| September 4, 2013
Dear Friends,
I am writing to update you on the progress of the pension conference committee. There are two topics that I would like to address: the timing of our work, and recent news reports about items under consideration by the committee.
Regarding timing, I know that many people are frustrated that the committee has not yet completed its work, and are anxiously awaiting our official proposal. Please know that I share this frustration: hundreds of thousands of people rely on these pension systems to provide them with a secure retirement, and they deserve clarity and resolution as soon as possible. This problem weighs heavily on our state’s fiscal condition and reputation, and we will all be better off when it is appropriately resolved.
This process has been lengthy, partly due to the difficult and contentious nature of the issue — even as we hone in on a recommendation, conference committee members are hashing out every aspect of the topic carefully, and many components require significant compromise from all participants. Perhaps even more importantly, we are taking very seriously the need for a robust, credible actuarial evaluation of our final product. Consequently, we are requesting very thorough — and, yes, time-consuming — studies of our ideas.
These facts notwithstanding, the problem still stands before us and demands a resolution as soon as possible. I am completely committed to achieving this, and I am hopeful that I will be back in touch before too long to discuss our proposal.
This brings me to my second topic: a leaked media report about some of the committee’s deliberations. On Friday, August 23, several news outlets published a list of items under consideration by our committee. These items included:
* A decrease in employee contributions by 1%;
* Replacing the current 3% automatic annual increase with a cost of living adjustment of one-half the consumer price index, potentially with floors and caps;
* Staggered delays to cost of living adjustments;
* Fully funding the pension plans over thirty years;
* Dedicating the pension funds money that is currently being used to make bond payments, beginning in Fiscal Year 2019;
* Switching to the Entry Age Normal actuarial cost method; and
* Changing interest rates used to calculate the money purchase option formula.
These ideas are in fact all under discussion by the conference committee, but nothing has been finalized yet and our conversations remain in a state of flux. That means that this is an ideal moment for you to share your feedback on these items, as well as any other thoughts you have on the pension issue. I look forward to hearing your thoughts as we hopefully enter the late stages of our deliberations, and I very much hope that we will be able to reach a compromise that, while painful, will be manageable for all stakeholders and will put our pension systems on a clear path to stability.
Best regards,
Daniel |
Fred Klonsky 
On Daniel Biss’ Wishful Thinking and Disregard for the Illinois Constitution (posted March 27, 2013)
“…The debate over Biss’ bill seemed to turn on the question of constitutionality because the bill imposed a reduced COLA as well as increased employee contributions and raising the retirement age incrementally for any employee younger than 45. Biss admitted he was pinning his hopes on the fact that the courts would take Illinois’ fiscal crisis into account and “balance” the pension protection language in the Illinois Constitution against the other obligations of state government under the constitution…” –IASA Capitol Watch, March 20.
Daniel Biss:
“… [T]here are those among us who want to abandon] the fundamental principle that the rules of the game for contracting parties are not to be changed midstream… This is especially hard to comprehend when public employees have diligently and faithfully paid their contributions while their government employers have failed to pay their required share. Indeed, for decades, states have treated pension systems as a credit card to pay for government services and avoid tax increases or service cuts (p. 194)… For lawmakers, it is simply politically more palatable to unilaterally cut pension benefits for public employees and retirees than to raise taxes, cut services, or both…” (Eric M. Madiar (2012). Public Pension Benefits under Siege: Does State Law Facilitate or Block Recent Efforts to Cut the Pension Benefits of Public Servants? ABA Journal of Labor & Employment Law, V. 27, no. 2, 179-194. Retrieved December 7, 2012 (Also reprinted in Defending and Protecting Public Employees’ Pensions against the Legislative Siege).
“…One thing we cannot do… is ignore the Constitution of Illinois… No principle of law permits us to suspend constitutional requirements for economic reasons, no matter how compelling those reasons may seem…” (from Ann B. Jorgensen et al., Appellees, v. Rod R. Blagojevich, Governor, et al., Appellants). (Also reprinted in COLA: a Guarantee for Illinois Judges).
