Evanston’s man on the Illinois pension compromise committee says a passable deal could come within a month that would reflect a new view of its constitutionality.
State Sen. Daniel Biss spoke Sunday at a town-hall-style forum at the Levy Center on the issue that has stymied the state legislature for years.
He said the main obstacle to a solution is the state’s constitutional provision that pension benefits
“shall not be diminished or impaired.”
While admitting that he is not a lawyer, Biss said that a new view of the constitution would enable lawmakers to reduce a pension benefit if it could be offset by a new benefit.
Biss had previously voted against a version of pension reform that would give pensioners a choice among various alternative benefit packages on the grounds that the fiscal savings required might not be obtained if the wrong choices were made.
“I was never persuaded,” he contended, “that the savings estimates I saw were realistic, because they didn’t take into account all permutations of different choices that employees might make.”
Under the latest theory, for example, the state could reduce the annual cost-of-living increase in exchange for some guaranteed health care benefits.
About 150 persons attended the forum at the Levy Center.
During the question-and-answer period Sunday, Biss rejected the argument made by state employees that the problem is solely a revenue problem, not a pension problem, nor does he subscribe to the argument that taxes should not be raised for any constituent group.
He argued that a balanced approach was necessary that might eventually involve a graduated income tax that would bring in more tax revenue from upper-income people without materially affecting persons with lower incomes.
At the same time, he advocates reducing the current 3 percent annual cost-of-living increase in pensions to half of the actual increase in the national consumer price index. With inflation currently at an annual rate of less than 2 percent, this would lower the annual pension increase to less than 1 percent.
Nevertheless, he predicted that the final pension compromise would involve sacrifices for everyone, including state employees and taxpayers.
Biss is a member of a conference committee consisting of three Democrats and two Republicans from each house of the legislature that missed an arbitrary July 9 deadline for coming up with a solution.
The committee has held three public sessions so far, he said, but various scenarios would have to be vetted by pension actuaries before a final deal could be made.
The timeline for this to occur, he said, “should be about a month. I hope we don’t find ourselves doing something in September.”
“shall not be diminished or impaired.”
It doesn't take a lawyer to read and understand that language. "Shall not be diminished or impaired" is about as clear as it gets. In addition, if you look at the legislative history of the Constitutional Convention, the Constiution is clearly intended to do exactly what the language said — protect state pensioners against cuts in the promised pensions for which they worked.
I've been really disappointed with Biss. His arguments have been facile. His lack of respect for the Illinois Constitution has been disappointing. He's carrying the water of the bond ratiing agencies and those companies interested in making money on state bonds — as wellas the Speaker — without independent thought.
It’s still a revenue problem
Key point…BISS is not an attorney. Constitutional hurdles for pension "reform" are very real. Including a Constitutional prohibitation of the graduated income tax he mentioned. Did anyone ask BISS what the unfunded pension liability would be if the State had made ALL ACTUARIALLY REQUIRED CONTRIBUTIONS? No. of course not. State politicians created this mess by robbing Peter to pay Paul and now want retirees and employees to pay the price for their incompetance.
This is, and always has been, a revenue problem. A very low income tax rate here for years contributed to this funding problem of state pensions. Everyone benfitted from this historically low tax rate and now everyone is paying 5% instead of 3% and pension funding deficit is being reduced by this increase. Illinois is still behind on its other bills to be paid and unless the income tax rate is mantained into perpetuity and other sources of revenue is found, we will continue to be the deadbeat State of Illinois.
Just a revenue problem? Baloney
The missed state payments account for only about a third of the pension hole, according to many analyses, including the most recent one by Pew Institute.
Even with the 66 percent income tax increase, the pension hole increased by $14 billion, as did the unpaid state vendor bills. And the entirely unfunded healthcare liability for retirees, which is another $50 billion, increases by $5 billion per year.
Those who say "this is just a revenue problem" are either innumerate or dishonest. No combination of tax increases imaginable can come close to addressing the $300 billiion in obligations the state has, not to mention the unfunded liabilities of Evanston and 650-plus other municipal pensions. That's why no commentator here or anywhere else will be specific about a tax package that has numbers that match the size of the problem.
Apples and oranges
We're only talking State pensions here. Your post substantiates my point that the income tax hike wasn't enough and way too late to fend off this 40 year problem in the making. Stay on point please! 2nd tier employee pension rule changes and increased revenue are helping with this funding problem caused by State politicians without the testicular prowess to address this issue much earlier. Illinois has a "revenue" problem only. Fix that problem before coming to employees and retirees who paid their required portion of pension contributions each and every check they've received.
