In a 2011 exchange with teacher and writer Glen Brown, Eric Zorn threatened that a defense of the pension moral and legal obligations of the state towards public employee retiree’s would “get ugly.”
For Zorn, seven years later, it is still ugly.
It makes me squirm listening to Daniel Biss squirm about pensions.
Biss, a state senator from Evanston, is among the top contenders in the March 20 Democratic gubernatorial primary, and he’s come under fire during the campaign for having once championed an overhaul of public pensions that was detested by union members and sympathizers in the Democratic base.
He’s since not just renounced that effort, he’s put on the figurative hairshirt and lashed himself over it.
Rather than applaud the Senator for taking the Supreme Court at its word that pension theft was illegal under the Illinois Constitution, Zorn chose to mock Biss.
On “Hitting Left,” a locally produced progressive podcast, Biss prostrated himself for the hosts. “I fell for the culture of Springfield,” he says.
In 2011 we public employees (some now retired) were waging the fight against the corporate millionaires and politicians on both sides of the aisle. We battled against all odds, fighting to defend the pension protection clause of the state constitution. You may now wonder where Eric Zorn stood at the time. Here is the May, 2011 exchange between Eric Zorn and teacher/blogger Glen Brown.
I’m glad you’ve agreed to have this e-mail exchange with me because I’m hopeful we can begin to clear up the points of difference between current and former public school teachers and critics of at least certain aspects of the education system.
I don’t consider myself an adversary. I have great respect for teachers and am a staunch defender of the idea of public education. Though there are obviously lazy, untalented teachers among the ranks – as in any profession – I believe the percentage is not large and that schools absorb far too much of the blame when students underperform.
That said, I tend to share the view of those who say that union contracts have insulated teachers from some of the realities of life in the private sector experienced by those who pay their salaries. These agreements have made it too difficult to identify and fire poor employees, insulated employees from salary-market realities and established a retirement benefit program more generous and secure than most of us can look forward to.
It’s envy when you wish you had the job and retirement security and the regular raises that others have. When your taxes are paying for it, that envy becomes tinged with resentment – not just regarding teachers, but all public employees.
And when your state, county and city are bleeding red ink, threatening services, because over the years these public-employee arrangements haven’t been subject to the normal supply and demand forces that govern most of private employment, that resentment boils into frustration and impatience whenever these employees complain about not getting what they’ve earned, fair and square.
Are these feelings unreasonable?
The law protects all employees against the sort of discrimination you describe, but very few employees have what you describe as a “sensible expectation of continued employment,” much as they too would like to have it. Many reports – including one published in our pages last year – indicate that it’s so difficult, time consuming and expensive for administrators to fire tenured teachers for incompetence that they seldom attempt it.
But let’s not get sidetracked on these broader issues. I’m sure we agree, along with most of the public, that good teachers and other union employees should be protected from arbitrary and unfair treatment, and that bad teachers should be subject to the same consequences for incompetence as most workers everywhere.
I’m sure we also agree that a deal should be a deal, whether hindsight suggests it was a good deal or a bad deal. We can go round and round debating whether the teachers’ promised return on their retirement investment has been excessively generous – by which I mean greater than the return would have been if the money had been privately invested and guaranteed in a way that private investment is not — but the fact is that this return was promised to teachers in binding contracts and that the state remains on the hook for that debt even though it failed to set aside money to pay it.
Where we may disagree is whether the state should continue, going forward, offering teachers and other public employees the same pension deals – the same level of return on investment. Particularly if doing so would require significant tax increases or program and service cuts.
I realize the state constitution may prevent even a prospective change in the pension deal, even as I’m sure you realize the state constitution prevents the implementation of a graduated income tax, which I’m inferring is what you’re alluding to when you mention our “inequitable revenue system.”
Is it really unfair – an unconscionable example of teacher bashing – to say “OK, we’ll make good on what we owe you as of today, but starting tomorrow (or as of the next contract) there’ll be a new understanding”? If so, do you have a better idea than just raising taxes to get us all out of this mess?
