Earlier this week, President Donald Trump granted clemency to
former Illinois Gov. Rod Blagojevich, who was eight years into a 14-year
federal sentence for corruption charges. As Wikipedia notes, “he was
the fourth Illinois governor to serve time in federal prison, after Otto Kerner Jr., Dan Walker, and George Ryan.” Of note,
although Illinoisans appear now to be either mystified or outraged at this turn
of events, he won re-election in 2006 even though he and his associates were already under investigation at
the time of the election. Earlier
in February, a report by the University of Illinois
at Chicago ranked Chicago as the most corrupt U.S. city.
That
same report ranked Illinois as the third-most-corrupt state. And the math
behind those rankings pulls from such examples as Ald. Edward Burke, who was re-elected to his 13th term back
a year ago after having been charged of attempted extortion. The charge was
plastered all over the newspapers, but voters still returned him to office —
and not even because he had opponents who split the opposition between them, as
the Chicago elections function on a run-off basis, and Burke won an absolute
majority.
Corruption
costs the city, and it costs the state, and it’s not merely a matter of a few
bad apples, but of a political system that is still too close to the machine
politics of the past, in which what matters to voters is whether they and their
interest groups get what they want.
And
it is no mere
coincidence that a state with such a legacy of corruption is so severely in
debt. Remember, Illinois is ranked second-worst according to
Truth in Accounting, with a pension debt of $139 billion (by
its reckoning) and a further $56 billion in unfunded retiree healthcare
promises. Only New Jersey is worse, because of the state’s smaller
size. And Chicago is second-worst of the 75 largest
cities; New York City is worse only because its finances include the
liabilities for its school system, which is a separate entity financially in
Chicago.
Here,
again, is a brief rehash of the numbers: The state is spending 25% — soon to be 27% — of
its revenues on pension contributions. As a result, the state falls woefully short in
meeting the basic human needs of its people — the disabled, the poor and
unemployed, the young and the old — while instead promising that tax increases
will fix everything, or increased gambling or pot legalization or some other
magical new revenue source, or that there’ll be some clever work-around if only
the clever people think enough clever thoughts. (Buyouts? the savings are too
small to matter. Consolidation? That’s no help for the $137 billion in state
debt. Asset transfers? I’ll believe it when I see it.)
The
state’s target of 90% funding in 2045 is so dependent on the reduced benefits
for Tier 2 employees staying in place (which is itself unlikely) and on the
optimistic assumptions for asset returns, that a boost in those Tier 2 benefits
(widely expected to occur) or a drop in the valuation interest rate/long-term
asset return, will cause the state to fall far
short, or contribute far more, than scheduled.
And
while the state of Illinois has a long history of underfunding its
pension plans (in 1969, its funded status was more or less the
same as now — 42% vs. 40%), the debt in 1970, when the new
constitution was put into place, was $1.5 billion. The projected
2020 debt? $139 billion.
That doesn’t include debt due to retiree healthcare promises, or
state and local debt, or pension obligation bonds needing repayment…
It
should be plain to see that debt has skyrocketed, and far beyond what can be
adjusted away by looking at inflation or other factors during this time frame —
and blame can hardly be placed on the “Edgar ramp” of 1996 when
there have been ample years since then in which the problem has only gotten
dramatically worse. That dip in 2004? That’s the result of Blagojevich’s
Pension Obligation Bonds shifting liabilities out of the pension funds
themselves to elsewhere on the state’s balance sheet.
Corrupt
state and local government officials who rationalize skimming a little for
themselves, and voters who overlook this if they think their interest group
(neighborhood, union, ethnic group, etc.) benefits from the state or city’s
spending — it’s an attitude that led columnist Mike Royko to pen his proposed new motto for
the city, back in 1967: rather than Urbs
in Horto (city in a garden), it should be Ubi Est Mea, “Where’s mine?”
And this is the very same mindset that accepts
unfunded/underfunded pensions, in which the costs are not placed on other
taxpayers in the here-and-now, but rather the
people on whom the burden is being placed is the next generation.
How
can we tell our children that they should build their future in this state when
we leave them this debt, not scheduled to be paid down for another 25 years,
and even then only incompletely and with a high degree of risk that the
scheduled payments are insufficient if returns are too low, or when restoring
Tier 2 benefits finally become unavoidable due to lawsuits or union pressure?
And,
yes, this is personal. I have three sons, one of whom has already left Illinois
to attend college elsewhere. I have three sons, one of whom, as an infant,
received therapy through the Early Intervention program, the providers of which
are impacted by the state’s unpaid bill backlog. And I am not a native
Illinoisan — however much those who are, may simply be accustomed to the
misgovernment and corruption in Illinois and Chicago, I can’t accept this.
Calling for pension reform is not about trying to hurt state workers; it’s
about having a state government that’s competently and responsibly managed now
and in the future.
And
in the same way in which it is not good enough for politicians merely to
promise that they themselves will not be corrupt, it is also not enough for
them to promise that they themselves will not sink the state/city further into
debt by no longer promising benefit hikes, bigger COLAs, larger multipliers.
In
order to leave behind the legacy of corruption, the politicians of Chicago and
Illinois and the city and state as collective entities, and the people of
Illinois, must commit to saying, “the
time of passing costs on to our children and grandchildren is over.”
