A View of the Illinois Public Pension Dilemma, Pt. II by Glen Brown

What would happen if the current proposals for pension reform are passed? Some of the proposals from Governor Quinn’s pension committee include the following: public employees should contribute more for continuing in the Tier I defined-benefit pension plan; there should be a 401 (k) defined-contribution savings option; there should be the formation of a capped salary with an attached hybrid plan option (401 k) for current teachers; the retirement age should be raised for full benefits;  the state’s “normal costs” (they do not include the service debt) for the Teachers’ Retirement System and the State University Retirement System should be shifted to local school districts; the Cost-of-Living-Adjustment (COLA) should be reduced for current teachers (and possibly for retired teachers, if it is judged “constitutional”); there should be a reduced calculation of the anticipated average for the TRS investment returns; and teachers currently in the Tier II plan (because of SB 1946) should merit a decreased contribution rate. These proposals are supposedly contingent upon policymakers guaranteeing the statutorily-required contributions to the public pension systems. Really!?

·         For every one-percent increase in the contribution rate by current teachers, approximately $100 million will be collected. Currently, the State of Illinois “owes $43.5 billion to the Teachers’ Retirement System in accordance with the payment schedule mandated by current law… The cumulative unfunded liability for all five state-sponsored systems currently stands at $83 billion” and will increase every year (the Center for Tax and Budget Accountability, April 2012).

·         The cost of mandatory social security for teachers opting out of the defined-benefit plan would be substantially higher than the costs for teachers remaining in the defined-benefit pension plan.  These costs would inevitably reduce funds available for education programs and other services; local government costs would also increase because of the Federal Insurance Contributions Act (FICA tax).  “A wage or salaried employee [would] pay only half of the FICA bill, 6.2 percent for Social Security plus 1.45 percent for Medicare… [The] employer [would] contribute the other half” (What is FICA?).

·         Migration into a Tier III, defined-contribution savings plan will accelerate the state’s obligation to pay down the unfunded liability. The defined-contribution savings plan will reduce membership contributions to the TRS and jeopardize retirement security for those teachers. If members in the defined-contribution savings plan receive Social Security and the state does not pay it, every school district would have to contribute 6.2 percent per teacher. The state will also have to pay down the TRS $43.5 billion unfunded liability more quickly as a result of any movement into the Tier III defined-contribution savings plan option.

·         If Illinois policymakers pass a bill to shift its responsibility of paying the “normal costs” to the local school districts, many school districts will not be able to afford to pay these costs, even if they are “phased in for a few years.”  What will be the probable effects? In cash-strapped school districts, of which there are many, teachers will not receive increases in their salaries; many teachers will lose their jobs; student programs will be reduced or eliminated; class sizes will increase; it will be more difficult to recruit, as well as retain and attract, the best teaching candidates without offering an equitable and solvent defined-benefit plan (Education Sector Policy Briefs).

·         “A shift would create a new and large financial requirement for school districts, which would be difficult for many to meet. Moreover, Illinois ranks last in terms of state spending on K-12 education, and school districts are already relying heavily on local property taxes. Shifting the state’s normal cost obligation onto school districts would only mean that an even higher proportion of school districts’ revenue would come from property taxes” (the Center for Tax and Budget Accountability, March 2012).

What would be some other outcomes of these proposals? The public school system in Illinois will be jeopardized; the public school teacher’s dignity and guaranteed retirement security will be imperiled, and their students’ right to be taught by the very best teachers available in Illinois will be at risk. The passing of a few of these aforementioned proposals will create a dispossessed class of teachers in Illinois and guarantee that many of the best, potential teaching candidates will not consider working in the State of Illinois. 

It is noteworthy that the exploitation of governmental policies, that are often written or subsidized by the Civic Committee of the Commercial Club of Chicago, creates a financial deprivation for the vast majority of people in the State of Illinois. Each new tax break for the wealthy, for instance, means less money to run the state’s government and; thus, it requires policymakers to get money elsewhere or to cut essential services (Of course, the Chicago Tribune, the Civic Committee and its obverse Illinois Is Broke website, and others will continue to blame the teachers’ pension for cuts to services).  Despotic governmental policies will not revive the Illinois economy and produce jobs. They will have, however, a negative economic impact on the state’s economy because retirees and most other middle-class taxpayers will be forced to reduce their spending.  