“… [T]he Supreme Court would most certainly reject Sidley [Austin’s] public policy argument that the State somehow retains a reserved police power to abscond on its obligations to pension recipients should a pension system default. (565) …Illinois courts have concluded that the Clause affords the legislature no such reserved power. (566) Relying on Kraus [v. Board of Trustees of the Police Pension Fund of the Village of Niles (1979], the Supreme Court explained in Felt [v. Board of Trustees of the Judges Retirement System (1985)] that to accept the Attorney General’s argument ‘we would have to ignore the plain language of the Constitution of Illinois, reject the New York decisions on the constitutional provision which was the model for section 5 of article XIII, and overrule this court’s decision in Bardens [v Board of Trustees of the Judges Retirement System (1961)].’ (567) As a New York court noted, ‘although fiscal relief is a current imperative, an unconstitutional method may not be blinked.’ (568) (from IS WELCHING ON PUBLIC PENSION PROMISES AN OPTION FOR ILLINOIS? AN ANALYSIS OF ARTICLE XIII, SECTION 5 OF THE ILLINOIS CONSTITUTION by Eric M. Madiar, Chief Legal Counsel to Illinois Senate President John J. Cullerton and Parliamentarian of the Illinois Senate, pg. 69). (Also reprinted in What happens if the Illinois public pension funds are “on the verge of bankruptcy?”)
Illinois citizens are tired of those members of the Illinois General Assembly who lack ethical responsibility and moral courage; they are also tired of those members who are willing to challenge the State and U.S. Constitutions. These “so-called” representatives and senators are incompetent cowards.
Every article, every interview, and every legislative session about Illinois public pension reform should begin with these statements: The public pension systems were not, and are still not, the cause of the state’s budget deficits. The state’s budget deficits were triggered by past policymakers’ corruption, arrogance and irresponsibility. This is the main reason why the State of Illinois has revenue and pension debt problems.
Past Illinois General Assemblies have created the severe unfunded liability for the five public employees’ retirement systems over several decades. The legitimacy of the current Illinois General Assembly is dubious. The current state government is attempting to isolate and sacrifice one group of people for hardship and, for many of these public employees, create a dispossession by way of intentionally-diminishing laws while perpetuating special exceptions and windfalls for the wealthy elite. This is a mockery of justice, Daniel Biss.
It is critical that today’s policymakers protect legitimate expectations and concerns for all the state’s citizenry, especially for people who must be defended against those with excessive economic clout and inequitable schemes to pass prejudicial legislations that benefit the financial elite at the expense of everyone else.
Glen Brown
http://teacherpoetmusicianglenbrown.blogspot.com/2013/03/on-daniel-biss-wishful-thinking-and.html
Is the choice of not being in the medical plan but keeping the 3% annual COLA still being discussed? What are its chances of success?
These are two different issues. The COLA and medical plan issue you are asking about (I think) is contained in the We Are One/Cullerton SB2404. This bill is basically dead. What we are discussing in this post is a change to the current TRIP/Medicare options.
Please give your assessment of those details listed in the whispers coming from the committee of 10.
I believe that any action by the legislature that diminishes our retirement benefits, including our COLA, is unconstitutional.
Inconvenient Questions?
Many of us have been doing a slow burn since the revelation that Tyrone Fahner and his plutocratic confederates at the Civic Committee have goaded the bond-raters, Moody’s, Fitch’s, and Standard & Poor’s into downgrading Illinois’ bonds in order to pressure the General Assembly into enacting pension-cutting legislation.
Several weeks ago, I wrote a note to one of Pat Quinn’s top campaign people in which I simply asked why the Governor didn’t make a public condemnation of Fahner’s and his Civic Committee’s clearly immoral, unethical, perhaps even illegal actions if insider trading could be proven. To date, I’ve not received an answer. I also called the Governor’s office in Chicago to ask the same question. The staffers seemed not to know anything about what Fahner and his pals had done. I once again left a message for someone higher than a staffer to get in touch with me. So far no answer. Then, I sent a detailed message to the Governor at the “Contact the Governor” on his web page. Again, no response.
I called Daniel Biss’ office and left a message with a staffer with the same question. I’m not holding my breath. It’s an inconvenient question with which none of our politicos would like to be confronted; but they need to be confronted by the questions over and over: “You, Mr. / Ms. Legislator claim to be fiscally responsible. Are you aware of Tyrone Fahner’s admission that he and members of his Civic Committee urged (conspired with) Moody’s, Fitch’s, and Standard & Poor’s to downgrade Illinois bonds which has cost the state $130 million? Were was your outrage? Why didn’t you publicly condemn Fahner and his corrupt members of the Civic Committee?” Fahner clearly put our “fiscally responsible,” pension-cutting legislators and Governor in an embarrassing position. Throw that into their “fiscally responsible,” pension-cutting faces.
