Monday, January 9, 2017

SB17: Eric Madiar

Eric Madiar
SB17: Eric Madiar, Master Architect

"We have a state fiscal system that is so poorly designed that it failed to generate sufficient revenue growth both to maintain service levels from one year to the next and to cover the state's actuarially required contributions."
-       Eric Madiar, Senate President Cullerton’s Advisor, Consultant and Designer of SB17 to the City Club of Chicago, Sept. 2015

Despite Mr. Madiar’s unblemished observations before the City Club of Chicago nearly a year ago, his draft of a new “reform” measure to reduce the costs of unfunded pensions by placing the burden directly upon the backs of those who work as public employees illuminates the characteristic politicians’ unwillingness to accept a clear, legal and moral path earlier provided by the Illinois Supreme Court.

Enter stage right: SB17.  The offering to an obstinate Governor Rauner to possibly break the ongoing deadlock in the state budget while guaranteeing the certainty of another battle in the courts over Article XIII, Section 5 of the Illinois Constitution.

“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.”

From a Cullerton  “Issue Background” Memo: “Savings would be recognized by giving Tier 1 public sector employees a choice of benefits related to raises they may receive in their careers and the annual cost of living adjustments to their pensions in retirement.”

In legally, overly- simplistic words, Madiar’s argument for Cullerton to Rauner is that as the employer, the state has the right to decide compensation.  And compensation is never guaranteed.  Just as a faculty or union may argue for an increase, so may a state (the employer of a public educator) define a raise or decide to withhold one. 

In other words, this is not “consideration; it’s an employer’s negotiable prerogative. 

In SB17, Tier 1 employees are asked to give up the 3 percent compounding COLA increase for which they would be eligible each year after retirement.  Instead, they would elect the lesser simple compounding formula for Tier 2 employees, but their future raises would qualify for figuring their final base pensionable annuity.

Sweeteners include a refund of what they have already paid into the pension funds of 10%, and a 10% reduction in payments going forward.  On the other hand, if they retire early? – no (simple)Cola until age 67 or five years after departing the profession. 

But the state’s argument will identify the right of the employer to determine salary, not the choice between two diminishments.  Emphasis on salary adjustment, not choice.

Disagreement is sure to follow.  A recent bulletin from IRTA reminds all retirees “The legal team who represented the IRTA Members against Senate Bill 1, Gino DiVito and John Fitzgerald, recently wrote an opinion concerning Senate President Cullerton's proposed "consideration" language in the bill.”

In short, the attorneys for IRTA do not accept Madiar’s position regarding SB17 or the vulnerability of Tier 1 active teachers; however, they do not represent them.

Likewise, Madiar himself never really supported his own scheme either:

“Our current pension disaster cannot be blamed on salary or pension cost increases.  Between 1985 and 2014, pension funding liabilities grew by $97 billion.  Benefit increase only counted for 8%, or $8 billion of that growth.  Pay increases were actually less than actuaries had assumed they would be. And the actually helped bring down the unfunded liability by $1.3 billion.  The state's failure to fund the system accounts for 49 or 47% of that growth.  So simply out, the main reason we are in this mess is for insufficient pension contributions” (City Club of Chicago).

Yet, SB17 provides no recognition for future salary increases over the years for those Tier 1 employees who “choose” to accept the status quo in pension law. Their salaries will be frozen when it comes to computing a compounded benefit of cost of living.

Yes, it all begins to become complicated unless you happen to be someone in Tier 1 looking at your future and a possible retirement some 5 – 10 years away.  Then it gets downright terrifying.  

Complication aside, another laurel to Rauner includes the offering of a 401K buy-in for the up-to-5% Tier 1’s who just want out of this whole legal labyrinth.  The 5% limit prevents the stampede of people (will there be?) from further undermining the pension system funding by employees.   

A good friend of mine who called me on the morning of May 8th 2015, to inform me of the Illinois Supreme Court’s unanimous decision overturning Madigan’s Pension Reform SB1, reminded me that they’ll (General Assembly) never stop.  “They’ll be back again because they won’t ever do the ethical or moral or right thing.”  
He was right, but Madiar knows this too.  He’s given them momentary hope with another method to avoid the larger issues: a progressive income tax, taxes for services, a re-amortization of state debts, an increase in income taxes, etc.  But he also commented:
“In the end, while contract principles and other permissible options can help mitigate the burden of State and municipal pension obligations, the state must still restructure its revenue system so it can meet, not simply defer its fiscal obligations. As Paul Simon observed in 1971, "We mortgage the future not only when we create bonded indebtedness; we also mortgage the future when we don't pay into the pension systems as we should.
“Revising our State's revenue system, of course, will require political courage and entail tax increases. Welching on public pensions, however, is still not an option for Illinois”.

