Friday, November 30, 2012

General Assembly Sessions



Veto, Regular, Special, and Lame Duck Sessions (The Road Ahead)





Veto Sessions are sessions of the General Assembly reconvening after the regular sessions in order to consider bills earlier vetoed by the Governor. On occasion, other bills and actions are also considered.  Bills in Veto Sessions requite a three-fifths majority of both houses to pass.  The Veto Session dates for the General Assembly in Illinois in 2012 are November 27, 28, and 29, and December 4, 5, and 6.  Earlier speculation had been that pensions and gambling would take up the majority of interest in this session.  So far, some tweaking of gambling has been discussed and rumors of a pension deal some time later abound.  In addition, the Governor has signaled interests in edited versions of earlier bills.  Perhaps another gambling version, with Rahm Emanuel’s assistance (arm twisting?), will appear in the Lame Duck Session (see below). We might certainly expect an appearance of old and new pension bills at that time as well. 

Regular Sessions of the General Assembly in Illinois begin on the second Wednesday in January (as per the Illinois Constitution) and adjourn at the end of May. Newly elected officials are sworn in and assume their legislative duties in the General Assembly on this day.  This year: January 9, 2013. 

Special Sessions of the General Assembly can be called by either the Governor or the presiding officers of each house for consideration of a specific issue or emergency.  Often these gatherings are the result of an economic concern or special need. In addition, Special Sessions deal with impeachments or confirmations of political appointments. Recall Governor Quinn’s convening a special session this last summer to deal with pensions, one which failed to bear any fruit due to the impasse regarding cost shifts to local districts.    


Lame Duck Sessions are those convened by the General Assembly, which include elected members who have been previously defeated or are leaving political office before the assumption of duties by newly-elected replacements.  In the General Assembly, sessions called before the swearing in of all newly elected replacements (as well as other incumbent legislators) are considered lame duck sessions.  Departing members of the House or the Senate are often considered lame ducks, ironically a term originally to describe someone who could not meet his/her debts.  On the other hand, it also depicts an individual who is no longer subject to the forced pressures of his or her political party or constituency.  Such sessions are infamous for passage of unexpected or previously contentious legislation.  The recent tax hike of 2011 was passed in a lame duck session.  Other issues that may certainly appear this year (2013) will include gambling, pensions, issues of marriage equality, etc.   A Lame Duck Session would likely occur in January, just after the New Year and prior to the swearing in of newly elected officials.  Those dates would be January 2 – 8.  There are 21 lame ducks in the House and 15 in the Senate. 

We Are One Illinois (http://www.weareoneillinois.org/news/save-the-dates-january ) is calling for possible days of action in Springfield by its over 600,000 members from January 3 through January 8.  Clear your calendar.  



Wednesday, November 28, 2012

Illinois Ranking in United States


Enjoy Illinois?  (Yahoo 24/7 Wall Street Rankings of States)

The latest report by 24/7 Wall Street on the best-and-worst-run states in the Union serves as a reminder of how Illinois historically got to where it currently ranks - #48 out of 50.  Well, at least we’re not last? (The Best and Worst Run States in America).
In their annual report, Yahoo Finance sifted through hundreds of data sets to determine the relative fiscal/economic positions of each of the fifty states, using information on “financial health, standard of living, and government services…”   Qualifiers like those would shake the fiber of anyone in the know in the General Assembly.  Furthermore, Yahoo authors warn that the “successful management of a state is difficult to measure.  Factors that affect its finances and its population may be the results of decisions made years ago.”  Amen!

In its opening, the Yahoo team also identifies a credo which should have been part of the swearing in of governors and legislators for the many years back to 1953.  ”Each state must anticipate economic shifts and diversify its industries and attract new business.  A state should be able to raise enough revenue to ensure the safety of its citizens and minimize hardship without spending more than it can prudently afford.  Some states have historically done this much better than others.” 