Consider that of the nearly 88,000 retired teachers in TRS, there are approximately 52,000 pensions below $50 thousand; more than 17,000 of them are less than $20 thousand (TRS).  These people do not receive Social Security and, if they do, it is minimal. To further reduce the COLA for these people would lead to the impoverishment and destruction of their right to self-preservation.  Reflect upon the fact that a “simple” COLA will not be sufficient for keeping pace with inflation for current teachers when they retire, and that members of the Civic Committee, Civic Federation and General Assembly will never have this concern. 

It is incongruous that nothing in these proposals will address the revenue problem in the State of Illinois or its self-induced debt problems. What will be most certain if these proposals are passed are costly lawsuits at the taxpayers’ expense to defend what is explicitly stated in the Illinois Constitution’s Article XIII – General Provisions, Section 5. Pension and Retirement Rights: “Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired,” and in Article I – Bill of Rights, Section 16. Ex Post Facto Laws and Impairing Contracts: “No ex post facto law, or law impairing the obligation of contracts or making an irrevocable grant of special privileges or immunities, shall be passed,” and in the Constitution of the United States of America, Article I, Section 10: “No State shall… pass any ex post facto Law, or Law impairing the Obligation of Contracts…” 

-Glen Brown

A View of the Illinois Public Pension Dilemma, Pt. I by Glen Brown

Despite the fact that the State of Illinois entered into an enforceable constitutional contractual relationship (Article XIII, Section 5 of the state’s constitution) in 1970 of which benefits “shall not be diminished or impaired,” the State of Illinois has underfunded the Teachers’ Retirement System (TRS) for decades and has used this money as if it were its own private savings account to pay for its other arrears and special interests.

Teachers have contributed responsibly to their pension fund, currently at 9.4 percent of their annual compensation. Most teachers will not receive Social Security and only a modicum of payment for having worked in the private sector because of the Windfall Elimination Provision that was “enacted as part of the 1983 Social Refinancing Act” and signed into law by union breaker President Ronald Reagan.

Most teachers have worked for lower wages (and without gratuities commonly distributed in the financial private sector) throughout their career for the promise of a guaranteed defined-benefit pension plan; 401 (k) savings accounts will never sustain their retirement beyond a few years. The “earned” and “deferred” compensation of a defined-benefit plan was originally established to keep college-educated people working in a sometimes difficult and stressful job without the higher salary, benefits, and bonuses commonly rewarded to comparably-educated workers in the private sector. It is significant to note that nearly 60 percent of all TRS pension annuitants are paid less than $50 thousand each year; a little more than half of this group (33 percent) is paid less than $20 thousand (TRS).  

To challenge and to attempt to impair a teacher’s constitutionally-guaranteed rights and benefits is an encroachment of their right to human dignity and justice that the state and U.S. laws protect. It is unethical, injudicious and discriminatory for policymakers to default on those promises.  Moreover, to call it a “shared sacrifice,” as Tyrone Fahner of the Civic Committee of the Commercial Club of Chicago claimed at the Fixing Illinois Public Pensions forum on April 9th when “billions of tax dollars [across the nation] have been directed to the rich leaving local government services starved for funds and jobs,” (Pulitzer-Prize Winner David Cay Johnston) is a travesty of justice and blatant hypocrisy.

It is true that at the time of the 1970 Illinois Constitutional Convention, the state’s pension systems were no better funded than they are today (Eric Madiar, Chief Legal Counsel to Illinois Senate President John Cullerton and Parliamentarian of the Illinois Senate). Any dialogue about TRS and other public pension systems being underfunded is misleading because it refers only to the retirement systems’ long-term unfunded liability (the current value of future financial obligations minus available assets).  It is evident that Illinois policymakers, members of the Civic Committee and Civic Federation, and many so-called journalists of the Chicago Tribune and others want to renege on the constitutional guarantee to public employees.

It is also true the unfunded liability of the pension systems grew exponentially because of the state’s inconsistent funding methods, unreliable accounting methods, and “special deals” made by legislators (and sometimes with union and business community stakeholders) that were to be funded with future monies. The scapegoating of public employees (especially teachers), exacerbated by greed and corruption particularly flagrant in the financial sector, exploded into the Great Recession. Of course, this came after eight years of inordinate military spending for two costly wars and deregulation and unprecedented tax cuts for the wealthy by the federal, state and local governments. This tsunami of debt intensified every state’s budget deficits. We can also add fiscal irresponsibility, incompetence, avarice, and corruption to Illinois' financial debacle.

