Zorn sneers at Biss’ change of heart on pensions. But Zorn’s solution to pensions was also unconstitutional.

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Writes Eric Zorn in Sunday’s Tribune:

On “Hitting Left,” a locally produced progressive podcast, Biss prostrated himself for the hosts. “I fell for the culture of Springfield,” he says.

He follows this by explaining that he now believes the pension problem can be tamed without cutting any worker’s benefits — by consolidating plans, raising more money through a graduated state income tax and a tax on financial transactions, and forcing the General Assembly to make the annual pension investments recommended by actuaries.

Whether those who raged at Biss in 2013 about his sponsorship of “pension theft” will accept as genuine his abject, self-abasing apology remains to be seen.

His support wasn’t, after all, merely an impulsive vote or momentary apostasy. For many months, Biss was the face and go-to defender of what turned out to be an unconstitutional proposal.

Hitting Left, the podcast that Zorn accuses Daniel Biss of prostrating himself for, is the show my brother, Mike Klonsky and I do every week.

You can hear the show with Daniel Biss here and decide for yourself whether he prostrated himself.

I doubt you will find prostration. I found it to be a lively give and take. Biss, my brother and I found plenty of topics that we disagreed about. So much for prostration.

Note to Eric Zorn.

Here is your exchange with my friend Glen Brown on pensions back when you and Daniel Biss were on the same side.

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.

Wow. Until I went back and read this today I forgot Zorn wrote all this while admitting he had no knowledge of case law or constitutional intent.

And he did that responding to Glen who knew quite a lot about case law and constitutional intent. Glen shared that with Zorn to no avail.

Zorn was correct today to point out JB Pritzker’s double talk in running ads attacking Daniel Biss’ pension record when Pritzker himself contributed heavily to anti-pension political action committees.

But Zorn sneering at Biss’ change of views on pensions rings hollow considering that Zorn too supported an unconstitutional solution to the pension issue.

But with no follow up change of heart.

Eric. Were you wrong then? Or now?

I’m not asking Zorn for prostration. But a little confession by Zorn is good for the soul.

I think Daniel Biss would agree.

 

JB on pensions is shameless.

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For years and years we made our arguments to Daniel Biss about pensions. Our members met with him, protested in front of his office, took many bus trips to Springfield.

In all that time we never saw JB Pritzker.  We never heard him say a word about pension theft. Not a peep.

You know why?

He wasn’t against it.

In March, Greg Hinz wrote:

As J.B. Pritzker nears a decision on whether to run for governor, the Chicago businessman would have to deal with past family political contributions to a group that pushed to cut back on state worker pensions.

I don’t see any signs that the donations from Pritzker and his wife, M.K. Pritzker, would poison his bid to win backing from organized labor. But with a potentially huge field of Democrats vying to take on GOP incumbent Bruce Rauner, the gifts definitely are getting some attention.

The donations—$10,000 each—came in December 2011 and went to the We Mean Business PAC, a group formed by Civic Committee President Ty Fahner to pressure state lawmakers to enact pension changes over union opposition.

The group ended up doing just that, giving large donations to several candidates opposed by labor—though one $10,000 check ironically went to House Speaker Mike Madigan, who enacted pension changes that later were tossed out by the Illinois Supreme Court.

To his credit, I suppose, Biss now admits he was wrong about pension theft.

As Biss moves up in the polls, Pritzker has decided to spend his self-funded multi-million dollar campaign war chest on ads attacking Biss.

That is smart.

Pritzker has decided to attack Biss on his record of pension theft.

That’s crazy, given Pritzker’s funding of corporate organizations attacking public pensions and throwing money at politicians like Madigan who got the constitutional pension bill passed.

Why are the unions that represent public employees backing Pritzker now?

Because they jumped on board when they were positive his self-funded campaign was unbeatable.

Yet, days before the start of early voting a third of Democrats in Illinois are undecided. I assume some of those undecided are union members.

Just as I thought it was crazy for Biss to talk about taxing pension benefits a few days ago, I think it is crazy for JB to pretend he’s a born-again pension warrior.

There are no clean hands in the governor’s race between these two when it comes to pension theft.

JB should take that shameless ad down.

Two constitutional amendments. What would they mean for pensions and revenue?

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A fellow retiree contacts me that he has heard credible reports that there is a proposal being floated for a change in the Illinois constitution that would remove the pension protection clause.