That involves doing what’s politically unpopular, rather than hiding behind claims
that it’s a “fantasy” or that other, no-cost actions will solve
the problem. In the same way as a twelve-step program requires an addict to
make amends, and a Catholic penitent is given penance, so, too, Illinois cannot become the honest, fair-dealing state it claims to
be without the pension reform which is a necessary part-and-parcel of “walking
the walk.”
All
of which means that pension reform is not merely about a few numbers on a
balance sheet; it is a moral issue. And, yes, the same holds for every other
state and city with similarly poorly funded pensions. For the article, click here.
Commentary:
Elizabeth Bauer has also written about amending the Illinois Pension Protection Clause.
Indeed, “Illinois public pension debt is a moral issue”;
however, this is the significant moral and justice issue columnists ignore:
To possess a right to a promised deferred
compensation, such as a pension, is to assert a legitimate claim with all
Illinois legislators to protect that right. There are no rights without
obligations. They are mutually dependent. Fulfilling a contract is a legal and
moral obligation justified by trust among elected officials and their
constituents.
According to philosopher David Hume, the idea of
keeping a promise depends upon creating rules of justice; that rules of
contracts, for instance, have to be considered morally desirable as well. In
other words, a “contract” or promise between the State of Illinois and its
public employees must be viewed as a moral commitment and requirement of
justice. Justice demands we keep our “covenants” with one another. In regard to
public pensions, keeping an agreement means a concern to promote the well-being
of public employees and the need to secure their rights.
All citizens have rights that must be protected.
When legislators swear an oath to uphold the state and federal constitutions
(Article XIII, Section 3 of the Constitution of the State of Illinois), then
citizens of Illinois and the United States have also acquired the right to
expect that they will uphold that pledge. This is also a matter of important
moral concern for all citizens of a state, for all legal claims will be
validated by a moral framework since the concept of justice is grounded in
ethics. If citizens’ legal rights are abused, then their dignity and humanity
will also be violated. As stated by Alicia H. Munnell, Director of the Center
for Retirement Research at Boston College, Illinois is one of seven states
where accruals are protected, and the legal basis for protection of public
pension rights is under state law (State and Local Pensions). This was also validated on the May 8, 2015 by the Illinois Supreme Court.
Without a doubt, the significant issue of past and now future pension
reform by today's pundits has been its attack on public employees’ rights to
constitutionally-guaranteed, earned compensation and the legislators’
obligation to safeguard those promises. An unconscionable constitutional
challenge of those rights and earned benefits generates a serious threat to
their secure sense of worth as citizens and creates the unfair possibility for
an economic disadvantage for a particular group of people and their families.
This can never be legally or morally justified.
What has continuously been at stake is not an adjudication of claims that public employees will have against
policymakers who want changes to public employees’ benefits and rights or an amendment to the Pension Protection Clause, but to
respect the public employees’ contractual and constitutional promises because
they are legitimate rights and moral concerns not only for public employees,
but for every citizen in Illinois: for any unwarranted act of stealing a
person’s guaranteed rights and compensation will violate interests in morality
and ethics and the basic principles of both the State and United States
Constitutions that protect every one of us.
For these reasons, it is imperative that
policymakers, stakeholders and columnists examine their own ethical and moral principles in view of the fact that they will have to justify their
decisions to the citizens of Illinois. Certainly, moral responsibility and
legal obligation to fully fund the public pension systems should not be ignored "so the time of passing costs on to our children and grandchildren is over."
It is a moral concern and legal duty to reform the
state’s sources of revenue and to address the incurred pension debt through
restructuring so the state can provide services for its citizens and fund the
public pension systems instead of incessantly incriminating public employees and retirees, and thereby
forcing them to defend the State and United States Constitutions nearly every day of their lives.
-Glen
Brown
Elizabeth Bauer overlooks critical context and ignores the role public pensions play in state and local economies and revenue generation.
ReplyDeleteIt is true that pension liabilities have been growing in absolute terms—but so has the economy. When we examine the ratio of pension debt and GDP growth in Illinois, the ratio has been pretty stable at around 2% of GDP.
A recent study by researchers from the Federal Reserve, the Bank of England, and the Brookings Institution shows that pension debt is or can be mostly stabilized by modest adjustments even at relatively low rates of returns. Major reforms are not urgent.
The author also overlooks the important role that public pensions play in generating revenues at the state and local level. In Illinois, for example, in 2018 investment of public pension assets and spending of retiree checks poured $78.3 billion into state and local economies. This, in turn, generated about $14.4 billion in state and local revenues. In the same year, taxpayer contributions to public pensions totaled $12.5 billion. In other words, public pensions generated $1.9 billion more than taxpayers contributed to them. If there were no public pensions, taxpayers in Illinois would have to pay $1.9 billion more in taxes to receive the current level of services.
We must think twice before undermining public pensions.
Respectfully,
Hank H. Kim
Executive Director and Counsel
National Conference on Public Employee Retirement Systems
Washington, D.C.
Indeed, Bauer and others do not care whether teachers and other public employees have contributed responsibly to their pension funds or that teachers will receive little to no Social Security when they retire. They do not care whether retired teachers’ and other public employees’ defined-benefit pension plans are a fundamental source of economic stimulus to communities in Illinois and the only retirement income for hundreds of thousands of people.
DeleteThe propaganda machines with their illogical logic and framed arguments are heating up again.
ReplyDeleteIf Bauer had worked and been denied the money she had been promised, she would not question moral, ethical, philosophical, or theoretical issues. She would expect the money she earned, the income she needs to have.
Regarding our deferred earned income (pensions) we ain’t dead yet, and we have bills to pay.