Bob Lyons. TRS Trustee. What happens next?

Making predictions is hard especially about the future. – Yogi Berra

What Happens Next

For months now we have seen a carefully orchestrated campaign of news stories designed to convince the people of our state that the Illinois pension systems are doomed to fail unless immediate and drastic pension reforms take place.   To state the obvious, pension “reform” means pension reduction.   Much of the original effort was aimed at the members of the Illinois General Assembly and it has been successful.

I think more than half of the legislators feel the state can no longer afford to follow the existing funded schedule.   That didn’t mean that a majority of the representatives were willing to vote for SB512 in the fall, but the recent release of the Civic Federation’s dire prediction that the state’s backlog of unpaid bills will grow to $34.8 billion in five years – and the bill backlog will be $2 billion higher than Illinois’ total projected General Funds revenues for that year – has really impacted Springfield.   There are observers that feel that being an election year means that nothing will take place, but many others that something must take place to change the pensions.

Illinois is Broke, the Civic Committee, and the rest with the aid of the Chicago Tribune have worked to convince the public that the ever-growing cost of funding the pensions is going to bankrupt the State of Illinois.   The litany is all too familiar – the pensions are overly generous, the money all comes from you, the taxpayers, and the money is not invested wisely.  An aroused public can convince even a reluctant legislator to vote for a drastic, but still popular set of measures to solve the pension crisis.

Significantly the effort to present the existing pension systems as an endangered species is also aimed directly at us.  If those of us that receive a pension, or expect to receive one when we finally retire, can be convinced that changes are necessary or there will be nothing left for us, then pension reduction will be certain.    Traditionally the way pension legislation has been passed is based on an agreed bill where the unions and legislators have negotiated an agreement.  The process by which the two current two-tiered systems were created was an aberration.

Ty Fahner has been quoted as saying that the Civic Committee will try to convince labor groups that reform works for everyone.  “What I’m going to do now is continue to talk and try to do some quiet diplomacy,” Fahner said. “The message is: ‘This is in the best interest of your members. You’ll at least have something’.”   Minority Leader Tom Cross has reached out with the same theme that retired teachers should urge the unions to come to the table in order to save our pensions.

When the legislators come to the bargaining table, they will want changes to make the pensions affordable and sustainable which would likely mean both to reduce the costs of the pensions and shift some of the funding away from the state.   As I have reported before, all of the unions have clearly stated that what comes from these negotiations needs to be fair to the teachers and other public workers, promote sustainability for the pension systems, and to be constitutional.   TRS and representatives of the other pension funds will be at the table primarily to provide information, the facts and figures that would result from the changes being argued.  They would also be there to remind all of the parties that the sustainability of the pension systems requires a certainty of payments.  No funding schedule will work in the long run if the state can reduce or even skip payments at will.

Putting those four concepts together in a negotiated package will not be easy and may in the end prove impossible.   The state needs drastic changes and even minor ones could run afoul of the constitution.  As an example, some on both sides have suggested that teachers could pay more, just one percent more, but not only would a suit to test the constitutionality of such change be certain, one percent today more only brings in an additional $100 million.  In the end the legislators may act without the agreement of the unions.

The Civic Federation’s recommendation that the automatic three percent COLA for current retirees be dropped and be replaced by 3% a year or one-half of the increase in the Consumer Price Index, whichever is less, and that pension benefits no longer be compounded shows a total disregard to the notion that existing benefits are constitutionally protected. Considering that would for all practical purposes end the growth of our pensions it would save the state billions.  We are seeing more legislators taking the attitude “let’s vote and then we will let the courts decide if it is allowable.”   Hopefully the recent decision in Arizona, a state with the same constitutional language as ours that ruled that a law to increase teacher payments without an increase in pension benefits was unconstitutional will dissuade that thinking.

The tax increase by Illinois last year did little to reduce the state’s debt load and the bond ratings agencies are calling on the state to do more to bring revenue and spending in line.   Reluctant to tax more, the state legislators will look to reduce spending and shift costs to others, but they will want to do that by means that they think are popular.  If you’re a Chicago legislator shifting a higher portion of the cost of teacher pensions to suburban and downstate school districts would be popular, but the majority of the legislators don’t live in Chicago and would see that as a local property tax with their name on it.

The leaders of the IRTA, IEA-R and IFT-R with the backing of all of their members will be at the table.   Decisions made about us should not be made without us. Remember pension reform means someone’s pension will be reduced or somebody will pay more.  If it is to tax our pensions, change our health care, or basically freeze what we have to live on, you need to know what is going on in Springfield.  And when you are called upon to respond, you need to be there.

-Bob Lyons

I have grave concerns about the ability of IEA leadership to sit at the table and defend the interests of their members. This is a requirement in order for them to have, as Bob Lyons says, “the backing of all their members.”

One can only hope.

-Fred Klonsky