We both know how emotionally-charged words can incite: describing the pension promise of teachers as a “good or bad deal” or as “excessively generous” arouses negative feelings unnecessarily. The fact is these earned benefits are protected by a “legally binding contract,” as you say, and to “make good on what [the state] owes as of today” necessitates upholding Article XIII, Section 5 of the Illinois Constitution: “Membership in any pension or retirement system of the State… shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”
Teachers acquire a “vested” right when they enter the pension system. In other words, pension benefits commence at the time a teacher’s contributions begin. The General Assembly cannot modify benefits except through an agreed-upon and fair “modification through contract principles” (Eric Madiar, Is Welching on Public Pension Promises an Option for Illinois?). Furthermore, to respect contractual and constitutional promises as legitimate rights and moral concerns is at stake for EVERY citizen in Illinois. Why? Cheating ANY citizen’s guaranteed rights and benefits violates moral, ethical and legal principles implicit in the state and the U.S. Constitutions.
Illinois has a revenue problem and not a pension problem. Among the many proposals to “get us out of this mess”: eliminate the tax loophole for “Tax Increment Financing Districts”; eliminate “Edge Tax Credits” for large corporations; eliminate “Accelerated Depreciation” or “write offs” of all assets; eliminate “Single Sales Factor” that “allows large corporations to cut their taxes 80-90 percent, and eliminate “Vendor Discounts” that allow companies “to keep an uncapped part of their state taxes as a ‘processing’ fee” (Illinois Tax Loopholes Cost Illinois Billions). There are many other suggestions, but these five recommendations would save approximately $2 billon, none of which raise taxes or require a constitutional amendment.
On the other hand, there is strong case to be made for a graduated income tax through a constitutional alternation. “Given an appropriately designed graduated-rate structure, Illinois could cut the overall state income tax burden for 94 percent of all taxpayers—on average providing a tax cut to every taxpayer with less than $150,000 in base income annually, raise at least $2.4 billion more in revenue, and keep the effective individual income tax rate for millionaires well below five percent… Illinois taxpayers with the bottom 94 percent of base income collectively would receive an annual tax cut of $1.06 billion… [T]he combined effect of this policy… would create at least 36,000 private sector jobs in communities across Illinois… If Illinois were to adopt the same graduated income tax rate structure as Iowa, Illinois would raise $6.3 billion more in revenue than it does from its current five-percent flat rate, while over 54 percent… of all taxpayers would pay less in state income taxes” (The Case for a Graduated Income Tax in Illinois, The Center for Tax and Budget Accountability, February 2012).
Though there was a pending bill (HJRCA0012, February 2011) to amend the state constitution to include a graduated income tax, the Illinois General Assembly chose to enact legislation giving tax cuts to profitable corporations instead. Eric, what are your legal and ethical ideas for solving the state’s structural budget deficit?
As a former public school teacher, I appreciate an opportunity to have this discussion with you. There is a legal point of view to consider regarding your suggestion that union “agreements have made it too difficult to identify and fire poor employees.” Most people believe that tenure means never being “fired.” Besides establishing a sensible expectation of continued employment, tenure law protects a teacher against discrimination, such as age, race, religion, gender, and ethnicity (a guaranteed due process of law). Nevertheless, tenure law does not protect an incompetent teacher.
Teachers accept legal contracts in Illinois; for example, teachers do not pay into Social Security; their pension is generally their only source of retirement income. Thus, the average teacher’s pension compared to someone with a college education in the private sector is not “generous.” It is reasonable for a teacher to expect a pension contract to be a binding agreement. Would you agree?
Defined-benefit pension plans work effectively if they are fully funded. Accordingly, these plans have an economic impact of hundreds of billions of dollars each year and support several million American workers in their jobs across the nation; defined-benefit pension plans contribute over a hundred billion dollars in annual local, state, and federal revenue (National Institute on Retirement Security). The effect upon our state’s economy should the incomes of hundreds of thousands of middle-class Illinois residents be unilaterally diminished would be devastating.
Ironically, a teacher’s pension is still being blamed for Illinois’ budget deficits when the money that should have been paid to the pension system was used to cover essential services and other special interests of the state for several decades. It is “unreasonable” to blame teachers and other state employees for “our state, county and cities’… bleeding red ink…” All citizens of this country should “boil into frustration and impatience” when we consider it was corporate America and the financial sector’s risks posed by credit default swaps, mortgaged-backed securities and derivatives that ignited the financial collapse. Unfortunately, in Illinois, the state government has added to this financial catastrophe by giving excessive tax breaks to corporations. We should be asking whether it is reasonable for Illinois policymakers to give taxpayers’ dollars to big businesses making billions in profits.
