MIKE MADIGAN’S PENSION REFORM PLAN: “THE BEST THAT (WE) CAN HOPE FOR IS TO DIE IN (OUR) SLEEP.”

5/2/13

Illinois House Speaker Mike Madigan has come up with a plan for reforming the states broke, and broken, public employee pension system.   The plan, which is a refinement and tweaking of a couple earlier House plans, attacks the pension problem on a number of fronts.  In broad terms, the plan

--increases retirement ages for younger state employees and provides incentive for older employees to delay retirement by postponing cost of living (“COLA”) increases in pensions until an employee is 67 years old or has been retired for five years, whichever comes first.

--increases employee contributions to their pensions starting July 1.  (Good luck with that date.)

--limits the amount of an employee’s pension subject to COLA adjustments to an amount determined by multiplying the employee’s years of service by $1,000.   So an employee who worked for the state for 15 years would have only $15,000 of his pension subject to COLA adjustments.  COLA adjustments would not be compounded.  The latter point is far larger than it appears at first glance.

 

--covers four of the five state pension funds; only the judges’ plan is excluded.

--includes various funding guarantees and schedules.

Further, the plan, at least for now, excludes a prior provision that would require suburban and downstate school districts to eventually fund their own pension plans rather than have the state pick up their tab, as it does now.   The excluded provision was a non-starter for the Republicans who, in most other contexts, like to talk about being fiscally responsible and not expecting handouts.  With the requirement that the suburban and downstate districts pay their own way dropped, the GOP leadership in the House is fully on board with the Speaker’s plan.

With the support of Speaker Madigan and House Minority Leader Tom Cross (R., Oswego), the plan sailed though committee by a 9-1 margin and is a lock to pass the House.  Prospects in the Senate are not as hopeful, however; Senate President John Cullerton is working on his own plan with the help of public employee union leaders who are apoplectic over Mr. Madigan’s plan.   Further, any plan must pass Illinois Constitutional muster; the Illinois constitution states that public pension benefits cannot be “diminished or impaired” and the lawyers are going to have a field day, and a big payday, with this one.

The politics of the situation are, as are all Illinois politics, interesting. 

First, Senate President Cullerton, in one of his rare disagreements with, or failure to pay obeisance to, Speaker Madigan, appears genuinely miffed at talk that, with the Speaker and, to a far lesser extent, the Republican leadership, behind it, the Madigan plan is inevitable.   As Mr. Cullerton said yesterday

“The fact that the president of the Senate and the unions are putting their full weight behind something means something in this building, too.”

Could this be the start of a genuine feud between the Speaker and the Senate President, with the public employee unions siding with the President?   Probably not; neither the unions nor Mr. Cullerton have the power, or the intestinal fortitude, to stand up to the Speaker.   This thing should cool down and the Senate will end up passing the Madigan plan or something very similar to it.

Second, as I mentioned before, the bill must pass Constitutional muster and the unions will fight it tooth and nail in the courts, as they are doing in the legislature and on the airwaves.   But this is Illinois and (Surprise!) we have perhaps the most politicized court system, and Supreme Court, in the country.   While there are plenty of good judges at all levels in this state, one doesn’t get on the bench here by being a legal scholar or even a good lawyer; in most cases, one gets to put on judicial robes because one has curried sufficient favor with the powers-that-be.  (See my 2/5/13 post HOW DID CYNTHIA BRIM GET ON THE BENCH…AND STAY THERE FOR NEARLY TWENTY YEARS?)  While one would think that such an august institution would be the exception to this rule, this is Illinois, so the Supreme Court is at least as politicized, and obedient to, or at least cognizant of, the state’s powers that be as the lower courts.   Mike Madigan, who is also Chairman of the Illinois Democratic Party, is clearly one of the powers that be.  He may not have as much power as Alderman Ed Burke in the judicial domain, but Mr. Madigan still makes and breaks many aspiring judges and generally works well with Mr. Burke…though this case may be an exception to the latter due to Mr. Burke’s strong union ties.   While predicting the outcomes of court cases is as problematical as predicting election outcomes or stock prices, one suspects that a Madigan plan will make it through the courts.   But don’t hold me to that.

Third, the public employee unions are, to put it mildly, infuriated with Mike Madigan over this plan.  Illinois Federation of Teachers President Dan Montgomery has called the plan a “gut punch,” and yours truly thinks Mr. Montgomery was being polite, or at least circumspect, by using that particular portion of the anatomy in his description of where the bill and, by extension, Mr. Madigan, directs its/his fist...or foot.  

Will the public employee unions take out their anger, especially if this thing is passed, on Attorney General Lisa Madigan, who is just about certain to challenge Governor Pat Quinn (no relation) in the 2014 Democratic primary for governor?   If they do, where do they go?  To Pat Quinn, who has been working for something like this plan for at least the last year?   Could this be an opening for Bill Daley, who also is pondering a run for governor?   Unless Mr. Daley is completely mercenary, one suspects not; Mr. Daley’s theme, his entire reason for running, is that he is the one who can bring fiscal sanity back to Illinois.  Backing the public employee unions in this case will not help that image.  Could the public employees go with the Republicans?   Though with the sorry batch of GOPers we have in this state, anything is possible, one can’t see even ultimate insider, collaborator, and go along, get along guy Kirk Dillard siding with the unions here, let alone someone like Bill Brady or someone even more conservative.

It looks like the unions have nowhere to go to vent their anger against the Speaker here…and Mr. Madigan knows it.

Not quite as interesting, but more important, are the strengths and weaknesses of the plan from a financial standpoint.

Yes, this is a big step in the direction of alleviating our pension funding problems; one might even call the steps Mr. Madigan is proposing draconian, especially in the context of the political realities of this state.   But even this plan only eliminates about a third of our $100 billion unfunded pension liability.   The plan does, however, promise to fully fund the four pension plans involved…by 2045, when most of the players involved, and yours truly, should be long gone.   And even that distant full funding date will be met largely due to promised $1 billion annual contributions by the state…starting in 2020 (when most of the players and yours truly will hopefully still be around) and continuing until the plans are fully funded.  

Since when have Illinois politicians, or politicians anywhere, lived up to their promises, especially to promises made in the relatively, or absolutely, distant past?   One of the many reasons that public pensions in Illinois are in such trouble is the failure of the state to make its previously promised pension contributions, contributions that it had neither the capability nor the intent to make.   Why should it be any different this time?  

Predictions are difficult, but this one is one of the easier prognostications to make:   Since full funding of our public pension plans requires politicians to keep their promises, we are not going to fully fund our pension plans…not even in 2045.   We are still going to be deeply in the red and headed toward bankruptcy.

Mr. Madigan’s plan is a step in the right direction.  He is to be lauded for formulating and/or championing the plan.  Either that or we should wonder what is really going on in that most sophisticated of political brains and ask ourselves what Mr. Madigan is really up to.   But assuming that the Speaker is sincere and this plan is legitimate, it still seems to involve a lot of pain, political and otherwise, for not enough progress.  It is, however, the best we can do at this juncture, or so it appears.

See my two books, The Chairman, A Novel of Big City Politics and The Chairman’s Challenge, A Continuing Novel of Big City Politics, for further illumination on how things work in Chicago and Illinois politics.