Consider the funding records of these Illinois governors to the Teachers’ Retirement System since 1949. The following is the total employer’s (the state’s) contribution as a percentage of the actuarial requirement (TRS):

·         Adlai Stevenson (1949-53): a steady decline to an approximately 40 percent funding;

·         William Stratton (1953-61): a roller-coaster funding record to approximately 60 percent;

·         Otto Kerner (1961-68): a roller-coaster funding record to approximately 70 percent (Kerner was also imprisoned for conspiracy and perjury);

·         Sam Shapiro (1968-69): a decline in funding to approximately 65 percent;

·         Richard Ogilvie (1969-73): a roller-coaster funding record that was as low as 33 percent to as high as 60 percent;

·         Dan Walker (1973-77): a steady climb of funding to approximately 80 percent (Walker was also imprisoned for bank fraud);

·         James Thompson (1977-91): a roller-coaster funding record from a high of approximately 90 percent then down to 30 percent;

·         James Edgar (1991-99): a roller-coaster funding record down to approximately 25 percent to as high as 70 percent; also signed into law the flawed "Pension Ramp," Public Act 88-593, the funding law that entails larger payments today to pay the pension systems what the state owes;

·         George Ryan (1999-2003): a roller-coaster funding record to approximately 65 percent (Ryan is currently in prison for fraud and racketeering);

·         Rod Blagojevich (2003-09): a roller-coaster funding record down to approximately 35 percent and then as high as 70 percent (Blagojevich is currently in prison for 18 corruption charges);

·         Patrick Quinn (2009- ): though the state has borrowed money to fund the system, it has also shorted TRS (its actuarial requirement) over $3 billion; thus, the state’s debt service continues to grow.

-Glen Brown
 

Message from Cinda Klickna, president of the IEA

Colleagues:

I wanted to take a moment to update you on the fight to make sure every IEA member gets the pension that he/she has been promised.

As IEA President, my focus is always on our members.  On the issue of pensions, that means protecting benefits of members as well as funding of the pension systems. The main discussion should be and must be - as it has always been- the funding of the pension systems.

We refuse to allow the conversation about how to fix the systems to be focused solely on benefits. The top issue is funding – it’s how we got into this mess, and only through funding can the pension systems get back on solid financial footing.

The Illinois Constitution makes it clear that benefits for state pension system annuitants cannot be diminished or impaired. IEA has always insisted that any pension ideas that we would be willing to consider must be constitutional and fair to members.  That has not changed, nor will it.

The TRS Trustee Resolution:

The TRS trustees recently approved a resolution on pensions that has not been well explained in the news media.  Read the resolution.  The resolution is clearly focused on funding of the systems. It calls upon the state of Illinois to get serious about its debt to the pension systems (the state currently owes more than $43 billion to TRS alone). The state ran up this debt by using “Illinois math” to decide how much to pay the state systems. The TRS resolution is a call to end this practice.

Among other things, the resolution:

    --Calls on the state to pay the systems the amounts dictated by actuarial science (the amount the state needs to contribute to ensure the systems remain capable of paying benefits to current and future retirees)

    --The problem is that the state for decades has paid, essentially, what it has felt like paying and has given the pension systems an I.O.U. for the remainder. This is what has caused the pension crisis

    --Calls on the state to fix Tier II, the new set of pension benefits that went into effect for employees hired after January 1, 2011

    --The contribution Tier II employees make exceeds the value of the benefit; therefore, the employee is paying some of the State's portion.  To fix that, the State needs to pay more. This must be addressed and it will cost the state money to do so.

Solutions:

It is important to understand that, though the TRS Trustees and TRS Executive Director, Dick Ingram, are very focused on the pension problem, they have not made any proposals for addressing the crisis and do not intend to do so. That is not the role of TRS.  It is the responsibility of the unions representing the participants in the pension systems to engage in discussions about proposals that could impact their members.