We hear this every year.

The pension protection clause ensures that current public employees and current members of the state’s pension systems cannot have their pensions diminished or impaired.

For a history of all this go to Glen Brown’s blog. It’s all there, archived for easy access.

If super majorities in both chambers were to agree to put a vote on a change to the constitution on the ballot, and if that change were to receive a super majority of the popular vote in a statewide election, the pension protection clause could be removed.

But the impact would not be retroactive to current retirees and to active teachers who are members of the pension systems. It would not make the $130 billion pension liability disappear. The debt must be paid.

Plus, pension benefits can be – and have been – changed without a constitutional amendment. The legislature already did that with Tier II and Tier III. But they could not go back in time and break a contractual agreement that already existed.

Tier II and Tier III are shitty. But once the legislature saw that they could reduce employee benefits, they salivated at the opportunity and no change to the state’s constitution was required go forward.

The same process is true for a constitutional amendment to create a fair, progressive income tax.

It requires supermajority votes of legislators and a supermajority vote in a state-wide election.

The current state income tax is a flat tax in which the richest and the poorest income earner pays the same rate of taxation. This system fails on at least two counts. It cannot supply the state with the revenue it needs to pay its bills and the cost falls most heavily on those who can least afford it.

It is why your property taxes are so high. It is why county government, like Cook, have to find ways to raise additional funds – like taxing soda pop.

Changing the tax structure in the state is a start. There must also be a requirement that part of that additional revenue is targeted to paying a reamortized pension debt.

This has what has gotten Senator Biss in trouble with some of my fellow pensioners. When Senator Biss even mentions pensions, it is a trigger word for thousands of retirees.

When asked about taxing retirement income, this is what the Senator should have said: “I believe that to solve the pension problem in Illinois, we must be laser-focused on creating a fair, progressive tax system that can provide adequate revenue to pay for the things the state must provide for its citizens. A progressive income tax would mean that the greatest responsibility would be placed on the wealthy who can most afford to pay.”

Keeping retirement real. Hey goober candidates: Leave us old folks alone!

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Bob Daiber.

Bob Daiber is running for the Democratic nomination for Illinois governor.

Bob is not going to win.

Daiber is the superintendent of schools for Madison County.

Generally speaking, school superintendents are not among my favorite people. Bob has done nothing to change my opinion.

For a couple of years, when I was a local union president, I worked for a Superintendent named Fred. We had our issues, but he was a pretty good guy.

Daiber, on the other hand, is more typical.

Daiber’s latest proposal is to tax all retirement income to pay for the public pension monster liability and debt.

Daiber calls this “thinking outside the box.”

It is not. Putting the burden of solving the pension liability on pensioners is way inside the box.

As for JB Pritzker and Kennedy, you don’t hear much about addressing the state’s pension debt. Neither has ever had to vote on it, so they have no record in that sense.

Then there is Senator Daniel Biss, who seems to have replaced Kennedy as the main challenger to Pritzker and a choice of many progressives.

You may remember that Senator Biss and State Representative Elaine Nekritz were the legislative leaders on the pension issue. When I say “leaders” I don’t mean it a good way.

Elaine has dropped out of politics. Pat Quinn, who as governor said, “I was put on this earth to cut pensions,” lost to Bruce Rauner.

Senator Biss has done a mea culpa.

Yet, in a scene out of Godfather III, as soon as you think Biss is out, pensions pull Biss back in.

State Sen. Daniel Biss, D-Evanston, one of Daiber’s opponents in the Democratic primary, said he does not support taxing retirement income under the state’s current flat tax structure, but would be open to the idea under a progressive system.

“I would only consider taxing retirement income once we’ve amended the Illinois Constitution to allow for a progressive income tax so that we tax retirement income of wealthier Illinoisans rather than burden middle-class Illinoisans,” Biss said.

Focus. Focus. Focus.

I don’t really care that much what Bob Daiber thinks.

My advice to Senator Biss is that whenever he feels the need to mention the word pension he should step outside the room.

For many retired public employees in the state it is a trigger word and brings back memories of what Senator Biss did.

Count to ten and then come back in and change the subject.

The Illinois pension debt is the issue not discussed in the race for governor.

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North west side State Representative Robert Martwick.

What don’t Illinois gubernatorial candidates want to talk about?

The $130 billion public pension liability.

