Friday, February 22, 2013

Clueless Governors

Clueless?  (Go Squeezy, Go!)

Remember that one wayward cheerleader back in school - some decades back before the time high school cheerleading demanded athletic prowess or any knowledge of rules and competitions? 

I recall fondly the one cheerleader noticeably out of sync with all the others, the same one who would cheer “First and ten; do it again”  - at  the basketball game.  (She was my sister.)

Thank goodness for progress.

Governor Quinn has been promoting and cheerleading his own concept of “pension reform” this year with the abandon and enthusiasm not unlike my earlier remembrances of an attractive but sometimes totally clueless cheerleader.  Well, avuncular if not attractive.

Recently, Lou Lang, a senior Representative from Skokie, suggested adopting a new plan to address the massive debt of Illinois to the pension systems by making the (2011) 2% tax increase permanent, in order to eliminate the nearly $100 billion debt owed to the five public sector systems after decades of borrowing by the General Assembly. 

Representative Lang is not the first to question the misuse or underuse of the additional 2% income tax increase passed in the lame duck session of the General Assembly of 2011.  In fact, Republicans have been threatening to stall or, if possible, overturn the continuation of the 2% increase when it sunsets in 2015.  Many legislators have decried the Governor’s cavalier use of the funds to fuel specialty undertakings and other pet projects.  The amount, they say – nearly $8 billion annually – could be put to much better use.

Block that kick!

Governor Quinn strongly disagreed with Representative Lang’s suggestion to use the 2% income tax increase to pay down the unfunded liability.  In his argument, the Governor said that “a pension fix needs to have more reforms than simply additional tax money”

The only reforms the Governor has so far agreed to and promoted through reptilian metaphor are benefit cuts.  But there’s a problem.  All the “Squeezy” reforms – or the cuts to benefits for active and retired teachers – will meet only about 25% of the needs to meet the required payments to the unfunded liability debt according to the Center for Tax and Budget Accountability. 

Also unsettling, the subtext of the Governor’s response displays not only a desire to retain the increased income tax but also a refusal to use it for paying down the unfunded liability.  Note how he also states that Lang’s plan is suspect because it only moves the unfunded liability to 80% rather than the 100% Quinn has been told is best.  By the way, Fitch and other rating agencies believe that 80% is quite acceptable for a public pension system fund ratio.  Without paying down the unfunded liability, the State of Illinois can never emerge from its fiscal nightmare and bond rating deterioration. 

Note: Representative Lang’s plan is not alone.  Others like Republican Representative Raymond Poe (Springfield) have offered ideas and schemas about using the increased 2% as a dedicated revenue source for the unfunded liability after 2015.  A late bill (SB 2404) by Senators Holmes and Althoff also identifies the possibility of using a stabilization fund of some kind to mend the unfunded liability, rather than cutting benefits, which would not make any significant difference.

This is all terribly complicated for the Governor/cheerleader.  While all of these ideas and possible bills do not steer the State of Illinois into the courts to determine whether or not Illinois is indeed a deadbeat state, the Governor listens carefully to his coaches.  Quinn has been profuse in his cheers to the group of young and climbing legislators in the House, sponsored by Speaker Madigan for their work to fix the “pension mess.”  He has also fawned over the work of Senator Cullerton to provide a coercive choice between health care and COLA’s for the public pension systems.  Despite his ovations, the guarantees of court battles exist in all these cases.  On the other hand, this is what the Governor has been told is how the game is played in Illinois.  Just as it has always been played.

“First and ten, let’s do it again…”

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