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Tuesday, December 3, 2013
Deadbeat Springfield Anxiety Playhouse
Anxiety is running high in the Springfield Playhouse called the Illinois State Legislature. State employees who have paid their share of their pension program while the State failed to pay its share are anxious. Thanks to some serious political spin, those State employees who paid into the funds their fair share, and who played by the rules, have been over the past few years portrayed as being greedy, while the deadbeat sovereign state they work for failed to pay its fair share. Now the deadbeat gets to punish those who played by the rules? By calling that punishment "consideration?" Only in Illinois!
I tried to read through the language of the proposed bill that was released roughly 24 hours ago. The technical jargon and calculations are admittedly over my head. It seems to make certain assumptions of income and of the state of the economy that somewhat downplays future recessions or depressions that may throw those numbers off. If there is a spike in income to the funds, our deadbeat State gets to reduce its payments? Am I reading that right? By how much and what triggers all of this, I leave to the experts. How much the actual "savings" are and who gets hammered in the process, I too will leave to the experts.
What is interesting is how the legislation seems to tie the hands of future governors in bargaining over pension changes. It also seems to forbid individuals and/or unions from filing suit against our deadbeat State to force it to make payments into the funds. It also seems to allow the deadbeat State to change its future payment obligations. Am I reading that right?
How does all of this pass constitutional muster? The State constitution seems pretty clear on protecting pensions of State employees. No one is talking about starting the arduous process of amending the constitution.
All four legislative leaders, Speaker Madigan, Minority leader Durkin, Senate President Cullerton and minority leader Radogno, have all signed off on this agreement. The major newspapers have editorialized for it, seemingly grateful that something, anything, is coming out of the Springfield Playhouse. All business groups are for it, using a theme of it is probably as good as it will ever get. Governor Quinn is prepared to sign whatever is put in front of him in a nanosecond.
Why the frantic anxiety over an issue that should have been fixed ages ago and keeps worsening? Is it because there is an election on the horizon?
Is this a short term fix or a long term plan? It seems more short term to me, but then again, the technical calculations and assumptions I will leave to some true experts to analyze.
Those expected to be for the measure are against it, those expected to be against it are for it. Strange alliances are popping up all over the place. Democracy is pretty messy stuff, but the usual tightly controlled roll call votes expected out of the Springfield Playhouse may not be seen should the "Pension Reform" bill be called for a vote today or later this week.
Even the Wall Street Journal editorialized against this bill today, using some pretty harsh and unique wording to get its point across. From the Rauner for Governor campaign, a press release attaches that Wall Street Editorial attacking the "Pension Reform" bill now pending in the Springfield Legislature:
The most dysfunctional state government lives down to its reputation.
"Democrats in Illinois have dug a $100 billion pension hole, and now they want Republicans to rescue them by voting for a plan that would merely delay the fiscal reckoning while helping to re-elect Governor Pat Quinn. The cuckolded GOP seems happy to oblige on this quarter-baked reform.
"Legislative leaders plan to vote Tuesday on a bill that Mr. Quinn hails as a great achievement. But the plan merely tinkers around the edges to save a fanciful $155 billion over 30 years, shaves the state's unfunded liability by at most 20%, and does nothing for Chicago's $20 billion pension hole.
"Most of the putative savings would come from trimming benefits for younger workers. The retirement age for current workers would increase on a graduated scale by four months for 45-year-olds to five years for those 30 and under. Teachers now in their 20s would have to wait until the ripe, old age of 60 to retire, but they'd still draw pensions worth 75% of their final salary.
"Salaries for calculating pensions would also be capped at $109,971, which would increase over time with inflation. Yet Democrats cracked this ceiling by grandfathering in pensions for workers whose salaries currently top or will exceed the cap due to raises in collective-bargaining agreements.
"Democrats are also offering defined-contribution plans as a sop to Republicans who are desperate to dress up this turkey of a deal. These plans would only be available to 5% of workers hired before 2011. Why only 5%? Because if too many workers opt out of the traditional pension, there might not be enough new workers to fund the overpromises Democrats have made to current pensioners.
"At private companies, such 401(k)-style plans are private property that workers keep if they move to a new job. But the Illinois version gives the state control over the new defined-contribution plans and lets the legislature raid the individual accounts at anytime. That's a scam, not a reform.
"Even under the most optimistic forecasts, these nips and tucks would only slim the state's pension liability down to $80 billion—which is where it was after Governor Quinn signed de minimis fixes in spring 2010 to get him past that year's election.
"Safely elected in January 2011, Democrats then raised the state's 3% flat income tax rate to 5% and its corporate rate from 7.3% to 9.5%, the fourth highest in the country. All $7 billion a year in new revenues have gone to pension payments, which will leave a huge new hole in the budget when the supposedly temporary tax hikes are phased out in 2015.
"The truth is that Democrats will never let the tax increases expire, and state Senate President John Cullerton all but admitted as much in October. Mr. Quinn won't rule out another tax hike, which means round two is a certainty in 2015 if he wins re-election next year. The difference is that this time Democrats will kill the flat income tax and impose a progressive rate scheme that will make future tax hikes politically easier.
"It's a sign of their desperation that the state's business lobbies are supporting the reform as the best they can hope for. Others want special tax breaks to offset the 2011 tax hike. Archer Daniels Midland (Decatur) and Office Max (Naperville) have threatened to move their corporate headquarters if the state doesn't guarantee $75 million in tax breaks. But Mr. Quinn has refused to approve more gifts for the legislature's corporate cronies until lawmakers pass something on pensions.
"Democrats hold comfortable majorities in the legislature and don't need GOP votes. Yet they are demanding Republican support so they won't be the only targets of union wrath. Mr. Quinn watered down the reforms to reduce opposition from the teachers and other government unions, but the unions are still promising to go to court to block the changes if they pass.
"GOP leaders who are rounding up votes must be feeling especially charitable this holiday season because they're making an in-kind contribution to Mr. Quinn, who will claim a bipartisan victory as he runs for re-election. While GOP gubernatorial candidate Bruce Rauner has denounced the pension legislation as window-dressing, his Republican primary challengers aren't as savvy. State Senator Bill Brady, who lost to Mr. Quinn in 2010, is supporting the bill while treasurer Dan Rutherford says it is too hard on unions. Such me-too thinking is why the Illinois GOP has become a useless minority.
"In return for their votes, Republicans ought to demand durable pension fixes modelled on the reforms that Democrats in Rhode Island passed in 2011, which suspended cost-of-living adjustments and modified future benefits for all current workers. Municipalities including Chicago should also be covered by any reform. Anything less is a guarantee of future fiscal trouble and a gift to Illinois Democrats."
Ouch! So what are your thoughts about all of this?