If you are at a forum and you press the question, as I have, you will get some generalities about pension promises being kept.

That is better than Bruce Rauner, of course. Or Mike Madigan and John Cullerton for that matter.

But specifics? Not much there there.

All of the Democrats, and now we are talking basically three – Pritzker, Kennedy and Biss – support a progressive income tax. But there is nothing in that change that would guarantee increased revenue would be targeted at the pension debt. History suggests it may not.  Pension payments have a way of being diverted.

Today’s Sprinfield Journal Register’s Doug Finke quotes Chicago State Representative Robert Martwick as suggesting three possible legislative approaches to the pension debt that might come up in the next session.

Martwick concedes that both sides of the aisle now get it that direct benefit cuts to current Tier I members of the state’s pension systems can’t happen based on the historic decision of the Illinois Supreme Court.

Martwick outlines three ideas being floated.

The first is a buy-out – a single cash payment in lieu of an annual compounded 3% raise.

Any retiree taking that deal is in desperate need of immediate cash or doesn’t know basic math.

It will not solve anything.

Martwick says that the legislature might consider issuing bonds to pay for the debt, hoping they can be sold at better than the current interest rate on the debt.

“This would be the largest bond sale in the history of the world,” Martwick told Finke.

That’s encouraging.

And then there is the sensible solution: Re-amortize the debt.

The idea has been promoted by the Center for Tax and Budget Accountability among others. CTBA executive director Ralph Martire said the plan would set a slightly lower target for the pension funds to be considered adequately funded, although still meeting acceptable standards. The problem is the date for reaching those targets is extended.

“You do have pressure created by editorial boards and others who say if you don’t follow the current (payment plan) and you get funded to a lesser amount, aren’t you kicking the can down the road,” Martire said. “No politician wants to be accused of kicking the can down the road. That attack has a lot of political value and it really makes elected officials nervous.”

So, count on nothing being done.

Also count on those in the media writing another story on the top ten pension recipients.

That’s always good for a slow news days.

WTTW’s Paris Schutz and the myth of averages.

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Paris Schutz. WTTW’s pension beat reporter.

Chicago Tonight’s Paris Schutz is at it again.

Last month I wrote about the lazy reporting Schutz does on his pension stories. Schutz will more often than not simply repeat Illinois Policy Institute talking points. IPI is a pro-corporate think tank which frequently is called upon to be the experts on pensions by public television’s WTTW.

Schutz breathlessly reports on the high pensions that Chicago “teachers” receive.

The average Chicago teacher pension is about $49,000 a year, but there are more than 1,100 teachers who take home six-figure pensions.  

Schutz is no math expert. It doesn’t take much math expertise to know that if 1,100 pension system members are receiving six figure pensions and the average is $49,000 a year, there are a hell of a lot of teachers whose pensions are less than the average.

This is the myth of averages.

Schutz reports:

The Chicago Teachers Pension Fund excludes most CPS administrators, who receive their pensions through the Illinois Municipal Retirement Fund instead.

But there on the list of the highest pensions is that of Manfred Byrd, former CPS superintendent.

Plus:

Barbara Eason Watkins, who served as chief education officer behind Arne Duncan and Ron Huberman until 2009.

Schutz suggests that CPS teachers are getting off easy on their pension payments.

Also, since 1980, Chicago teachers contribute relatively little to their pension: only 2 percent per year.

A good reporter would have pointed out that the reduced pension payment by CTPF members was originally bargained between the CTU and the CPS board in lieu of a salary increase back at a time when they were in bigger financial trouble than they are now. That deal was the CTU offering CPS a life-line.

A unilateral attempt by the CPS board to end the pension pick-up in 2016 was challenged by the CTU as an unfair labor practice. The CPS board then withdrew their attempt to end the pension pick-up.

What is behind Chicago Tonight and their reporter Paris Schutz to focus on pension payment outliers?

To his credit, Schutz relies on the Center of Tax and Budget Accountability’s Ralph Martire to explain the source of the problem.

From 1995 to 2005 CPS did not pay a dime of what they owed to the pension system. It went from being fully funded to 50% funded in 20 years.

That is why taxpayers are on the hook now. Pension payments were diverted by this and previous City administrations to pay their bills. Pension payments were kicked down the road.

Yet Schutz then counters Martire’s historical explanation with the corporate Civic Federation’s Larry Msall who says that what drives the problem is yearly pension increases.

