Wednesday, February 27, 2013

Madigan's Impatient


Madigan’s Impatient 


In “The Lottery,” a chilling fable by Shirley Jackson, a town politician guides his  small town citizenry to find a single townsperson to stone to death in order to assure the safety of the village for another year.  If you’re a pensioner, I don’t recommend you read this anywhere near sharp objects.

If you have not read it: Spoiler Alert!  After the village has trod the carefully managed and orchestrated procedure, targeting the poor soul Tessie Hutchinson, the village manager exhorts them to hurry up the sacrifice.  “All right, Folks,” Mr. Summers said. “Let’s finish quickly.”

They have Mr. Summers. 

We have Mr. Madigan. 

Speaker of the House Madigan has presided over the theft of billions of dollars owed the retirement systems of the public sector unions for over thirty years.  He’s been party to it for forty years. This morning he is calling out to the General Assembly:

“All right, folks,” Mr. Madigan said.  “Let’s finish up quickly.”

Madigan wants to guide the participants in this bizarre version of “The Lottery” as quickly as possible. 

He wants to eliminate the COLA’s, raise the ages of retirement, increase the contributions…

More than impatient, the Speaker is realizing that something is up in Illinois that he and many other legislators do not want people to hear or see.

We know Illinois has a revenue problem.  At local meetings, Madigan’s representatives have been met with remedies and possible legislation that would correct the structural deficit in Illinois and amend the problem.  There’s been movement.

We know the 1995 Ramp is not being addressed.  People are beginning to understand that not one of the pension cutting bills will do anything to rid the state of the unfunded liability (caused by Madigan, et.al.) and we will all be back right where we started.  That is, except for the disaster we will cause to the spending stimulus that is nearly a million people with pensions or pension prospects.  There’s been movement here too.

We know that legislators are calling for a fundamental change in an antiquated, outlandishly unfair, and unproductive flat tax system (HCJR0002).  A change that would promise $billions more in revenue.  There’s been movement there too.

We know that legislators are beginning to call for a funding mechanism to devote promised funds to the pension shortfalls in the future, one which would address the pension debt in a more amortized and logical method.  There’s been movement there too.

We know that this kind of rush to judgment is sure to bring court litigation, even if the Speaker could care less – about costs or outcomes?  We Are One has tried to find a constitutionally acceptable settlement. There’s been movement there too.

When you call the Representative or Senator, remember to remind them that people are looking for real answers, answers the Speaker does not want anyone to consider.  Remind the legislator that there are people in the General Assembly willing to do what is right, not what the Speaker tells them to do, or else.

Make the call.  Let’s stop this quickly.

Sunday, February 24, 2013

I Am the Very Model of a Modern General Assembly


Apples & Oranges (or I Am the Very Model of a Modern General Assembly)

Idiom: Apples and Oranges is a colloquial phrase indicating the positing of a false analogy.  In essence, it means the illogical comparison of two or more items that cannot be logically or accurately compared. 

From the Chicago Tribune on February 11, 2013, the oak-paneled, cloistered Editorial Board once again offers a specious proposition suggesting that “Some lawmakers in Illinois are setting a good example…” in relinquishing their rights to a pension benefit, as described by state law” ( http://articles.chicagotribune.com/2013-02-11/news/ct-edit-pension-20130211_1_pension-system-pension-benefits-pension-funds).  The Tribune then goes on to list the 22 example-setters who have paved the way – with good intentions – to help solve the pension crisis by personal example. 
You’ll find the list at the end of this blog – although at least one new representative informed me that their own name is excluded and that perhaps several others are as well.  After all, the freshman legislator proudly explained, they want to do what all the others are doing to show they too recognize the extremity of the State’s financial problems.  The newspaper was proud of their combined sacrifice, and they were too.

By the way, the Tribune does not inform that the legislators have opted for other forms of retirement – as they must under federal law – social security or a dedicated 401 program.  

