Saturday, January 19, 2013

Reprise: "'Cause That's Where the Money Is..."


“Let’s be honest about the unfunded liability,” said the veteran state Senator across the table from Glen and me.  “It’s not missing for any reasons except we stole it from you all.”
“That’s refreshing,” I responded.
“That’s the truth,” he reminded us. (January 3, 2013, Springfield, Illinois)

PENSION HOLIDAYS

Noun.  When the legislative leadership in the General Assembly and the Illinois Governor determine that the Illinois fiscal system has failed to generate enough funds to pay the annual-required pension costs and maintain the same levels of public service, they can elect to take “a holiday” on pension spending.  Such holidays have occurred despite the planned ramp-up to 90% funding by 2045.  In fact, the General Assembly decided “not to make the scheduled contributions for Fiscal Years 2006 and 2007 under the Pension Ramp.  This was accomplished through legislation that created a two-year, partial ‘Pension Holiday’ under P.A. 094-0004, Senate Bill 27” (Center for Tax and Budget Accountability, 2006).

A HOLIDAY?

In a sense, such legislative reneging is a holiday with the gift that keeps on giving from generation to generation.  The bill that comes through in the form of an “unfunded liability” is an accumulation of debt that increases steadily at 8.5%.  Let’s consider FY 2007 as an example.  The State of Illinois owed $2.5 billion to the pension systems in FY 2007 but paid only $1.3 billion in order to balance its budget and maintain no changes in services or taxes.  The shortfall of $1.33 billion and the 8% debt cost will come to $90 million in the first year.  Each subsequent year of “holidays” (or shortfalls) add exponentially to the final bill in the future.  Such shortages add up quickly, and when a state like Illinois has played this game for nearly a half century, the bill becomes astronomical.  Governor Quinn (a.k.a. Squeezy) likes to remind us that not correcting the problem costs many more millions more each day.  Of course, the Governor likes to suggest that the amount is due to excessive benefits,  or at the very least, should be resolved by bleeding current and future benefits from all public sector workers.  By constantly working with his legislators and media to define all of us as some part of the problem, Quinn, Nekritz, et.al.  believe they can make the public sector ALL of the solution.  In that sense, that cynical and duplicitous mantra, Quinn is no different than any or many of the Republican and Democratic governors who sacked the financial holdings of the public sector in order to make themselves popular and appear fiscally brilliant.

HOW LONG HAS THIS BEEN GOING ON?

Since the inception of the funding requirement, the State has inconsistently paid its share of the obligation.  TRS has a past record of state contributions, but the actuarial amounts necessary for funding are unknown; nevertheless, “subsequent reports indicate that Illinois’ contributions have not met actuarial standards” (Farney, Kathleen, TRS Funding, 28 January 2011).   After 1952, when actuarial revenue requirements became available, the under funding record in Illinois turned more accurate and more dismal, (e.g., dropping in years 1982 – 1988 to averages of 60% or less of required payments).  Continued payments at lesser levels after that (1989 – 1995) brought funding ratios to below 30% (Farney, Kathleen). 

AND WHAT SHOULD BE OUR MANTRA?

How about the words of one of the more popular governors who took the pension funding levels down to some of the lowest percentages on record?  Governor “Big Jim” Thompson proudly crowed at his 1990 State of the State Message to the General Assembly, “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 ”— (Wheeler III, Charles N., Illinois Issues, 16 Dec. 1990).

Imagine the crowing if they can steal the rest of it?

Monday, January 14, 2013

Reprise: Gotta Respect Yourself!


“I came to the conclusion that NCLB has turned into a timetable for the destruction of American public education.  I had never imagined that the test would someday be turned into a blunt instrument to close schools – or to say whether teachers are good teachers or not – because I always knew children’s test scores are far more complicated than the way they’re being received today.” -  Diane Ravitch ( http://www.npr.org/2011/04/28/135142895/ravitch-standardized-testing-undermines-teaching)

  
Keeping Them in the Box (or “love you just the way you are”)
  
Idiom:  In Pulitzer Prize winning author Tony Morrison’s The Big Box, several “unruly” children from various backgrounds find themselves placed (incarcerated) into a Big Box complete with toys, articles of clothing, food, furniture – all of it to remind them what would be best for them if they were to conform to what society expects of them.  In fact, although not directly stated, they have been placed in the box for behaving/thinking outside of the societal norms by which they should be constrained.  If you’re a teacher or nurse or public servant, it’s worth a read.  Pull up a chair at your local Barnes and Noble’s and give it a good look.  You’ll find it in the children’s section.


