Deadline near, Illinois pension reform snarled in state politics by Karen Pierog

May 28 (Reuters) - With less than a week left to go in Illinois' spring legislative session, the future of reforms to rein in burgeoning costs for the nation's worst-funded public pension system rests with the two Democrats who run the state's House and Senate chambers.

The Illinois legislature, which over decades has built up a $100 billion unfunded pension liability, now is a study in gridlock. Speaker of the House Michael Madigan and Senate President John Cullerton each are pushing competing versions of a fix and each refuses to take action on the other lawmaker's bill.

There is no clear path toward resolution. A Madigan-backed bill is hung up in the Senate, where Cullerton controls the legislative calendar, and Madigan has Cullerton's plan bottled up in the House, which he controls.

House Republican Leader Tom Cross said the Democratic leaders have the power to take action and need to exercise it. "When the two of them want to accomplish something regardless of its magnitude they get it done," Cross said. "There is no upside to inaction." Cross said he favors Madigan's bill, which is similar to one he sponsored earlier in the session…

Despite pressure from credit rating agencies, business leaders, editorial boards and others, the two leaders have dug into their positions. They have until Friday to break the deadlock. "We are still not seeing the needle move in support of (Madigan's bill) in the Senate," said Cullerton spokeswoman Rikeesha Phelon.

The Madigan bill, now sitting before the Senate, was passed by the House earlier this month. Madigan's representatives claim the bill would eliminate the state's $100 billion underfunding over 30 years but the bill's critics claim it violates the state constitution by requiring retirees to accept cuts to their pension benefits.

Phelon said Cullerton is resisting pressure to call for a vote on a bill "that he thinks isn't constitutional." A majority of the Senate's Democratic caucus opposes the bill as well, Phelon said. The Cullerton plan, backed by the state's public employee unions, would lead to more modest cost savings than the Madigan plan. It allows workers to retain access to state-sponsored healthcare in retirement if they opt for pension concessions.

Madigan spokesman Steve Brown said the House prefers the bill it passed. "I don't think the House is interested in a bill without much in savings," he said. Madigan is willing to talk to Cullerton and other legislative colleagues, Brown said but the differences between the two bills "are pretty stark."

UNIONS BALK AT MADIGAN BILL

Unions have pushed hard against Madigan's bill and threatened a constitutional challenge in the courts if it becomes law. Lawrence said the constitutional issue makes the Madigan plan politically risky. "The legislators are being asked to cast votes that could create enemies for them, and there is no guarantee the legislation they support will withstand judicial scrutiny," Lawrence said.

Cullerton's pension fix is believed more secure against any constitutional challenge because it offers an incentive - called a "consideration" in pension parlance - that is designed to persuade workers to accept changes in their pension benefits. Employees who agree to the changes would receive a benefit for doing so, and this tradeoff would help the law comply with the state constitution, legal experts say.

Meanwhile, Democratic Governor Pat Quinn has largely been sidelined. Quinn, in remarks to reporters after a speech in Chicago last week, said he is working around the clock toward a settlement of the pension problem, but the governor has taken no action in public. "Quinn on pensions as far as I can see is not really a factor," said Christopher Mooney, a political scientist at the University of Illinois. "He'll sign whatever they come up with."

America's municipal bond investors are watching closely. "They will have to come to some sort of agreement, or the market will take it out on them. You'll see Illinois paying higher yields," said John Mousseau, portfolio manager at Cumberland Advisors Inc.

Like many states, Illinois has seen a jump in revenues recently thanks to an improving economy, but Mousseau said the improvement is not significant to bond holders. "Revenues have improved but they still haven't wrestled with the 800-pound gorilla in the room," he said of the pension crisis in the state.

Investors have been demanding hefty yields for Illinois general obligation bonds. Illinois' bond rating is the lowest among states after credit rating agencies collectively downgraded the state a dozen times since 2008, and those agencies have warned that failure to fix the pension problem could result in further downgrades... 

My position on Illinois pension reform (or breaking a constitutional contract with public employees) remains…

For two years of analyses, please click on the “pension analyses” tab.