Political courage?  In Springfield?

Monday, January 2, 2017

Workmen's Compensation: Rauner's New Line in the Sand

Workmen’s Compensation: Rauner’s New Line in the Sand

There’s an old standard joke told at Republican cocktail parties.  The short version goes something like this:  After being saved by three elderly fisherman in a small dingy, a beautiful mermaid decides to reward their behavior by giving each of them a miracle.  The first old man’s broken and twisted hands are suddenly made supple and youthful.  The second angler’s darkened eyes behind inch-thick glasses become unexpectedly clear and bright.  The third old fisherman, whose back is bent and misshapen by years of toil, yells out, “No! Don’t!  I’m on disability.”

It doesn’t take too much deconstruction to arrive at the nasty barb that sits within the middle of this little tale.  Those on disability or claiming injury would rather remain that way instead of working, and at the expense of the employer or the insurance companies.

If you listen to the Republicans in the Illinois General Assembly, you’ll hear a number of terms thrown about with deadly serious looks and a somber shaking of heads.  Workmen’s Comp and Causation will be re-echoed in the next few months’ after one more failed budget, and Governor Rauner will cite the burden of those expenses on businesses in Illinois as the singular reason for our state’s failure to recover economically.  He’ll be sure to add property taxes as well. 

The definition of causation has changed in the last few years primarily as a result of legal interventions on the state level.  In short, causation refers to the legal obligations in a workplace accident and the subsequent compensable responsibility to provide for a worker’s recovery or permanent disability.

In other words, $%@& happens, and if it happens on the job, the employer should assist the injured worker.  It’s not a new idea, and, in fact, for as long as $%@& has happened, there has been some kind of workers compensation, believe it or not. 

Records of workers compensation can be traced all the way back into the Old Testament, when warriors (generally a pretty common form of employment in those days) were reimbursed for loss of limb or appendage.  In some cases, rewards were based even upon the inches of flesh lost.  Yikes!

Quite probably the form of workers’ compensation most closely resembling our current form of insured workers reimbursement can be found in the high seas adventures of the pirates of the wind-tossed Caribbean.

Pirates, before entering into an expected bloody and dangerous fray, often pooled their expected swag before the battle; and the money would be used to pay out for loss of limbs or other parts of a daring swashbuckler – especially parts that would be necessary in future pillaging and plundering. 

In fact, the loss of a right (or dominant) arm was reimbursed at a higher level than the left (or less dominant) arm.  Eyes were also insured, most especially that last one.  Blind pirates were given monetary amounts that acted as a small sinecure for the rest of their lives.  Captains also added large amounts of promised booty to these “insurance” pools, for they knew that a brigand was more likely to fight wildly and recklessly if he knew he was covered for losses to his person.  Pirates valued their work forces and sufficiently rewarded sacrifice. 

And you expected a similarity to politicians?

In the U.S., workers compensation laws are determined by each state, although there exist general guidelines on the federal level.  Fifty states each have a different set of legal requirements for workers compensation, and you can bet that “right to work” states have far different schedules for benefits than other states.  With severely limited revenues since 2008, many state legislatures have been looking frantically for ways to increase revenues; and in many cases, increasing by cutting costs on the backs of those who needed or required state assistance in the years leading up to the Great Recession. 

In an effort to alleviate costs of doing business for companies in a terrible economy, states like Illinois provided loopholes for taxes and other monetary perks; but this slippery slope required more than just tax breaks.  Enter insurance cost reductions stage right. 

When it came to determinations of causation in workers compensation claims, for example, states like Kansas, which had initially a threshold level that stated if the job activities contributed “one iota…” it was deemed compensable…have now changed to the terminology of “must be…the prevailing factor in injury.”   Most states hold to the threshold for compensation if “more probably than not” the injury was workplace related( . 

Bruce Rauner, like several of the previous GOP gubernatorial candidates, has declared his intention to bring a better business environment to Illinois by (1) getting rid of the Quinn tax hike,  (2) enacting tort reform and limiting lawsuit parameters, and (3) by reforming the workers compensation laws to make Illinois more competitive with other states.

