Rep. Nekritz on Problems in SB1: Seriously, You Think We Care?

Representative Elaine Nekritz (D-Northbrook)

Rep. Nekritz on Serious Problems in SB1: We Can Fix It Later

Representative Elaine Nekritz (Northbrook) is still pushing the numbers as the reason to pass SB1 in the Senate and get it to a willing, waiting Governor to sign.  Forget the other stuff.

Forget about the promised court challenges? 

Forget that those numbers are the result benefits stripped from public employees in a State with a Constitutional Contract Clause?

Forget recent arguments by We Are One that savings in SB2404’s “consideration” would be four or more times higher than what Representative Nekritz and her spokespersons originally maintained for SB2404?

And now, forget about SB1’s forcing Tier One employees into the same overpayment of earnings for less than adequate retirement benefits? 

Finally, forget about the eventual issue of non-compliance with the Social Security Administration for creating a retirement scheme that will not meet Federal as a retirement structure?

Yep. Forget about it. 

You seriously think we care?

According to Rich Miller’s Capitol Fax, a spokesperson for Nekritz responded to the latest issue of federal non-compliance with, “Simple answer is it’s an issue that’s not immediate — probably 10-12 years down the road — and could be addressed later. It shouldn’t stand in the way of a real solution like SB 1” (http://capitolfax.com/).

Like you fixed Tier Two? 

You’ll probably fix that later too?  Probably an issue that’s not immediate until 25 or 30 years down the road.  Meanwhile, Tier Two people will continue to pay off the debt that legislators like Representatives Nekritz and others accumulated by taking the money from public employees.  Representative Nekritz called it “diverted not taken”; Fred Klonsky called that “ a distinction with no difference.” 

Meanwhile, just keep looking at the numbers.  The numbers, look at the numbers.

Fragged: Shrapnel of SB1 in the Senate!

Fragged: HB1135 in the Senate.

Fragged: (military/ Vietnam) – wounds or death caused by military FRAGmentation weaponry, like grenade, mortar, or landmine. The urban dictionary also explains it as political maneuvers to destroy the marginalized as a result of friendly fire or perhaps something like a remnant of SB1 (http://www.urbandictionary.com/define.php?term=fragged).

SB1, Madigan’s principle piece of draconian and unconstitutional cuts to active and retired public sector workers has been held enthralled in Senate Leader Cullerton’s pension committee, but Cullerton may allow various pieces of the SB1 bill to arrive unattached on the floor of the Senate in order to either appease Madigan, test the viability of Madigan’s SB1, or demonstrate the Senate’s unwillingness to abandon their own bill: SB2404.  Only Madigan and Cullerton truly know.  Either way, we in public sector will take the pain for Springfield’s decades of non-payment to our pensions.

It is likely that these deadly shards and splinters of SB1 could become subject to voting in the next two days.  Please call your Senator to dissuade them from voting “yes” on such unconstitutional segments of SB1.  From We are One:

•   HB 1165 (deep COLA cuts) is opposed by the coalition. It caps cost-of-living adjustments (COLAs) at extremely low levels and delays all COLAs for five years or until age 67, whichever comes first. The caps alone have the effect of reducing the value of a pension by one-third to one-half after twenty years in retirement.

•                     All the while, senior citizens – as major consumers of health care services – are one of the most at-risk demographic groups subject to inflationary pressures. The bill makes it near impossible to keep up with the rising cost-of-living.

•   HB 1166 (retirement age increases) is opposed by the coalition. It increases retirement ages anywhere from one to five years. Employees under age 35 would face a five-year increase, employees between age 35 and 40 would face a three-year increase, and employees between age 40 and 45 would face a one-year increase. 

•                     It contains no consideration for employees with physically-demanding professions, such as police officers, fire fighters, corrections officers, and nurses.

•                     An increase in retirement age effectively causes an individual’s accrued benefits to lose 6% in value for each year of increase. A younger worker – under the age of 35 in this instance – would lose 30% of his or her pension’s value if this amendment became law. Even slightly older workers – those between 35 and 40 – would face a loss in value of 18% upon retirement.

•   HB 1154 (pensionable salary caps) is opposed by the coalition. It puts a cap on the amount of salary that qualifies for a pension.

•                     The bill fails to recognize the mandatory overtime worked by many public servants.

•                     Caps on pensionable salary also create disincentives for hiring and recruiting for critical public professions, particularly ones that require advanced degrees, such as those in the medical or higher education fields. It can also hurt filling these types of civil service positions, which are often more cost effective than contracting out for expensive, specialized services.