Rules of Conduct for Teachers – 1915
You will not marry during the term of your contract.
You are not to keep company with men.
You must be home between the hours of 8 PM and 6 AM unless at a school function.
You may not loiter downtown in any of the ice cream stores.
You may not travel beyond the city limits unless you have permission of the chairman of the school board.
You may not ride in carriages or automobiles with any man except your father or brother.
You may not smoke cigarettes.
You may not dress in bright colors.
You may under no circumstances dye your hair.
You must wear at least two petticoats.
Your dresses may not be any shorter than 2 inches above the ankles.
To keep the classroom neat and clean you must sweep the floor once a day, scrub the floor with hot soapy water once a week, clean the blackboards once a day and start the fire at 7 AM to have the school warm by 8 AM when the scholars arrive.


Given these historical circumstances, we’d hardly expect a governess/educator to demand anything - much less a living wage.  Pity the Ichabod Crane, Mary Poppins, Miss Crabtree, Anna [The King and I] – were they to shed their timidity for a sudden temerity and request deserved respect and compensation.  That would be out of character and totally unacceptable.  They might even lose their heads?

Teachers, nurses, police, firefighters, and public servants are taught through hammering stereotypes and reiterated imagery that their professions’ nobility is derived from the following:  practiced compassion over personal reward, good works over self-interest, and graciously granted respect for the sacrifices each profession makes.  We illuminate our minds with these strobe images of the dignity of penury through self-sacrifice.   

 But those once admirable stereotypes have changed recently, haven’t they, my educator friend?


Anyone familiar with the print media (in Chicago especially) is aware of the persistent vilification of the teaching profession, the new emphasis on privatization of the schools, the demand for testing as a measurement of teachers, not students.  And with those angry new caricatures we have at times come to doubt ourselves and our work – and I might emphasize – our value.

For decades, any real threats by public servants demanding respect, seeking appropriate compensation, or calling for a voice in their respective professions have been countered with the media’s cynical rejoinder that they are coldly willing to hurt kids, or patients, or crime victims, or the populace.  The economy, destroyed by speculators; retirement savings, drained to less than half their value; foreclosures, still rising unabated – we look at our pension and feel – of all things – guilty.


“Honestly,” one teacher whispered to me at a recent gathering, “I feel scared when people ask what I do for a living.  They’ll either hate me or feel envy.  So I make up things.”  It won’t get better.

In the new world or the “new reality,” our discomfort will be enhanced with the media’s consistent call to simplify the process – teach measureable skills only, reduce the scope of class choices, or just add more time.   And be paid accordingly. 

In academics, they (public servants) are often reminded to remain in their domesticated positions as governess, tutor, nanny, baby-sitter, or hired help “in a feudal system of corporate masters and serfs” (Chris Hedges).  Our job is simple: teach to the test.  Replacing real teachers – the ones who educate children to think critically or inspire them to reach for their potential – the privateers now seek those who design curriculum that can objectify and assess basic skills at the expense of insights, gifts, or desire.  

“Passing bubble tests celebrates and rewards a peculiar form of analytical intelligence.  This kind of intelligence is prized by money managers and corporations.  They don’t want employees to ask uncomfortable questions or examine existing structures and assumptions.  They want them to serve the system…They reward those who obey the rules, memorize the formulas and pay deference to authority.  Rebels, artists, independent thinkers, eccentrics and iconoclasts – those who march to the beat of their own drum – are weeded out” (http://www.truthdig.com/report/item/why_the_united_states_is_destroying_her_education_system_20110410/). 

Here’s a peek into the corporatist’s future educational model.
And No – this is NOT from The Onion. 

