Saturday, July 29, 2017

Primer: How a Dedicated Group of Young Actives Influenced a Board Election

This important and energizing primer to all active teachers and faculty leadership goes out as schools begin to gear up for the new academic year, meetings about contracts, or possibly new board elections.  Last year, a dedicated team of teachers successfully took on the incumbent Tea Party in an Illinois School District with the help of the entire faculty and a carefully constructed plan to tap into positive messaging.  Reading this outline is so motivating and helpful, I hope you will scrutinize and pass along.   You gotta admire these guys!  

Teamwork, Young Actives!
Against the Odds: Winning a School Board Election Amid Adverse Circumstances

“We teach in a high-achieving suburban high school district in a red county. Our Association has approximately 400 members. This is the story of how our Association-backed candidates won four seats on our school board in 2017. If we can make this happen, any local can. 

Facing declining enrollment and an adversarial relationship with the previous board’s majority, we knew we were up against incredibly difficult odds in the 2017 school board election. Four seats were up for grabs, with two incumbents running and a four-person Tea Party slate vying for them. Months in advance of the election, we began recruiting and vetting potential candidates for our Association to support. After our LPAC committee interviewed all of the candidates who were willing to sit down with us, we decided to endorse 3 candidates who we believed shared the values of our educational mission; we deliberately chose 3 (despite 4 available seats) because we did not want to attach ourselves to an unpopular incumbent in a change-based election. We also felt this would prevent our Association-endorsed ticket from being split by voters who liked the most well-known candidate from the Tea Party slate, who happened to already hold public office at the county level. Our endorsed candidates were strong and motivated, engaging in their own campaigning and canvassing, but we as an association were incredibly active in this campaign. 

From the beginning, we took an approach that was laser-focused: we, like many public employee organizations, had for so long been so intently driven to refute the outlandish and inflammatory Tea Party sentiments that devalue education and the role of teachers that we realized that we were preoccupied with their rhetoric. We deliberately made the decision to IGNORE THEM in this election. We will never change their minds, no matter how much we reason with them, because they fundamentally do not value the service we provide to the community. Instead, we focused on relying on the relationships we'd built over the years and connecting with those in the community who DO value education - fellow educators, parents of children in our schools and our feeder schools, recent alumni, and friends/family/neighbors living in the district - to increase voter turnout (which is historically dismal in these odd-year spring elections).

Follow this plan, please!
Our primary message?  
STRONG SCHOOLS = STRONG PROPERTY VALUES. The Tea Party slate was proposing a 10% cut to the levy that would absolutely gut education quality and, as a result, gut property values when school quality dropped. Whatever meager tax cuts they might provide in the form of decreasing the levy would result in disastrous cuts to education quality and very little actual realized savings to the taxpayer (approximately $200/year for an average district boundary household, according to our math). The Tea Party slate was promising tax cuts they wouldn't deliver and education cuts they would deliver. Meanwhile, our Association-endorsed candidates were fiscally conservative and responsible but also knew the value of quality education in our community.

So to get this message out, we took a three-pronged approach to the election: 

#1: Increasing voter turnout 
Education is a relationship-based industry, so we relied heavily on those relationships. It could easily be said that our relationships won this election for us. Please take that as the ultimate affirmation that WHAT WE DO MATTERS! People trust us as the professionals we are and when we talk about education, they will listen! Through internal communications with the Association (primarily home email addresses and Remind101 texting), we provided scripts to our members to share with friends/family who live in the district through whatever communication tool they felt most comfortable using (email, text, Facebook messaging, phone calls, personal conversations, etc.). We gave incredibly explicit instructions - easy copy-paste text and scripts - and our members shared it with everyone in their circle of contacts who lived within district boundaries to get the word out about the election.