•                  

SB 1 (Speaker's mega-bill) is opposed by the coalition. It essentially packages these three pension-cutting House bills together into a single, destructive piece of legislation.

Call 888-412-6570 NOW!  Tell your friends and families to make the call.  Tell them NO to SB1, HB1154, HB1166, and HB1165! 

Tribune's Unctuous Dear Mike Letter

Unctuous, Urgent: Tribune’s Dear Mike Letter for SB1

My mother loved watching George Sanders in old movies where he played the rake, a character he performed over-frequently.  “He’s so oily,” she’d remark, “like you’re violated just by listening to him.” 

Were my mother a public school teacher she’d say the same thing about the Chicago Tribune and its Editorial Board.  Teachers know only too well what it feels like to be violated by the oleaginous wording of the Trib’s editorials, thanking them profusely as first responders and educators and later reminding them they’re undeserving and nasty union creatures. 

I’m sure Speaker Madigan ignores this bipolar parenting by Mr. Dold and his group of editors too.  After all, last month it was “All Roads Lead to Madigan”: an expose on the dark-creature who controls all things political and otherwise in the state.  Today, it’s “Mike.”  Today it’s promises of ice cream.  Today it’s mocking and unctuous, but a reader (especially a teacher who has or is being violated) can read the urgency.

The Tribune thanks Mike (“May we call you Mike?”) for delivering the numbers, but avoids being nearly so accurate with the competing bill SB2404.  “Cullerton's bill simply doesn't go far enough to dig Illinois out of its pension mess — it would save maybe one-third as much as yours, or maybe one-fourth as much, or maybe less. But Cullerton believes his is the only bill that the courts would uphold” (http://www.chicagotribune.com/news/opinion/editorials/ct-edit-madigan-0529-jm-20130529,0,3209942.story).

In fact, “Mike” had earlier released his emissaries Representative Nekritz and Representative Senger to denounce SB2404 as falling precipitously below the numbers of “Mike’s” bill – SB1.  After their stern condemnations, actuarial computations revealed more would be gained from SB2404 than they had projected.  Capitol Fax was quick to point out the issues, and Representative Senger’s offices worked to control her mathematical bungling (http://capitolfax.com/wp-mobile.php?p=18419&more=1).

Indeed, TRS also states “Sponsors project that Senate Bill 2404, if enacted, would reduce the total unfunded liability of the five pension systems by $8.5 billion to $15.7 billion. The projection is that SB 2404 would save the state between $45 billion and $51 billion in future pension expenditures. The projections say that the bill would “free up” $850 million in the fiscal year 2015 state budget for other purposes”(http://trs.illinois.gov/subsections/press/PensionReformProposals.htm). 

Nevertheless, the Tribune urges “Mike” to put pressure on the Senate to secure the seven votes  needed to get SB1 passed, if Cullerton (whom they refer to as a bull-headed Peter Pan) will release it to the floor.  They smoothly remind “Mike” and their readers that  “about $1.9 billion would be freed for fiscal year 2015 should…the courts uphold your plan.”  (Read that should to be IF) Six of the seven votes may come from those who voted present or did not vote at all.

Those six Senators are listed below.  While you are calling your own Representative or Senator to tell them how you want them to vote on SB1 or SB2404, you should make the call to these others who are/were on the fence originally.

These Senators voted “present” on SB1.

Mattie Hunter (217-782-5966, Chicago: 312-949-1908)

Jacqueline Collins (217-782-1607, Chicago: 773-224-2830)

Thomas Cullerton (217-782-9463, Villa Park: 630-903-6662)

These senators “did not vote.” 

Kimberly Lightford (217-782-8505, Westchester: 708-343-7444)

Tim Bivins (217-782-0180, Dixon: 815-284-0045)

Gary Forby (217-782-5509, Benton: 618-439-2504)

(Thank you Glen Brown).

Madigan Cost Shift? He's Scored Already!

Local Districts: Caught Holding the Bag, Pt. Two

“There is more hope for a fool than for someone who speaks without thinking.” (Proverbs 29:20 – New Living Translation)

According to Representative Tom Morrison (District 54 – Palatine), his bill HB3303 surpasses the two competing bills currently in the General Assembly that deal with pensions: Madigan’s SB1 and Cullerton’s SB2404. 

Morrison’s bill, which has the backing of Tea Party colleague Representative Ives and new Senator Oberweis, “provides a clear path toward sustainability by converting the entire system into a modernized 401K-style contribution plan.  Private and public entities have embraced these types of contribution plans because they are sustainable and serve the ultimate purpose, ensuring an individual’s retirement…The economy is dynamic, individuals are living longer, and the government - which is supposed to serve taxpayers, not the other way around – must change its retirement system to reflect these new realities” (Representative Morrison in email response to questions by Robert Zahniser, May 22, 2013).