Finally, the report also notes, “There is a strong correlation between well-educated populations and generally well-managed states.  Of the ten best scoring states on our lists, nine have among the highest percentage of adults with high school diplomas.”  Currently, Illinois resides at number 32 out of 50 in education according to Education Statistics

It should be disconcerting for anyone living in Illinois to consider that the General Assembly and Governor Quinn have worked in the last two years to severely diminish the benefits and salaries of educators in the state.  Augmenting that, bills before the General Assembly in the Veto Session or lame-duck January Session (or later) would provide significant reason for promising future educators to seriously consider teaching outside of Illinois.  Why work where you pay out more in contribution than you will get in return, face draconian cuts for not toiling until 67, and lose cost-of-living benefits which would stave off inflation?  

And the state winners are: 

The top five states in the United States include North Dakota (with no budget deficit), Wyoming (Unemployment 6.0%/7th lowest), Nebraska (debt per capita $1279/2nd lowest), Utah (only member of winners with flat tax), Iowa (median household income $49,427/24th highest).

The losers include California (lowest bond rating in U.S.), Rhode Island (debt per capita $9018/ 3rd highest), Arizona (budget deficit 39%/3rd largest), New Jersey (Unemployment 9.3/ 14th highest), and (see below) – Illinois.

Illinois:
Debt per capita: $4790 – 11th highest
Budget Deficit: 40.2% (2nd largest)
Unemployment: 9.8% (tied – 10th highest)
Median Household Income: $53,234 (18th highest)
Pct. Below Poverty Line: 15% (25th highest)

“Although many states have budget issues, Illinois’ faces among the biggest problems. In 2010, the state’s budget shortfall was more than 40% of its general fund, the second-highest of any state. Both S&P and Moody’s gave Illinois credit ratings that were the second-worst of all states. In addition, the state only funded 45% of its pension liability in 2010, the lowest percentage of any state. Governor Patrick Quinn has made the now-$85 billion pension gap a top priority for the new legislative session beginning in January. “

After fully funding the pensions for the first time in decades for just two consecutive years (2011, 2012), Governor Quinn and the General Assembly are working feverishly – from metaphorical pythons to coercive choices between health care of COLA’s  - to make retirement something of the past for public service employees.  
Want a good education?  Look for a good educator.

Sunday, November 25, 2012

Drapetomania


Drapetomania? (The Governor Comments on the Film Lincoln)

NOUN: Drapetomania was a “medical” disease supposedly capable of spreading through combines of plantation slaves in the American South that led to the slaves’ sudden and surprising attempts to flee their conditions of bondage (despite this factuality, please note my sense of abhorrence).  Of course it is a ridiculously impossible condition, but it is one coined unbelievably by a white medical doctor (Samuel Cartwright) in what was a desperate attempt to justify why a human being might be disgruntled with the concept of being a slave – and not fully satisfied with conditions or outcomes that would be physically, emotionally, spiritually and humanly injurious, to say the least.  When reading Huckleberry Finn, one can recognize the confusion of those who wonder at Jim’s disappearance, even after his family is threatened selling “downriver.” 

While the horrors visited upon the many hundreds of thousands of those who were kept in bondage must never be forgotten, my post today reflects the current Governor’s complete obliviousness to the pain he will inflict upon the hundreds of thousand of public servants, retired and current, who toil without knowing that he sees himself as another Lincoln by bringing pension benefit reduction down upon them.   All of this by using his mantra “pension reform.”

While I watched Lincoln, the latest film by Steven Spielberg, I was struck by an aggressive use of close-ups and washed color to create a sense of claustrophobia and darkness, just as momentous events like the Civil War, involuntary bondage, and Lincoln’s own life were about to end.  The struggle to force the 13th Amendment was an effort of moral highs and lows in a political world likely unchanged today. 
Quite differently, Governor Pat Quinn, not a retired public worker in the State of Illinois, watched from an entirely dissimilar perspective.  Quinn noted that the film denoted just how hard it was to get something like pension reform through.  “You will appreciate the battle to get pension reform if you see the movie and see how hard it was to abolish slavery and get that amendment for the people” (http://communities.washingtontimes.com/neighborhood/bill-kellys-truth-squad/2012/nov/18/Illinois-Quinn-pension-reform-lincoln-slavery-/). 

