Wednesday, March 9, 2016

Memory Redux: Fighting Pension Amnesia

They’re back…

Less than a year after an austere judicial response by a unanimous Illinois Supreme Court to the General Assembly in Illinois and its political leadership that the attempt to curtail the benefits of public employees earned and protected under the Constitution is forbidden – they’re back at it again.

The Governor is promising an extra $billion to use for programs strangled by his refusal to govern if only Senate Leader Cullerton would hurry up with “his” Pension Reform package – in essence a plan for those currently working in the public sector to select between two types of diminishment and impairment. 

Representative Elaine Nekritz, Rep. Batinick, and Rep. Fortner are playing with opt-outs or lump sum payments in lieu of pensions.

The Editorial Board at Tribune disingenuously drones that Illinois’ fiscal debt is more a result of sweet deals made with unions than a regretful history of legislative irresponsibilities.  And conveniently disremembers the May 8th ILSC decision on SB1.

Meanwhile, the Tribune’s Voice of the People accepts what appears increased complaints from forgetful individuals who blame union workers and embrace a rewritten history quite fashionable in Gov. Bruce Rauner’s mansion(s).

I was pleased to receive an email correspondence from the leadership of the West Lake Shore Unit of the IRTA this afternoon.  Please see below:

“Dear Fellow IRTA Members,

This is a piece written by Al Popowits, Legislative Committee WLSU.  His information about the history of the pension dilemma in Illinois is worth reading.

Marjorie Sucansky
President West Lake Shore Unit

‘Dear Board Members,
          Recently a conservative writer blamed Madigan and the Democrats for the state’s fiscal mess. I thought it useful to give a historical perspective of the problem in order to highlight the culpability of both political parties.
                                                                                      Al Popowits
A recent contributor to Viewpoints stated that Michael Madigan was the main culprit responsible for Illinois' financial mess. In doing so the writer ignored the contributions of previous Republican and Democratic governors. 
Illinois pension woes date back nearly a century. However, today’s crises took root under Governor Jim Thompson. In 1989 and 1990s  the four term Republican signed off on sprawling pension packages that granted generous cost of living allowances to retirees. 
In 1994 Republican Governor Jim Edgar conceived of a fifty year program-“the Edgar Ramp” to stabilize the state’s retirement systems. The governor’s goal was to have the five systems 90% funded by 2045. For the first fifteen years state payment levels were set artificially low, and then ramped up significantly in later years. The hope was that future leaders would somehow find the billions of dollars to make up for the deficits. In 2016-’17 the ramp required a state contribution of $7.6B-one out of every four dollars in the state’s general fund. Some have described the Edgar Ramp as a “balloon payment on steroids”.
 When in 2002 it became obvious that the Democrats would retake state government, then Republican Governor Ryan signed off on a lucrative exit package for thousands of state employees who got their start under Republican administrations. His plan gave them the option of speeding up their retirement by buying age and service credits.  Eleven thousand employees took the offer at a cost of $2.3B. 
In 2003 Democratic Governor Rod Blagojevich signed off on a $10B borrowing plan to give the state’s five pension funds new cash. The state owes $15B in principle and interest through 2033. However, the plan was an actuarial success in that the retirement systems investment returns varied from 8.43% to 9.25% whereas the original borrowing rate was on 5.047%. The successful plan raised the systems’ funded ratios from 49% to 61%. Unfortunately, the legislature used the good news to declare pension holidays in 2006 and 2007. One sponsor of the bill later acknowledged that he and his colleagues did not understand the cumulative impact of differing financial obligations into the future. 
 In December of 2013 Speaker Madigan crafted pension cutback legislation. He assured the legislature that it would pass constitutional muster. The legislation was signed by Democratic Governor Pat Quinn. The legislation supposedly would save $160B over 40 years by substantially reducing the pension benefits of retirees and current employees. In May of 2014(sic) the State Supreme Court unanimously declared the legislation unconstitutional. 
Last July Governor Rauner proposed a plan that he said would save billions of dollars by reducing pension benefits and weakening labor unions. Little has changed. 
There are well-known solutions to Illinois’ financial difficulties. However, they have been eschewed by both political parties because they require painful choices. 

The great statesman Winston Churchill once remarked that Americans would always do the right thing…after they’ve tried everything else.   It appears that Illinois legislators are not yet finished trying everything else.’” 

1 comment:

  1. There is one point that is missing in Al's account - the role of corruption in each of the pension decisions.
    Actually, who gave what to whom and how much did so-and-so make from doing this managing and that loan and that bond deal and that legal fee, and the deal to ramp how much after how much...
    Well, Al was right to list what he did. Corruption and the trail of money in Illinois is too immense a calculation for Einstein and too great a task for Hercules.
    Thanks Al, Marge and John.