Jim Dey: Can pension dream become pension deal?

Jim Dey: Can pension dream become pension deal?

Just as a thirsty man in a desert envisions a lush oasis out in the distance, so too do top state officials have dreams of a legislative fix to Illinois' $100 billion pension underfunding problem.

But, like the oasis, the closer legislators get to an apparent solution, the greater the chances it fades away.

Illinois' next pension oasis looms in the week of Dec. 2. Legislators have been informed by the four House and Senate legislative leaders to keep their schedules open for a special session, but the stars have yet to align.

Late this week, Steve Brown, a spokesman for Democratic House Speaker Michael Madigan, said he might have an announcement later about whether the special session will be held. He called back several hours later to say that he could add no further clarification.

Asked if a special session is less or more than likely, Brown said, "I just don't know."

Brown's four words — "I just don't know" — pretty much sum up the General Assembly's long-running effort to come up with a pension fix. Terrified of taking action, terrified of not taking action, legislators have been paralyzed for years by this vexing problem. They have seen it grow worse by the day but repeatedly opted for inaction.

It won't get much easier for them. Union leaders in Illinois already urged public pension fund members to bombard legislators with calls and letters expressing opposition.

The specifics of the pension plan they oppose remain unknown, but union leaders figure they won't like whatever is proposed.

They're not the only ones who see it that way. State Rep. Chad Hays, a Catlin Republican, said "my guess is that you will see retirees who are extraordinarily unhappy" if a pension bill passes.

Legislators eased the pressure a bit by pushing possible action back after Dec. 2, when the filing period for the November 2014 election expires. That way an unpopular vote won't result in a primary challenge. Further, the vast majority of legislators will be insulated from electoral challenge by the gerrymandered districts in which they run.

Unfortunately, the undeniable reality is that dramatically reducing the underfunding of the state's public pensions will require more money going into pensions and less money coming out.

It's the latter that has current workers and retirees concerned. They're guaranteed generous pensions, can retire far earlier than private-sector employees and are entitled to annual 3 percent cost-of-living increases.

Proposals that would reduce pension payouts include raising the retirement age, modifying the cost-of-living increases and putting limits on pensionable income. Details remain a topic of discussion.

Other proposals include reducing the amount of money current workers must contribute each year, a proposal designed to offer legal "consideration" in a contractual exchange for the employee givebacks on the payout end. The exchange is intended to address a state constitutional provision that bans any diminution of retiree pension benefits.

Increased pension fund revenue could come from using money that now goes to pay interest on pension bonds, once the bonds are paid off. The state is paying on two bond issues — one due in 2015 and the other in 2019. Interest is roughly $1 billion a year on each, money that could go to the pension systems if legislators can resist the temptation to spend it elsewhere.

It's impossible to say whether plans will go forward. But one sign that action may be forthcoming is a recent legislative vote to approve pension changes in the system for retirees and employees of the Chicago Park District. That legislation includes a dramatic modification of the annual cost-of-living increases, a reduction that sets up a court test that could determine what the state constitution's pension diminution clause means.

That constitutional issue must be resolved by the Illinois Supreme Court before any meaningful pension decisions can be fully implemented.

Brown described the park district pension bill as an "example that it is possible for employers and employees to negotiate a plan to stabilize their pension funds" and get it approved by the Legislature.

However, Brown said state employee union leaders "have largely circled the wagons and fought every step of the way.

Illinois' legislative process on pensions is far different than the traditional bill passing described in civics textbooks.

A special 10-member House/Senate committee has been formed to study the issue in private. There are five Democrats and five Republicans. The four House and Senate legislative leaders — Speaker Madigan, House Republican Leader Jim Durkin, Senate President John Cullerton and Senate Republican Leader Christine Radogno — also have been meeting in strict secrecy.

When and if they agree on a proposal, Hays said, he expects the leaders to start twisting arms to attract enough votes to pass both chambers. They will rely on what is known as a "structured roll call" to pass the bill.

A structured roll call reflects a bipartisan conspiracy of party leaders to each get legislators from safe districts in their parties to vote yes so that Democrats and Republicans in more problematic districts can vote no.

Hays said "there is no question it will be a structured roll call," and that means legislators with large constituencies of public pension members — teachers, university employees, retirees — will vote no. That group would include virtually all of this area's local legislators.