Explain how to “fix” the “revenue problem”
If taxes were too low for 40 years, you can't just magically make that up. You have to further raise taxes. I make decent money and pay a small fortune in state and local taxes. I can see a handful of ways to maybe raise a little bit more revenue (maybe another round of toll hikes, raise vehicle registration fees, maybe even go back for another bite at the income tax apple keeping the constitutional limitations in mind), but there is no practicable way to fund that gap that continues to grow while interest rates are stuck at almost 0% (liabilities grow drastically while a big portion of the assets in the investment portfolio don't grow).
If the State tries to raise corporate taxes, they'll just have to give back the hikes to the biggest corporations because if they don't, the corps will just leave. Then you'll have fewer deep pockets to tax and fewer jobs from which to collect income taxes along with fewer citizens to collect tolls, vehicle registration fees, sales taxes, etc. The Chicago area is great, but it is not like NYC with its immense pool of capital and smart people congregating or California with its great weather and immense natural beauty, so soaking people too much will lead to a prolonged exodus from Illinois. The State is in a really, really tough spot. I completely understand the moral and legal arguments that pensioners make, but a contractual promise is only as good as the counterparty's ability to perform, and when you look at the real world, the ability of Illinois to perform its obligations is not very promising.
If there is a revenue problem, I would be interested in whether or not it would be constitutional to enact an origination tax on pensions so that the State can help fill that revenue gap so when folks retire, no matter where they go, so we can claw back a reasonable tax on the funds originating from the State of Illinois' coffers. Maybe exempt $50k and then tax the balance at 50% or so. That seems fair, it would not be a diminution or impairment of the actual pension benefit and it would certainly raise the revenue that is so desperately needed. Would you be on board with that?
State must raise more revenue
I'm all for taxing pension/retirement benefits in Illinois. Employee pension contributions are not taxable income and therefore should be taxed in retirement. Additional revenue inceases could be attained by sales taxing services which make up 60% to 70% of Illinois' economy. A new income tax rate increase should be large enough to get the States required revenue but also must increase the exempt amount large enough not to soak low and middle income families.
Retireee health care isn't an Illinois constitutional guarantee and, like some of the city of Chicago retirees, will be eliminated soon. The ACA will save us all a lot of money going forward by allowing retirees to purchase their own required health insurance and (according to your earlier stated figures) elimination of retiree health care saves us millions. States cannot go bankrupt under federal law and therefore pension promises will and must be paid according to the States' constitution
Ralph Matire wrote a great paper on how Illinois has a structural funding deficit because of how its has historically collected revenue. Inadequate State education funding means your zip code determines how well your children will be educated. Is that fair? I don't think so!
Cuts are not going to make it. Illinois has the least amount of state employees per capita already. California took drastic measures to raise more revenue and are now out of the worst financially off State spot occupied currently by us. The status quo will not work any longer! Out of the box thinking is required and anyone who says or thinks taxes won't be raised in the near future is either lying to you or just naive.
Ralph Martire – Union Puppet
Anything and everything that Ralph Martire publishes and says must be take with a grain of salt – that is a healthy dose of skepticism. Here is his website at the CTBA:
The following is directly from his website – "The Center for Tax and Budget Accountability ("CTBA") strives to be the pre-eminent source for objective, honest, reliable, and relevant analysis of state and local tax and budget-related issues." Ha !!
While he claims to be independent, look at the list of his funders:
AFSCME Council 31, American Federation of Teachers, Associated Fire Fighters of Illinois, Fraternal Order of Police, Illinois AFL-CIO, Illinois Federation of Teachers, etc, etc.
Just click on "About CTBA" and you can read it for yourself under the "Vision" statement, and click on "Funders"
Ralph has been, and continues to be a puppet for the unions.
Anyone who thinks otherwise is naive.
Many politicians treat his analysis as the gospel. Now you know why Illinois has all its problems?
Union equals good paying jobs
Thomas Paine: Your obvious disdain for public unions shows the total disregard and understanding for their need. In todays society people can work a full time job and their spouse work a full time job and still be eligible for "Food Stamps". Why? Because the direct correlation between a ever decreasing amount of union represented workers and take home pay. The slow death of the middle class is a result of these unionized job losses. Public sector workers already make significantly less than private sector employees of a similar nature. Of course they need unions. Every one that doesn't work for themselves needs union representation to protect them from the ever decreasing average pay of a United States worker.
Pensions — Detroit’s a warning for Evanston and Illinois
A NY Times article today focuses on Detroit's pension problem but deals with why pension promises by government and calculations by actuaries can cause problems.
On a different note, one article dealing with Detroit's bankruptcy and possible termination of Pension payments says that while state law says they cannot be diminished, Federal law does not have such promises and Federal law trumps state laws. I'm sure this will be debated but it maybe a warning to Evanston and Illinois [State, Local and pension holders] that they had better deal with this or face consequences they did not envisiion.
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