The Illinois Education Association took full credit for a payment to the Teacher Health Insurance System (THIS) and to the Teacher Retirement Insurance Program (TRIP) following the reveal by the Illinois Retired Teachers Association (IRTA) and by this and other pension bloggers that no state contribution has been made since January of 2017. At the time of the recent payment retirees were owed nearly $140 million. The unpaid debt is now larger in spite of the back payment.
Prior to today, no mention of the shortfall had been reported by the IEA or the Illinois Federation of Teachers to its active or retired members.
Meanwhile I received a call from Comptroller Mendoza’s office that payments of $18 million in March; $9 million in April and another $9 million this month were just made.
Those payments are credited to unpaid bills for January through March of 2017. That means the state is still 19 months behind in its payments to THIS and TRIP
In the IEA statement, no mention is made of Governor Rauner’s unconstitutional attempt to cut the state subsidy to TRIP and no mention of the continuing financial crisis the state faces because of Rauner’s policies. There is no mention of other dependent groups that remain unfunded as a result of the Governor forcing Comptroller Mendoza to engage in what her office calls “triage.”
They suggest that the payments were made because of their “great working relationship” with Comptroller Mendoza, as if the Comptroller can make money magically appear.
Here is the IEA’s message.
Comptroller Mendoza reports $36.5 million transferred to TRIP/TRAIL
Illinois Comptroller Susana Mendoza clearly understands the importance of the TRIP/TRAIL health insurance program to the members of the IEA and told IEA President Kathi Griffin on Friday that $36.5 million was recently transferred to TRIP/TRAIL because she wanted to protect the retirement security of retired educators. The IEA and the comptroller’s staff have a great working relationship and this was a sign of the strength of that relationship.Delayed TRIP/TRAIL payments
The issue of delayed state payments to TRIP/TRAIL has raised the concerns of some retired members. Despite the delay, IEA members participating in TRIP/TRAIL have not experienced any problems with their health insurance coverage. The IEA continues to work to make certain that the retiree health insurance program receives every penny it is owed by the state. This is a huge issue for the IEA since our members, active and retired, continue to pay every penny they owe to maintain the stability of the program. President Griffin was in direct communication on Thursday with Comptroller Mendoza to convey the concerns of the IEA and to work through the issue to be certain that TRIP/TRAIL receives all of the state funding that has been appropriated to it for the benefit of retired teachers.Funding for the Teachers’ Retirement Insurance Program (TRIP/TRAIL) remains IEA priority
The IEA has been working to ensure that TRIP/TRAIL continues to receive full funding from the state. On Thursday, President Griffin met with Senate President John Cullerton (D-Chicago) and Senate Republican Leader Bill Brady (R-Bloomington) to stress the importance of funding the insurance program for our retired members. The IEA is uniquely positioned at the Statehouse because of the strong bipartisan relationships it has built on both sides of the aisle through both the Government Relations Department staff and through the activism of its members. This positioning allows the IEA to talk directly to leaders in both political parties. President Griffin’s message was clear – the $120 million owed to TRIP/TRAIL in the upcoming fiscal year must be funded. TRIP/TRAIL receives funding from four sources: active teachers, school districts, the state and retiree insurance premiums.
As the legislative session nears its end, the IEA is committed to keeping members apprised of issues that will impact them and the students they educate.
Retired Illinois teachers who are enrolled in the Teacher Retirement Insurance Program (TRIP) pay about 40% of the cost into what is called the Teacher Health Insurance System (THIS) managed by a state agency called Central Management Services (CMS).
Smaller amounts are paid into TRIP by the feds, current teachers and local school systems.
Unlike some state employees who receive the health insurance benefit at no cost (good for them, by the way), Illinois teachers do not receive the benefit for free. For the state employees the health insurance benefit was bargained as part of their pension and is protected by the pension protection clause of the Illinois Constitution.
There is a state subsidy to retired teachers, however. Illinois is supposed to match the teacher contribution with a subsidy. The 40% is also considered part of the teacher pension benefit.