Bill and Melinda Gates’ Foundation has been throwing more than $1.4 million into a scientific plan to create a biometric wrist band (called a pedometer) that will measure the emotional engagement of students in a classroom.  In other words, the student’s response – excitement or ennui – could be demonstrably identified and graphed for a class period and thereby allows a charting of student-to-teacher response.  Voila, we have a way to measure a student’s interest/learning – or – do we have a measure of how a teacher is doing in exciting a student or all the students for that matter?  It doesn’t take much to realize the ridiculousness of this attempt to reduce and codify instruction like we would review an electro-cardiogram.  But the Gates Foundation is serious enough to drop a ton of money on this project.  In fact, additional money will be spent this year to begin testing the device in middle schools this fall (http://articles.chicagotribune.com/2012-06-12/news/sns-rt-us-usa-education-gatesbre85c018-20120612_1_gates-foundation-veteran-english-teacher-teachers-feedback )   

The company spearheading this project, Affectiva Inc., states in all seriousness that such data could be used, for example, after watching a film in order to ask students questions about scenes in the film that aroused them.  That’s just one example.  Forget theme, symbol, holistic response, personal response – just what aroused you.  I personally spent most of 8th grade sitting next to the Susie Wettergren and would have been in a constant state of excitement, so I guess I would have been identified a great student – or my teacher would have been considered exceptional. 

One persistent problem with asking the educated to educate is that those who deliver the academic experience are not mindlessly obedient like the drones that function at basic levels of existence in third world labor shops.  And in fact, their greatest danger is in educating those in their charge to think independently, or outside of the box, if you will.  Despite the historical costume of subservience, real teachers provide or nurture a student’s further passion for learning, most especially in the intangible areas of art, music, dance, acting, etc.  Like real teaching, these qualities are not measureable test outcomes.  They are not subject to a single curve of improvement of failure; they grow in spurts of discovery and momentary drops of frustration, failure or confusion. 


On the other hand, corporate entrepreneurs and business-model-minded people like Bill and Melinda Gates, Arnie Duncan, Ty Fahner, Michael Noble, Rahm Emanuel, Penny Pritzker, etc. are trying to shift that timeless paradigm of education to a measureable, data-driven curriculum concept, one that tabulates basic improvement in a student’s achievement as easily as a good or bad business quarter, an electrocardiogram, a simple test score.   That’s placing both students and teachers in the box.  That’s wrong-headed.

Respect yourself.  Respect your good work.  Fight back.

Friday, January 11, 2013

Finding Revenue in Illinois...Hey, What's That?


REPEAT - Illinois, You Also Have a Solution


Let’s – just for a moment – forget the current pensions, Tier One, Tier Two, and the pension protection clause.  Let’s concentrate on the problem for once.  Let’s speculate on a solution that does not create a constitutional conflict or an egregious punishment of the entire public sector for the sins of previous administrations.

History: In January of 2011, legislators in a lame-duck General Assembly passed a temporary income tax hike, one that was described by supporters as an immediate palliative to the state’s ailing finances.  You might remember that the plan passed by the barest of margins, and not one Republican backed it in the House or the Senate. Opponents warned that businesses would leave the state in droves.  Proponents promised it was temporarily necessary.  After his signature, Quinn proudly stated, “It’s important for their (citizens) state government not to be a fiscal basket case”  (http://www.huffingtonpost.com/2011/01/12/illinois-income-tax-increase_n_807801.html).  Agreement all around, still.

Problem: The same reports in 2011 correctly identified an expected increase of nearly $7 billion per year, but even that was not enough to stop the fiscal bleeding of the state.  Legislators found themselves cutting Medicaid benefits, adding taxes on cigarettes (not passed during the original income tax hike), and bemoaning the evaporation of the additional tax hike money.  Important note:  Budget director for Governor Quinn, Jerry Stermer identified the 1995 ramp to pay back the unfunded liability the greatest impediment to the state’s fiscal health. “The state now finds itself in the midst of those years with increased pension costs. Quinn budget director Jerry Stermer calls the payment plan ‘fiscal suicide.’ He notes the state's required contribution has nearly tripled: going from $1.71 billion in the 2008 budget year to $5.09 billion in the budget year that starts July 1” (http://articles.chicagotribune.com/2012-05-28/news/ct-met-illinois-budget-20120528_1_pension-payments-income-tax-tax-hike).  That’s last year.  That’s when the bill was only $83 billion.