“Reform,” for those of us who may have pensions is politic-code for “cut.”  Herein Rauner echoes what we can read in the Illinois GOP webpages.  According to the Illinois GOP, the state still lacks the clear standards of causation, and because of this Illinois employers pay more than other states for workers compensation.  Senator Dale Righter (R-Matoon) worried that we have lost our competitive edge over other states because we provide too much for injured workers.

Righter said, “Causation does not negatively impact workers who are hurt on the job, it simply protects employers from those who try to take advantage of the system.  This will save on workers’ compensation insurance rates and help to create much needed jobs in Illinois.” 

Will it?  A study by Ralph Martire of the Center for Budget and Tax Accountability does not suggest the climate will improve by limiting the opportunities for those injured in the workplace to receive compensation (   

In fact, a recent article in Crain’s examines a very different mix of issues – ones much more systemic to the loss of factory jobs to overseas countries, the aging and unskilled workforce, or even and overly dependence on capital-goods makers.  Not Workmen’s compensation.

Governor Rauner and Senator Righter would disagree with those last words, probably vehemently, but this belies a philosophy of relationships they embrace more than likely the actual data.   This is why Governor Rauner is quick to say, “I hear from business leaders…”  Or “They tell me that…”  In their view, it will always be a battle against those workers who will take advantage of the employer at every turn.


Illinois GOP legislators have wanted the threshold for compensation revised to “major contributing cause,” signifying that the employee must prove that more than ½ the injury must have been created by incident(s) in the workplace.

If, like many workers in this economy, you happen to find yourself working part time in multiple jobs; and you are severely injured on one job, your respondent (responsible) employer need not pay you anymore for the money you will lose at the other job(s).  Example:  I lose a disc in my back working at the seed store carrying bags.  I can no longer work part time at the gardener store where I had another part time job, and I can no longer work at the UPS dock where I had a part time job unloading trucks.  I receive the compensation for part time at the seed shop…and am likely terminated at my other two jobs. 

If I work for a company that demands I travel from one place to another, the GOP now proposes that am covered for any accident occurring while I am in the performance of my job, but if I am injured on the way to a lunch or any other destination which could be construed as “out of specific job description” I am denied compensation.  They use the phrase “actively engaged in the duties of employment…” 

If my workplace injury is a serious “aggravation” of a previous condition (let’s say a heavy object falls upon my hand which is already a bit arthritic), I can only be compensated for the “aggravation” until determined that it is just my arthritis acting up. 

And, if you were to suddenly to become ill or diseased spontaneously, but there was no direct link to your duties of employment, it would be deemed idiopathic and no compensation could be awarded.  Better not be headed toward diabetes or working in an area where chemicals are pooling under your boots. 

Oh, and remember that value differential for right and left arms?  Well, there are value differentials between shoulders (think rotator cuff injury) and arms; and hips (think dysplasia) and legs; BUT the proposed laws would change terminologies to include shoulder as arm, and hip as leg.  That will reduce payouts by insurance companies and might decrease costs for insurance payments for small businesses sometime in the next millennia.

One of the reasons we went to worker’s compensation in the United States in the late 1800’s and early 1900’s was because it was one way to prevent negligence suits by workers against major companies, taking those companies to court and being awarded major settlements.  Think about it. 

Workers compensation is an agreement that I won’t sue you if you promise to take care of me while I work for you – even as I give you my physical strength and loyalty over my work life.   

We are back to rewarding sacrifice.  

Springfield doesn’t do that…never has.  And Rauner never will.

Tuesday, December 13, 2016

Immediacy of Christmas Giving

…And If You Haven’t Got a Ha’penny…

Christmas is coming, all right.  So is the cold.  And, according to the latest reports, the colder…

It always awakes me when I see those ringers for the Salvation Army standing all day and into the pink-orange dusk brandishing that one-handled bell.  They’re usually standing carefully between the exits and the entrances of grocery stores and mall entrances.  

In fact, they’re told when hired to make sure the pot and stand do not block anyone’s entrance or exit.  If possible, they’re supposed to open the doors for you as you approach the entryway. 

Some wear red and green colors to remind us of the holidays; others don a festive hat and stamp about to keep warm.  One gal I see sings with a little boom-box in accompaniment, and believe me, she can make the ice thaw off the store windows with that sweet southern voice of hers.  She touches people on the arm when they give her something, and her blessing feels like something direct from the Vatican. 