Many pension reform discussions provide an “incomplete context…” by Mark Pennington

Dear Dr. Green,

Please allow me to introduce myself.  My name is Mark Pennington. I am a newly retired teacher/high school administrator of 35 years plus.  Originally I was trained as a research biologist but soon realized that while my passion was science, I was drawn to teaching as opposed to test tubes. The beauty of it all: I was able to combine both into an amazing career.

I am a big fan of your public contributions and perspectives. I have listened to you engage with many people on WGN radio for many years.  Your style, presentation, and insights – while I may not always agree – have always been thought provoking.  I would expect nothing less from one educator to another.

Most recently, I have listened to your commentary regarding the public “pension crisis” the State of Illinois is facing with great interest.  After listening to you on the Mike McConnell show this week, I am compelled to send you this letter.  This is one of those times I take exception to your commentary because what you said was incomplete and, as a result of your forum, can and does have an undue influence on the general public opinion.

Let me paraphrase your comments [on May 21, 2013]:

This pension issue needs to be addressed. It is costing 18 million dollars a day... If not addressed, it will reallocate revenues intended for other critical programs that will impact a great many Illinois citizens.  If there is no pension resolution, then the only solution is to raise taxes…

What concerns me is the incomplete context in which these ideas were presented. You are correct that this is a revenue problem, and it is obvious to the casual observer that the current flat-rate income tax cannot support the current fiscal needs of the state because it is regressive and penalizes those that can least afford it…

I have never heard you allude to or make the connection to the fact that it was the monies collected for the pension funds that was redirected to many of these programs that you mentioned would suffer when/if revenue is redirected.  In other words, citizens of the State of Illinois have benefited by Illinois legislators robbing Peter to pay Paul to finance these programs instead of being honest regarding the deficient revenue stream and the need to upgrade the taxing system that meets the needs of 21st century citizens and demands.   

Knowing that you have a growing relationship with Ty Fahner, let me remind you of some of his perspectives: “Let's recall what Ty Fahner, president of the Civic Committee of the Commercial Club of Chicago and a former Attorney General of Illinois, said about reneging on contracts in his interview with Phil Ponce on WTTW (April 25): ‘This [public pension financial mess] was not created by the people entitled to the benefits... Well, if this happened in the private sector… if someone didn't pay in the money… there would be prosecutions going.’ Moreover, according to Jack Tucker, ‘At one time Ty Fahner was employed as legal counsel for TRS.  He assured Trustees at that time that their pensions were constitutionally guaranteed, and they should not fret over underfunding’” (What do we think about Illinois House Speaker Michael Madigan’s exclusion of Illinois judges from his pension reform bill?).

Where is your indignation regarding these legislative abuses and their impact on all the citizens of Illinois?  Apparently, Mr. Fahner's chameleon-like qualities suit the audiences in front of him at the moment. Apparently, legislators are immune to prosecution since none has happened... Had those pension funds been used as intended, this pension crisis would not exist...

I am a “closet historian” and when I have the opportunity to read for pleasure, I read revolutionary and colonial history.  I find it strange that many legislators do not honor and protect the constitutions; instead of being honest with their constituents, they are preparing for a court battle to circumvent the documents that promotes public trust and removes the judicial pension system from the impact of their pension reform.  This is disturbing because a) their solutions will not solve the identified legislative problems, and they will be asking for more; b) if they can do this to any segment of Illinois citizenry, then who will be next?

Not providing the necessary historical context on this issue instigates anger and resentment for public employees. They have done nothing wrong except perhaps pay for their contractually-guaranteed earned benefits that will be diminished by current politicians.

Kind regards,
Mark Pennington

A Simpler Time

The four of us lived in a two-room flat,
for fifteen dollars a month,
where the floors sagged from the weight of a wine
press and barrels that were once stored there.

A stream of water rushed diagonally
and dammed up against the room’s west wall when
my mother scrubbed the linoleum floor. Not even Lysol
could remove the perfume of fermented grapes.