There has been a lot of discussion regarding comments attributed to Mr. Ingram about the COLA. Please note that the trustees’ resolution does not reference COLA. That is NOT part of the resolution adopted by the Trustees.  The reason COLA is being discussed at all is because the cost of it is huge ($50 billion out of TRS's liability of $81 billion), and legislators have mentioned this cost for a long time.

  

Even though the media attention to Ingram’s comment has diverted many people's focus to anger and distrust, your association’s focus has not changed; we are fighting to find funding solutions to the Illinois budget pension problems.  We will only consider constitutional proposals. IEA attorneys, as well as those representing the other members of the labor coalition, will guide us. All of these top-quality legal minds understand what is, and isn’t, constitutional.

What you can do :

Current and future annuitants have a huge stake in this issue. You owe it to yourselves to be informed and to make your feelings known.

     --Attend Dick Ingram's TRS town hall meetings

     --Listen to the data, ask questions, raise your views

     --Don't get diverted by the media who want to create distrust from within our own ranks 

        INSTEAD, direct the conversation with legislators, etc. back to the real focus - funding of our   pensions 

     --Check the IEA website for updates and be prepared to act on short notice on any legislation regarding your retirement benefits.

I assure you, as your IEA President and as a TRS Trustee, IEA and TRS will never stop fighting for the people we represent. We remain deeply concerned about the future of pensions for all our members and we continue to work daily to ensure our members get the pensions they have paid for. Thank you for your support and your continued work in contacting legislators. 

“Fixing Illinois’ Public Pensions” Better Government Association, April 9, 2012

                                                  (Photograph by Todd Mertz)

Remarks made by TRS Executive Director Dick Ingram became an immediate subject of a recent panel discussion held by the Better Government Association on April 9, 2012, at Loyola University in Chicago. Two members of the pension committee convened by Governor Quinn had an opportunity to speak about what “we all face” in light of increased pension costs because of the unfunded liability (money now owed and that has not been paid into the fund during several governors’ tenures).

Representatives Darlene Senger and Elaine Nekritz spoke about the nature of the deficit problem and moving forward to make adjustments to the retirement system. Henry Bayer, executive director of the American Federation of State, County and Municipal Employees, AFL-CIO, Council 31, and Tyrone Fahner, president of the Civic Committee of the Commercial Club of Chicago were also present.

Fahner was quick to remind everyone in the audience that “out of a sense of responsibility to his membership, Mr. Dick Ingram, head of the TRS, has admitted to the pension system’s insolvency”; that the “real numbers were hidden.”  Rank-and-file members from the public unions in the room were silent, not out of surprise but because once again they were hearing Ingram’s words being used to make a case that “cuts” to the current teachers and, quite possibly the retirees, were necessary, despite the constitutional provision that protects such changes.

When asked “what are the limits of pension reform? Where must we stop because of the constitution,” Fahner replied that “the only limits are that we can’t take what’s already been earned. That would be inappropriate and unconstitutional.” Nonetheless, Fahner said that changes going forward can be “frozen” or “changed”; that Chief Legal Counsel to Illinois Senate President John Cullerton and Parliamentarian of the Illinois Senate “Madiar is wrong” about his analysis regarding a current employee’s vested right when he or she enters the pension system. He also said “if we do nothing, everyone is screwed.”

Senger added “SB 512 wasn’t unconstitutional. It wasn’t taking away benefits. We have a system that is failing” and “every time you delay a solution, it becomes costly.” Senger also declared that the employer (school district) should pay the normal costs since the employer makes the contracts, and that “the COLA is the problem” and “should be suspended like in Rhode Island.”

The Chicago Tribune had cited Ingram a few days earlier: “With insolvency looming in as little as 17 years, the head of the state’s largest pension fund is a warning that pension benefits promised to teachers, starting with those already retired, may need to be cut” (Teachers and pension cuts. Chicago Tribune 4 April 2012). Another article by Chris Wetterich in the Springfield’s State Journal Register had quoted Ingram: “What we are saying is that the number is so bad that you have to start having those conversations. The reality is that if you look at the pension math, the single biggest cost is the COLA” (31 March 2012).