Reading the Tribune – if one must – their Board makes it easy to apply this seemingly altruistic act to the general public sector workers.  If the freshmen members of the General Assembly can perform such a sacrifice in the name of the general good, why can’t the other public sector workers?  After all, pensions are the problem, right?  And the Tribune is quick to give support to that reverberating opinion: “They can collect up to 85% of their final salary, with compounded cost of living increase every year.  They can begin collecting as early as age 55.”  The Tribune goes on to use past Senate leader Emil Jones as an egregious example, also pointing out “And we repeat: The state doesn’t collect taxes on pension benefits.”  For shame!  Of course, Illinois is one of a few states (certainly not like our neighbors in WI, IN, or IA) that does not tax retirement income, but the Tribune would make an exception for evil Emil Jones. 

On the other hand, don’t take the Tribune’s campaign of the positives in relinquishing a pension for social security too faithfully.  It might just cost you and me – the taxpayers – more than the current pensions system, a system the General Assembly already robbed and now owes nearly $100 billion. 

Legislators are required to pay 11.5% of their annual salary to the GAR (General Assembly Retirement), which is around $70,000.  To be honest, that includes several other nice additions – COLA, Health Care, social security, etc.  On the other hand, the Tribune calls their work a “part time job,” which it is for many who have businesses or partnerships in law firms.  Nevertheless, the statesman or professional legislator may not be quite as supported by additional income like a Senator Jim Oberweis, etc.  Indeed, some began as librarians or teachers and are following a calling, not seeking another trophy.  Extended, the Tribune’s patriotic plea for monetary sacrifice can also be an invitation to the overtly wealthy to make law for the less fortunate. 

And if we were to follow the business model that the Tribune so favors?  After all the Trib considers a pension “one of the sweetest perks.”  What if all teachers were to decline the pension for social security, which is what the “no thanks” is really all about.  Here is what actually would happen.

A teacher would pay 6.2% of his or her salary to Social Security.  The district would pay a matching 6.2%.  The impact on the needs of students in the curricular programs would be considerable.  A 2007 study showed that moving teachers into social security would cost school districts an additional $3 billion on the first 10 years (from 2008-2018)”( http://www.ilretirementsecurity.org/news?id=0050).

Not done yet: We haven’t even talked about Tier Two victims.  According to Bucks Consultants, it is very likely that the State of Illinois will owe even further on the federal level as the “TRS second Tier plan will no longer meet the requirements for FICA tax exemption”  (Bucks Consultants.  TRS. 30 June 2010.).  Salary caps for Tier Two employees will cease to meet minimum federal requirements in approximately 2036.

Meanwhile, the unfunded liability hovers like the 200-pound gorilla in the room.  But the Tribune doesn’t see that.  Never does.  The Tribune would apply this pension-denial movement to all of us in the public sector.  It’s what they do.  Here’s how they end their piece: “So, give credit to the 22 members who have said they won’t take a pension.  They’ve set a good example.  Now they should lead a reform effort to reform the pension system…”  Let’s see.  No more pensions.  Still owe $100 billion.  Great idea?

Social Security Takers: Representatives Kelly Burke, John Cabello, Katherine Cloonen, C.D. Davidsmeyer, Scott Drury, Brad Halbrook, Josh Harms, Jeanne Ives, Dwight Kay, Stephanie Kifowit, David McSeeney, Thomas Morrison, Martin Moylan, Pam Roth, Ron Sandack, Sue Scherer, Kathleen Willis; Senators Melinda Bush, Thomas Cullerton, Davis Luechtefeld, Andy Manar, and Julie Morrison. 

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…”

Sunday, February 17, 2013

Zavist: Reprise


“But you have to understand,” said the Senator. “Every one of my constituents ask, ‘Why should they get a pension? None of us get a pension anymore.’”

“The real question,” Glen responded, “is why not?  What’s happened in the private sector that they’ve been robbed of a promised retirement? This is much more than just a teacher's issue.”