We also tapped into our relationships by reaching out to recent alumni; our membership sent emails and Facebook messages to students who had recently graduated, encouraging them to early vote over spring break if they were still registered in our boundaries (which many of them were due to the recent presidential election). We provided links to early voting locations and instructions. We also provided them with absentee voting information to vote by mail. Because so many of our recent grads value the experience they had in our classrooms, they were more than willing to go the extra mile for us when we let them know how important this election was for future generations of students to receive the quality education they'd received.

Finally, we connected with our PTO and athletic booster organizations, feeder school locals, and lists of IEA members living in our district boundaries.

Compared to the local election in 2015, we increased voter turnout by over 5%; this doesn't sound like a lot until you realize that turnout in 2015 was just over 10%. Turnout in 2017 was nearly 16%. While 16% is admittedly still terrible turnout, it signified a HUGE increase from the election two years prior. We considered this a huge victory.

#2: Social media outreach
When examining our target demographic, we discovered that placing a hard-copy ad in the local newspaper would be a pointless waste of precious resources; the demographic we were trying to target gets their news from social media (Facebook and Twitter primarily). Since we were organized early, we began driving traffic to our Association Facebook page four months prior to the election by posting "sunshine" stories about student and teacher successes. We also aligned these posts with Twitter to reach a broader audience. We "sponsored" posts using our IPACE funds to be sure that our posts were being seen by people of voting age in our district boundaries. When the official campaign started mobilizing, we shared local endorsements for our candidates, our candidates' written and video statements, video of candidate forums, and other pertinent information on Facebook and Twitter. We shared positive statements and videos about our candidates, touting their expertise and suitability for office. But this digital outreach became even more crucial when a candidate on the opposing Tea Party slate was found to have engaged in abusive, vulgar behavior online. We were able to show this activity to the public via social media and the candidate and opposing slate received tremendous negative attention online and in local newspapers when our posts went viral through extensive sharing.  We also designed easy-to-share and easy-to-read infographics that our members could use as their profile pictures and share with friends.

#3: Targeted campaigning
Our 400-person membership was tremendously engaged in this election process. However, we did have what we began to affectionately refer to as "The War Room" - a core group of about 10 members who were the driving force behind the campaign and were responsible for the campaign strategy and mobilizing the broader membership. One of the members of the War Room (a psychology/sociology/history teacher) came up with the idea of targeted campaigning; he analyzed the data from the 2016 presidential election and realized that although the county had gone for Trump, a large portion of our district boundary had gone to Clinton. We dissected this voter data down to the precinct, even down to the intersection. When it came time for mailers/door hangers to be distributed (which the opposing slate was doing in force and with a huge budget), we realized our meager budget did not allow for such activities. So instead, we looked at those precincts that voted Democratic in 2016 and targeted them; our philosophy was that these were, to generalize, people who valued education as evidenced by their prior blue votes but who might not turn out for this local election due to a lack of awareness. We believed it was our job to make them aware of not only how damaging the other slate could be for the future of education in our district, but also how valuable and beneficial our endorsed candidates would be. 

We stuffed envelopes labeled by precinct with door hangers advertising our candidates and how much they value education. At the final association meeting before the election, we distributed these envelopes to our membership along with maps of the precincts. We instructed them to hang these materials on the doors of any family with children, and then to canvass everywhere else. Again, we were targeting a specific demographic: people who value education but might not show up to vote on election day. When the election results rolled in, the precincts we targeted had much higher turnout than those we did not.

In the end, we succeeded in getting our endorsed candidates elected along with our preferred incumbent, which was a particularly surprising achievement given the name recognition of the opposing slate's top vote-getter. 

A bit too little and too late, but it's come to our attention that IEA actually provides many resources for locals to engage in grassroots action. We pretty much did everything with this election on our own; in the future, however, we plan to utilize the many resources that IEA provides.

