The four leaders of the Illinois
legislature have come up with a deal to solve the state’s public pension deal
crisis. Perhaps I should clarify here;
the one leader of the Illinois
legislature and the other three poseurs have
come up with a deal to solve the state’s public pension crisis. The plan will
be voted on this week, after the filing deadline for the 2014 primary has
safely passed so that legislators, mostly but not exclusively Democrats, who
curry the favor of the public employee unions, can vote for the necessary legislation
without fear of retribution in the primaries.
So have yours truly and others who are convinced that our
once great state’s $100 billion plus unfunded pension liability will sink us as
surely as the iceberg sunk the Titanic, been proven wrong? Won’t this bill, as its champions argue,
save the state $160 billion over the next half century or so and result in the pension
plans’ being fully funded by 2044? The
answer to both questions is a resounding “No.”
Not that this isn’t a decent bill. Ending the nonsensically generous 3% compounded
increase in pensioners’ entire pension payment while protecting those at or
near the bottom of the pension ladder makes eminent sense. So does increasing the retirement age, though
this provision would have been better had it not been limited to those under
45. Taking one or more COLA adjustment
“holidays” is also fiscally sound.
Offering the option of a defined contribution plan for some state
employees could have ultimately solved the entire problem…if it weren’t
voluntary and necessarily limited to 5% of employees due to the systems’
needing those contributions to stay afloat…or, more properly, to continue
slowing the systems’ descent to the bottom.
The 1% reduction in the required contributions by employees, which seems
counterproductive at first glance, might, but only might, help the plan pass
Constitutional muster. All these are great
ideas, and Representative Elaine Nekritz and others who worked so hard on this
plan, and even Speaker Mike Madigan, the only guy that matters, who pledges to
push this plan, deserve some praise for these attractive plan features.
The whole plan falls apart, however, with what is perhaps
its most widely touted feature, i.e., the supposedly legally enforceable
requirement that the state make supplemental payments to shore up the
plan. The payments amount to $364
million in FY 2019 and then $1 billion each year thereafter until 2045.
What do you suppose the odds are that the state will
actually come up with the spondulicks when the time comes to write these
checks? Our distinguished public
servants in Springfield (and Chicago ,
but that’s another matter) have made such pledges before only to break them
when the time came to fork over the dough.
Why should it be any different this time? Oh, yes, we are told, under provisions of
this plan, the state’s promise to make those supplemental payments is legally
enforceable; the unions can go to court to compel payment. But our esteemed legislators can, under terms
of the plan, declare a “crisis” and decide to forgo or reduce the payment. What do you suppose the odds are that a “crisis”
will surely arise when the chips are down and our modern day versions of
Pericles decide they’d rather spend the money on something more directly
related to keeping their jobs?
But suppose that last question is more than rhetorical and
our selfless, dedicated legislators decide not to do their typical dodge and
actually come up with the money the plan demands? Where will they get the money? Does the state have an extra $1 billion here
and there lying around every year? Will
these guys cut the programs that they feel are so vital and that, doubtless as
a surprise by-product, help prolong the lifelong sinecures they call careers? Will the populace stand for higher taxes and,
if they do, what will such higher taxes do to our already miserable business
climate?
One more point. The
legislators are telling us that the reason they are supposedly so hell bent on
fixing this one of the many problems that they have created is because funding
pensions will “crowd out other functions of government.” Translating, this means that funding
pensions will result in our public servants’ being unable to spend our money on
constituents and contributors who will keep them on the public payroll and, not
for nothing, eligible for generous public pensions. So even if this plan somehow works and the
Land of Lincoln avoids fiscal doom wrought of pension underfunding, it will
surely run aground, perhaps a few years later than currently scheduled, due to
the spending the legislators intend to do with the “savings” generated by the
pension deal.
In other words, the legislature and the governor will either
spend the money funding pensions or spend the money on something else. This is largely a moot point, however,
because we are discussing spending money the state doesn’t have and can’t possibly
generate because the level of taxation necessary to come up the money in
question would force businesses and people out of the state and hence be
self-defeating.
Does this mean I oppose the bill? By no means.
While substituting one meant to be broken promise with another meant to
be broken promise seems silly, this plan ought to be passed because of its
aforementioned salubrious provisions. They may delay doom for a number of years.
But make no mistake; this state of Illinois
is doomed and it is too late at this point to change that. The only feasible long run solution would be
to file bankruptcy, if such a thing is possible, and do so right away before
the hole gets deeper. But that isn’t
going to happen. And even if we were to
face reality by declaring the obvious, one can bet that the legislature would
take the opportunity presented by a clean fiscal slate to spend us back into
bankruptcy within a very short time period.