I suppose this is WTTW’s idea of fair and balanced.

My suggestion to Daniel Biss: Focus. Focus. Focus.

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State Senator Daniel Biss on Hitting Left with the Klonsky Brothers. WLPN 105.5fm. Lumpenradio.com

We had Senator Daniel Biss on our Hitting Left show a few months back. He was the second candidate for Illinois Governor we had as a guest.

We also had Alderman Pawar who was a candidate for governor but now he is not.

I think we are basically done with gubernatorial candidates. Although I wouldn’t turn Rauner down.

I would love to get him in the studio with my brother and me. Just the three of us.

Since Daniel Biss was on the show he has been doing pretty well – beating Chris Kennedy by several measures – but still trailing billionaire JB Pritzker.

Full disclosure: I’m voting for anyone running against Rauner.

I would prefer it not be Pritzker, but I would also prefer that my pension was fully funded.

Some things are more likely to happen than others.

I don’t count Biss out. When he was on our show, and in conversations that I have had with him, he admitted he was wrong about state pensions when he was leading the legislative fight to steal them.

“I fell for the culture of Springfield,” Biss confessed.

Sure ’nuff, he did. Big time.

But that was then and this is now.

I read today in the Daily Herald that Daniel has a new pension plan.

Something about consolidating all the state’s public pensions into a single system.

I suppose there is some sense to the idea. I mean every local pension system in the state has their own board. Some cops and fire fighters down state probably have their investments managed by somebody’s Uncle Louie.

But focus Daniel.

No new pension ideas for a while.

Here is the platform on pensions you should run on:

Raise revenue with a progressive income tax.

Re-amortize the state’s major pension debt.

Have a goal of 100% funding.

Otherwise, stay away from new ideas.

New pension ideas did not go well for you in the past.

 

 

 

 

Attorney John Fitzgerald. Notes on his presentation to the Illinois Retired Teachers Convention.

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The last time I heard attorney John Fitzgerald was when I attended the 2013 state convention of the Illinois Retired Teachers Association.

The issue he addressed at the time was a state law that would later be passed by the Illinois legislature in December of 2013 and signed by then-Democratic Gov. Pat Quinn that stopped automatic, compounded yearly cost-of-living increases for retirees, extended retirement ages for current state workers and limited the amount of salary used to calculate pension benefits.

John is a member of the law firm of Tabet, DiVito and Rothstein. At the 2013 IRTA convention John laid out what would later be the legal arguments that his fellow attorney Gino DiVito would make in his oral argument as lead attorney before the Illinois Supreme Court. While other state unions and organizations representing active and retired pubic employees had legal representation, Tabet, DiVito and Rothstein were paid for by individual donations of members of IRTA.

And we won by an 8-0 vote of the Illinois Supreme Court.

I promised a number of people, including my good friend Glen Brown, that I would try and take good notes from Fitzgerald’s key note speech today.

So here they are:

Fitzgerald pointed to four legal cases: Kanerva v. Weems, Heaton v. Quinn (Yes. THAT Quinn), Jones v. the Municipal Employees Annuity and Benefit Fund of Chicago and Matthews v. the Chicago Transit Authority.

What were the significant legal conclusions of each as they concerned the pension protection clause, Article XIII, Section 5 of the Illinois Constitution which states that benefits are a contractual obligation that cannot be diminished or impaired?

With Kanerva v. Weems the court established the principle that protected benefits went beyond annuities and included such things as health insurance benefits.

With Heaton v. Quinn the court confirmed that a crisis, particularly one created by the state, is not an excuse to violate the constitution.

“It is a summons to defend it,” wrote the court in its unanimous opinion.

With Jones v. the MEABF of Chicago the court said that it means nothing that a union gives political support to legislation reducing pension rights if that result does not result from collective bargaining and a vote of the members.

In Matthews v. the CTA the court wrote that constitutionally protected benefit rights can be waived through collective bargaining but cannot be retroactively applied to those already retired.

While the 1970 Constitution does protect pension benefits, it is less clear on how the benefits are to be funded.

Fitzgerald explained that those at the convention discussed it but did not anticipate the degree to which the politicians of the state would allow the funding to be diverted. They believed that action would be taken before a system would go into default.

But what constitutes default?