Of course, when Quinn points to pension reform, he highlights his own past record of trying to accomplish this colossal task for which he feels “he was put on earth.”  Unfortunately, his “amendment” would hardly help nearly 1 million people in Illinois – those who work as public servants.  Thus far, the groups that the Governor has assembled to accomplish Illinois’ fiscal Armageddon (Rep. Nekritz, Sen. Brady, Rep. Senger, Sen. Nolan, Administrator Stermer) have not found any solutions in revenue, the issue many actuaries and authorities are pointing to as the only way out of this dire predicament. 

Instead, they have concentrated on cutting benefits, wages, and end-of-life promises for public sector workers, active and retired.  Their proposals, in the form of bills, generate new methods of capping or eliminating COLA’s (Nekritz, Stermer, Brady), providing defined-contributions rather than benefits (Senger), shifting costs to the local districts (Nekritz, Stermer), or finding methods to bleed the public sector workers for the benefits promised in the past (all). 

Meanwhile, Quinn has decided to demonstrate leadership for later legislative action in January by refusing to accept the normal conditions of contractual talking points with AFCSME this last week. 
“Illinois Gov. Pat Quinn dropped a bombshell that echoed through the homes of the state's 40,000 union employees over the Thanksgiving holiday.  After extended contract negotiations, the Quinn administration announced Tuesday it would terminate the contract between the state of Illinois and the American Federation of State, County and Municipal employees, its largest employee union”( http://www.daily-journal.com/archives/dj/display.php?id=499818 ). 

Remember that one significant part of Quinn’s position (as put forward by his working group) is the need to eliminate the promised health care to thousands of Illinois public sector workers, first through a coercive choice between that and a COLA that appears on proposed bills if this bargaining attempt is not successful. 

The head of AFCSME, Mr. Henry Bayer, added, “In 40 years of collective bargaining, Pat Quinn is the first and only Illinois governor to terminate a union contract," Bayer said, adding the action will "lower employee morale, provoke instability in the workplace and make settling a contract more difficult” (http://www.daily-journal.com/archives/dj/display.php?id=499818).

It occurs to me now that perhaps Quinn fell asleep during the film “Lincoln.”  I wonder at this possibility because he suggests “they (the politicians) went to great lengths to use the Democratic process properly” (http://communities.washingtontimes.com/neighborhood/bill-kellys-truth-squad/2012/nov/18/Illinois-Quinn-pension-reform-lincoln-slavery-/).   

Huh?  This was not quite the same film I enjoyed.  I recall a serious number of politicians endorsing the 13th Amendment after being promised satisfying sinecures or being threatened possible exposures for faults that reminded me of the current state of politics in Illinois even today – an unseemly political climate which has left all of us with a fiscal debt that cannot be paid without changing the very nature of our doing business.  We need look at revenue, not business as usual coming from the Speaker or other lesser leaders, Governor. 




Friday, November 23, 2012

REPRISE: Simple Vs. Compound - What You Need to Know




Update: The latest designs by the General Assembly, Governor Quinn, or those inner-party members who work with Stermer's pension task force are serious attempts to reduce, diminish, impair, or destroy the compounded COLA (cost of living provision) for active public workers or currently retired employees.  


As we head into the Veto Session and the January lame-duck Session, bills before the General Assembly include last spring's SB1673, Rep. Fortner's HB 2604, and Rep. Nekritz's HB 2609 and 2610.  All of them include provisions to eliminate a compounded COLA (cost of living) by coercive choice, participation in a defined contribution plan, or replacement by a simple cost of living. 

The ultimate destructive effects of a loss of the compounded COLA cannot be understated.


A graph (courtesy of Capitol Fax) clarifies the importance of the compounded COLA.  

