SB 512 (a Review of the May 2011 version written by the Civic Committee of the Commercial Club of Chicago/Illinois Is Broke)

The Tier-One Pension Benefit Plan

 The current TRS Tier-One teacher would pay a pension contribution of 13.77 % of his or her annual salary. The current contribution rate is 9.4 %. His or her contributions would also increase every three years.
 The current SURS Tier-One instructor would pay a pension contribution of 15.31 % of his or her annual salary. The current contribution rate is 8.0 %. His or her contributions would also increase every three years. (SURS offered a defined-contribution plan for its membership in 1998-99. Fifteen percent of its members chose a defined-contribution plan. Thus, the SURS defined-benefit plan lost a portion of its membership contributions, and the plan’s sustainability has abated).
 A Tier-One teacher will have a choice every three years as to whether or not he or she will remain in his or her current plan.
 As stated, the teacher’s pension contribution will increase from one election period to the next; thus, the cost for remaining in the Tier-One plan will become increasingly expensive.
 Note a teacher cannot rejoin the Tier-One pension benefit plan once he or she has chosen to leave it.

The Tier-Two Pension Benefit Plan

 Any teacher that fails to elect a pension benefit plan will default into the Tier-Two pension benefit plan.
 Participation in the Tier-Two pension benefit plan that was signed into law in April of 2010 (SB 1946) includes a teacher’s retirement age of 67 for eligibility of full benefits (the highest in the country), a reduction of the Cost of Living Allowance, and a reduced final-average salary. The teacher pays a pension contribution of 6 % of his or her annual salary.
 A current Tier-Two teacher can elect to participate in the Tier-Three pension benefit plan (a defined-contribution plan or 401-K).

The Tier-Three "Retirement Savings Plan"

 Participation in the proposed Tier-Three pension benefit plan or a defined-contribution plan (401-K) shifts all the responsibilities and all of the risk from the State to the teacher; henceforth, the benefit is not guaranteed for life. The individual teacher assumes all funding, investment, inflationary and longevity risks.
 The Tier-Three pension benefit plan does not have the pooled investments, professional asset management and shared administrative costs that a Tier-One defined-benefit plan provides. Moreover, there are no survivor or disability benefits and guarantees with the Tier-Three plan.
 The teacher would pay a pension contribution of 6 % of his or her annual salary (and the State of Illinois would assumedly pay 6 %).

Sources: the 97th General Assembly Legislation (2011-2012), the Teachers Retirement System, the Illinois Education Association, the State University Retirement System, and the National Institute on Retirement Security

What do we do best as teachers? by Glen Brown

We inspire others. We influence and move people to action. We take a person’s potentiality and make it an actuality. We offer our help to others because of our compassion and our empathy, because of our humility and our dignity. We communicate truths because of our integrity. We never give up because of our moral responsibility towards one another and the importance of trust among individuals. We fight against all injustices. We understand; we discuss; we mediate, and we act. We do what is right and model our behavior for others. We hold ourselves accountable for what we do and what we believe is true. We set the example.

What are we as teachers? We are leaders, consultants, diagnosticians and evaluators; we are life-long learners; we are architects for the experiences of others. We are what we want to see in others: our idealism, our indomitable spirit, our commitment to human rights and to the creation of a better society. We are responsible, intrepid and just. We are one of last bastions of hope for a society driven by amoral envy, indifferent greed and partisan politics.

We are appalled by hypocrisy and lies, by incompetence, irresponsibility and cronyism. We are appalled by intentional faulty logic and the unethical scapegoating of others, by arrogance and self-interest, by prejudice and the injustices done to others. We are appalled by irrationality, indifference, and authoritarianism; therefore, we must stay united and fight not only for the rights of others but for our teaching profession. 

-Glen Brown

SB 512 = No Trust in Legislative Leadership

When Civic Committee members, whom people have not voted into office, write a bill for state legislators and give advice on how to pass their bill, the people of the state are subjected to a law concocted with partisan interests. This is a breach of trust between the constituents and their legislators’ duty to represent them.

When legislators wield the power to impoverish some people and to destroy their right of self-preservation; when the Civic Committee and legislators are exempted from the severe consequences of their unjust proposal; and when the Civic Committee’s money not only buys the legislators’ votes but generates and perpetuates untruths among the public employees' and retirees' pensions, then one’s belief in the legitimacy of the Illinois General Assembly degenerates into skepticism and exasperation.

Furthermore, when one discovers that some of the best statesmen have retired a long time ago from the General Assembly; that competent and ethical leadership, in fact, no longer exists; that the majority of Illinois legislators pass bills they do not even read because “doing something” is all that really matters regardless of the disastrous consequences, then one’s belief in a representative democracy and justice becomes disfigured by cynicism.

How could we have faith in a process where some legislators are afraid to vote against a critical legislation because they are worried about running for re-election, about the redrawing of boundaries of their legislative districts, and about the funding of their next campaign? Is it because of their lack of will power and ethical leadership?