ZAVIST

Zavist (za’ veest): n. [Russian] - exponential jealousy, or envy of the most cruel and black-hearted kind; an evil type of envy desirous of inflicting pain instead of emulating what is lacking in one’s own life.

While some writers consider “zavist” fables of Czech or other communist-bloc origin, most seem to honor Russia as the true mother of such feelings. According to Emily Yoffe (“Artful Prague,” Slate Magazine 2009) even the Czech defenders describe such stories and behaviors as a “hangover from communist domination.” The concept Zavist was first employed in 1928 as a title by Yuri Olesha, a Russian satirist who fell in and out of favor during the Stalin regime; the fable(s) themselves come down to us in various forms, all most horrifying.

One more modern version from Joseph Epstein’s book (Envy 2003):

"An English woman, a Frenchman, and a Russian are each given a single wish by one of those genies whose almost relentless habit is to pop out of bottles. The English woman says that a friend of hers has a charming cottage in the Cotswolds, and that she would like a similar cottage, with the addition of two extra bedrooms and a second bath and a brook running in front of it.
"The Frenchman says that his best friend has a beautiful blonde mistress, and he would like such a mistress for himself, but a redhead instead of a blonde, and with longer legs and a bit more 'culture and chic.'
"Following the behaviors dictated by zavist, the Russian, when asked what he would like, tells of a neighbor who has a cow that gives a vast quantity of the richest milk, which yields the heaviest cream and the purest butter.
“'I vant dat cow dead!' the Russian tells the genie: 'DEAD!'”



MORAL? There are solutions to the pension “crisis” made and consistently manufactured by the governor and the legislature in Illinois: Fix the structural revenue shortfall with a graduated tax system, eliminate tax loopholes for corporations,  look at revenue from services and transactions, and amortize the unfunded liability brought on by the General Assembly's not paying what was owed to the state pensions.  

Thursday, February 14, 2013

Tribunes and Thievery (Reprise)


“And we’ll be in the office extra early on Wednesday. One never knows what the Illinois corruption beat will serve up next.”  – Editorial Board of Chicago Tribune in April 18th (2012) editorial on Dixon official’s embezzlement of $30 million.

“The ceremony of innocence is drowned;/ The best lack all conviction, while the worst/ Are full of passionate intensity.” –William Butler Yeats on our future in “The Second Coming.”)   

Tribune (Watchdogs of Duplicity)
Noun – an officer in ancient Rome who was elected by the common people (plebians) to protect their rights from the arbitrary and injurious actions of the the wealthy or powerful (the patricians)  

Today, Valentine's Day, Rita Crundwell will be sentenced for what the Tribune Company calls "the greatest theft of government funds in Illinois history."  Wrong.

Back on Wednesday, April 18, 2012, the Chicago Tribune Editorial page sarcastically trumpeted its frustration and exhaustion in yet one more routine day on “the Illinois corruption beat.”  “The real shocker of the day,” says the editorial board is what has happened to poor Dixon, Illinois, where the chief financial officer has allegedly misappropriated over $30 million in city funds for her own purposes (“Hall-of-Infamy corruption?”  Editorials. Chicago Tribune. 18 April 2012).   We found out later it was far more - as much as $50 million. It is now apparent that one Rita Crundwell (pictured at right) had maintained an extravagant lifestyle and collection of ultra-expensive vehicles and accessories.  In fact, as more information came to light, amounts of money taken exceeded $50 million.  According to the St. Louis Today news, Rita “pocketed the equivalent of almost one-third of Dixon’s $9 million general fund budget every year for 21 years – about $3,300 for every man, woman, and child in town.  If true, it would be one of the biggest public embezzlement schemes ever” (McDermott, Kevin. In tiny Dixon, Ill., a theft for the ages.  13 May 2012).  Actually, that is incorrect.  One of the greatest public embezzlement schemes was and continues to be perpetrated on the public workers in Illinois by the politicians– at least since 1953.

Let me explain.