So long for now.  Well done, War Room!
So, to summarize -- 

Keys to our victory:
Organization, organization, organization!!!
Strong candidates endorsed by the Association
Alumni outreach (absentee/early voting)
Outreach to boosters/PTO/other locals
Clear messaging
Social media outreach
Phone calls to all IEA members living in district boundaries
"The War Room" - core group of talented, motivated members who acted as a braintrust of campaign strategy and motivated the membership
Broad membership involvement
Targeted campaigning (right down to the precinct)

What we were up against: 
Motivated local Tea Party
Prominent county politician on the slate
Opposing slate "Tax Cut" agenda with no specific strategy (looks good on campaign signs)
Much larger budget

If we can succeed, anyone can!”

Monday, July 24, 2017

Pension Vocabulary: What does "smoothing" mean?

Pension Vocabulary:  What Does “Smoothing” Mean?

One of the elements of the addition of a Tier III in the new law for latest hires in Illinois is a change in how state government calculates the amount of money TRS and other programs will receive from the state government in Illinois for the years going forward: 2018, etc. 

Making common sense of how one might determine what would constitute a required annual contribution is a bit complicated, because that contribution by the State of Illinois to TRS is dependent upon the fluctuating rates of investment returns in the reserves into which we (teachers) all pay. 

Confused?  Believe me, as a retired Language Arts teacher, me too.   But think of it this way:

If the investments in TRS do better than the funds assume (predict) in a current year, the state and local governments can fund pensions with much less tax money, which could be in turn used for services, infrastructure, or citizen benefits. 

However, if the investment returns do poorly, the required annual contributions  by the state will need to increase to meet the needs; and that will crowd out the same programs – the services, infrastructure programs, and citizen benefits mentioned above.

With me so far?

So…if TRS is down 5% this year in investment returns, the state picks up the additional 5% of contribution.  Or if the investment returns are up 3% this year, then the state is able to lessen its payment by the corresponding amount.  Right?

Yes, that is, until a little actuarial gimmick called smoothing is applied to the mathematical reality. 

According to one economist, smoothing is a “actuarial camouflage,” a method to dampen on-book asset volatility.”  The practice is meant to protect the payer from the shocks of sudden changes in market returns (or volatility) in gains and losses during a single year.  So, why not spread the damages or gains over five, or ten, or twenty years to artificially reduce asset volatility? 

Analogy:  I’ll meet with my Doctor later next month.  He’ll be checking my weight carefully again as he does every six months.  Let’s just say that I have a deep and abiding love for good food and paired wines.  And my weight has fluctuated during those times we have met.

 Doctor:  Well, I must tell you that I see you have gained about five pounds despite the last serious talk we had in April.  And you had done so well the time before with a drop of nearly eight pounds.

Me: Yes, you know, Doctor, I think we should smooth the last five years of our appointments.  I calculate an overall average loss of a single pound over our ten meetings.  That’s a hopeful indicator, don’t you think?

Doctor: Does that make you feel better?

When the smoothing is done, it is more likely that the underfunding of pensions will continue as it artificially reduces asset volatility and reduces funding pressures in the short run.  In my case, my assets may look better than they are (pun intended), and the same is true of this engineered value of pension assets and returns.

According to the Rockefeller Institute study on Public Pension Funding Practices, “Funding policies and practices that take a long time to repay shortfalls protect current taxpayers and beneficiaries of government services from sharp and possibly unaffordable changes.  But they create risk that the pension plan will become deeply underfunded and that future taxpayers who never benefitted from past services will have to pay for them.  This is particularly true of the plan suffers a series of shortfalls over several years.” 

Welcome to Illinois.

According to TRS, the original state contribution for TRS expected in fiscal year 2018 – $4.65 billion – will be recalculated.

“TRS must retroactively “smooth” the fiscal effect of any changes made in the TRS assumed rate of investment return over a period of five years.  The “smoothing” applies to assumption changes from 2012 on.  Up until now, the fiscal impact change in the assumed was totally absorbed at one time.  For example, in 2016 TRS reduced its rate of investment return from 7.5% and the result was a $402 million increase in the fiscal year 2018 state contribution to TRS.  Under this new law, that $402 million increase would be phased in over a five-year period.“

The only way it could get any more slippery or worse is if Illinois found a way to short the funding even more.