The Illinois Supreme Court ruled that health care benefits were protected by the pension protection clause in a case called Kanerva.
Even so, Republican Governor Bruce Rauner has tried to end the state subsidy to TRIP.
While the Governor hasn’t been able to end the subsidy through the front door, he has been successful in ending the subsidy through the back door using Democrat Comptroller Susan Mendoza.
Mendoza says she doesn’t have the money to pay the subsidy, so she hasn’t. She says she is only paying the bills she is obligated to pay.
I’m not sure what that means.
She hasn’t paid the bill since January, 2017.
But until March off 2018 she didn’t tell anyone that she wasn’t paying the $10 million a month into THIS.
What we have here is a failure to communicate.
The state now owes THIS $140 million.
By the way, if your are a member of the Illinois Education Association or IEA Retired or the Illinois Federation of Teachers, this may be the first time you are hearing about this. Both state unions have been unremarkably silent.
This isn’t surprising since their record of defending the rights of retired teachers is not all that great. In fact, it is terrible.
Will Mendoza begin paying the subsidy again? Nobody is saying when or if.
Will the $140 million be paid back? Again, the record isn’t good. The full state pension debt and liability is now over $130 billion and nobody has a plan for paying that back.
The Teacher Retirement Insurance Program (TRIP) is paid for out of the Teacher Health Insurance System (THIS).
Active teachers may see THIS in the list of their paycheck deductions and may not know what it is. Active teachers pay into the insurance bucket called THIS.
Also paying into the THIS bucket are school districts, the feds and the state of Illinois. The state subsidy is supposed to match the retiree payment. Rauner wants to end the state subsidy.
The Illinois Supreme Court has already ruled that public employee pension benefits cannot be reduced or impaired. And in the Kanerva decision the courts ruled that health care benefits were a part of pension benefits and were also protected from reduction or impairment.
Unknown to us until a few days ago is that the state of Illinois simply hasn’t paid their legally required contribution into the THIS bucket.
They haven’t paid it for a year and a half.
Mendoza just told us.
That would be $10 million a month.
Our lawyers believe that this is a violation of the pension protection clause if it impacts payments to our health care providers.
So here are the questions:
Will the state pay back the $170 million in payments they have missed?
How many more months will Comptroller Susan Mendoza, a Democrat, skip making the state’s payment into THIS?
Is the shortfall currently affecting retirees? Has any retired teacher been asked to pay their health care provider for services up front because the state won’t pay the bill?
If that has happened to you, the state is in violation of the pension protection clause and IRTA wants to know.
From Illinois Retired Teachers Association Executive Director Jim Bachman.
At a recent meeting of the TRIP Advisory Committee we were notified by the Department of Central Management Services (CMS), that the Comptroller had not made the State’s payment to the Teachers Health Insurance Security fund since January 2017. The State’s payment is approximately $10 million a month. Therefore, the State currently owes the fund approximately $170 million.
The fund is where all TRIP money is deposited. The fund has the following contributors: TRIP participants’ premiums, Active teachers (percentage of payroll), School districts (percentage of payroll), State of Illinois (matches the active teachers’ portion) and the federal government. Due to the lack of the State’s payment insurance companies are not being paid on a timely basis as in the past. Therefore, if the insurance companies are not getting paid in a timely manner the doctors and hospitals are not receiving their payments in a timely manner either. CMS has told us some payments have been delayed as much as 200 days.
The IRTA’s contract lobbyist and I met with the Comptroller’s office recently to discuss the lack of payments to the fund. As we assumed, the Comptroller does not have enough revenue to make all required payments on a monthly basis. Therefore, she has decided to make the most necessary payments first and if money is available she will make payments to other needs.
In addition, I asked our law firm of Tabet, DiVito, and Rothstien to provide us an opinion on whether IRTA had standing to sue the Comptroller to compel her to make payments to the Teachers Health Insurance Security fund. In short, our law firm replied that the IRTA can bring a mandamus action to compel the Comptroller to pay TRIP payments.