Moreover, what should we think about the legislative folly of the past several months? What should we say to a legislator when confronted with questions such as “how can a legislator read a 314-page bill when it’s being called in an hour or less?” or “why don’t you write the legislation?” and “what do you propose that we [legislators] do about the budget problem?” How can we believe in our state government when “party committees are often switched out or switched in to make sure that a bill will be unanimous,” and why aren’t any Nobel-prize winning economists invited to the Illinois pension symposiums?

Unquestionably, some legislators do not want to pay for public pensions, even though they were never fully funded since their inception many decades ago. It’s not about “pension sustainability,” “unfunded liabilities,” or suspect actuarial-cost methods, for we are aware of the media artifice that is “Illinois Is Broke” and that data can be easily manipulated and rationalized when one begins with a preferred conclusion and then works backwards to a plausible justification.

Many legislators and their Civic Committee benefactors want as much as House Speaker Madigan desires to “let the courts decide” (at the taxpayers' expense), while the Illinois Education Association and its members hope that Chief Legal Counsel to Illinois Senate President John J. Cullerton and Parliamentarian of the Illinois Senate Eric M. Madiar's scrupulous research and final conclusions that the State of Illinois cannot “welch on promises” to the public pensions because there is “an enforceable contractual relationship” between the state and its public employees of which benefits “shall not be diminished or impaired.” 

-Glen Brown

Teacher, “did I miss anything?”

(after reading Tom Wayman's poem)

Nothing much. When we finally noticed
your absence, we thumbed our iPhones
and BlackBerries for the rest of the class period.

Surely, you should know that our classroom is the forum
where we examine the paradigms and presumptions
of everyone else with your own.

Nothing except the fact that you are our raison d’etre.
It is through you that our collective
and authentic Self is realized.

Of course! You missed The Second Coming on the day you were gone.
It occurred in this very classroom, over there,
slouching in your seat, "blank and pitiless as the [blackboard]."

Not a thing, and who cares? We’re all going to die anyway.
After all, this class is as meaningless as any Sisyphean task.
…might as well pluck the day, "ye rosebud," while it’s still worth plucking.

Absolutely! God, herself, could not miss this class without falling behind.
I gave a surprise quiz worth 66 percent of your grade;
Then I assigned the rest of the textbook to be discussed today!

Besides, esse est percipi (being is to be perceived)!

 

Questions for My Colleagues and Friends at the IRTA about Pension Reform and Meeting with Our Legislators

Why should retired and active teachers be concerned about so-called "pension reform?" Consider the effects that it will have on the defined-benefit plan if the benefit formulation (for Tier 1 and Tier 2 teachers) is reduced? And what might the current teachers in Tier 1 do if their pensionable salary is capped, as this is the case for members participating in the Tier 2 plan? What do you think would happen if the vesting period for Tier 1 members is increased, and their cost of living adjustment is changed to a simple interest computation or even possibly eliminated? And what might Tier 1 teachers do if their retirement age is also raised to 67 and their extra-curricular assignments are excluded from the calculation of their final average salary (which has recently been extended to a ten-year average instead of four)? What would Tier 1 members do if their contributions are increased steadily from 9.4 percent to 17.43 percent by 2027?

It is important to note that as some members migrate to a potential Tier 3 defined-contribution savings option, will their contributions to the TRS defined-benefit pension plan be reduced? Will remaining teachers in Tier 1 and 2 have to make up the difference? These are a few of the ideas discussed and examined in meetings thus far and will be debated in the future until there is agreement on these issues.

Now ask yourself this question: how will the above-mentioned possibilities threaten the existing defined-benefit plan for current teachers and retirees, and why would any teachers choose the Tier 3 defined-contribution option? One answer is that most beginning teachers do not believe there will be a guaranteed pension for them in the future; moreover, some of them have even become cynical because of the past legislative sessions.

Furthermore, will the initial, anticipated 10-15% exodus to the proposed Tier 3 option also increase the State’s cost and its contributions to the pension system? The answer is yes, and will the State pay for it? The answer is doubtful, and though teachers will most likely become eligible for social security (and will be determined at the federal level), who will match these contributions? Local school districts or the State of Illinois?

In addition to these complex considerations, will the State also have to pay down the current $44 billion unfunded liability of the TRS pension plan more quickly as a result of any movement to Tier 3? The answer is yes. How will all of these concerns ultimately affect current teachers and retirees, and what might be the catastrophic effects and legal challenges of a proposed constitutional amendment?

Now consider why it is important that we continue to meet with our legislators and tell them that "pension reform" (or reneging on a constitutional contract) will not reduce the unfunded liability and address the causes of the State’s budget problems. Why is it important that we meet with our legislators?

It’s imperative that we do because attacks on our pensions will never cease; thus, we need to discuss reasonable and fair alternatives for solving the state’s budget problems and the disastrous effects that so-called "pension reform" bills would have on Illinois retirees and teachers, their families, their communities, and the recruitment of the best and brightest university candidates for teaching in our public schools.