The reactionary firestorm was to be expected. Rank-and-file, as well as the IFT and AFCSME, were shrill in their condemnations of Ingram’s sudden and unexplained change. The Illinois Education Association likewise responded but with close connections to the TRS (the president of IEA is also a TRS trustee): “It’s important to understand that the current situation is very serious but capable of being resolved. TRS, SURS, and other state systems can be saved, but we need to understand that it will not be easy or inexpensive” (http://www.ieanea.org/featured/pension-update-april-1-2012/). 

Meanwhile, Ingram has been eager to make clear that his statements were a warning regarding what would happen as a result of the state’s failure to fund or lessen the funding to the teachers’ pension. Those were, according to Ingram, the reasons for the stress tests conducted by Buck Consultants. In short, his words were being used “out of context.” To make this even more clear, Ingram printed a clarification in the Chicago Tribune’s Voice of the People on Tuesday, April 10 that stated: “Neither I nor the Teachers Retirement System is proposing any changes in member benefits, especially a reduction in the current annual cost-of-living adjustment… It is not our role at TRS to suggest a solution to this problem.”

Nevertheless, in the same editorial, Ingram once again warns that he has told his board that significant changes must occur in order to avoid insolvency, and these changes need come from newly-generated revenue sources. He further said “Any of these significant changes can only be made by the General Assembly.” For the media, Ingram outlined the “possible areas where lawmakers may look for a solution. There are only a few options available, and none are very pleasant to discuss – changes in the cost-of-living adjustment, in member contributions, in retirement age and in the benefit formula, as well as increased revenues through taxes.”

When the question of finding revenue rather than cutting pension benefits was asked, Senger’s immediate response was “giving an ‘over-spender’ [the State of Illinois] more money is not an answer.” Fahner then asked the audience in the forum: “Do you want your taxes to go up?” While no one wants an increase in taxes, and most people want an equitable and fair taxation for all, Fahner reminded the audience that under Illinois’ current tax structure, they [the middle class] would take the brunt of any increase.  Bayer countered that Fahner “wants to fix the pensions and roll back $6 billion worth of taxes” on the wealthy and corporations.

When asked “are taxpayers going to take another hit?” Nekritz responded that “we knew that the [income] tax increase wasn’t going to solve the pension problem.”  When asked whether the retirement age for current teachers be raised, Senger, Nekritz and Fahner said “yes”; Bayer said “no.” When asked whether the COLA be a part of the pension solution? Senger, Nekritz and Fahner said “yes”; Bayer said “no.”  When asked whether the state should pay what it owes, all of them said “yes.”

In seven days, the pension committee will send its recommendations to Governor Quinn.  They will not include increases in revenue such as a graduated income tax that has been recommended by the Center for Tax and Budget Accountability, the Center on Budget and Policy Priorities, the Center for Economic Policy and Research, the Institute on Taxation and Economic Policy, the National Conference of State Legislatures, the Chicago Metropolitan Agency for Planning, and United for a Fair Economy, et al.

They will not include the establishment of a broader tax base so rates are “lower in order to minimize the impact…” and because a broader tax base offers “diversification since it spreads the burden of taxation among more payers than a narrow basis does” (National Conference of State Legislatures).

They will not include the taxation of services to increase needed revenue despite the fact that “the tax system in the State of Illinois does not reflect today’s economic realities” (Chicago Metropolitan Agency for Planning) and the State of Illinois taxes less than one-third of the 168 potentially-taxable services (Center on Budget and Policy Priorities).

Moreover, they will not include the elimination of welfare for the rich even though “the State of Illinois is among 10 states in the nation with the highest taxes paid by its poorest citizens at 13 percent” (the Institute on Taxation and Economic Policy), and one of the few states where the top five percent of income earners pay the least amount of sales, excise, property and income taxes because of federal deduction offsets or regressive tax loopholes from itemized deductions, such as capital gains tax breaks and deductions for federal income taxes paid that are coupled with a flat-rate structure (the Institute on Taxation and Economic Policy).  They will include suggestions to cut the constitutional benefits of teachers, however.