In other words – stop the pension, freeze current payouts for residual actives, and provide 401K’s like they do in the private sector.

What Representative Morrison omits or overlooks in his tutorial to Mr. Zahniser is that 401K’s are not accepted as a valid retirement program that can meet federal muster by the Social Security Administration.  In fact, 401K programs are simply self-directed savings plans offered by some companies and on occasion with matching incentives for employees to save funds to augment federally acceptable retirement programs like Social Security or a qualified Pension Program. 

Note: A 401K does not meet federally acceptable levels as a legitimate retirement program for public school teachers.

In Illinois, like almost all other states, public employees face the Windfall Elimination Provision (WEP), which provides a substantial offset to any earnings outside the public arena in which that same employee paid social security taxes.  Public employees like teachers in Illinois do not pay into social security; instead, the state instituted the pension system in 1939, and opted out of the payments to Social Security.  Instead of paying his own 6.3% of income to the federal system, the public teacher in Illinois pays 9.4 % toward his pension/retirement contribution. 

In the spring of 2010, SB1946 passes the General Assembly in less than a day and established Tier Two.  That change in benefits included increased retirement age (67), a maximum pensionable salary calibrated to social security, a simple COLA with lesser increases, and the same payment of 9.4% in contribution despite reduced benefits.

Note: It is also very likely that Tier Two does not meet federally acceptable levels as a legitimate retirement program for public school teachers.

Comptroller for the State of Illinois Judy Baar Topinka sagely warned in her 2011 Fiscal Focus publication: “The new ‘Tier Two’ pension benefits for non-coordinated systems may no longer meet the minimum standards for the Social Security tax exemption.  If the IRS determines that the new plan no longer provides sufficient retirement benefits, the employees and their employer would each owe 6.3% of payroll for Social Security taxes for coverage in addition to current pension contributions.  It is not clear whether this would apply to all employees in the plan or just those who fall below the Social Security requirement” (http://www.ioc.state.il.us/index.cfm/linkservid/C0426A73-1CC1-DE6E-2F485B26D3820194/showMeta/0/ ).

At first, one might think that bill is going to fall on the State of Illinois – an additional 6.3% of salary for each Tier Two employee – and perhaps some Tier One’s as changes like Representative Morrison promotes are applied?  That’s a lot of money. A real lot.

Note: But, believe it or not, it will be the local school districts who will pay for this possible, probable penalty for not meeting federal standards.

When determining responsibility for the payment to meet a federally acceptable retirement program, the “common law control test” is used to ascertain fiscal responsibility to pay the Social Security payment of 6.3%.  While the common law test has several aspects, one primary determiner is whether “a relationship exists between the worker and the firm they work for…(and)…the employer has the right to tell the employee what to do, how, when, and where to do the job” (www.ssa.gov).  This reasoning is reinforced in 1950, and it was first established in 1939, when the Pension System was advanced to replace Social Security for public teachers in Illinois.

Tier Two is a ticking financial time bomb, just waiting to go off.   

According to Kathleen Farney, a director of research at TRS, roughly 3000 Tier Two teachers currently work in the public system in Illinois; that is, an incoming number of about 1000 annually since inception.  According to the TRS Financial Annual Report of June 2012, the average age of an active in Illinois was 42 with an average of 12 years of earned service.  As would be expected, the population of Tier Two workers will inevitably increase as more and more Tier One teachers leave the workforce, and the exodus of Tier Two workers from the profession will begin after 2035 and swell moving forward to 2045.

Even the director of TRS, Richard Ingram, is counted among that number, and the inequities of his financial position were not lost on him.  “It is what it is.  I pay the same 9.4% of my salary towards my pension that everybody else does. The value of our benefit only costs about 5 percent or a little less. Half of what I’m contributing every two weeks is somethingI’m never going to see or never get the benefit of. It’s monies that reduce the cost of the state” ( http://www.sj-r.com/top-stories/x1274367255/Tier-2-teachers-helping-pay-off-states-pension-debt ).

Interestingly, when 2035 begins to roll steadily on to 2045, The Social Security System may want to weigh in as well.  And any comptroller sitting in an office in a local district might want to consider the impact that this yet-unopened gift from General Assembly will might provide in a few decades. 

And for local districts?  They may be worried about the possibility of a future Madigan Cost Shift, but he’s scored already!