This chart shows how the 3% compounded COLA is critical to protecting retirees from inflation. "Imagining someone who retired with a $15,000 pension in 1987, the chart shows the amount of their pension in each of the 25 subsequent years under two scenarios: Red is what the retiree has earned under current law, with a 3% annual compounded COLA; green is what they would have earned if the Tier 2 COLA provision had been in place (half of CPI capped at 3%, simple). The purple line shows the amount the retiree would have needed in each year for the pension to keep pace with the actual rate of inflation.
Under current law, the 1987 retiree is today an aggregate $12,000 behind, or 2% less than, the amount required to keep pace with CPI for the period. The benefit has exceeded the real value of the base plus inflation in just 3 of the 25 years. Had the Tier 2 COLA been in effect, the retiree would have lost $111,000 or 20% of the value of the base plus inflation"
(Capitol Fax.com - Your Illinois News Radar » *** UPDATED x2 *** The compounding problem).


"I can't tell you how many people retiring had absolutely no idea of what compound or simple interest was or even how it applied to their retirements..."  - an observaton by a current retiree commenting on the state of other retirees' knowledge.  (Are you kidding? )


Simple Interest and Compounded Interest
(Two Very Different C.O.L.A.s)
Nouns.  Simple interest is a percentage of money (a.k.a. interest) earned on an original (or principle) amount of money.  For example, if you invest $100 at 10% simple interest per year, you will receive $10 at the end of the year on your original $100 investment.  And, with simple interest, you would receive the $10 each next year, and on and on.  In short, you would earn $10 per year for every year you maintained your original investment. 

Compound interest, on the other hand, provides you the percentage on the original amount (principle) plus any earlier earned interest.  In other words, you would earn a return (in this case, 10%) on the original investment plus the interest earned in the year previously.  This difference is as significant as  E = MC2!  

See the chart below for an example:

Original $100 After
Simple Interest
Compound Interest
1 YEAR
$110
$110
2 YEARS
$120
$121
3 YEARS
$130
$133
4 YEARS
$140
$146
5 YEARS
$150
$161
10 YEARS
$200
$259
20 YEARS
$300
$672
30 YEARS
$400
$1,744
40 YEARS
$500
$4,526
50 YEARS
$600
$11,739


In other states – let’s take Rhode Island, for example – legislatures are freezing the COLAS where they are; that is, no increases for a period of time in order to make up for their unfunded liability to assure a resultant funding achievement of 80% or 90% or upward.  In the case of Rhode Island, such a freeze will occur for the next nineteen years, bringing current purchase power for retirees down from $52,000 to $39,000 in 2011 dollars.  In Minnesota, a state without a Constitutional provision like Illinois’ Article XIII, Section V, courts have found that the base pension is protected while the COLA is not.  The same was also true in Colorado, where district judge Robert Hyatt proposed that the inflation adjustment could be reduced in difficult economic times, but not the base pension  (www.nytimes.com/2011/07/01/business/01pension.html).  

Originally, the COLA in Illinois became a part of the TRS annuitant’s payment in July of 1969; however, since 1990, retired teachers in Illinois (TRS) Tier One receive a 3% compounded increase annually after attaining their sixty-first birthday.  On the other hand, those in Tier Two (hired after January of 2011) will receive only a simple COLA after retirement.  The annual cost of living increases for Tier Two recipients will be calculated using either 3 percent or one-half of the consumer price index (CPI), whichever is less.  Any increases will be simple, not compounded (www.trs.illinois.gov/subsections/general/history/pdf.).

On the other hand, one must bear in mind inflation does not increase in simple terms.  Increases in inflation are compounded; therefore, the cost of living escalates faster and faster.  The cumulative effect of inflation presents numbers that are sobering and staggering.  From 1980 through June of 2011, thirty-one years, the cumulative effects of inflation reach a bit over 280%.  An item costing you $78 in 1980 will cost you nearly $220 in our current year(www.inflationdata.com).

For this last  year 2011, cost of living benefits for the COLA for Social Security will begin in January of 2012 at the rate of 3.6% (www.ssa.gov/cola/) - nearly ½ percent beyond teachers in Tier One, who are not eligible for Social Security benefits.  Retired Tier Two teachers would receive a 1.8% increase.  Please consider the differences.