Fitzgerald pointed to the case of the City of Harvey and the Harvey Firefighters Pension Fund. In that case the pension fund was only 27% funded and actuaries anticipated it would go belly up within five years.

An appellate court judge ruled in summary judgement that this constituted  impending default and ordered the City of Harvey to implement a time-line levy to make the pension system whole.

Some have wondered what might happen if the state pension funds were to go into default. Fitzgerald believes the Harvey Firefighters case gives us some clues.

In that case the judge found that there is a legal threshold for what constitutes default.

In spite of what Governor Rauner has suggested, Congress cannot amend the state constitution and eliminate the pension protection clause.

The pension debt must be paid. The legislature can do it. If it refuses to act on their legal and moral obligation, a court can and will order it done.

To those who have threatened state bankruptcy, as happened with the City of Detroit, Fitzgerald argued that bankruptcy cannot be applied to just one debt, like the pension debt. Bankruptcy is applied to all debts.

And states cannot file bankruptcy anyway as long as they have the power to raise revenue.

These were my notes. I am not an attorney. If I did not represent John Fitzgerald’s presentation with perfect accuracy, I apologize.

That’s why they make the big bucks.

 

Picking the form of the defined contribution is picking your poison. Working people need a livable, dependable retirement income.

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Nobel economist Richard Thayer. Drawing: Fklonsky’17

There seems to be a difference of opinion between Trump and some Republicans about how much people can contribute to their 401(k).

I wrote about it here.

Some Republicans want to reduce the amount that can be tax sheltered from $18,000 to $2,400 a year.

This caused some consternation on Wall Street since it takes money out of what professional investors can steal through exorbitant and hidden fees.

Trump came to their defense and appears to be opposition to the reduction.

Many teachers have their retirement funds invested in 401(b) accounts, which are even worse when it comes to fees and returns.

These investments are pushed by local school districts and even teacher unions. As president of my union local I would constantly be asked by annuity vendors to arrange time at each of our buildings for them to sell their product.

I wasn’t doing that. Nor my job

Many school districts approve certain annuity products and have our contributions made through payroll deduction. This always seemed to me to be ripe for corruption.

The point is that these tax sheltered deductions were to a defined contribution plan unlike our Teacher Retirement System pension which is a defined benefit plan.

A defined contribution plan is one that is entirely at the mercy of the market and is entirely at greater risk. A defined benefit plan guarantees a specific amount that is a dependable source of retirement income.

The fight over the amount that can be sheltered in a defined contribution plan is in many ways a phony fight.

How many workers can afford to shelter $18,000 from their current income?

For thirty years after Word War II the share of workers with access to a traditional defined benefit pension plan expanded steadily. Reagan ended that.  After Reagan, U.S. companies eliminated a combined 84,350 separate pension-based retirement systems for workers. The reversal exactly mirrors the rise of 401(k)s where individuals save and invest rather than accruing a guaranteed retirement income for years of service.

Instead of fighting over how much of retirement savings is taxed now or how much is taxed later, our unions where we have them, and progressive politicians should be fighting for a guaranteed safe defined pension in retirement for every worker.

Richard Thayer, 2017 Nobel Prize winning economist dismissed the the current 401(k) defined contribution model as useless for most of the poor and working families.

When those who oppose our Illinois teacher pension (we get no Social Security) try to make it seem as if our defined benefit pension is some kind of privilege, I always have said that in a humane society, every worker should have a pension that guarantees a livable income in their later years.

I still say that.

Better government doesn’t include paying what you owe, it seems.

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The Better Government Association’s solution to the pension liability.

Give me a couple of minutes to review the Illinois pension problem.

Our state pension is now carrying a $130 billion dollar liability because for decades the state didn’t pay their share.

The Illinois Supreme Court ruled that the 1970 Constitution’s pension protection clause which states that current retirees and current members of the pension system cannot have their pensions diminished or impaired.

So, put those two facts together and you must come up with the conclusion that the debt must be paid.

Revenue must be raised.

Try taxing the rich for a change.

Better Government Association policy and civic engagement director at the Better Government Association writes a Sun-Times column which starts with the facts I stated but then ignores the solutions.

Instead she talks about State Representative Matwick’s plan to move future employees to a 401k.

The benefit of such an idea for future state employees aside, will this help pay off the debt?

Nope. Not until all current retirees are dead.

Oops.

I think I get what she means by better government.