public sector retirees

Thoughts On Illinois State Lawmakers Passing Public Pension ‘Fix’

The Illinois General Assembly barely passed legislation yesterday that’s been touted to “fix” the state’s $100 billion public pension crisis.

Illinois Governor Pat Quinn, who has promised to sign SB0001, declared in a press release Tuesday:

Since I took the oath of office, I’ve pushed relentlessly for a comprehensive pension reform solution that would erase a $100 billion liability and restore fiscal stability to Illinois.

Today, we have won. The people of Illinois have won.

Not so fast, big guy.

First off, as I blogged yesterday, the Wall Street Journal recently picked apart the legislative “fix,” and concluded not only was it “fake” but:

Even under the most optimistic forecasts, these nips and tucks would only slim the state’s pension liability down to $80 billion- which is where it was after Governor Quinn signed de minimis fixes in spring 2010 to get him past that year’s election…

Second, this legislation is almost certainly headed to court, as in the Illinois Supreme Court. As I noted on December 1, a provision of the 1970 Illinois Constitution defines public pension benefits as “an enforceable contractual relationship” that “shall not be diminished or impaired.”

Even the top-ranking Democrat in the Illinois Senate wonders if SB0001 can pass legal muster. Ray Long and Monique Garcia reported on the Chicago Tribune website this morning:

Senate President John Cullerton, whose earlier union-backed plan to curb pension spending was stymied by House Speaker Michael Madigan, said he remained concerned that the package passed by lawmakers violated a state constitutional ban on diminishing or impairing public pension benefits.

Cullerton, whose Senate Democrats had been viewed as closer to the unions than Madigan’s House majority, said he viewed it important to get something before the courts to decide whether the approach is legal.

“I think the bill has serious constitutional problems, I’ve made that clear from the start, but now it’s in front of the court and they can decide,” Cullerton said.

And decide they will, meaning this supposed “fix” for the state’s public pension crisis might eventually amount to nothing.

I thought Mark Brown of the Chicago Sun-Times summed it all up well. Brown wrote on the Sun-Times website yesterday afternoon from Springfield:

Oh, how I wish I could tell you that the long fight to fix Illinois’ grossly underfunded public pension plans was at an end with Tuesday’s historic votes by the state Legislature.

But that wouldn’t be true.

First, there will be a court challenge — or more likely challenges — brought by state workers, teachers and their retirees, along with the unions that represent them.

And before those cases can even work their way through the system, state lawmakers will have to decide in early 2014 how they are going to handle Chicago’s pension problems — beginning with those of city teachers.

Other local officials, including Cook County Board President Toni Preckwinkle are clamoring for pension relief as well, which will combine with Mayor Rahm Emanuel’s priorities to keep the issue on the front burner.

If the courts strike down the pension reform plan approved Tuesday on narrow votes by both chambers, or even if they rule out parts of it, we could be back here within a year or two to start over.

(Editor’s note: Italics added for emphasis)

What transpired Tuesday in the Illinois General Assembly might be a first step in “fixing” the state’s public pension crisis, but much more work and sacrifice will eventually be required to arrive at a real solution.

Question is, is the will even there among Illinoisans and their elected state officials to do this?

I kind of doubt it.

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Sources:

Garcia, Monique and Long, Ray. “Unions vow legal fight as lawmakers OK pension overhaul.” Chicago Tribune. 4 Dec. 2013. (http://www.chicagotribune.com/news/chi-illinois-pension-vote-20131203,0,5070497.story). 4 Dec. 2013.

Brown, Mike. “Brown: State’s financial problems far from over.” Chicago Sun-Times. 3 Dec. 2013. (http://www.suntimes.com/24156150-761/brown-states-financial-problems-far-from-over.html). 4 Dec. 2013.

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Illinois Public Sector ‘Double-Dipping’ Targeted

“Double-dipping.” When public sector public employees draw a public paycheck while at the same time drawing a public pension.

Back when I as a civil servant, not only did I see this taking place, but suspected the arrangement would come under fire one of these days.

As Main Street’s finances eroded significantly after the economic crisis reared its ugly head five years ago, more grumbling was heard over the practice. I blogged back on April 4, 2011:

An employment arrangement I witnessed during my days as a civil servant is coming under increased fire these days. Bloomberg’s David Mildenberg wrote on March 29:

With U.S. unemployment averaging 8.9 percent, so-called double-dipping by tens of thousands of government workers nationwide is drawing increasing scrutiny.