Monday, November 19, 2012

Cinema Verite? (Hardly)


Amazing! Impressive! Exceptional!  Important!  Capital!  Phenomenal!  Celebrated!  -  from Thesaurus.com

Cinema Verité?  (Hardly)

Some of the most frightening and nightmarish themes or concepts can be found in, of all things, children’s literature and film.  Hansel and Gretel face likely cannibalism trudging through the deep woods, a Little Red Riding Hood looks under the blanket for a loving grandmother but finds a ravenous wolf, three little pigs build homes hoping for a safe future and find anything but, etc.  It seems life can digest pretty much all our hoped-for dreams.

Now, in a new film created under Governor Pat Quinn’s signature direction, Grimm’s redundant themes of a safe future cut untimely short for the innocent is once again manifested (on the little screen). 


The Pension Squeeze 
( http://www.youtube.com/watch?v=H62W9iLfKv4 ) appears just in time for the late year rush toward both cinema awards and the Veto Session in Springfield.  What makes the film so very unsettling is not necessarily all the menacing props placed haphazardly within the video: a huge carrot-colored cartoon python squeezing our Capitol Building, a business-type narrator who looks like a thinner version of Ty Fahner, a pathetically incompetent teacher on a background slide who is about to be eaten by  little Hansels and Gretels. 

That last image is a lesser theme (or leitmotif for you English teachers) of educator incompetence, which gallops more than runs through all state and Tribune media documentation of pensions.  But I digress.  Back to the film.

The well-dressed, unctuous narrator sprints the audience through over two thousand years of pension history and describes the simplicity of pensions and how they work in less than two minutes; on the other hand, he exhorts an authenticity that will give many unprepared viewers a false sense of veracity.  Don’t be fooled.

For example,  “If you the worker contribute to a pension fund, we the employer will contribute to that fund AND we’ll invest it with the interest going back into the fund and when the employee is ready to retire, he or she will receive regular payments or annuities from the fund.”  

Fact Check:  TRS, SERS, SURS, and other pension funds are depositories for the contributions of active workers, and they maintain an investment service with the annual funds coming from its members.   The State of Illinois does not maintain a commensurate fund nor did it ever.

Once again: Sometimes the government employers made smaller payments into the fund than they had promised.  And the investments we made with that pension fund?  The Great Recession hit those investments hard (sound of explosion – narrator cringes).”

Fact Check: Sometimes? In fact, since 1953, the state of Illinois had made full payment to the pension fund on just two consecutive annual occasions.  Governor Quinn has been enthusiastic to declare that these two full pension payments were made during his administration.  On the other hand, public employees paid in fully for every year, 1953 and on.  By the way, there was NO investment fund for public employees kept by the State of Illinois that was affected by the Great Recession.    

The Pension Squeeze narrator wrings his hands and laments over the longer lives, earlier retirements, and increased healthcare costs for public worker retirees.   What’s a state to do?  According to our storyteller these costs are making it impossible to provide for education (shot of a hopeless student), public safety (image of pained policeman), and public safety (medical center being buried under orange cartoon snake). Making a specious if not tenuous connection, the narrator adds In Illinois the slice of the budget pie devoted to pensions has tripled in just five years.” 

Fact Check:  In actuality, the required cost for pensions for next year will drop from 2012 costs several hundreds of thousands.  It is the unfunded liability that the storyteller conveniently forgets to tell the viewer about that makes for increased costs: it is not increasing ages, etc.  The unfunded liability is the debt service and interest owed for all those years the State of Illinois “sometimes” did not pay in what was required.

Several, like Rep. Franks of Marengo, are criticizing the Office of the Governor for creating something so “juvenile,” while others like Rep. Tom Cross of Oswego are happy Quinn has produced something at all (Garcia, Monique & Pearson, Rick.   Pension marketing called juvenile.  Chicago Tribune.  19 November 2012).  Governor Quinn hopes that this video will become the subject of table talk among families during Thanksgiving and fuel a new grass-roots movement to…?