We shouldn’t leave Pat Quinn or any of our legislators off the hook, particularly the pension cutters, Democratic and republican. Let’s mount a campaign to call their offices around the clock, send them letters, e-mails, go to their local offices until we get some decent answers, or better, some positive action to deal with Illinois’ revenue problems without cutting pensions. Get friends and family members involved. Call civic-minded organizations like the League of Women Voters. Call Andy Shaw, shame him and his Better Government Association into action against the political / plutocratic corruption. Let our outrage at the corruption and manipulation by politicians and plutocrats not subside. Hammer them again and again with the inconvenient questions:
1. Are you aware of Tyrone Fahner’s admission that he and members of his Civic Committee urged (conspired with) Moody’s, Fitch’s, and Standard & Poor’s to downgrade Illinois bonds which has cost the taxpayers $130 million in precious money?
2. Were was your outrage?
3. Why didn’t you publicly condemn Fahner and his corrupt members of the Civic Committee for what they did to the people of Illinois?”
Correct me if I am wrong.IF the COLA increases, would one day, be maxed out at 1/2 of CPI wouldn’t that guarantee that the retired be falling behind more and more each year in our ability to keep up with raising prices and costs to live?
Would these changes affect ALL LEGISLATORs as well? Would the legislators be able to “opt out” of the future pension changes / benefits and find a way to be “grandfathered into” the current pension program?
If the 10 person committee presents their study and it comes to a vote in our state legislature, can Mr Madigan refuse to allow it to be voted on in his chamber? In other words can he ignore the whole thing?
I am very glad to hear that the committee is looking for ways to save monies in the state without having all the pension changes occur on the back of the current or retired members.
Also happy they are taking their time to have actuaries study the cost saving measures prior to the concluding of their work.
Just wondering!
I agree with Glen Brown and Karl Gabbey. I also recall when the teacher contribution percentage was increased several years before I retired in 2009. I was led to believe that the increase in teacher contributions was encouraged and enacted to help eliminate future deficits from continuing to grow as a result of past elected officials’ failure to meet the fiscal responsibilty to the pension system.
While I do not regret my 40 years of dedication to the children of Illinois and the many hours above and beyond my “work hours” that I gave to my profession, I do regret that I did not donate more time to becoming active in protecting my future through lobbying, etc.
The elimination or change to the COLA benefit will result in grave consequence to my (and all of my colleagues) financial futures. I believe it will also be damaging to the economy of Illinois in the long run as more and more retirees will require economic assistance from welfare programs.
KWAME RAOUL: FAILING TO PAY CONTRACTED COMPENSATION IS UNCONSTITUTIONAL. FYI KWAME, PUBLIC PENSION COLA BENEFITS ARE ALSO CONTRACTED (DEFERRED) COMPENSATION FOR WORK COMPLETED.
Illinois State Senator Kwame Raoul is an engaging public figure, but he needs to get it right on public pension rights in Illinois. Illinois’ Governor recently decided to withhold the salaries of Illinois state lawmakers until they reach a solution to Illinois’ historical pension underfunding problem (i.e., he wants them to propose breach of pension contracts.)
Kwame Raoul thinks that it is unconstitutional for the state to withhold state legislator’s earned compensation. So, why does Kwame believe that it is constitutionally permissible for the state to withhold the earned, deferred compensation of retired public sector workers by perhaps seizing their contracted pension COLA benefits?
NEWSFLASH KWAME: Your work contract is not superior to the work (deferred pension compensation) contracts of Illinois public sector workers.
Illinois Pension Conference Committee Chair Kwame Raoul on state legislator’s contractual rights to earned compensation:
“I think … there are just plain old labor law issues, employment law issues, because we’re employed, in essence, by contract. And it’s an assigned salary, so if you don’t pay somebody, you’re obviously in violation of the law, you know?”
Kwame Raoul on Illinois public pension retiree COLA benefits:
“It’s identical in that aspect (the plan’s primary component is changing a 3 percent compounded cost-of-living increase to a percent equal to half of the inflation rate).”
“One of the attractive aspects is the notion of inflation protection for the employees and retirees. And that’s attractive both from just a moral standpoint and from making an argument of constitutionality in terms of having something offered.”
(My comment: Kwame, breaking a contractual public pension COLA obligation is not at all “attractive,” nor is it constitutional.” Taking something from a person is not giving something to a person. Illinois pensions have “automatic,” contracted COLA benefits. Public pension COLA benefits are deferred compensation, presently earned. It looks like Kwame wants to see the State of Illinois “inflate away” its pension debt, by taking money from the elderly.)
http://www.chicagolawbulletin.com/Articles/2013/07/30/dispatch-7-30-2013.aspx
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