Sunday, July 13, 2014

Illinois Policy Institute By Any Other Name...

Illinois Policy Institute By Any Other Name Would Smell the Same

A writer for the Illinois Policy Institute tried her hand at analogies the other day.  Diana Sroka Rickert, whose article was directed at “solving the pension mess,” had some suggestions.  Of course as an IPI spokesperson, those recommendations involved privatization, 401K programs, and a scrapping of the firefighters Illinois pension code.

In 1979, the original Sony Walkman was the newest way to listen to music. Switchboard operators still connected telephone calls.
That's also when the Illinois village of North Riverside signed its first contract with the firefighters' union.”  

I think you can see where this is headed, but if you’d like to see some over-stretched resemblances, here’s where to go:

The Tribune enjoys the Illinois Policy Institute and most of the “think tank’s” conservative and oft tea-party proposals.  And, to be honest, there are many similarities in the Tribune’s conscious efforts to blame the pension shortfalls on the concept of a defined benefit to start with – that’s the basic credo for the IPI.  If you watch or read the two, you’ll often note the harmony in their themes.

John Tillman - Illinois Policy Institute
You may have seen Ms. Rickert on WTTW Chicago Tonight arguing against all things pensions when Ted Dabrowski or the John Tillman aren’t available.  She usually plays opposite Ralph Martire of the Center for Tax and Budget Accountability.  He provides numbers and information; like most IPI spokespeople, her mantra is “all pensions are wrong.” 

Now, she likens pensions to Sony Discmans.  This goes beyond simply saying pensions are bad.

Indeed, Rickert’s handling of the facts facing the good firemen and first responders in North Riverside is nearly as inventive as her creative comparisons in the opinion piece.   And, if she were to have her way (the IPI way), the citizens of North Riverside should consider another activity by night, rather than sleeping soundly.

Diana Sroka Rickert
Rickert claims “The union's most recent contract expired April 30.  The village of 6,700 faces a $1.9 million budget shortfall. Officials say $1.8 million is due to rising police and fire pension costs…It's a common scenario in Illinois.”
In actuality, the town’s politicians, including the Mayor, have put themselves in the cross hairs of the Illinois Department of Insurance, which oversees the required funding for village and Illinois pensions systems.  The real reason for the $1.8 million shortfall is due to their refusal to pay anything at all into the funds in the last six of twelve years. 

In Article 4 of the Illinois Pension Code (Firefighters’ Pension Fund  - Municipalities 500,000 and under), the city council of North Riverside is obliged to pay the 17.5% matched contribution to the downstate fund, “equal a sum sufficient to meet the annual actuarial requirements of the pension fund, as determined by an enrolled actuary employed by the Illinois Department of Insurance or by an enrolled actuary retained by the pension fund or municipality.” [(40)  ILCS 5/4-118 Financing]
The city council of North Riverside chose not to contribute.
Understandably, the Illinois Department of Insurance wants to know WHY?
And, although Rickert takes aim at the Firefighters of North Riverside, it’s actually the shortfall in the police pensions of $1.1 million that greatly surpasses their $.7 million deficit in the payments that should have been made by the town to the downstate pension funds. 
If this is beginning to sound familiar, you’re not wrong.  The firefighters contribute 9.45% of each paycheck to the fund, the local politicians decide to take a holiday or refuse to pay their required share every other year, and the Illinois Policy Institute finds the pensions are the problem. 
Rickert’s solution: Privatize the fire department. 
“Beyond preserving all the firefighters' jobs and keeping intact the level of fire protection, the move also would save the village more than $3.5 million over the next five years. Most savings would come from firefighters banking what they've put into their pensions and earning new retirement benefits through a 401(k).”
That sounds simple.
On the other hand, Pat Devaney, president of the Associated Fire Fighters of Illinois was not impressed with Rickert’s or Mayor Hermanek’s suggestion, not to mention the Trib editorial board for putting such misinformation out there.  The Tribune’s defense of suburban North Riverside’s bid to abolish its fire department in favor of a private, profit-incentive service steps way beyond the boundary of sensibility. Worse, your (editorial) advocates government malfeasance that borders on lawlessness.”(http://www.carrollcountytimes.com/topic/chi-letter-privatization-of-emergency-first-responders-is-dangerous-20140702,0,4036921,print.story)
And, really it does endorse an avoidance of responsibility toward the towns people's welfare..  
Let’s not forget that the lion’s share of the debt also originates in non-payment to the police downstate fund; therefore, would the IPI and Rickert suggest privatizing that as well?  Probably. 
And North Riverside already moved its ambulance service to a private company rather than the firefighters.  By the way, being a union member firefighter Emergency Medical Technician requires several certifications to provide safe, adequate service; the private company requires only one basic certification.
Sleepless in North Riverside, yet? 
Rickert laments, “It’s hard to put a price tag on the bravery and service provided by any fire department.”  But of course, she just did.  And even though this IPI writer would suggest that a 401K is a more up-to-date and streamlined version of the Sony Discman, a veritable IPod if you will – its what we call in the writing world a disconnected or noisy analogy/metaphor. 
Pensions were retirement savings program, an agreement to provide some comfort and safety for efforts and greater mastery of the job over the years.  It was a contractual exchange.   Conversely, the 401K was introduced as a supplementary savings program, one which could be controlled by the employee and managed for a cost by pricey fund managers.   According to Forbes, pension plans often beat 401(k) plans. "Since 1995, Towers Watson found, defined benefit plans outperformed by 76 basis points annually (0.76%). They(sic) did so in nearly all of those years except years in which stocks boomed, such as 2009…Part of the reason is mutual fund fees.  Mutual funds in the plans studied had weighted average expenses of 65 basis points in 2011, a drag which reduced overall returns by 31 basis points. Nearly half of the 401(k)-type plans were composed of mutual funds, compared to just 14% in the pension-style plans” (http://www.forbes.com/sites/mitchelltuchman/2013/06/04/pension-plans-beat-401k-savers-silly-heres-why/ ).
Some companies match employee 401K contributions to some levels, but not in the public arena.  In addition, the firefighters in North Riverside, like other public employees, are not entitled to Social Security; one more fly in the ointment for Rickert in her suggestion to simply jump to a 401K.  In addition, 14 of the 15 firefighters in North Riverside are vested; that is, they have spent more than a decade in service. 
In her conclusion, Rickert wags a warning, pedantic finger at the reader:  But because new ideas and competition constantly are introduced, society changes. At some point, we upgrade the Walkman for the Discman for the iPod. We learn to be flexible and embrace innovation, because the way things were done 30 and 40 years ago might not be the best way to do them today.”

It’s only an upgrade?  Not if you're a responsible firefighter or police officer.  I'd have trouble sleeping in North Riverside if I lived there.   It would appear there's already a crime prevention problem.   


3 comments:

  1. I wonder why all of us in public pension funds sit and wonder what they'll do to us. How about organizing and using our numbers to make some demands that all these deadbeats honor their contracts to pay up on our pensions. I'm tired of feeling victimized and beaten down. It's time for some organization and fighting back!

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