Most agree that the video is short on solutions, but few in the media or in politics have been bold enough to call it glaringly short on accuracy.
Maybe the best family table discussions would entertain questions of governmental responsibility, promises not kept, the consistent undercutting of the middle class, or even an avoidance of true political statesmanship.  To do that would be to look for real long-term fixes in the chronic, systemic revenue shortages Illinois faces annually.  Some politicians may suggest we need to first stop the bleeding, but should we do so by bleeding those who did their part?
Happy Thanksgiving and please pass the Twinkies.

Saturday, November 17, 2012

COLA


At a gathering the other night, some friends and I were talking about what benefits should be given up for the greater good of the corporate and public interests in a public workers' self-sacrifice of what was originally owed to all of us.  What followed was an argument which ranged from one extreme to the next.  Voices varied from "sell the Governor's mansion" to the belief that "the loss of a compounded COLA" might be acceptable.  Acceptable?  Had it been acceptable for those who did receive Social Security - as teachers do NOT - imagine what life would have been like ( or hadn't been like) for Ida - see below.  My good retired friend south of I-80 who receives $24,000 per year to survive will eventually be left in the wake of increasing costs to survive in very short order without her compounded COLA.  As the COLA will be first and foremost this January, I recall an earlier vocabulary for all of us.    

COLA (Cost of Living Adjustment)

noun.  Annual increases to retirement benefits  “to offset the corrosive effects of inflation on fixed incomes ” are known as Cost of Living Allowances or Adjustments (www.ssa.gov.history).   In Illinois, TRS and other public pension plans were accompanied by a compounded COLA prior to the development of a new Tier Two public employee (HB1946) in January of 2010.  Tier Two recipients will be provided only “simple” COLA’s.  Any allowances or changes to pension benefits in Social Security or public pensions to ward off inflationary destruction were not always the norm, however.  See history below:

The first Social Security benefit in the United States was issued to Ida May Fuller of Ludlow, Vermont, in January of 1940 (pictured at right).  At age 65, Ida May began collecting $22.54 monthly, and she lived until 1975, surpassing her 100th birthday.  For the first decade of payments, Ms. Fuller’s benefits remained unchanged; that is, she received only $22.54 per month.  Unfortunately, Ms. Fuller’s steady payment was accompanied by an average annual inflationary increase of 5.52% during the next decade (http://inflationdata.com/inflation/Inflation/DecadeInflation.asp).     In fact, by 1950, retired workers applying for and receiving Social Security were receiving less than if they’d have been supplied the least effective social safety net of Old-Age Assistance – also a part of the original Social Security Act of 1935.   This shortcoming prompted the enactment of major amendments that increased benefits for the first time in 1950 and again in 1952 for retired beneficiaries. After the passage of the Amendments to the Act, Ms. Fuller’s payments climbed to $41.30 per month.  


Special acts of Congress provided later increases on an occasional basis until July of 1972, when President Richard Nixon signed PL 92-336, which authorized a 20% cost-of-living effective in September of that year.  The statute also established procedures for the inception of an annual automatic cost-of-living adjustment.  Cost-of-living increases are based upon increases in the cost of living as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), determined by the Bureau of Labor Statistics (BLS).  According to IEA Fact Sheet (HB5418 McCarthy (D) Governors Pension Proposal for Educators), “…Social Security has a compounding COLA.”   Members of Tier One in Illinois are currently promised a compounded COLA.  

Next:  Simple vs. Compounded Cost-of-Living Adjustments  

Wednesday, November 14, 2012

Ty Fahner's Doomsday


Ty Fahner (Doomsday Puppeteer)

In a memorandum to fellow members of the Civic Committee, a bombastic screed carefully choreographed to achieve the widest impact on print and televised media, President Tyrone Fahner announced his belief that the Illinois pension system was now officially “unfixable” on Wednesday, November 14th

Fahner’s Civic Committee of the Commercial Club of Chicago, long a bastion of wealthy CEO’s fighting to curtail the collective bargaining rights of unions or the earnings of public employees, warned that legislators had lost the ability to make any significant headway on the “pension crisis” as they had waited too long. 

