Review: First Pension Committee Meeting by Bob Lyons

Personal Reflections on the First Pension Committee Conference by TRS Trustee Bob Lyons

“As other reports on the first meeting of the conference committee on pensions have already been circulated, I will only add some personal observations.  First, I will agree with all of those that have said there is no reason to expect they will have a well thought-out bill to be introduced for possible passage on July 9, the date the Governor expects a special session to "at long last to solve the problem."    As Senator Kwame Raoul, Co-Chair of  the Committee, put it,  "We have more options than just picking one of the two bills that have already been considered," and time will be needed to consider the vetting of the "savings" made possible by any new ideas.  The next meeting of the committee will be Wednesday, July 3, without any serious and open discussion of a new idea yet to take place.

Before the first witnesses to the committee had a chance to speak, Republican State Senator Matt Murphy stressed the point, "Tell us something new.  Don't just give us your 'entrenched position'.  Give us something that can move us closer to a solution."   Dan Montgomery, President of the IFT, speaking for the coalition We Are One opened his remarks by saying, "We once represented an entrenched position of zero reduction of benefits, but we moved from that."  When he stressed that that was not an easy move, that there had been some dissent and not all of the coalition's individual members accepted the willingness to compromise, I could hear Fred Klonsky, persistent critic of the IEA's acceptance of the changed position, who was sitting behind me, remark that he and others had unknowingly performed a useful role for the unions.    Some of you may not see the humor in the idea that by not willingly accepting that your union was negotiating some of your benefits to further the cause and in openly expressing your dissatisfaction that you were actually helping them make their point that their actions were a real sacrifice.

I will say this for all of the spokespeople for the We Are One Coalition: they all were articulate, spoke clearly and to the point.  Montgomery held that the Coalition's position was that any solution had to meet four tenets: any bill had to be legal, fair, solve the problem, and to be viable.  An attempted solution that was unconstitutional was a waste of time.   And the Coalition wanted the injustices of Tier II to be addressed. The legislators were told that as matters now stand that sometime in the future that the federal government would rule that public employees in Illinois with inadequate retirement plans would need to be covered by social security.  Sean Smoot, Director of the Police and Protective Association, put a face on public employee pensioners by talking about the widow of a state policeman killed in the line of duty with two small children living on the pension his death had left to her.  As others and I have noted before, legislators need to know that this is not a numbers problem, but the livelihood of real people that is at stake.

The legislators closely questioned the We Are One spokespeople as to their possible support of any of their members that might sue on the constitutionality of a bill that the legislators would pass.  Dan Montgomery said that if it was an agreed upon bill by both the unions and the General Assembly they would not support such a move.  Then the legislators wanted to know if the union coalition's acceptance of "consideration" was elastic.  More than one of the union leaders spoke to the issue and they stressed that they felt that they had already moved and that the union support of the SB 2404, the Cullerton bill, was already a compromise.   The said they would look at any new proposals but they were not ready to approve any new "considerations" without knowing the details.

Before the meeting much was made of the fact that eight members of the committee have at one time voted for SB1, the Madigan bill, but having Senator Raoul, who had voted against that bill, as the leader of the conference meant that some hard questions were asked of those that wanted to cut retiree benefits.  He asked such questions as, "If you want to cut benefits, is there a floor that you would not go below?"   Or, "How do we know we have not gone too far?"   For those that had already expressed a concern that the Madigan bill may not go far enough in solving the problem, those were unwelcome questions and they squirmed to avoid answering.  

The last person to testify before the conference committee was State Representative Lou Lang, Democrat of Skokie, and one of the best supporters of the state's public employees.  He said what we have "is not a pension problem, but a political problem" and that the temporary 5% state income tax needed to be made permanent.  Unless we find a way to fund state government and fund any plan to fix the pensions anything that you do, "is a waste of time."   On January 1, 2015, the current 5% state income tax drops to 3.75% and most of the $7 billion annual increase to state revenue will be lost.   It will be interesting to see if the legislators step up to the responsibility to keep that money coming by voting for an extension of the current tax before the election or do they try to wait to pass such a measure during the future "lame duck" session at the start of January, 2015.   What followed Lang's testimony was not a substantial discussion on the need to preserve the current tax, but adjournment.

The next committee meeting is 9:00am, Wednesday, July 3, and again it will be on the sixth floor of the Bilandic Building 160 North LaSalle directly across the street from the Thompson Center.  Senator Raoul stressed that much work still needed to be done and much would be accomplished by the legislators and the staffs of all four caucuses talking to each other in the days in between the meetings.  I would imagine that the state Open Meetings Act will be stressed, but that is how they will move anything along.   Their problem is if they move away from SB1 or SB 2404 that any new ideas will need to researched by the individual system actuaries and that will take time.  Also the legislators that have supported SB 2404 know that they will lose the cover of the We Are One endorsement if they move for greater cuts.

At the conclusion of the meeting an IEA member asked me why the IRTA had not been "at the table," a part of the negotiations.   I may have assumed that everyone understood the organization's position, but let me explain if there is any question.   Director Jim Bachman and the Executive Board of the IRTA feel that there is nothing that they can give away and thus nothing they can negotiate.   The legal opinion that they have received is that the constitutional protection of benefits for annuitants is absolute and that a bill that changes, that diminishes benefits, even for "consideration," is wrong.  Certainly there are those that disagree, but you have to understand that the IRTA believes that the protection of benefits is their Raison d'être, their reason for existence.  If a bill agreed to be the unions’ is signed into law that in anyway diminishes retiree benefits, the IRTA will go to Court.   If a bill that is not agreed to be the unions is signed into law that in anyway diminishes retiree benefits, the IRTA will go to Court with the unions.”

Bob Lyons