A lawsuit would be a last resort. What we are asking you as TRIP participants is if you begin to experience your doctors or hospitals asking for payment up front for any procedure in lieu of them waiting for payment from the insurance company to notify the IRTA. At that time the IRTA Board of Directors will determine our course of action.
In October 2015 venture capitalist Henry Feinberg emailed Chicago Mayor Rahm Emanuel.
“Since when did Rahm Emanuel let a judicial ruling get in his way and not find a creative work-around solution?”
Emanuel replied, “Never. Which is why I eliminated retiree health care. Only elected official to eliminate — not cut or reform — a benefit. Thank you very much. A $175 million saving!”
On the day before Thanksgiving 2017 the Illinois Supreme Court sided with the Mayor and said that the city did not have to deliver health care benefits promised to about 20,000 city retired workers.
Most Illinois court decisions regarding pensions and retirement benefits have sided with the employees.
Boy, not this one.
In a six-word ruling the Illinois Supreme Court refused to hear the retirees’ appeal of a state Appellate Court ruling that upheld Mayor Rahm Emanuel’s now-completed, three-year phase-out of retiree health care coverage and a 55 percent city subsidy for anyone who did not retire by Aug. 23, 1989.
Last week’s ruling is a major hurt on about 10,000 city employees who started working for the city before April 1, 1986, and therefore do not qualify for Medicare.
In some cases their health care insurance costs are double their city pension check.
Over a hundred retired teachers and educators, members of the Illinois Retired Teachers Association and their friends, filled the room at the old Elks Club in Des Plaines to hear candidates running for Illinois Governor.
Rauner did not respond to our invitation. Nor did Tio Hardiman. Ameya Pawar said he would attend. Then said he wouldn’t.
The format was inevitably constraining. Each candidate got four minutes and then there was only time for each to answer two questions.
I came away with a couple of impressions. With a long campaign ahead of us that may be the most I can expect from a event that our North Lake Shore IRTA members worked hard to organize.
Five of the candidates sounded like traditional liberal Democrats.
I might say that they even sounded like new progressive Democrats.
This is no small thing at a time when it seems like many Democrats are fighting over Trump and Republican voters rather than standing up for the Democratic base and where the last Democratic Governor in Illinois, Pat Quinn, claimed he was put on this earth to cut public employee pension benefits and who spent much of his time battling the state’s public employee unions.
This paved the way for Bruce Rauner’s election.
The first question after their four minute presentation came from me.
I asked, “What can be done to change the politics of this state so that in four years there might be a woman sitting there on the panel?”
From their answers I don’t think the solution will come from them.
Drury basically ignored the question. JB and Chris told stories about the strong women in their families. Biss addressed the need for male politicians to do more in be in inclusive, which seems like a dubious prospect.
For me the surprise was Kennedy. He didn’t say anything that was more substantive than the rest, but he was far better on the stump than I had expected for a candidate that has seemed almost invisible up until now. His answers almost always were illustrated by a compelling story. When he spoke of tax reform and a progressive income tax, which every candidate supported except State Representative Scott Drury, he targeted those in the legislature who literally profit from the current system.
“We had a super majority in the General Assembly and a Democrat as governor and a progressive income tax only got 31 votes in the House,” Kennedy said.
He was clearly bashing Speaker Mike Madigan, which is easy to do, but it was where none of the other leading contenders would go. Certainly not Pritzker.
Then there is State Representative Scott Drury. He has made a career of attacking the Speaker, but for all the wrong reasons.
Scott Drury is not going to be the Governor of Illinois. Ever.
When it was his turn to respond to the question about a progressive income tax he said it would take too long. Instead he called for another attempt at pension theft to save the state money.
While Drury will never be governor, his plan is out there and is supported by Democrats and Republicans.
He wants a buy-out offered to those current retirees and members of the Teacher Retirement System at seventy cents on the dollar. He claims number crunchers at TRS predict up to 30% of retirees would take the deal.