After work each day, my father went to a bath house
on Grand Avenue, while we bathed
in a twenty-five gallon tub filled with pots
of cold water heated on the oil stove.

We kept our food in a fruit crate from A & P
hammered and braced outside the window,
just out of reach of alley cats and sewer rats.
We lived on Race Street for fourteen months

where I slept in a crib opposite a glass-dividing door,
and where just beyond another family lived a life
in silhouettes with clear voices. Sweetness
filled the rooms, and we were drunk with happiness.

“A Simpler Time” was originally published by Lake Shore Publishing, 1995.

State budget, pension woes tied to big gambling giveaways by Phil Ciciora

CHAMPAIGN, Ill. — Budget and pension woes in Illinois are inextricably linked to giveaways to “Big Gambling,” a University of Illinois expert in legal policy says. If the state had taxed gambling at rates comparable to other states over the past 20-plus years, Illinois would have had an additional $35 billion to $56 billion in tax revenue in its coffers – and most likely no budget crisis, according to John Kindt, a professor emeritus of business and legal policy.

“Until Illinois taxpayers wake up and realize that they are subsidizing gambling interests at the expense of teachers, firefighters and police officers, then public employees in the state of Illinois will continue to see reductions in their salaries, pensions and earned benefits,” Kindt said. “The net result is that everyone suffers when Big Gambling is involved.”

Kindt, who has testified before Congress and state legislatures about business and legal policy issues, says the new 555-page gambling expansion bill, which has been approved by the Illinois Senate but still awaits approval in the Illinois House, values casino licenses at $100,000 apiece.

By even the most conservative of estimates, that’s a $5 billion to $10 billion freebie to gambling interests, Kindt said. “To be fair, there are other initial fees that would give Illinois a one-time revenue injection of $1.2 billion,” he said. “But that number is dwarfed in comparison to what the state could be getting if it got tough on Big Gambling.”

Illinois House Speaker Michael Madigan must assume some responsibility for these continual giveaways by the state to gambling interests, particularly as he proposes a pension-reduction bill, Kindt said. “The original Madigan pension bill had an unusual nine-page introduction outlining the supposed history leading to the 2013 budget crisis,” he said. “But nowhere in this so-called historical record is there any mention of the tens of billions of dollars legally given away to Big Gambling’s political insiders during Rep. Madigan’s decades-long tenure as Speaker.”

According to Kindt, in 1990, Illinois sold 10 casino licenses worth a total fair market value of $5 billion for only $25,000 per license. Political insiders quickly snatched up the licenses, Kindt said. “An independent analysis conducted in 2003 confirmed that the fair market value for each of those licenses was at least $500 million,” he said. “The report also noted that, in 2000, a Detroit casino license was sold for $660 million. In 2001, Argosy Gaming purchased a suburban Cincinnati casino license for $750 million. And in 2002, the Rosemont casino license, which was originally granted by Illinois for $25,000, got a bid of $615 million.”

Even casinos in regulatory trouble sell for about $500 million, Kindt said. “When the Nevada-based owner of one Illinois casino ran into trouble in 2001, they sold the casino to another gambling company for $465 million,” Kindt said. “But it should be noted that the initial Illinois license fee they paid was just $25,000. That’s a pretty good return on the initial investment.”

Gambling facilities in Illinois also pay very little in taxes, when compared to other states and venues.

“In Canada, all gambling revenue goes directly into government bank accounts, which technically makes the tax rate 100 percent,” he said. “The service providers, including many of the same gambling companies that operate in Illinois, receive only management fees.”

By comparison, proponents of a Chicago casino have historically argued for an effective tax rate as low as 7.7 percent, Kindt said. “Over two decades, the relatively low Illinois tax rates on Big Gambling have trended mostly downward through a maze of deductions, all of which are legal,” he said. “That type of financial sleight-of-hand only serves to obfuscate what the Illinois treasury could actually be receiving.”

And under the new Illinois gambling expansion bill, the proposed Chicago casino would, in effect, be allowed to operate as a government unto itself, according to Kindt. “For starters, the gambling bill’s ethical constraints on political contributions are filled with loopholes,” Kindt said. “But the kicker is that the bill actually proposes laws to indirectly fire the entire Illinois Gaming Board, apparently because the board is performing good regulatory work. In essence, gambling interests wish to neutralize the regulations of the Illinois Gaming Board and its noted chair, retired judge Aaron Jaffe.

“Explain to the public-sector workers of Illinois how that is good public policy.”

 from Expert: State budget, pension woes tied to big gambling giveaways

A One-Year Moratorium on Charter and Virtual Schools Passed in Illinois

Bill Status of HB0494 98th General Assembly

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  Full Text  Votes  View All Actions  Printer-Friendly Version

Short Description:  EDUCATION-TECH

House Sponsors
Rep. Linda Chapa LaVia - Sandra M. Pihos - Renée Kosel, Jil Tracy, Robert W. Pritchard, Bill Mitchell, Kay Hatcher, Fred Crespo, JoAnn D. Osmond, Emily McAsey and Jehan A. Gordon-Booth

Senate Sponsors
(Sen. Jennifer Bertino-Tarrant - Linda Holmes - Jacqueline Y. Collins, Sue Rezin and Michael Connelly)

Last Action

Date	Chamber	Action
5/24/2013	House	Public Act . . . . . . . . . 98-0016

Statutes Amended In Order of Appearance

105 ILCS 5/32-1.3

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:
	105 ILCS 5/27A-5

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.

What goes on in Chicago—should be exposed to the world: An Interview with Paul Horton

[Paul Horton is a History teacher at the University of Chicago Laboratory High School]

The following interview was posted by Michael Shaughnessy Education Views Senior Columnist on May 18, 2013 in Commentaries, Daily, Editor’s Pick, Insights on Education, Teachers

Michael F. Shaughnessy - Paul, what the hell is going on in Chicago?

Fifty-four schools are targeted for shut down and 90% are in African American communities within the city. As you may know, the public teachers in Chicago struck last year and made our mayor look bad. Most teachers think that this is payback now. Our County Commissioner, a former history teacher, just called the hearings to close the schools a charade. Our mayor has taken heavy campaign contributions from some people who are heavily invested in charter schools, and they are starting to worry about the return on their investments.

Our Mayor is under heavy pressure to close schools if he wants to continue to raise money for his party and a possible future run for Illinois senator. Most political analysts are thinking that our mayor will run for president in the next cycle following a potential Clinton term.

He is very ambitious to make things happen to build a record of accomplishment. The problem is that his decisions about schools might not be the best for the kids of Chicago. He appoints Board Members for the city schools, and he is their de facto dictator. He does his best to let his superintendent do the talking, though, to give the impression that he is not in charge.

The Superintendent, Barbara Byrd Bennett, is very good with handling the press. She has command of her Broad Foundation script, as she is a Broad Foundation Administrator School graduate, like her immediate predecessor and Arne Duncan. They are all well-schooled in the Broad Foundation lingo.

Layered on top of this is a situation in the Woodlawn neighborhood (where I live) involving the encroachment of the University of Chicago into a neighborhood that it has an interest in gentrifying, located south of its campus. The University has purchased a lease on the best and biggest public school from the Chicago Public Schools (CPS) in the Woodlawn neighborhood, Wadsworth School.

The students from this school will be forced to attend a school five blocks to the southwest without a green space play area. The move will bring together students from three elementary schools and into a school packed as tight as sardines without adequate play space. The high school that the University is taking for its charter high school, on the other hand, has plenty of park space and several new playgrounds appropriate for elementary age kids. In another case, students will be asked to cross the most dangerous gang boundary in Chicago every morning and afternoon to accommodate a shutdown.

Tell us about the demonstration.

The demonstration brought together parents, teachers, and students from the neighborhood and all around the city. It was staged at a very busy intersection along the gang border where the kids will have to cross next year to go to their new school. It was also staged after school and during the shift change of the University of Chicago Hospitals nearby. Thousands of people commute through this intersection to begin their after-school commute. The apex of the protest involved students, teachers, and parents sitting down in the street with blood-stained shirts to call attention to the potential violence at that intersection next year. Innocent people are often caught in gang gun battles in and around this intersection. A few months ago a two-month old child was shot and killed in gang crossfire in a child seat in a parked car near this intersection. We have a lot of worried parents who don’t like their kids crossing this intersection at any time.

