Costly fix to public pension

Costly fix to public pension

State legislators finally act on a public pension problem.

Members of the Illinois House and Senate last week adjourned their fall veto session without voting on THE pension crisis that's confronting state taxpayers.

But they didn't adjourn without addressing A pension issue, and the action they did take may foreshadow the action they didn't take.

Members of the Illinois Senate gave final approval by a 46-4 vote to a purported pension fix for current and former employees at the Chicago Park District.

Union leaders representing park district employees are opposed to the legislation, but it was overwhelmingly approved thanks to the strong support of Chicago Mayor Rahm Emanuel, Senate President John Cullerton and House Speaker Michael Madigan.

Gov. Pat Quinn has not indicated whether he'll sign the legislation. He has accepted large campaign contributions from the Service Employees International Union, which represents park district employees, but if Quinn is as serious as he claims to be about fixing public pensions, he can hardly avoid signing this legislation. If he doesn't do so, it will severely undermine his credibility in the face of an upcoming election.

The park district pension system is severely underfunded with $421 million in assets and $971 million in liabilities. According to the Illinois Policy Institute, those numbers are just the tip of the iceberg. The institute estimates total park district long-term debt to be $1.4 billion.

The plan approved by legislators requires employees to increase their pension contributions — from 9 percent to 12 percent of their salaries by 2019. It also would reduce their annual cost-of-living increases from either 3 percent or one-half of the increase in the cost-of-living, whatever is less. Finally, it would raise the retirement age from 50 to 58 for employees who are under 45.

In exchange, the park district will make supplemental contributions to the pension system of $12.5 million in 2015 and 2016 and $50 million in 2019. The agreement also calls for a near tripling of the district's annual contributions between 2016 and 2019, which will significantly boost property taxes.

Union leaders have indicated they will file a lawsuit to block the plan, relying on the Illinois Constitution's prohibition of a diminishment of benefits. The question for the courts to resolve is whether the diminishment applies to benefits currently paid or extends to benefits that might be paid in the future.

The free-market based Illinois Policy Institute also objects to the legislation because it said the "pension bill means higher taxes for city residents," "forces workers to keep paying into a failed system" and "keeps the retirement age too low." The IPI favors replacing the current defined benefit system with a 401(k)-style defined contribution plan, a proposal that has been a nonstarter with most elected officials.

We applaud the General Assembly for passing legislation that may help lead to a clarification of the legal issues surrounding public pensions. Legislators have for months been hung up on the issue, unilaterally declaring some proposals as "unconstitutional" because of perceived violations of the diminishment clause.

One of the greatest offenders in that respect has been Senate President Cullerton. Last week, however, Cullerton sang a different tune, stating that "we in the Senate are not the Supreme Court and unless we can pass a bill someone can challenge, we're never going to know."

Raising the pension retirement age is another key issue. Park district workers may not be happy about the increase in the retirement age from 50 to 58. But private-sector workers whose usual retirement age ranges from 65 to 67 won't be too sympathetic.

Retiring so early raises the prospect that pensioners can collect generous benefits for a period longer than what they worked. This kind of foolish generosity by public employers, often motivated by electoral concerns, is one of the reasons the state's public pension systems are underfunded by roughly $100 billion.

After the vote, Mayor Emanuel said the template for the park district legislation could be applied to other underfunded city pensions. There also was speculation that the park district plan might be applied to the state's pension systems.

But there's a big difference. The park district legislation affects about 6,100 current and former employees. In terms of votes, that's hardly enough to matter. But many thousands of current and former state employees will be affected by whatever legislators do, if anything, to address state pension woes, and that's a totally different ballgame for our self-interested legislators.

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Sid Saltfork wrote on November 12, 2013 at 8:11 am

It is going to be applied to the state, university, and teacher retirees.  It is the same scenario where the employees paid their contributions, but the employer did not.  The question is whether it is unconstitutional for the retired employees.  Changes made to current employees is one thing; but changes to the retirees is another.

"According to the Illinois Policy Institute" is a bunch of beans.  Rauner, one of the wantabee gubernatorial candidates, gave a large chunk of money (of course he is wealthy) to the Illinois Policy Institute for their paid propaganda.  For the right amount of money, the Illinois Policy Institute will do anything.

The News Gazette continues to encourage the theft of the public service retirees money.  The money they want stolen is the money that the retirees paid into their retirement systems.  The employers have admitted that they did not fund the systems.  The money in the systems is what the employees paid.  If the state constitution is not honored, why would anyone believe that more "promises" of employer required contributions will happen?  For a newspaper that is in an area of at least 6,000 retired public employees; it is either right wing arrogance, or greed that encourages the theft of others earned money.

Cloud wrote on November 12, 2013 at 10:11 am

What would the Supreme Court as now constituted be likely to do with this legislation?  ----Cullerton sang a different tune, stating that "we in the Senate are not the Supreme Court and unless we can pass a bill someone can challenge, we're never going to know."  ---  

Sid Saltfork wrote on November 12, 2013 at 12:11 pm

The largest public employee union, AFSCME, will not defend it's retirees in a lawsuit regarding the constitutionally of "pension reform".  Why?  Two reasons were given to the retirees.  First, the union feels that the Illinois Supreme Court is political instead of impartial (imagine that in Illinois).  The union is encouraging the retirees to accept Cullerton's "pension reform" because it is not as drastic as House Speaker Madigan's (30 years of backing "skipped" employer required contributions).  In other words, The Fix Is On.  The second reason is that the retirees' chapter does not have the money to defend the retirees in court.  In other words, it takes money to buy justice under the Illinois Constitution.

We all know it.  Illinois is corrupt from the General Assembly, governor, and up to the State of Illinois Supreme Court.  We choose not to acknowledge it until it is our money being stolen.  The judges are exempt from "pension reform".  The retired legislators will be exempt from "pension reform".  The union leadership is exempt from "pension reform".  The majority of the public, except the public service retirees, is exempt from "pension reform".  The current employees will face "pension reform" when they retire.  The only ones affected by "pension reform" are the elderly retirees who paid their pension contributions.  Yet, it is their pension contributions that is being stolen.  Remember that the employer DID NOT make it's payments while the employee did.  This is only the beginning.  They will come back for more, and more until the owed debt is cancelled.

 

Bulldogmojo wrote on November 13, 2013 at 12:11 am

SURS sent this press release out today...

"SURS Posts Solid FY 13 Investment Results"

http://surs.org/news-article/110613/surs-posts-solid-fy-13-investment-results

Sid Saltfork wrote on November 13, 2013 at 2:11 pm

Yep, the investment returns have not been bad over the years.  We both know the problem.  The problem is that the employer does not make it's pension contributions; but the employee does.  If the state had funded their portion as do private employers, there would be no problem.  The pension systems work.  What the big hullaballo is about is the State of Illinois trying to absolve it's debt owed to the pension systems.  Your lucky that you have SURS.  I have SERS with Judy Barr Topinka as the patronage, appointed head of it.  The pensioners are not allowed to vote for who is in charge.  That is a politically appointed job.  Wonder why?