Beginning with the premise that nothing would work at this point, a position unfettered by real or actuarial numbers, the Civic Committee president’s memorandum urges the immediate

      Elimination of all cost of living increases
      An immediate cap to pension salaries
      An increase of the retirement age to 67
      A shift of the annual costs to local districts/employees over a period of twelve or more years.

Fahner told Crains Business that the numbers are “there” in a binder over “an inch thick.”
 

Once again, Mr.. Fahner has initiated the charge on forced pension reform in Springfield, just as he has for the last several years.  You’ll remember that Mr. Fahner, although not a member of the General Assembly was a co-author of SB512, and also a signer on the promise to get it right next time after the failure of the draconian bill to cut current and retired teachers’ benefits in 2011.  If anyone would have an inside track on how pensions were underfunded to begin with, it would be Mr. Fahner, who served as an appointed Attorney General of Illinois under Governor “Big Jim” Thompson, who managed the pension holiday program effectively to the point that the funded ration for pensions dropped from 90% to 30%.   

In fact, Thompson boasted while leaving office that he had supplied the citizenry of Illinois with more services than they had ever known with no increased costs to anyone (except of course public servants, then and now).  Mr. Fahner was his chief attorney-general in charge of the 1982 botched Tylenol murder investigations, and later a good friend with whom he and Thompson traded expensive cars.  I have a file an inch thick. But I digress.

But, wait a minute!  Perhaps this time Fahner’s numbers are based upon some real insight, not just another attempt to generate a better playing field for those many companies in the Civic Committee who already enjoy tax loopholes, giveaways, and breaks provided by Governor Quinn and the General Assembly. 

Maybe, just maybe, Fahner is realizing that the problem IS a revenue problem, not a pension problem.  Maybe he knows, just as Ralph Martire of the Center for Tax and Budget Accountability warned, that all the proposed cuts thus far would only account for about 25% of the problem.  Indeed, that the legislators will just have to come back for more from the taxpayer, even if the General Assembly passed all the cuts on the backs of the public sector who already gave their required amounts over the decades. 

Maybe Fahner is now hinting at what others are finally saying in the General Assembly.  It is time to consider a revenue source like a progressive tax system in Illinois.  “According to the Center for Tax and Budget Accounting, replacing our flat tax system with the system Iowa has in place would provide an additional $6.3 billion in annual revenue.  In addition, the move to a graduated tax would bring tax relief to nearly 94% of all taxpayers in Illinois” (Pension Vocabulary. Oct. 25).

We can expect more drumming and dire predictions from the Civic Committee, but remember that real reform will come with a change in revenue and a promise kept to pay the promises made in Article XIII, section 5.


Tuesday, November 13, 2012

Reprise - Giving Thanks


Henry Green and Helen Kinney
Two Stalwart Delegates to the 1970 Illinois Constitutional Convention

We need to recall and appreciate that Illinois is one of only 10 states in the nation that has a pension protection clause ratified in its state constitution.   The 40 carefully crafted words created for the 1970 Constitutional Convention have thus far prevented the wholesale unraveling of our pensions under the guise of "pension reform" or "pension stabilization."  We need to give thanks and remembrance during this time of year to two indispensable and stalwart persons who led the way for the protection of hundreds of thousands of current public-sector workers.  

Without Henry Green’s and Helen Kinney’s collective foresight, wisdom and prescience of likely future political irresolution, the members of the five retirement systems in Illinois could already have suffered the fate of other public employees in some other states across the United States (Minnesota, Colorado, Rhode Island - to name a few).  Both individuals were delegates to the Constitutional Convention of 1970, and Mr. Green was the primary sponsor of Article XIII, Section 5, “the Pension Clause,” which states that “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.”  Ms. Kinney was the secondary voice behind this attempt to insert into a constitution, unchanged for one hundred years, a new guarantee of retirement security for those who toiled for the state. 