But no legislators can vote either yes or no if there's no agreement on a bill, or no agreement to schedule a special session or no agreement to twist arms to get the necessary number of yes votes.

A pension deal is glimmering off in the horizon, but there's no guarantee it won't fade away — again.

Jim Dey, a member of The News-Gazette staff, can be reached by email at jdey@news-gazette.com or at 351-5369.

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Sid Saltfork wrote on November 23, 2013 at 10:11 am

"Generous  pensions"?  Once again, the News Gazette presents it conservative view regarding the theft of others earned money.  No mention of tax credits, and no taxes for the newspaper industry.  Oh, that needs to continue in the view of the NG; but it is okay to steal old people's money?  What hypocrisy in the name of "news".

Skepticity wrote on November 23, 2013 at 10:11 am

When the double digit inflation from the recent spate of reckless Federal borrowing and spending hits the fan, the proposed reduction in annual pension increases to half the rate of inflation will over time impoverish Illinois pension recipients. 

Inflating itself out of debt is a poor approach for the State of Illinois to use to meet  obligations to employees' EARNED retirement benefits that are protected by the Illinois Constitution from being diminished or impaired.  Using inflation to escape obligations may be the cynical plan in Washington D.C., but it remains unacceptable anywhere. 

So before any "solution" to Illinois's decades long failure to fund the pension fund is implemented, I propose that  any pensions owed to government officials be confiscated if at any time they supported not fully funding the pension fund and voted or signed bills for the money to go elsewhere.  That money was spent on other programs and projects to buy political support instead of fullfilling the fiduciary responsibility to fund the pensions, and those that benefitted from the misappropriation now need to pay up. 

State employees earned their pensions (and retirement healthcare benefits!!!) as part of a negotiated compensation package, approved by elected and appointed OFFICIALS of the State of Illinois (not just promised by politicians). 

A government that steals from retired former employees in violation of contractural and constitutional guarantees is not a legitimate government. 

Dan Corkery wrote on November 23, 2013 at 10:11 am
Profile Picture

Sid,

Are you saying that newspapers do not pay taxes?

Dan Corkery

ME Administration

Sid Saltfork wrote on November 24, 2013 at 8:11 am

Dan;

www.revenue.state.il.us./bussinesses/taxinformation/sales/rot.htm      Look at "tax exemptions", and "graphic arts".   I am sure that there are good answers.

glen brown wrote on November 24, 2013 at 12:11 pm

“Pension benefits are under siege for two reasons: opportunity and political motives… [Legislators] frame [the] larger discussion of whether the law provides states with a means to achieve a particular objective: the unilateral reduction of public pension benefits to avoid painful tax increases, service cuts, or both… For decades, states have treated pension systems as a credit card to pay for government services and avoid tax increases or service cuts…” (Eric M. Madiar, Chief Legal Counsel to Illinois Senate President John J. Cullerton and Parliamentarian of the Illinois Senate (2012), Public Pension Benefits under Siege: Does State Law Facilitate or Block Recent Efforts to Cut the Pension Benefits of Public Servants?)

“Most states… cannot readily reduce their existing pension obligations to their employees in an effort to solve a fiscal crisis, and until recently few even tried… It is worth noting the inequity inherent in cutting pensions promised to state and local public servants based on alleged underfunding that was substantially caused, in many cases, by funding “holidays…” [Approximately $15 billion was stolen from the Teachers Retirement System of Illinois and a total of $30 billion from the public pension systems combined. These amounts do not include the possible investment income that would have been earned].

“[Any] attempt to denigrate the validity of decades of judicial precedents about the binding nature of legislation establishing pension commitments to government employees and to motivate state courts to overturn long-settled premises about these commitments would impose its own, unjustifiable costs. The states and their instrumentalities have promised pension benefits to their employees; those employees have relied on those long-standing promises; and as a result the citizens of the states have benefited from the services provided by those employees…” (Douglas L. Greenfield and Lahne, Susan G. (2012), How Much Can States Change Existing Retirement Policy? In Defense of State Judicial Decisions Protecting Public Employees’ Pensions) (link for quotations: Defending and Protecting Public Employees’ Pensions against the Legislative Siege).