Surprisingly, Dixon is a microcosm (small world representation) of Illinois and its citizens; the same Tribune editorial reminded its readers that the little city’s median household income in 2010 was only $35,720 (Hall-of-Infamy).  Sadly, the diminutive size of the town is reflected in its financial holdings as well as it severe pain for its lost from stolen money.  “The size of the losses represents a staggering hit for the small northwest Illinois town with a budget of only about $8 million to $9 million a year, leaving residents bewildered (Grimm, Andy & Jenco, Melissa.  “$30 million theft case staggers small town.”  Chicago Tribune.  18 April 2012).  BEWILDERED is indeed the operative word, and one that describes perfectly the sense of loss that an individual must feel once he or she has been duped or the victim of a huckster, schemer, or canard.  

And what happens to Crundwell, a world famous breeder of quarter horses?  She could face “a maximum sentence of 20 years in prison and a $250,000 fine…” (Hall-of-infamy corruption?).  By the way, that's exactly what she received.  Hooray!  We all hate a cheat!  Those who prey upon the unknowing and the trusting deserve our contempt and punishment.  Just imagine if it were the other way about?

Yikes! Uncle Bernie Madoff would be faultless; and instead, the idiocy and naiveté of the investor would be outlined in vicious told-you-so’s.  Bernie Ebbers, the scoundrel head of WorldCom who inflated his company’s assets by nearly $11 billion would be simply a pawn of the company’s investors.  And in Dixon, could we imagine a situation where a Tribune remarked, “it is the fault of the people of Dixon for “Nobody watching the store…We don’t have the checks and balances” (Grimm & Jenco)?   Or even worse: Actuarially, the people of Dixon are simply living too long…?

In the greatest perversion of the titular term, the TRIBUNE has promoted the concept that teachers themselves are to blame for the refusal and now inability of the State of Illinois to pay for its past crimes against a middle class of hard-working individuals who jumped through every fiscal hoop; invested naively in the future of the promises given; and gave their creativity, ingenuity, and professional effort to the betterment of the state’s children.  And who were the Madoff’s of the public pensions’ misappropriation?  If not the General Assembly, certainly the leaders of the State of Illinois who decided for their own political gain to forgo payments required to keep the pensions systems solvent:

Adlai Stevenson (1949 – 53): a steady decline to an approximately 40% funding;
William Stratton (1953 – 61): a roller coaster funding record to approximately 60 percent
Otto Kerner (1961-68): a roller coaster funding record to approximately 70percent (Kerner was imprisoned for conspiracy and perjury);
Sam Shapiro (1968-69) a decline in funding to approximately 65 percent;
Richard Ogilvie (1969-73): a roller coaster funding record that was as low as 33 percent to as high as 60 percent;
Dan Walker (1973-77): a steady climb of funding to approximately 80 % (Walker was imprisoned for bank fraud);
James Thompson (1977-91): a roller coaster funding record from a high of approximately 90 percent then down to 30 percent;
James Edgar (1991-99): a roller coaster funding record down to approximately 25 percent to as high as 70 percent;
George Ryan (1999-2003): a roller coaster funding record to approximately 65 percent (Ryan is currently in prison for fraud and racketeering);
Rod Blagojevich (2003-09): a roller coaster funding record down to 35% and than as high as 70 percent (Blagojevich is currently imprisoned on 18 corruption charges);
Patrick Quinn (2009 - ): the state has funded the Teachers’ Retirement System, though it has borrowed the money to do so; thus, the state debt’s service continues to grow” 
(Brown, Glen. A View of the Illinois Public Pension Dilemma, Pt. I. 14 April 2012).

One might think that someone like Bernie Madoff or  Kenneth Lay of Enron might feel badly about what he’s done? Fat chance.  

Here’s what Governor James “Big Jim” Thompson, close personal friend to Ty Fahner of the Civic Committee of the Commercial Club of Chicago, had to say about his use of money saved by taking pension holidays during his terms (see above).