Most importantly, we need to discuss the fact that any proposed "pension reform" bill will violate a contractual obligation guaranteed by both our State and U.S. Constitutions. We need to tell our legislators we vote, our families and relatives vote, our friends and neighbors vote, and we will network with anyone who will help us protect our retirement security and our dignity.

-Glen Brown

Defined-Benefit Pension Plan v. Defined-Contribution Savings Plan

Defined-Benefit Pension Plan:

 Your defined-benefit pension plan is more cost efficient than the defined-contribution savings plan
 Your defined-benefit pension plan offers predictable, guaranteed monthly benefits for life
 Funds are invested by professional asset managers in a diversified portfolio that follows long-term investment strategies
 The large-pooled assets reduce asset management and miscellaneous fees
 Your defined-benefit pension plan provides spousal (survivor) financial benefits
 Your defined-benefit pension plan provides disability benefits
 The state is responsible for funding, investment, inflationary and longevity risks
 Your defined-benefit pension plan is a more effective protection than the defined-contribution savings plan
 Your defined-benefit pension plan provides you with self-sufficiency in retirement; it is associated with far fewer households that experience food privation, shelter adversity and health care hardship
 Your defined-benefit pension plan is less expensive for taxpayers than Social Security – a reason why legislators, et al had negotiated for Illinois teachers to not pay into Social Security
 Your defined-benefit pension plan has an economic impact of over $4 billion on Illinois; the effect on Gross Domestic Product is $2.38 billion; jobs that are created: 30,448 (Teachers Retirement System of Illinois, TRS)
 The Teachers Retirement System of Illinois is the 39th largest in the U.S. with 378,288 members (TRS)
 The average investment returns for TRS: 9.3% (over 30 years), 8.8% (over 25 years), 8.3% (over 20 years) (TRS)
 Defined-benefit pension plans contribute over $100 billion to annual local, state, and federal revenue in the U.S. and provide capital to financial markets (National Institute on Retirement Security, NIRS)


Defined-Contribution Savings Plan (401k):

 With a defined-contribution savings plan (401k, 403b, 457), only your contributions are defined
 A defined-contribution savings plan shifts all the responsibilities and all of the risk from the employer to you (unless negotiated otherwise); thus, your benefit is not guaranteed for life
 Your benefit is based upon individual investment earnings
 You assume all funding, investment, inflationary and longevity risks
 A defined-contribution savings plan does not have the pooled investments, professional asset managers, and shared administrative costs that a defined-benefit pension plan provides
 There are no survivor or disability benefits and guarantees
 Though you bear no portability risks, accounts are not always rolled over when you change jobs
 Your employer (state) will have to bear the administrative costs of both defined-benefit pension and defined-contribution savings plans when you switch over
 Though not your problem, “payments to amortize unfunded liabilities for the defined-benefit pension plan may be accelerated” (NIRS)
 The Governmental Accounting Standards Board “requires [an] acceleration of unfunded liability payments when the defined-benefit pension plan is closed to be recognized on financial statements” (NIRS)
 When changing from a defined-benefit pension plan to a defined-contribution savings plan, “new members do not start with any unfunded obligation” (NIRS)
 “Projected defined-benefit savings contributions for new members are worth more than the projected defined-benefit pension costs for those members” (NIRS)
 “No unfunded obligations [liabilities] for existing members are reduced when new members go into a defined-contribution savings plan” (NIRS)
 “The loss of new members make it difficult to finance the unfunded obligations of the defined-benefit pension plan” (NIRS)

Sources: the National Institute on Retirement Security (NIRS), the Teachers Retirement System of Illinois

Our Indifference about "Pension Reform" or Breaking a Contract

We define indifference as a lack of interest, an unimportance or insensibility. As the Nobel Peace Prize winner Elie Wiesel states: “[It] is more dangerous than anger and hatred.” We might add that indifference courts a complicit relationship with political and social injustices and that, conversely, these injustices owe their success and power to indifference.

We know the cousins of indifference are weakness and fear; we know if we choose to be indifferent, we also relinquish our constitutional rights and benefits. So how do we asphyxiate our apathy and abnegation? How do we disable them? Is one possible answer to such questions our need to become responsible for not only our future but for the future of others?

Political and social indifference is an overwhelming enigma. Nevertheless, each one of us can make a difference. The road to caring about our future begins with our comprehension of any legislative injustice that will affect retired and current teachers and other public employees in Illinois. It begins with our compassion and empathy for those citizens who will suffer the consequences of an unconstitutional prejudicial theft.

Our most effective responses to this possibility remain our concerted actions to protect and secure our constitutional rights and benefits; to educate our colleagues, friends and neighbors about this attempted assault on our contracts; and to un-elect the liars and thieves in the Illinois General Assembly who support "pension reform," instead of addressing the state's revenue and pension debt problems.

"Indifference is never creative... Indifference elicits no response. Indifference is not a response. Indifference is not a beginning, it is an end. And, therefore, indifference is always the friend of the enemy, for it benefits the aggressor -- never his victim, whose pain is magnified when he or she feels forgotten" (Wiesel, The Perils of Indifference).

-Glen Brown