                                                                                                --John Dillon & Glen Brown

The Escalation of Attacks on the Illinois Public Pension Systems

·         The best funded system is the Illinois Municipal Retirement Fund (IMRF). IMRF uses the actuarial cost method called “entry-age.” For calculation of assets, IMRF uses “smoothing”: a practice that averages the market gains and losses over a five-year period; furthermore, IMRF guarantees payments to its pension system. The five state-sponsored retirement systems use the projected unit method

·         The current “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 88-593 – to pay the pensions systems what the state owes.  According to Amanda Kass, Research and Policy Specialist for Pensions and Local Government of the Center for Tax and Budget Accountability, (April 2012) “the issue is that Illinois lawmakers designed a system -- the way the employer cost is calculated (or what the state pays) -- [that is] inconsistent with rules set by the Government Accounting Standards Board (the rules are non-binding and are for reporting; public retirement systems can fund themselves however they so choose). The way GASB specifies that systems should be funded is generally referred to as the ARC (annual required contribution). According to GASB, the employer’s ARC should be the normal cost (which is calculated using the cost method) plus an amount to amortize an unfunded liability over 30 years. The 30-year time period is an open system, [in other words] those 30 years don’t count down. In systems in which there is no unfunded liability, the employer's ARC would just be the normal cost. In Illinois, what the state has historically paid was less than the employer's ARC (as calculated according to GASB rules). Then there were years like 2006 and 2007 in which lawmakers passed legislation that lowered the contributions for those years to an amount that was below the pension ramp (those amounts were already less than the employer's ARC).  In addition to a revenue problem, the pension ramp was designed in such a way that it’s unfeasible. Even if Illinois’ revenue issue was addressed, the pension ramp would still likely be an issue”

·         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 more painful 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

·         A compounded COLA (Cost-of Living-Adjustment) is a constitutional benefit (Madiar) that must be protected for both current employees and retirees; there is no corresponding benefit enhancement as important as a COLA for ensuring the individual employee’s sound financial future

·         The state must continue to pay both the “normal costs” to the pension systems as well as the service debt

·         The state’s debt problem is not a pension problem. It is a revenue problem, and this needs to become the focus and conversation in the legislative sessions

·         Because the state cannot evade its unfunded debt, the state needs a progressive tax rate

·         Though we might assume that the state already has the votes to pass the “normal costs” to the school districts in Illinois, policymakers will probably delay the passing of this legislation until shortly after the elections in November in the fall veto session before shifting this consequential financial burden to the school districts

·         “[However], 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” (The Center for Tax and Budget Accountability March 2012)

·         The defined-contribution option recommended by policymakers will incur expensive costs for the State of Illinois while jeopardizing not only the pension systems’ funding, but the individual’s financial security (HB 5754)

·         The unfunded liability in Illinois is a unique problem and should not be “lumped together with other states’ financial problems” (General Treasurer Gina Raimondo’s state of Rhode Island, is not comparable to Illinois!).  Illinois has a structural revenue problem (and not a pension problem that the Civic Committee of the Commercial Club/Illinois Is Broke has maliciously perpetuated).  The Illinois citizenry has been brainwashed to believe that the public pension systems are contributing factors to the state’s deficits, and public employees and their leadership have not effectively addressed this disastrous prevarication.  If there is a call for a constitutional convention to amend the state’s constitution, consider that most voters are already convinced that the public employees’ benefits are the sole cause of the state’s debt “crisis”

·         Regarding recent remarks attributed to the TRS Executive Director Dick Ingram, though these “worst-case” scenarios speculated by the Buck Consultants may have been taken out of context and are misleading and hyperbolic, they have successfully fomented panic and inadvertently supported the continual vitriolic diatribes of Illinois Is Broke (their often heard commercials on radio stations, et al); these “worst-case”  possibilities have also incited more distorted “yellow” commentary from the Chicago Tribune.  Rebuttals need to be written by Ingram, our leadership, and us and disseminated in our defense against the Civic Committee’s and Tribune’s relentless, fallacious tirades

·         Governor Quinn has unilaterally proposed to “zero out” the state’s contribution to the Teachers’ Retired Insurance Program. This effrontery needs our continuous attention

·         There is a current piece of legislation that has unanimously passed the House. It is a test case that will challenge the public employees’ constitutional guarantees (HB 4513). Take notice of this potential threat to all of us

·         “[Our] indifference is not a response. Indifference is not a beginning. It is an end. And therefore, indifference is always the friend of the enemy” (Elie Wiesel).  We are responsible for not only our future but for the future of others.  Become informed, unite and protest against these injustices.


Please read the comments below for information regarding the actuarial costs methods: "entry-age" and "projected-unit."

