THE CULLERTON PENSION PLAN: “THE (PUBLIC EMPLOYEE UNIONS) FAMILY DON’T EVEN HAVE THAT KIND OF MUSCLE ANY MORE”???

5/8/13 

On Monday, State Senate President John Cullerton unveiled the multi-faceted approach to pension reform that he formulated in collaboration with the leaders of the state chapters of AFSCME, SEIU, and the AFL-CIO along with leaders of the IFT and IEA.   As readers will recall, Mr. Cullerton was in something of a snit when House Speaker Mike Madigan came up with his own plan for addressing Illinois’ $100 billion unfunded pension liability and vowed to come up with his own plan; see my 5/2/13 piece MIKE MADIGAN’S PENSION REFORM PLAN:  “THE BEST THAT (WE) CAN HOPE FOR IS TO DIE IN (OUR) SLEEP.” 

Mr. Cullerton’s plan is complicated because it offers workers a menu of choices, but its common theme is a trade-off between continuing to receive retiree health benefits and having pension cost of living (“COLA”) adjustments grow at simple interest rather than compound .  Unlike Mr. Madigan’s plan, Mr. Cullerton’s union backed plan would not increase the retirement age for state workers or limit the amount of a worker’s pension subject to COLA adjustment.   Again, see my 5/2/13 piece for details of the Madigan plan.

The Cullerton plan has a few virtues.  One is that, since it does not directly reduce retirees’ benefits but instead offers workers and retirees something of a Hobson’s choice between health care benefits in retirement and reduced pension benefits, the plan is less likely than the Madigan plan to run afoul of the Illinois constitution’s provision that pension benefits of public employees cannot be “diminished or impaired.”   One wonders, however, given the highly politicized nature of the court system in this state, whether any plan with the full backing of Mike Madigan would encounter more than rhetorical resistance even in the state Supreme Court.

Another virtue of the Cullerton plan is that it has the backing of, and indeed was formulated in association with, the state’s public employee unions, who are apoplectic over the Madigan plan.   But one wonders (I’m not being disingenuous here; one really does wonder.) how much muscle the public employee unions have any more.  That Mr. Madigan, a life long ally of those unions, formulated a pension plan that ostensibly sent the unions through the roof indicates that perhaps Mr. Madigan, the state’s shrewdest politician, doesn’t think the unions hold the aces they once did.

Those virtues are more than offset by the Cullerton plan’s major weakness:  it does little to address the state’s gaping budget hole.  The Cullerton plan reduces the state’s $100 billion unfunded pension liability by $10 billion while the Madigan plan lops of $30 billion, and even that $30 billion is not enough.   If we insist on getting into the fantasy land of the distant future, the Cullerton plan saves the state $46 billion over the next 30 years while the Madigan plan supposedly saves the state $140 billion.   But that larger number depends on the state’s politicians’ keeping their promises, albeit, according to the Madigan plan, legally enforceable promises. (This enforcement mechanism would only force bankruptcy…if the state isn’t already in court by 2019, the date of the first enforceable payment…more quickly if the state’s finances don’t begin to show nearly impossible improvement.  But that is grist for another mill.).   And since when have this state’s, or any state’s, politicians kept their promises?   One of the reasons this problem arose is because our state’s “leaders” refused to honor promises to fund pensions.

Two other points worth pondering…

First, doubtless some will, if they haven’t already, argue that the whole Madigan/Cullerton plan is part of some Machiavellian dance to avoid doing anything about our pension problems.   The Madigan plan has passed the House, the Cullerton plan will pass the Senate, and the whole thing will die in conference.   This doesn’t make much sense, though.  Why would Mike Madigan so infuriate the unions, especially when his daughter is apparently conducting a campaign for governor, while achieving nothing?   The unions may not have the power they once did, but it makes no sense, especially to someone as savvy as Mike Madigan, to incur their wrath for nothing. 

Some might argue the unions are in on the whole conspiracy.  While this is plausible, remember the old adage about the reducing likelihood of keeping a conspiracy secret as the number of conspirators grows.   Talk of a Madigan/Cullerton plan to appear to be doing something about pensions while doing nothing is even too cynical for yours truly and assumes Mike Madigan is even more Machiavellian than he is…isn’t it?

 Second, even if something does get done on pensions, one cannot be sanguine about the fiscal future of our state.  Note John Cullerton’s comments as he unveiled his proposal

“We know we have to pass a pension reform bill this year.  We’re the worst funded in the nation.  It’s affecting our budget.  We have to free up money next fiscal year and fiscal years after that.  And that’s why we have to pass these bills.  We know that.”  (Emphasis mine)

One suspects that when the likes of John Cullerton speak of “free(ing) up money,” it’s not to roll back the “temporary” income tax increase he and Mr. Madigan passed with the help of Governor Quinn a few years ago.   Mr. Cullerton is talking instead of “free(ing) up money” for, you guessed it, more spending…on “the children,” or “public safety,” or “health care,” or any of the many anodyne labels politicians put on ladling out your money to their contributors.  What will have been achieved if we save money on pensions only to blow it on something else?

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.