And, perhaps saddest of all, the voters in the Land
of Lincoln
Merry Christmas.
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.
How I wish, Mr. Quinn, you had been a public school teacher with no Social Security but who had made every pension payment required and had been vested. Or were a lawyer working for a state agency, making $70,000 a year when new law grads were getting $90,000 at 2nd tier law firms for signing on, that the State saying you'll be paid less but you'll have job security, less pressure and good hours, and a constitutionally guaranteed pension and health care as a trade-off. I'd like to know how you'd feel about the fat cat businesses and companies like the Tribune then. Kinda like all those folks making the victims pay for the crimes of the poltroons and popinjays maybe?
ReplyDeleteI’ll do you one better. I have NO pension from anywhere. Any retirement savings I have are from a 401k plan or simply from saving my money. Yes, I will get social security…which will come out to about $2,000 a month and for which I or my employer (back when I had an employer) have contributed 15% of my income for my entire working life. Before you start crying about public employees having no social security, ask if they would like that deal. If they would, Illinois’ pension problem would be solved.
ReplyDeleteFurther, I and my family have no employee paid health care; we buy our own health insurance with neither an employee contribution nor a government subsidy. So don’t be making assumptions about the rich health care plan and pension plan I have; I have neither. Yet, like all taxpayers in the state of Illinois, I pay for pensions and health care for public employees. And though you might not believe it, I am happy to pay for REASONABLE pensions and health care for public employees, despite the fact that I do not have an employee who pays for either for me.
The operative term there is REASONABLE. Why should people be allowed to retire at 50 at ¾ of their salary when the people who pay for those pensions must work until 65 to get anything? Even under this plan, teachers now in their 20s will be able to retire at 60 at ¾ of their salaries. Why should public employees have health care plans with minimal deductibles and low, if any, employee contributions when the people who pay for those health care plans are paying through the nose for their health insurance, if they have any?
I’ll tell you why: Because the politicians have bought the support of public employee union leaders with taxpayers’ money. They have effectively bought today’s votes and contributions with tomorrow’s taxpayer dollars. So, yes, the poltroons in public office are far more culpable than the public employees and their unions; the unions are only doing what they are supposed to do: get the best deal for their members. They use whatever means necessary, including political power, to achieve those goals. It is the politicians who think nothing of spending other people’s money who accede to the unions’ demands (What the hell, it’s not their money.) who are most at fault. And those pols can never envision a time in which they will be off the public payroll; their jobs are lifetime sinecures feasting at the public mammary gland.
If there were a way to make the pols pay for this plunder, I would certainly go along with it. But there isn’t…other than voting them out of office and having them face the same circumstances private sector taxpayers face. Even that, though, will not solve our financial problems. That burden has to fall on the public employees who are only partially culpable, but culpable nonetheless. Did they really believe that the state could afford the pensions and health care benefits they were promised? Do they live in a fantasy world? Didn’t they see that they, along with their accomplices in Springfield, were bankrupting the state? If they did, why did they persist in what they knew were untenable demands?
And we’re all sick and tired of hearing how public employees could make so much more in the private sector, like the $70,000 lawyer you cited. At least you are willing to admit that those who chose to work for the state did so for “job security, less pressure, and good hours, and a constitutionally guaranteed pension and health care as a trade-off,” rather than the “selfless dedication to public service” bullroar we frequently hear when such things are discussed. And it’s not always safe to assume that people who work in the public sector would do as well as they suppose they would do in the private sector. Perhaps, in most cases like the one you cited, those $70,000 state lawyers couldn’t get the $90,000 private sector jobs.
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CONTINUATION OF LAST COMMENT
ReplyDeleteOne of the worthy features of the plan that has been concocted by the culprits in Springfield is that it protects the people at the lower end. They will still get their 3% “COLA” adjustments (far more than most private sector plans, to the minimal extent there still are private sector defined benefit plans) on an amount derived by multiplying years of service by $1,000 and then adjusting that figure for inflation. So a 20 year employee will get automatic bumps of 3% on $20,000 regardless of what happens to prices, and that $20,000 base will be adjusted for inflation. That’s a far better deal than social security recipients, the people who pay for these public sector pensions, get. But most of us, again, are happy to pay for this protection for people on the bottom. We’re sick and tired of lavishing on EVERYBODY on the public payroll benefits that we can’t even approach.
Thanks for reading and commenting.