They did:

According to Mr. Richard Ingram, the executive director of Illinois’ TRS,  Over the last several years state government has taken its responsibilities to TRS very seriously and has paid its legal obligation in full. Still, the legal state contribution for the last several years has been insufficient to improve the System’s long–term finances. State government’s annual contribution is set artificially by law. It is not an actuarial calculation.

As it does every year, for FY 2017 the TRS Board asked its actuaries to calculate two state contributions — the payment calculated under state law and the payment calculated under actuarial practices. Under standard actuarial practices, the state’s annual contribution for FY 2017 should be $6.07 billion.
The calculations set in state law artificially lower the state’s annual funding level. For instance, state law:
   Requires pension costs to be calculated on a 50–year timetable instead of the standard 30 years
   Establishes a 90 percent funding target instead of the standard 100 percent goal
   Requires the debt payments on state pension bonds to be deducted from the total contribution. 
Illinois teachers have always paid their required share and are counting on their pensions to sustain them in retirement. The state has never paid its full share.
The annual contribution is the amount of money required by state law to fund TRS pensions during the coming year, as well as a payment on the System’s unfunded liability, which currently stands at $71.4 billion.”

The inclusion of another Tier by the General Assembly as a laurel to Republicans and Rauner does not fix the hole nearly 80 years of underfunding has excavated.  It provides some relief (like SB7 did) to borrow to pay off debts, once again on the backs of those who paid into their pensions as demanded each and every paycheck. 

Does that make you feel better?


Wednesday, July 19, 2017

Future Tier II and Tier III Hires Looking at 401K's

For Future Tier II and Tier III Hires

“We can overturn any law we pass within an hour.”

The most significant and everlasting words I received from a legislator concerning pension reform bills and future promises came back in 2011, when my good friend Glen Brown and I met with Representative Elaine Nekritz in Buffalo Grove area to discuss our concerns about the “pension reform” being pressed by Governor Pat Quinn.

Representative Nekritz was thought to be the probable successor to Michael Madigan before her announcement to retire from Illinois politics this year. 

Back then, as Tier One retirees, we realized the General Assembly – facing an underfunded pension liability after decades of shirking their payments – was about to move to some draconian diminishment of promises made and benefits constitutionally protected.   The bill – SB1 – was not yet fully baked, but it was on it’s way. 

We had an emotional discussion.  One of many more…

We were such idealists.  She smiled when she replied to our question –
“We can overturn any law we pass within an hour.”

On May 8, 2015, the Illinois Supreme Court echoed our hope unanimously.  Article XIII, section 5, stands.  There shall be no diminishment of benefits earned upon the contractual entering of employment as a state employee. 

Earlier Tier Two passed quickly by the General Assembly for those hired after January 1, 2011, and without any real objection by the unions, requiring new hires to work toward a defined pension that is capped at a CPI of about $110,000 and without a compounded cost of living adjustment.  With the caps and the lesser benefits, Tier II workers started paying down much of the debt created by the General Assembly and surrendered nearly 9.5% of their salaries for less than 6% of a return in a defined benefit. 

Glen Brown wrote in January of 2015:

“If Tier II is left alone, it will accomplish its mission. The $61.6 billon TRS unfunded liability will shrink over several decades and eventually be eliminated because the state will pay less to the ever-growing number of Tier II members. In fact, at some point in the future, we estimate that Tier II members actually will help create a surplus of funds for TRS that effectively could eliminate the need for any state government contribution to the System.

“But the core of Tier II – the reduced benefits structure – is a problem the Teacher Recruiting and Retention Task Force will review. The benefit structure is unfair to all Tier II members. Right now, a Tier I member’s pension costs roughly 20 percent of an active member’s salary. Because of the benefit reductions in Tier II, a Tier II member’s pension is worth just 7 percent of an active member’s salary. However, by law, active Tier II members of TRS, like me, pay the same 9.4 percent salary contribution to the System that active Tier I members pay.