In Illinois, people who ring for the Salvation Army start at about $8.25 an hour.  In other states where there are no minimums, it’s about a dollar less (like MO).  On the upside, you’re not allowed to work more than 40 hours, so you won’t be taken advantage of or dare ask for overtime. 

When I stray a bit from home, it isn’t unusual for me to know the person ringing the bell.  For the homeless, it’s not a bad gig.  $330 a week before taxes.  Of course it’s temporary employment, but nevertheless it might get you a couple of rooms this month, or a few meals, or even a bike for the spring.

Tonight I watched people at the local Jewel entering and leaving to see if there was some kind of pattern to who gave, who didn’t, when they gave, if families made a difference, etc.  But I couldn’t quite make it out.  It was only 10 degrees outside, and I wasn’t able to take legible notes.

I’m sure the Salvation Army keeps stats.

Tonight, not many wanted to stop and give anything either.

But he kept ringing that bell and wishing everyone leaving or entering a “Merry Christmas.”  What a trooper.

A really close friend of mine once listened to my self-absorbed whine about how sad this all seemed, especially during the Holidays, and she said something that changed me from then on:

Her: So what do you give the guy?

Me:  I dunno, maybe a dollar or whatever change I have left.

Her:  You know what I do every time?

Me: Give them a Krugerrand?

Her: No, jerk, but I would if I could.  No, I give the pot a dollar, but I give the ringer $5 or $10. 

Me: Really?

Her: You know them better than I do.  Why wouldn’t you?  And you know what?  They think at first you’re kidding, but guess what?  They can use it better than anyone, appreciate it more than anyone, and – you should know that.

This is not to denigrate the Salvation Army, no, not at all.  According to their CEO Todd Bassett receives a small salary of only $13,000 annually while managing a $2 billion organization.  So, regardless of what you may do, the money you drop in that bucket is doing good.  In fact, nearly the entire dollar goes to assistance for the needy.

Just remember quite often the ringer is the “needy” directly in front of you.

So, here’s an idea, if you haven’t done it yet. 

Me:  Hey, thanks for staying out here in the cold and doing this for everyone, all of us.  What you do means a lot and makes a difference.  Here’s a something for the pot and something for you for all your work. 

Remember when Scrooge awakes on Christmas morning.  It’s the same good feeling.

Chris Hedges on Donald Trump as Demagogue

Below are excerpts from an investigative and personal essay by Chris Hedges in Truthdig (12/12/16) of what is to come and what we may expect after January 20th ; a succinct and soul-curdling view of Donald Trump as leader of our country. 

From Demagogue-in-Chief

“For Donald Trump, the presidency will be a vast stage for accommodating his megalomania and insatiable appetite for money. Those who mock, defy or anger him will feel the wrath of the state. Those who are not obsequious will be cast aside. He will invest most of his energy in his brand. Self-promotion is the only real talent he possesses. Corruption, already rife within the political system, will explode into a full-blown kleptocracy. Manufactured stories about Trump’s prowess, brilliance, sexual allure and goodness, as well as how America is becoming “great again,” will be pumped out by the White House smoke machine. He will demand encomiums that will become ever more outrageous. All love, devotion and allegiance will be to Trump.
“Trump is the sick expression of a dysfunctional political system and mass culture that celebrate the most depraved aspects of human nature—greed, a lust for power, a thirst for adulation and celebrity, a penchant for the manipulation of others, dishonesty, a lack of remorse and a frightening pathology in which reality is ignored. He is the product of our escapist world of constant entertainment. He embodies the mutation of values in American society that has culminated in an enormous cult of the self and the abandonment of the common good.
“’When a population becomes distracted by trivia,’ wrote Neil Postman, ‘when cultural life is redefined as a perpetual round of entertainments, when serious public conversation becomes a form of baby-talk, when, in short, a people becomes an audience and their public business a vaudeville, then a nation finds itself at risk: cultural-death is a clear possibility.’
“Demagogues—insecure and crippled by an unbridled narcissism and seldom of high intelligence—play to the inverted values of a decayed society. They attack all who do not kneel before the idol of “the great leader.” “Saturday Night Live” can continue to go after Trump, but Trump, as president, will use every tool in his arsenal, no matter how devious, to banish such public ridicule. He will seek to domesticate the press and critics first through the awarding of special privileges, flattery, gifts and access. Those who cannot be bought off will be destroyed. His petulant, childish taunts, given authority by the machinery of the security and surveillance state, will be dangerous.”
The entire article should be read here: