generations.

“The warning and funding recommendation went unheeded, as did similar warnings and recommendations found in decades of public pension reports issued before and after the pension clause was added to the Illinois Constitution in 1970. For decades, these reports consistently warned the public and lawmakers of the dire consequences of the state’s continued under funding and of the significant burden unfunded pension liabilities posed for taxpayers. They advised that the pension clause bars the legislature from unilaterally cutting pension benefits of retirees and current employees.

“Indeed, one of the clause’s purposes is to prevent the state from reneging on its pension obligations during a fiscal crisis because of the burden imposed by unfunded liabilities. The clause was added at a time when the pension systems were no better than they are today” (Madiar).

“As you no doubt know, healthcare costs continue to go up and people continue to live longer lives so why would we have a clause that doesn't allow for us to make any modifications and guarantees people free health care for the rest of their lives” (Sosnowski). Joe, read In the Supreme Court of the State of Illinois (Docket No. 115811) Roger Kanerva et al., Appellants, v. Malcolm Weems et al., Appellees.Opinion filed July 3, 2014 (Kanerva Health Insurance Case).

It is absolutely ridiculous that we have individuals retired from the state of Illinois making over $400,000 a year and we can't do anything to make modifications to correct what is outrageous…” (Sosnowski).

It is faulty logic to reason that the properties or minority of individuals are necessarily the properties of the whole which they constitute – In this case, a small percentage of recipients is not representative of the whole. The average TRS pension is $48,218 (TRS). Moreover, legislation took effect January 1, 2012 that addressed so-called double-dipping in Illinois.

It is shameful and reckless that a representative who has sworn an oath to uphold the State and U.S. Constitutions would propose an amendment that ignores and challenges a legal contract. Breaking a contract threatens the integrity of all laws that govern and protect the citizenry, for the values of the United States Constitution (Article I, Section 10) and the Illinois State Constitution (Article I, Section 16 and Article XIII, Section 5) are dependent upon the understanding and integration of all of the articles and amendments in totality; “the strength of the constitution[s] would not be proven by considering each article or amendment in isolation from the others” (Tom Beauchamp, Philosophical Ethics).

As citizens, we are advocates of a unification of the Bill of Rights in the United States Constitution, which protects all of us from any violations of human rights and contracts, as much as we would wish others to be motivated by a way of life that is also governed by a complete moral system of thinking. There are no good reasons for a legislator’s attack on public employees’ rights and benefits that were earned. The General Assembly cannot justify breaking a contract in accordance with fundamental, constitutional principles of reason and morality and neither can you justify an amendment to "sap the morals of the people and destroy the sanctity of private faith."

What Illinois citizens can accurately predict about future contracts with state legislators who believe they have the “power to interfere with the obligations of contracts [that are] specifically denied to the states [in Article 1, Section 10 of the U.S. Constitution]” is that if Illinois legislators “can declare an emergency to exist and abrogate one provision of [both State and U.S. Constitutions]…, ‘this decision serves notice upon [every citizen of Illinois], who heretofore had trusted in the constitutions for protection and believed in the sanctity of a contract, that the constitutions are no longer a guarantee nor security against the abrogation of a proper and legal contract’” (Fliter, John A. and Derek S. Hoff. Fighting Foreclosure: The Blaisdell Case, the Contract Clause, and the Great Depression).

Glen Brown

P.S.

I do agree with one statement of yours: “We can't sit around and do nothing.” Indeed, I suggest you take classes in ethics and logic, Joe.

4 comments:

  1. What a biased argument with no supporting facts. I don't know about the other 4 public retirement systems, but nobody from TRS retires at 47. $400,000 is possible with university presidents that are not in any union. It is the University that decides what to pay them. Nobody in TRS gets free health care and most no social security. I don't think anybody in TRS can double dip or I would have jumped on that. You also forget to mention Pinkerton's letter that says tier II are contributing too much and there will eventually be a surplus of funds. Eventually, a law suit by this group will challenge their over payment.

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  2. It is estimated 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.

    As stated by Dick Ingram, TRS Executive Director, “Tier II is the pension benefit structure created by the General Assembly in 2010 for anyone who had not contributed to TRS or another Illinois public pension system before January 1, 2011. Tier II is designed to help solve the financial problems faced by TRS and the other systems by reducing pension benefits for these new members. Lower pensions mean reduced long term costs for the state.

    “If Tier II is left alone, it will accomplish its mission. The $61.6 billon TRS unfunded liability will shrink over several decades and eventually be eliminated because the state will pay less to the ever-growing number of Tier II members. In fact, at some point in the future, we estimate that Tier II members actually will help create a surplus of funds for TRS that effectively could eliminate the need for any state government contribution to the System.

    “But the core of Tier II – the reduced benefits structure – is a problem the Teacher Recruiting and Retention Task Force will review. The benefit structure is unfair to all Tier II members. Right now, a Tier I member’s pension costs roughly 20 percent of an active member’s salary. Because of the benefit reductions in Tier II, a Tier II member’s pension is worth just 7 percent of an active member’s salary. However, by law, active Tier II members of TRS, like me, pay the same 9.4 percent salary contribution to the System that active Tier I members pay.

    “What all this means is that Tier II members are paying the entire cost of their pensions plus an extra 2.4 percent to TRS. That extra 2.4 percent subsidizes the pensions of Tier I members” (Topics and Report, Teachers Retirement System of the State of Illinois, winter 2015).

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  3. After logic and ethics classes:

    Consider 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. 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; though the initial payment will be difficult 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.

    Legislators should focus upon structural reform for increasing revenue, but they haven’t the political will to do it. What is needed to solve the budget problems in Illinois is a better revenue base to pay the state’s debts. What is easier to do is to evade serious problem solving of the budget issue and to incriminate the state’s public employees.

    The state’s regressive tax rate that few legislators want to confront... Politicians, the Civic Committee, Civic Federation, Illinois Policy Institute and the Chicago Tribune have capitalized on a mostly gullible public by calling for radical pension reform as the solutions for the budget problems in Illinois. They are diversionary, scapegoating tactics that will bring intentional, financial harm to public employees and allow policymakers to escape their legal and ethical responsibility.

    “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)…

    Illinois is one of seven states with a regressive flat-rate tax. The state needs a tax rate that is “efficient with minimal impact on the economic decisions that taxpayers have to make” (Center for Tax and Budget Accountability CTBA), one that captures increased revenues in times of economic growth, one that maintains revenue collections during poor economic times, one that is simple and not liable to inconspicuous error, one that is transparent and builds trust with the state’s government officials (CTBA), and one that helps 99 percent of the state’s population.

    Focus on why the State of Illinois cannot obtain more revenue. Besides federal sources of income, the state uses only 11 sources of revenue: personal income tax (but note Illinois was tied for the fourth lowest individual tax rate on households in the top income bracket), corporate income tax (note extortionate tax breaks given to some Illinois corporations), sales tax (Illinois does not tax services like most other states for another significant source of revenue), corporate franchise tax and fees, public utility taxes, vehicle use tax, inheritance tax, insurance taxes and fees, cigarette taxes, liquor taxes and other miscellaneous (or rather unsubstantial) tax sources (Commission on Government Forecasting and Accountability).


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  4. “Decades of mismanagement and failure to match contributions are the predominant reasons that the state’s pension systems are suffering to the degree that they are today. Years of pension holidays, continually borrowing against the systems without a plan for repayment and a severe economic recession, which caused investments to plummet, further exacerbated the problem” (Senate President John Cullerton). Thus, there needs to be a required “actuarially-sound” annual payment from the state to the pension systems and not a constitutional challenge that breaks a contract with public employees.

    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).

    Consider a broader-based taxation system that would provide a decrease in taxes for low-income and many middle-income families. Taxing services alone “would generate enough revenue to stabilize the General Revenue Fund and prevent structural deficits that lead to cuts in basic needs and social service programs” (CTBA).

    Establish a financial transaction tax or “Robin Hood Tax”: a .50 cent tax on every $100 of transacting. Eliminate the tax loophole for “Tax Increment Financing Districts.”

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