“What all this means is that Tier II members are paying the entire cost of their pensions plus an extra 2.4 percent to TRS. That extra 2.4 percent subsidizes the pensions of Tier I members” (

And now, Tier II pension reserves are calculated to be at 151% funding. 

But now, suddenly,  we have Tier Three. 

Remember: “We can overturn any law we pass within an hour.”

According to the IEA, Tier III offers a positive opportunity to “fix” some of the problems with the Tier II design.  

Among those problems was an unscored bill Tier II passed which did not meet the Federal requirements for a qualified retirement plan or “safe harbor” limit.       

According to IEA’s website, “ SURS and TRS members who first become participants of the pension systems on or after a to-be-determined implementation date (likely no earlier than July 1, 2018) will have the option to:
1) Be in a new hybrid benefit, known as Tier III, or
2) Elect to be part of the current Tier II.”
Elect.  Choose.  Decide to leave the benefits of a promised contractual agreement. This is a form of long-sought-after consideration, wrapped in promises of personal ownership has been part of Cullerton’s olive branch to Rauner and an earlier acceptance by a collective of state workers’ unions. 
“Tier III offers a hybrid plan of a partial defined benefit (pension) and a defined contribution plan (401k or etc.).  While none of this is fully formed yet, those Tier II people choosing to go with the irrevocable defined contribution (401K, etc.) will pay minimally 4% of their salary, but see their pension contributions drop from 9 percent to no more than 6.2 percent. 
“Also, existing Tier II members will have the option of joining Tier III. The retirement systems shall establish procedures for making these elections which, once made, will be irrevocable. The Tier III plan is a combined defined benefit (DB), often referred to as a pension plan, and defined contribution (DC) plan. Under the DB part, the member’s contribution will be no more than 6.2 percent of salary, but may be less depending upon a system’s determination of the annual normal cost of benefits. The member’s contribution drops from the 9 percent of salary required under Tiers I and II.
Entering finally stage right: the 401K style retirement plan.
In 2011, the Civic Committee of the Commercial Club of Chicago urged the adoption of a 401K program for teachers to replace the pension structure currently in place – SB512.  But 401k’s had their birth in the Reagan era: Congress acted in 1986 (during the Reagan presidency) to replace defined benefit plans for federal workers (CSRS) with a less generous defined benefit plan (FERS) and a generous 401 (k) plan called a TSP.  This explicit endorsement by the government from a single type defined-benefit plan to a possible combination of defined-benefit/contribution plan to which employees could elect to contribute amounts of their own choice became the starting point for a fast growing industry in financial investing and personal portfolios for retirement (Employee Benefit Research Institute, 2005).

Makes you wonder who will be managing these teacher investments, doesn’t it?  Maybe Ken Griffin at Citadel? 

Sorry.  Couldn’t resist.

“We can overturn any law we pass within an hour.”

Beginning with the 2020-21 year, all employer costs (normal and any unfunded liability) for a Tier III member will be picked up by the member’s employer and not the state (prior to that date, the state will contribute 2 percent of each Tier III member’s salary to each system with the Tier III member’s employer picking up the rest, if any exists). Under the DC part, the member must minimally contribute 4 percent of salary, while his/her employer must contribute at least 2 percent and could contribute up to 6 percent of salary.
Your future 401K will likely not be protected under Article XIII, Section 5.
 By 2020, the local districts pick up the cost of your 401K savings plan.  The state has no responsibility to engage in any promised compensation for your investments..
I repeat what I warned in 2014:  
Note: Always remember this.  Were the State or Rauner ever able to move public workers to a 401k retirement system, it would not be protected under the Pension Clause.  If the State found that matching contributions to a 401k plus the need for Social Security were too much, the General Assembly could do away with 401k plans altogether.