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The pension cost shift.

July 25, 2012

For some strange reason known only to Tribune columnist Eric Zorn, he decided to try and explain how Chicago Public Schools are overfunded.

It’s an argument too stupid to even get started on. But at the end of his blog post, Zorn mentions the pension cost swap in passing.

This is a topic worth addressing.

The pension cost swap is Mike Madigan’s idea. The state owes the Teacher Retirement System maybe $44 billion dollars. Maybe more.

Why?

Because for over fifty years the state either hasn’t paid what they owed or used TRS funds to build bridges, roads and, ironically, schools without raising taxes.

That bill must be paid.

One solution would be to restructure the debt, like an overdue mortgage.

Quinn, Madigan and Cullerton have other plans. They want to cut pension benefits to retired teachers and shift the pension cost to local school districts.

The pension cost shift will add a burden to local schools, many of which are already broke. If the cost shift takes place no teacher in Illinois will ever see a raise again.

But based on my conversations with teachers who are currently bargaining contracts across the state, the damage has already been done.

School boards are using just the threat of a cost shift to justify salary freezes and benefit cost increases to employees.

As if things weren’t tough enough already.

3 Comments leave one →
  1. Barb permalink
    July 25, 2012 9:00 pm

    Let’s talk about what Madigan wants to do to teachers that are already retired. I am with the Chicago pension fund but what happens to TRS will happen to CTPF. While TRS retirees still get a 75% support with heatlh insurance, CTPF retirees are down to a 60% support and are scheduled to go lower in January, possibly as low as 40%. Then there is the constant threat from Rahm to cancel our supposedly guaranteed COLAs for 10 years (as if he would ever give those back).

    How can these legislators be so incredibly ignorant to think that any retiree could recoup these types of cuts in income, income that we all worked for decades to secure??? How can they think that health insurance and COLAs are not part of the pension? As emerging reports continue to discuss the increase in poverty in this country, can’t these legislators connect the dots and see that what they want to do to retirees will force more and more of us into that category?

    We always thought that the state constitution protected us. But that is evidently not the case in Illinois. The state allowed the Chicago pension plan to fall below 60% funded (CPS loved those pension holidays) and now retirees are viewed as The Problem. The state failed to fund TRS on any level but now retirees are The Problem. Somehow, some type of revolution is needed to convince these people who run our state that they must hold themselves accountable and not punish those already retired. Any suggestions?

    • Fred Klonsky permalink*
      July 25, 2012 9:19 pm

      Revolution would be good.
      In the mean time:
      The leaders of the unions representing those of us who are in the public employee pension systems must reject any plan that treats this as a benefit problem. It is a revenue problem.
      The leadership must develop a plan that explains to the people of Illinois that the attack on benefits will have serious consequences for the economy of the state. It will negatively impact the living standards of all working people in Illinois.
      We must demand that our leaders prepare for a defense of our constitutional protections instead of preparing a series of concessions.
      We must work with the leadership of our unions to organize for a change in the regressive tax system that presently is in place in Illinois and replace it with a progressive graduated tax system.
      We must demand that each of our state elected officials adress the repayment of the $80 million owed to our pension systems. The debt must be restructured and paid back.
      Then revolution.

  2. MiC permalink
    July 26, 2012 9:48 am

    “Because for over fifty years the state either hasn’t paid what they owed or used TRS funds to build bridges, roads and, ironically, schools without raising taxes.”

    I’m going to disagree with this as any politician in office now will tell you that we need roads and bridges and schools too, and your pension just costs too much to afford these important bits of infrastructure. This is a straw-man argument used to divide Illinois voters.

    The state largely didn’t build bridges, roads or schools with this practice, but instead cut funding to these projects or privatized them or diverted their cost to local tax payers. Toll roads were extended so now we have more miles of tollways Illinois residents have to pay ever increasing fees to drive on. Bridges outside the toll roads were largely left to crumble or wait their turn for federal highway funds. Schools were also left to crumble or have renovations paid for by local tax payer funded referendums. If these referendum passed the cost was transferred to local tax payers, if not, too bad for the students.

    What the state did by shirking its responsibility to fund pensions was to keep tax rates artificially low to support a regressive fixed-rate tax structure. A tax structure that is only a handful of states in the US still support. A tax structure that sees a family earning $40,000 pay the same tax rate as a millionaire making $4,000,000. A tax system that is outdated, favors the affluent, and creates a structural deficit in Illinois budget that has resulted underfunding for roads, bridge and schools for decades.

    What the state did by shirking its responsibility to people like teachers, firefighters and police officers was also to subsidize corporate profit margins. Those in Springfield were able to divert pension funding to corporate giveaways to businesses making nearly $1 Billion in profits or business that threatened to cut a few hundred jobs at the expense of needed social services if they didn’t get their extorted tax breaks – who then cut jobs anyway. To pay for these subsidized profits, necessary and important public sector services were cut and the Illinois taxpayers who filled these jobs were laid off by the thousands.

    Don’t make the mistake of thinking that pension funds were diverted because Springfield politicians wanted to do something the majority of Illinois residents needed and elected them to do. Springfield politicians diverted the money earned by pension recipients to keep their influential donors’ tax rates low and profit margins high and thereby advance their political careers.

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