Prior to their efforts, pension rights were dependent upon whether one’s pension plan was compulsory or optional.  In the former, a person signed on to the retirement program offered at that point in time by the company, state, or organization.  In that sense, according to one judicial review, “pension benefits in mandatory plans [were] mere gratuities… springing from the appreciation and graciousness of the sovereign” (Handbook of Illinois Pension Case Law: Illinois Committee of Government Finance and Accounting, January 2008).   In other words, as mere statutes, compulsory pensions could be amended, repealed or ignored by an act of the legislature in Illinois.  On the other hand, later rulings by the Illinois Supreme Court found that when a public pension was optional, the employee’s right to receive later benefits was a contractual certitude. 

After 1970, and the adoption by the people of the State of Illinois of the new Constitution and Article XIII, Section 5, the issue of a reduction in pension payment due to a disability was brought before the courts (Kraus vs. Board of Trustees 1979).  The court, led by Justice Stamos, relied heavily upon the transcripts and comments of delegates Henry Green and Helen Kinney in order to discern their intent in the original drafting of the “Pension Clause.” 

According to conversations and notes by Henry Green, “The underlying purpose of the pension clause was ‘to provide public employees with a basic protection against abolishing their rights completely or changing the terms of their rights by reducing their benefits after they had already embarked upon employment’”  (The Illinois State Pension Crisis: Secure Retirement for Public Servants at Risk). Green had admitted that he “promoted the pension promise, which was based on a 1938 amendment to the New York State Constitution because of concerns raised by university employees who had lost ‘faith in the ability of state and local governments to make benefit payments.’

Helen Kinney, later to become a distinguished judge in DuPage County, was more direct: “Benefits not being diminished really refers to this situation: If a police officer accepted employment under a provision where he was entitled to retire at two-thirds of his salary after twenty years of service, that could not subsequently be changed to say he was entitled to only one-third of his salary after thirty years of service, or perhaps entitled to nothing.  That is the thrust of the word ‘diminished.’…It is simply to give them a basic protection against abolishing their rights completely or changing the terms of their rights after they have embarked upon the employment – to lessen them” (IEA Fact Sheet: Reducing Pension Benefits for Current Educators, 15 Feb 2011).

According to Eric M. Madiar, Chief Legal Counsel to Illinois Senate President John Cullerton and Parliamentarian of the Illinois Senate: “The Pension Clause’s plain language reveals that an employee’s contractual rights exist and are legally secured at the time of membership, and those rights cannot be unilaterally reduced or voided thereafter. Nowhere does the Pension Clause limit protection, as Sidley claims, to only ‘benefits that were previously earned.’ To reach Sidley’s conclusion, the provision would need to add the word ‘earned’ or ‘accrued’ before the word ‘benefits’ as is the case with the Hawaii and Michigan Constitutions. Distilled to its essence, Sidley’s construction ignores the Pension Clause’s plain language, defies common sense and logic, and adds limitations where none exist” (Is Welching on Public Pension Promises an Option for Illinois? An Analysis of Article XIII, Section 5 of the Illinois Constitution).

Finally, the Civic Committee of the Commercial Club of Chicago’s legal advisors and members (Sidley Austin) argue that two voices of the many delegates involved in the drafting of the Illinois Constitution do not speak for the entire body of delegates.  We might ask what about the endorsement of both Republican and Democratic parties in 1970?  What about the more than one million voters who ratified it? 

“While welching on its pension obligations is not an option for Illinois, legitimate contract principles provide a solution to mitigate this crisis. The Pension Clause will become a ‘suicide pact’ only if individual citizens are purely self-interested and admit no obligation to the common good. By adopting the Clause, the drafters and voters weighed, measured, and found wanting the current claim that it is unfair to pay these pension obligations. Public employees have paid their required fair share of pension costs; it is incumbent on the State to meet its end of the bargain” (Madiar).

As the year turns once again, now 43 years later, all public employees in the State of Illinois need to pause and give thanks to these two friends of labor, advocates of a legal promise, and sentinels of workers’ respect and rights.  Thank you, Henry Green and Helen Kinney.

Photos: 
Henry Green – Courtesy of the archivists at Parkland College, of which Henry Green was a founder.
Helen Kinney – Courtesy of Women’s Bar Association of Illinois.  She was the first woman to be appointed to the bench in DuPage County.