Have you spoken off the record to any police—what do they have to say?

Most of the police I spoke to were very sympathetic regarding the protests because the mayor is hostile to unions in general. The only cop I talked to who did not share this opinion was the afternoon Grand Crossing Precinct Shift officer who responded with a “no comment.”

And our brave firefighters—what is Rahm Emanuel proposing?

The firefighters I have talked to are upset that the safety corridor plan developed by the city to protect students making this and other commutes to new schools will move them away from their (fire) houses and, in some cases, trucks. They feel that this is a public safety issue and that it violates their contract. The firemen have suggested that the mayor hire more cops to take care of the safety corridors.

I heard you were interviewed. What happened?

I was picketing and representing my Union local, AFT 2063, at the protest and a TV reporter asked me for an interview, so I talked to him.

Do you have a link?

Here it is: Police Arrest Demonstrators Protesting School Closings

 

What have I neglected to ask?

This is “the City of Broad Shoulders” and we aim to teach the Broad Foundation that they cannot steal our schools or harm our kids. The people of Chicago worked for a hundred years to build these buildings, and the public needs to continue to invest in them. We don’t like the idea of private companies profiting from public property that we have invested in. We don’t like not having a say in how and why this happens. What we have here is classic machine politics. The aldermen will support the mayor because he controls who gets what and who doesn’t. The aldermen have been told to shut up and, with a few exceptions, they are shutting up.

from Diane Ravitch’s Blog: The Scoop on Chicago Privatization

Why are Finland's schools successful? by LynNell Hancock

The country's achievements in education have other nations doing their homework.

“There are no mandated standardized tests in Finland, apart from one exam at the end of students’ senior year in high school. There are no rankings, no comparisons or competition between students, schools or regions. Finland’s schools are publicly funded. The people in the government agencies running them, from national officials to local authorities, are educators, not business people, military leaders or career politicians. Every school has the same national goals and draws from the same pool of university-trained educators. The result is that a Finnish child has a good shot at getting the same quality education no matter whether he or she lives in a rural village or a university town. The differences between weakest and strongest students are the smallest in the world, according to the most recent survey by the Organization for Economic Co-operation and Development (OECD). ‘Equality is the most important word in Finnish education. All political parties on the right and left agree on this,’ said Olli Luukkainen, president of Finland’s powerful teachers union.

“Ninety-three percent of Finns graduate from academic or vocational high schools, 17.5 percentage points higher than the United States, and 66 percent go on to higher education, the highest rate in the European Union. Yet Finland spends about 30 percent less per student than the United States.

“Still, there is a distinct absence of chest-thumping among the famously reticent Finns. They are eager to celebrate their recent world hockey championship, but PISA scores, not so much. ‘We prepare children to learn how to learn, not how to take a test,’ said Pasi Sahlberg, a former math and physics teacher who is now in Finland’s Ministry of Education and Culture. ‘We are not much interested in PISA. It’s not what we are about…’

“Teachers in Finland spend fewer hours at school each day and spend less time in classrooms than American teachers. Teachers use the extra time to build curriculums and assess their students. Children spend far more time playing outside, even in the depths of winter. Homework is minimal. Compulsory schooling does not begin until age 7. ‘We have no hurry,’ said Louhivuori. ‘Children learn better when they are ready. Why stress them out?’

“It’s almost unheard of for a child to show up hungry or homeless. Finland provides three years of maternity leave and subsidized day care to parents, and preschool for all 5-year-olds, where the emphasis is on play and socializing. In addition, the state subsidizes parents, paying them around 150 euros per month for every child until he or she turns 17. Ninety-seven percent of 6-year-olds attend public preschool, where children begin some academics. Schools provide food, medical care, counseling and taxi service if needed. Stu­dent health care is free…”

Why are Finland's schools successful?