Solution:  Make the 2011 income tax hike permanent.  Designate the additional 2% in income taxes (approx. $7 billion per year) solely for paying down the unfunded liability, which is now $96 billon. Discard/repeal the failing and fiscally injurious 1995 law called the “Ramp.”  Secure enough funding through the sale of pension bonds to erase the entire unfunded liability at a suitable rate (that’s right, $100 billion at, say, 6.5%).  This will turn “soft” debt into hard debt and a guaranteed payment for let’s say 25 years in an amortized and consistent method to pay back bondholders. It can be done.  I’ve seen the numbers.  A respected, senior Representative in the General Assembly suggested even a moderate growth rate in the State of Illinois could accomplish an end to the unfunded liability. You look, too.



                 Pension Bonding to Solve Pension Crisis


          Year



Tax Revenue
@ 2.5% Growth
(in millions)

$100 Billion Pension Bond Payment @6.5% Rate (in millions)
2013
 $7,000.00
$8102.49
2014
 $7,175.000
$8,102.49
2015
 $7,354.375
$8,102.49
2016
 $7,538.234
$8,102.49
2017
 $7,726.690
$8,102.49
2018
 $7,919.857
$8,102.49
2019
 $8,117.854
$8,102.49
2020
 $8,320.800
$8,102.49
2021
 $8,528.820
$8,102.49
2022
 $8.742.041
$8,102.49
2023
 $8,960.592
$8,102.49
2024
 $9,184.607
$8,102.49
2025
 $9,414.222
$8,102.49
2026
 $9,649.577
$8,102.49
2027
 $9,890.817
$8,102.49
2028
$10,138.087
$8,102.49
2029
$10,391.539
$8,102.49
2030
$10,651.328
$8,102.49
2031
$10,917.611
$8,102.49
2032
$11,190.551
$8,102.49
2033
$11,470.315
$8,102.49
2034
$11,757.073
$8,102.49
2035
$12,051.000
$8,102.49
2036
$12.352.275
$8,102.49
2037
$12,661.082
$8,102.49
2038
$12,977.609
$8,102.49
                          TOTAL                             $252.081.96                $210,664.74


Benefits:  Bond companies will now have a commitment to timetables and repayments they do not have from Illinois as of yet.  They may be willing to assist in this re-amortization of expenses.  The annual payment will be known and unchanging as we the State move forward year by budgetary year.  In time, as we crawl out of this recession, the economy in Illinois (number 5 in GDP in all 50 states) will gear up and we will see a lessening of expense against a growth in revenue.  There would be no unnecessary constitutional fight, and public sector employees’ contributions and good works would be honored.   That part of the recent proposals which ofers a dubious planned promise by those in Springfield “to pay or be taken to court” would be a reality with a timetable for full payment!  The part of the annual budget devoted to normal costs in pension obligations could become just that – the normal yearly costs.  By the way, those costs are down this year, and do not always outpace the preceding year’s costs.  If a battle looms to make an increased income tax hike permanent, why not accomplish something which has bedeviled the State’s economy long enough.  Freeze the COLA and face a potential constitutional court battle? OR  Freeze the income tax increase until later and pay down the debt with revenue already there?

This constant battle to seek huge fiscal solutions by making a thousand small, and possibly unconstitutional cuts has bond houses reeling as much as fellow retirees and public sector workers.  Public sector organizations like We Are One have already stated they’d be part of the solution, but they will not be held responsible for the problem they did not create.  They did not create the problem that is Public Law 88-593.  Representatives Nekritz, Cunningham, Biss, and others did not create the problem that is Public Law 88-593.

Let’s fix the problem: Public Law 88-593. 



Wednesday, January 9, 2013

A Modest Proposal


Illinois, We Have a Problem (you also have a solution)

Before making the first attempts to paddle the English Channel back in the late 1800’s, would-be swimmers used to sail large buoyant bags of reeds or plants to make sure it was possible or that tides would actually help bring them across the oftentimes 30 or more mile course.  After that, the swimmers themselves would brave the elements, treacherous tides, sudden storms and occasional jellyfish to transverse the narrows. 