The problem we all confront is not public employees’ pension, benefits and bargaining rights, for public employees have served their communities throughout their careers. The problem we must address is the state’s inequitable revenue system. This should be the focus and conversation in Springfield and in the media. Do you believe these statements are reasonable?
As you know, there is substantial and vigorous disagreement among very learned lawyers about the meaning of the pension clause in the Illinois Constitution. Does it mean only that benefits already earned shall not be diminished? Or that benefits earned in the future must be calculated based on the most advantageous past pension formula?
My view, which is based neither on case law nor an educated analysis of Constitutional intent, is that future pension benefits based on future service ought to be as re-negotiable as is future salary based on future service.
I can see why you don’t like my view — it suggests pension plans shouldn’t be the secure super-contracts teachers have long assumed they are – but I don’t see why you find it morally and ethically objectionable. Most of us face less than certain futures and must deal with changing circumstances – suddenly higher taxes, for example, foisted on us by politicians whose lives have become a Hitchcockian nightmare of chickens coming home to roost.
In theory, public pension systems are a fine idea. In practice, they’ve inspired politicians to saddle their successors and taxpayers of the future with additional burdens and investment risk, paying for today’s goodies with tomorrow’s money (or, in the case of suburban school districts and municipalities, other people’s money). Teachers unions have showered these same profligate pols with millions in contributions.
Meanwhile, the Tribune editorial board, which teachers seem to believe is a co-conspirator in all this, has been sounding the alarm: The state “skips a pension fund payment to help meet one year’s operating expenses, never bothering to wonder how it will meet those same expenses next year – let alone get the cash to replace the money it borrowed,” said a March, 1991, editorial. “Maybe if legislative leaders are forced to deal with today’s honest numbers, rather than buying with the promise of money to come tomorrow, they can make a frank assessment of the state’s revenue situation.”
My ideas for boosting revenue to pay our bills and meet future needs include graduating the income tax, expanding the goods and services subjected to the sales tax and taxing retirement income.
It also includes pension reform that outlaws payment skipping, makes the contracting entity responsible for setting benefit levels and making payments and adjusts terms and benefits going forward to keep the systems solvent and prevent the sudden, whopping tax increases that will be needed to continue sustaining the unsustainable.
We agree that a graduated income tax is needed “for boosting revenue” and for addressing the state’s structural flaws in its tax system. Because the State of Illinois diverted revenue that should have funded the pension systems and cannot evade the unfunded liability, a practical response by policymakers should be the creation of a graduated tax rate used by 43 other states in this country. This is even more crucial since General Fund spending has been capped.
What’s more, if policymakers shift the normal costs to the pension system to local school districts and universities, it “would only mean that an even higher proportion of school district’s revenue would come from property taxes” (The Center for Tax and Budget Accountability, CTBA). Representative Darlene Senger told me she thinks this is a “bad idea.”
It appears we also agree policymakers need to design a broad-base tax base. “A majority of states apply their sales tax to less than one-third of 168 potentially-taxable services. Five of the 45 states with sales taxes impose them on fewer than 20 services… Research suggests that purchases of some services do not fall as precipitously as durable goods purchases do when the economy slows nor rise as rapidly when the economy is booming.” States that do not tax services, such as Illinois, “probably could increase [its] sales tax revenue by more than one-third if [it] taxed services purchased by households comprehensively” (The Center on Budget and Policy Priorities).
Consider the fact that a broader-based taxation system would provide a decrease in taxes for low-income and many middle-income families. Taxing services alone “would generate enough revenue to stabilize the General Revenue Fund and prevent structural deficits that lead to cuts in basic needs and social service programs” (CTBA).
To achieve fairness or a “shared sacrifice,” policymakers also need to consider putting an end to “corporate welfare,” in particular, extortive tax breaks and loopholes. The Institute on Taxation and Economic Policy maintains that the top five percent of income earners in Illinois pay the least amount of sales, excise, property, and income taxes because of federal deduction offsets or substantial tax savings (regressive tax loopholes) from itemized deductions, such as capital gains tax breaks and deductions for federal income taxes paid that are coupled with a flat-rate structure.
We both agree there needs to be a required annual payment from the state to the pension systems; the debt needs to be amortized for a longer frame of time just like a home loan that is amortized (CTBA). The ill-conceived ramp-up design (Public Act 88-0593, FY 1996) to pay down the state’s debt demonstrates the dangers of acting without careful or more systemic planning.