For further explanations, read: “An Illinois Legislator Confirmed that HB 4513 is a Constitutional Test Case” (April 5, 2012) http://teacherpoetmusicianglenbrown.blogspot.com/2012/04/illinois-legislator-confirmed-that-this.html;
“Poisoning the Pension Well: TRS Executive Director Dick Ingram’s Shift in Position” (April 2, 2012) http://teacherpoetmusicianglenbrown.blogspot.com/2012/04/poisoning-pension-well-trs-executive.html;
“Why Are We Still Focusing on the Wrong Issues?” (March 30, 2012) http://teacherpoetmusicianglenbrown.blogspot.com/2012/03/why-are-we-focusing-on-wrong-issue.html;
“TRS Executive Director Richard Ingram’s Address to Delegates at the IEA Representative Assembly” (March 27, 2012) http://teacherpoetmusicianglenbrown.blogspot.com/2012/03/trs-executive-director-richard-ingrams.html;
“COLA (Cost-of-Living Adjustment): Is It Guaranteed in Illinois?” (March 14, 2012) http://teacherpoetmusicianglenbrown.blogspot.com/2012/03/cola-cost-of-living-adjustment-is-it.html;
“HB 5754 by Representative Mike Fortner (a Rebuttal)” (March 13, 2012) http://teacherpoetmusicianglenbrown.blogspot.com/2012/03/hb-5754-by-representative-mike-fortner.html;
“The Effects of HB 5754 and HB 1325 on the Teachers’ Defined-Benefit Pension Plan” (March 9, 2012) http://teacherpoetmusicianglenbrown.blogspot.com/2012/03/effects-of-hb-5754-and-hb-1325-on.html;
“Governor Quinn’s Proposal Will Somersault TRIP” (March 5, 2012) http://teacherpoetmusicianglenbrown.blogspot.com/2012/03/governor-quinns-proposal-will.html

An Illinois Legislator Confirmed that This Is a Constitutional Test Case

Representative Michael Connelly stated today in a meeting that "HB 4513 is a constitutional test case." 

"[HB 4513] amends the Metropolitan Water Reclamation District Article of the Illinois Pension Code. [HB 4513] increases the required employee contributions of persons who first became employees of the Fund or certain reciprocal systems before January 1, 2011. [HB 4513] changes the manner in which the District calculates its required contribution and tax levy. The new contribution amount is calculated as the employer's normal cost plus the annual amount needed to amortize the unfunded liability by the year 2050 as a level percent of payroll, but shall not exceed an amount equal to the total employee contributions 2 years prior multiplied by 4.19 (currently 2.19)…" 

from the IEA
Unconstitutional pension bill advances

"HB 4513 (Nekritz, D-Northbrook) is a piece of legislation that amends the Metropolitan Water Reclamation District (MWRD) article of the Pension Code. The pension board of MWRD proposed legislation that it felt would stabilize its financial position. The fund is roughly 60 percent funded. There are an estimated 2,400 active participants in this pension fund and those employees reside in the Chicagoland area. It is one of the smallest public pension funds in the state. The legislation increased the active employee pension contribution by 3 percent of salary over the next 3 years (beginning in 2013). Currently, members of MWRD pay 9 percent of their salary toward their pension but after these increases, that would rise to 12 percent of their salary. The legislation also required the employer to increase its contribution amount and requires the fund to be 90 percent funded by 2050.

"The IEA took a position of opposition to this legislation along with the Illinois Federation of Teachers, the Teamsters’ Union, and the Fraternal Order of Police. The Teamsters’ Union was the only opponent that actually represented members in this pension fund. The other unions that represented members in this pension fund either took no position or were proponents of the bill. The IEA’s opposition to this legislation was based on our constitutional view that contributions by members cannot be increased unless there is a corresponding benefit modification. Some will argue that the funding of the pension benefit is a “benefit.” That line of thinking was ruled unconstitutional recently in Arizona, which has a protection in its Constitution that is almost verbatim to Illinois’. The bill passed the Illinois House unanimously and is now in the Senate."