After the program I went up to Drury.
“Your idea is ridiculous,” I told him. “Why would any rational person agree to a deal that gives them less than the deal they originally agreed to and which the courts have ruled must be paid?”
“Because the federal courts can overrule the state Supreme Court and those people are afraid that the system won’t be solvent in the future,” was roughly what Drury told me.
When these kind conversations come up I flash on an image of an elderly retired teacher in downstate Illinois who counts on her TRS check for basic survival. She hears politicians like Drury talk and it causes them great anxiety. They do worry that their retirement savings won’t be there because creeps like Drury keep going after it.
First they scare the crap out of them. Then they offer them seventy cents on the dollar.
It’s like some scam artist knocking on the old lady’s door and fast-talking them out of their ATM number.
“It would be voluntary,” says Drury.
I told him that to come up with a policy based on fear that takes money from the elderly and retirees to save the state money was immoral. And that he was immoral. Or maybe I said amoral.
He shook my hand and told me that we agreed to disagree.
More than 60 businesses and other groups are owed at least $10 million apiece by the state, while 13 of them are due $100 million or more. Those owed the most are in health care, including insurers Aetna Better Health and Blue Cross/Blue Shield parent Health Care Services, each out nearly $600 million.
A list of state vendors, which stretches to 778 names with unpaid invoices of at least $500,000 and totals $6.7 billion, was circulated today by the Chicagoland Chamber of Commerce. The business group is asking members if it should weigh in on how to quicken the payment of the state’s $15 billion backlog of bills. Whether the mountain of debt should be refinanced and how soon has divided Gov. Bruce Rauner and State Comptroller Susana Mendoza, among other politicians.
The Teachers Retirement System, owned $350.4 million, and the Regional Transportation Authority, owed $340.2 million, were the biggest public-sector creditor, followed by the Chicago Board of Education at $295.3 million.
A hell of a typo.
We don’t own $350.4 million.
They meant to say that our pension system is owed $350.4 million.
Only the Illinois’ Supreme Court’s ruling upholding the pension protection clause offers any protection to current retirees.
Thank God for Ms. Kinney and Mr. Green.
They were the delegates to the 1970 Illinois Constitutional Convention that made sure the pension protection clause was inserted because they knew no politician could be trusted with our pensions.
But the pension protection clause didn’t prevent the Democratic legislature from creating a Tier II which required teachers hired after January 1, 2011 to pay 9% of their salary into the pension system with a requirement that they work until they were 67 and receive a pension valued at only 6%.
I asked Senator Dan Biss about Tier III. He is one of only two Democratic Party candidates running for governor who got to vote on the budget package. The other is Scott Drury.
I didn’t talk to Drury yet.
Senator Biss responded briefly.
The creation of the Tier III plan is a bad idea that I oppose. Its voluntary nature made it fairly easy for me to decide to support the package notwithstanding that, but I was frustrated to see this proposal in the final package.
I find this response confusing since a voluntary option to put money into a privately managed annuity paid for by TRS and local school districts is key to Tier III. It is a foot in the door for Rauner’s plan to turn all public pensions into private annuities.
Thanks for your brief response.
I think that Tier III – along with the change to the estimated return on TRS investments – are terrible ideas which are not mitigated by the voluntary component of Tier III. I look forward to talking about this when we schedule a date for you on our radio show/podcast.
Thanks — likewise looking forward to it. So just to make sure I understand, you think the assumed rate of return on TRS investments should be higher than it is now?
The change by the legislature reduces the amount the state pays into the system. It will increase the liability. Where does the so-called $1.5 billion in savings come from? Shifting costs to the local school districts and reducing the amount paid into the system by rolling back the change to the assumed rate of return on investments. The action of the legislature increases the assumed rate. Just to make sure I understand, you voted to return to the old assumed rate which is higher.
Oh I see, sorry. You’re talking about the so-called “smoothing”? Yeah I hate that.