Lastly, Eric, the Chicago Tribune of 1991 is certainly not the Chicago Tribune of today; for everything else that you mentioned, my view is the courts will rule to uphold a state and federal constitutional ban on diminishing or impairing contracts, just like they have in Arizona, New Hampshire (February 15, 2012) and Florida (March 6, 2012). In regard to your comment that “teachers’ unions have showered… millions in contributions,” perhaps corporate lobbyists and Citizens United, et al. should be our next discussion.
Though it is printed here, I chose not to respond to Eric Zorn’s final discussion on his Tribune blog. I told him that beginning with his second post, he began to use tabloid thinking, causal oversimplification, faulty analogy, straw man, and non sequitur… that if the Chicago Tribune reneged on his current contract, he would understand a different point of view…
Discussing future pension obligations with you is like discussing proposed restrictions on gun rights with an NRA member: Every answer invokes the constitution – the Second Amendment to the U.S. Constitution in their case, the pension clause in the Illinois Constitution in yours – and avoids the request for a common-sense analysis of compromise reforms.
I asked what’s objectionable, morally or ethically, about the idea of honoring all pension obligations for past service, but renegotiating the future pension benefits that will be based on future service, much as salary and other terms of employment are renegotiated. Your answer: The state constitution forbids it.
I asked whether these pension deals were ever good deals for taxpayers – transparent, market based and actuarially responsible — and if they remain good deals for taxpayers today. Your answer: Doesn’t matter. The state constitution renders such speculation moot. [I never said this].
We agree that irresponsible legislators turned a potential problem into a looming crisis by skipping pension payments to in effect pay their bills with money from the future. And that now the future is here, so we’re going to have to raise taxes to make good on our obligations.
But at the suggestion of a compromise re-definition of those obligations going forward, in order to minimize the potentially metastatic impact of significant tax increases on citizens and businesses, your answer remains the same. And your allies on the comment threads rage that any other answer amounts to teacher bashing, union bashing and a Wisconsin-esque attempt to divide working people.
If these truly are the battle lines, I’m afraid this policy fight’s going to get ugly.
What we call rights of individuals is bound up with the theory and precepts of social and political justice we adopt (John Stuart Mill, On Liberty). When legislators swear an oath to uphold the state and federal constitutions, then citizens of Illinois and the United States have also acquired the right to expect that they will uphold that pledge. This is also a matter of important moral concern for all citizens of Illinois, for all legal claims will be validated by a moral framework since the concept of justice is grounded in ethics. If citizens’ legal rights are abused, then their dignity and humanity will also be violated.
Rights and obligations are logically correlative. In other words, a citizen’s rights imply or complement the legislators’ obligation to guarantee them. The keeping of promises is the General Assembly’s legal duty. It is something the U.S. Constitution requires them to do whether they want to or not. Unfortunately, many legislators will act without moral principles, even though “claims of rights [are] prima facie or presumptively valid-standing claims” (Tom Beauchamp, Philosophical Ethics).
If policymakers do not take individual rights seriously but prefer to challenge them in a court of law, then we can assume they will not take any of their other laws seriously either. All citizens of the State of Illinois have legal justification for their rights and benefits. The foundation of their rights and benefits is the state and U.S. constitutions that directly support any claims against them.
“Each person possesses an inviolability founded on justice that even the welfare of society as a whole cannot override… It does not allow that the sacrifices imposed on a few are outweighed by the larger sum of advantages enjoyed by the many. Therefore, in a just society the liberties of equal citizenship are taken as settled; the rights secured by justice are not subject to political bargaining or to the calculus of social interests” (John Rawls, A Theory of Justice).
To possess a right to a promised benefit, such as a pension, is to assert a legitimate claim on all Illinois legislators to protect that right. There are no rights without obligations. They are mutually dependent. We both know state contracts are also protected by the federal government as well (Article 1, Section 10 of the United States Constitution).
The significant issue of today and tomorrow is the relationship between a teacher’s right to an earned, constitutionally-guaranteed defined-benefit pension and the legislators’ obligation to safeguard that promise. An unconscionable constitutional challenge of teachers’ rights and benefits will generate a serious threat to their secure sense of worth as citizens and create the unfair possibility for an economic disadvantage for one particular group of people and their families. This cannot be morally or legally justified.
For an in-depth discussion about constitutionality, please read “Illinois Pension Reform… Is Without Legal and Moral Justification”