Unlike our current politicians in the General Assembly, it never occurred to these would-be aquanauts to make the crossing with an anchor tied to a foot, an anchor that steadily increased in bottom bouncing poundage as the miles wore on.  But that is exactly what our best and brightest young politicians in Springfield (Nekritz, Biss, Cunningham, etc.) seem determined to do – no matter how many times others have gone before and failed.  They need to cut the weight. 

The ever-increasing weight is the ill-designed 1995 ramp (Public Law 88-593) requiring the payback of an unfunded liability of what is now $96 billion in exponentially increasing payments each fiscal year, payments which threaten other necessary services to citizens in Illinois.  In addition, it reminds every bond company from here to London that we’re deadbeats

Let’s – just for a moment – forget the current pensions, Tier One, Tier Two, and the pension protection clause.  Let’s concentrate on the problem for once.  Let’s speculate on a solution that does not create a constitutional conflict or an egregious punishment of the entire public sector for the sins of previous administrations.

In January of 2011, legislators in a lame-duck General Assembly passed a temporary income tax hike, one that was described by supporters as an immediate palliative to the state’s ailing finances.  You might remember that the plan passed by the barest of margins, and not one Republican backed it in the House or the Senate. Opponents warned that businesses would leave the state in droves.  Proponents promised it was temporarily necessary.  After his signature, Quinn proudly stated that “It’s important for their (citizens) state government not to be a fiscal basket case”  (http://www.huffingtonpost.com/2011/01/12/illinois-income-tax-increase_n_807801.html).  Agreement all around, still.

The same reports in 2011 proposed an expected increase of nearly $7 billion per year, but even that was not enough to stop the fiscal bleeding of the state.  Legislators found themselves cutting Medicaid benefits, adding taxes on cigarettes (not passed during the original income tax hike), and bemoaning the evaporation of the additional tax hike money.  Important note:  Budget director for Governor Quinn, Jerry Stermer identified the 1995 ramp to pay back the unfunded liability the greatest impediment to the state’s fiscal health. “The state now finds itself in the midst of those years with increased pension costs. Quinn budget director Jerry Stermer calls the payment plan ‘fiscal suicide.’ He notes the state's required contribution has nearly tripled: going from $1.71 billion in the 2008 budget year to $5.09 billion in the budget year that starts July 1” (http://articles.chicagotribune.com/2012-05-28/news/ct-met-illinois-budget-20120528_1_pension-payments-income-tax-tax-hike).  That’s last year.  That’s when the bill was only $83 billion.

Solution:  Make the 2011 income tax hike permanent.  Designate the additional 2% in income taxes (approx. $7 billion per year) solely for paying down the unfunded liability, which is now $96 billon. Discard/repeal the failing and fiscally injurious 1995 law called the “Ramp.”  Secure enough funding through sale of pension bonds to erase entire unfunded liability at suitable rate (that’s right, $100 billion at, say, 6.5%).  This will turn “soft” debt into hard debt and a guaranteed payment for let’s say 25 years in an amortized and consistent method to pay back bondholders. It can be done.  I’ve seen the numbers.

Benefits:  Bond companies will now have a commitment to timetables and repayments they do not have from Illinois yet.  They may be willing to assist in this re-amortization of expenses.  The annual payment will be known and unchanging as we the state move forward.  In time, as we crawl out of this recession, the economy in Illinois (5th highest GDP in all 50 states) will gear up and we will see a lessening of expense and a growth in revenue.  There would be no constitutional fight, and public sector employees’ contributions and good works would be honored.   Perhaps the term temporary can come back into fashion at some later date, but let's take a sensible direction.  

This constant battle to seek huge fiscal solutions by making a thousand small, and possibly unconstitutional cuts has bond houses reeling as much as fellow retirees and public sector workers.  Public sector organizations like We Are One have already stated they’d be part of the solution, but they will not be held responsible for the problem they did not create.  They did not create the problem that is Public Law 88-593.  Representatives Nekritz, Cunningham, Biss, and others did not create the problem that is Public Law 88-593.

Let’s fix the problem: Public Law 88-593.