“And here, here is our proudest accomplishment.  In the last 13 years, state government has delivered efficiently more services in more areas to more people than at any time in our history.  Whole programs that didn’t even exist in 1977 thrive now.  And yet, the share of dollars that we take from our people’s income in Illinois to do all that is lower, not higher than it was in 1977" —Governor James Thompson in his 1990 State of the State Message to the General Assembly (Wheeler III, Charles N., Illinois Issues, 16 Dec. 1990).

Thanks for all your work, Tribune.

Tuesday, February 12, 2013

Pension Ramps and Gorillas?


Missing the 200 Pound Gorilla in the Room (The ramp?...  What Ramp?... I don’t see any ramp…

Selective Attention: noun.  In psychology, a singular focus for information or answers at the expense of other alternatives which may be available.  In short, thinking only inside the box without other consideration; a particularly dangerous form of group-think.

In a famous study of the 1970’s, Ulrich Neisser, a professor of cognitive psychology at Harvard, tested the results of singular concentration on perception that has real implications for what we see in Springfield these days. 

First, he videotaped some students passing a basketball back and forth on an open court and differentiated them by using shirts of white or a darker color.  He asked those watching the video to count the number of passes between the players wearing white for a specified period of time.  During the video, he inserted images of a woman with an umbrella.  Later on, the vast majority of the subjects who watched the video never reported seeing any woman with an umbrella in the room. 

Lately, professors Christopher Chabris and Dan Simons decided to try it again, but this time adding a 200-pound gorilla that, in one case, remained on the court for nearly ten seconds before ambling off screen through the moving basketball passers.  Results?  Once again, half of the people watching the video never saw the gorilla.  
You can see the interview and video at BigThink (http://bigthink.com/ideas/20583 ).

The frightening implications of selective attention are everywhere –the kid texting while driving next to you or the Representative in Springfield looking at the latest bills for “pension reform.”  And, of course, you and I both know the gorilla in this case is the crazy, ascending ramp (PA 88-0593)designed to repay the money stolen from public sector pension funds over nearly a half century. 

Instead of addressing the problem of the 1995 Ramp, the legislature has decided to ignore the gorilla and construct an answer by cutting benefits. Governor Quinn is their best cheerleader. 

Proposed bill HB6258 (Rep. Nekritz, Sen. Biss) severely diminishes promised cost-of-living adjustments, increases retirement ages, escalates employee contributions to highest in the land, caps eventual pensionable salaries, and pushes new employees into a cash balance plan (instead of a pension).  Nothing about the Ramp.  Nothing about the nearly $100 billion owed.

Proposed fall-back SB1 (Sen Cullerton)  requires all active and retired members to make choices: Either accept a reduced cost of living adjustment and maintain access to the state’s health insurance program for retired teachers, or keep the current TRS COLA and lose access to state supported health insurance in retirement.  Nothing about the Ramp.  Nothing about the nearly $100 billion owed.

As Ralph Matire has been warning for years now, “Purportedly to rectify the problem, Public Act 88-0593 was passed in 1995. Known as the "Pension Ramp," it established a repayment schedule to get the pension systems 90 percent funded by 2045.
“Unfortunately the Pension Ramp was fundamentally flawed, because it continued the practice of borrowing against pension contributions to fund services for 15 more years, effectively tripling total pension debt, and was so backloaded that the installments of debt to be repaid in out years jumped at annual rates that were unrealistic and unaffordable.
“For instance last year in FY2012, the state's pension contribution was $4.1 billion, of which only $1.6 billion was the cost of funding benefits, while more than half, $2.5 billion, was repayment of debt. In FY2013 the contribution jumps by 23 percent to $5.1 billion — with all the increase being debt repayment under the goofy Pension Ramp”(http://www.dailyherald.com/article/20120703/discuss/707039979/) .
The problem is not pension benefits, no matter how many times Governor Quinn links the regular payment (which is minor) with what the state owes the pension funds.  That’s the gorilla.  That’s what they choose not to see.