See "Antedated Court Cases: Challenging the Pension Clause, Article XIII, Section 5" (May 18, 2011) http://teacherpoetmusicianglenbrown.blogspot.com/2011/05/antedated-court-cases-challenging.html

Poisoning the Pension Well: TRS Executive Director Dick Ingram is at it again

Has the TRS Executive Director Dick Ingram successfully contaminated any future evidence regarding the pension system’s sustainability, so that we do not have to evaluate any longer or refute the Civic Federation’s and Buck Consultants’ data with other stronger evidence – statistics, for example, that do not use a risk-free rate of return to assess liabilities? Isn’t the Civic Federation the third head of the crossbreed, “Cerberus,” that guards Chicago’s plutocratic netherworld?  We already know what the Civic Committee of the Commercial Club of Chicago and the Chicago Tribune safeguard.  Just visit the Civic Committee’s website, Illinois Is Broke, or read the Chicago Tribune.

Have Ingram’s recent assertions spread like a virus and in such a way that their infectious frequency will convince most everyone by the sheer weight of their contagious reiteration rather than by the presentation of more meaningful substantiations of evidence and better solutions that are available?

Does Ingram’s suggestion that the State of Illinois will no longer pay enough money to the public pension systems lead inevitably to the undesirable expectancy that legislators will not pay what is owed in the future and that we should begin to presume a reduction of rights and benefits for both current and retired teachers is ethical and legal?  Will we allow such an expectancy to determine acquiescence?

According to Ingram, “this painful collision between what is fair and what is real is the outcome of the fact that the unfunded liability has grown to such a level that no one has been able to determine a reasonable plan or expectation to pay down this amount? If that is the case, the only other option available that would significantly change the amount owed is to reduce past service costs for active members and retirees” (Chris Wetterich, “TRS director: Retirees might have to take pension cut,” The State Journal-Register, March 31, 2012). 

Aren’t the realities of a pension’s sustainability far more complex than a black-or-white fallacious reduction? Is it possible to omit or to minimize particular testimony and “fair” solutions, especially in the case of the teachers’ retirement system?   How about looking at the numerous ways to raise necessary revenue to pay the state’s debts instead of ways to rob teachers’ of their constitutionally-earned rights and benefits? How about reforming the pension debt that legislators created?

As stated by Ingram, “the number is so bad [regarding the COLA]… that you have to start having those conversations… that if you look at the pension math, the single biggest cost is the COLA,” in other words, “…the math is not trueing up with what is constitutional or fair or earned or whatever else.”  Well, since Ingram has changed his once stated “neutral” position since last fall, how about asking Ingram to include conversations concerning tax breaks and loopholes for corporations and the wealthy at his upcoming town hall meetings? How much revenue would be created singlehandedly with their eliminations?

How about having conversations regarding the creation of a graduated-rate structure that will “cut the overall state income tax burden for 94 percent of all taxpayers” (the Center for Tax and Budget Accountability), or how about conversations regarding the elimination of the tax loophole for “Tax Increment Financing Districts?” According to Greg Leroy, the executive director at a national policy resource center that promotes corporate and government accountability in Washington, DC, that eradication will “save $1.2 billion a year.” 

Yes, according to Ingram, let the suggestions and solutions for the TRS board be “new, bold and honest.” So here are two “new” suggestions for Dick Ingram: let’s put an end to scapegoating teachers and other public employees once and for all.  Public employees are not responsible for the state’s deficits.  Moreover, let’s put an end to distracting the general populace from the real problems that the State of Illinois confronts.

Ingram is correct when he says that solutions should be “honest.”  Indeed, resolutions should emphasize the preservation of the teachers’ and other public employees’ “integrity.”  Let’s defend the constitutional promises made to all of them and focus on raising revenue without compromising the future of the state’s teachers (and their students) as well as other state workers.

Lastly, here’s a “bold” suggestion for all public employees, their families and their friends: let’s unite together and make sure that any arrogant, deceitful and incompetent legislator in Illinois does not get re-elected this fall. 

-Glen Brown

For further reading: “Why Are We Still Focusing on the Wrong Issues” (March 30)

“SB 512: ‘Something Wicked This Way Comes’ (or ‘What, Me Worry about What Ingram Said?’)” (January 23)

“TRS Executive Director Richard Ingram’s Address to Delegates at the IEA Representative Assembly” (March 27)

“We have to do something [about the public pension systems in Illinois” (March 20)

“COLA (Cost-of-Living Adjustment): Is It Guaranteed in Illinois?” (March 14)