Lawmakers from coast to coast are taking steps to curb the practice as states face combined deficits projected at $112 billion and unfunded pension liabilities of as much as $3 trillion.

Arkansas banned double-dipping by state workers last month, while bills to curb it are pending before lawmakers in Olympia, Washington, and Trenton, New Jersey.

And then there’s Illinois, where double-dipping is still permitted in a state saddled with a nearly $100 billion unfunded public pension liability.

Perhaps for not much longer though.

Enter Illinois State Representative Jack D. Franks (D-Woodstock). Representative Franks has introduced Illinois House Bill 3760, the “Retirement Means Retirement Act,” on November 14. Natasha Korecki reported on the Chicago Sun-Times website today:

[Representative Franks] says the legislation would address anyone — from state lawmakers to school superintendents to those in law enforcement who retire from one public job because they’ve maxed out on their pension, then take another public job as they begin to draw pension benefits.

Franks pointed to school superintendents and police chiefs who retire on a Friday only to return the following Monday with a new title, new salary — and drawing a pension— all while staying in the same office.

“I see a lot of people who retire and just end up in another government job shortly thereafter,” Franks told the Sun-Times. “That’s not what this system was designed for, but it’s a major loophole that they’re able to exploit… We’re going after the abusers — and we know who we’re talking about. Some of these guys make more than the president in retirement.”

Supporters of “double-dipping” argue that someone has to be hired to fill the job opening, so it might as well be the best qualified candidate applying for the position- which in many cases is the new retiree.

Reading over the proposed legislation, “double-dipping” looks to be prohibited only going forward. Illinois public sector retirees who are already participating in such an arrangement appear to be safe.

For now, at least.

You can find out more about Illinois House Bill 3670 on the Illinois General Assembly website here.

Source:

Korecki, Natasha. “Public pension and salary ‘double-dippers’ targeted in new bill.” Chicago Sun-Times. 19 Nov. 2013. (http://www.suntimes.com/23845706-761/public-pension-and-salary-double-dippers-targeted-in-new-bill.html). 19 Nov. 2013.

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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Chicago Sees ‘Most Violent January In More Than A Decade’

I have a pretty good idea what a number of you will be thinking as you read this post:

How’s that gun “control” working out for you, Chicago?

From John Byrne, David Heinzmann, and Bob Secter on the Chicago Tribune website late last night:

Following the most violent January in more than a decade and the high-profile slaying of a 15-year-old high school band majorette, Mayor Rahm Emanuel and his police chief moved closer than ever Thursday to reintroducing the very police strategy they dumped when they took over in 2011.

Emanuel said he would move 200 officers off desk duty to bolster the size of roving teams aimed at suppressing outbreaks of murderous violence that have been on the rise in the city for more than a year.

“The most violent January in more than a decade.”

According to the Crime in Chicago blog yesterday, 44 people were murdered and 160 were shot in the city last month.

Now, back on New Year’s Eve, I noted that at the end of a year in which Chicago surpassed 500 murders (534 according to CIC), the number of beat cops was less than before Rahm Emanuel became mayor.

So, why not just hire more police officers then?

Byrne, Heinzmann, and Secter (sounds like a law firm) added:

The head of the police union said retirements and a lack of new hiring amid tight budget years has reduced the size of the force well below what is needed to keep the streets safe.

“No matter how City Hall slices the numbers or spins this issue, the fact remains we have less officers on the street now than when the mayor was elected,” said Mike Shields, head of the Fraternal Order of Police.

At the news conference announcing his new plans, Emanuel said “you don’t ask the taxpayers to pay for additional cops until you make sure you’re using every cop on the payroll today effectively.”

Personally, I think City Hall is well-aware of the significant, fast-approaching fiscal challenges that are in store for Chicago, so basically “what you see is what you get” could be the case for Chicago Police Department manpower. As things stand, taxes will be going up- significantly- but one has to wonder how much of it will be earmarked for the following, which I blogged about back on August 1:

The “Windy City” has a $25 billion pension crisis that will require property taxes to be doubled by 2015 (from an anticipated $476 million this year to $1.2 billion in 2015) if no changes are made to both retirement benefits and City of Chicago employee contributions.

Remember that $2.98 billion the city received when the Chicago Skyway and parking meters were privatized under former Mayor Richard M. Daley? Only $623 million remains.

The analysis comes on the heels of year-end audit findings that show Chicago is in the midst of a debt crisis, adding $465 million of debt in 2011 to a total long-term debt that’s sitting at just over $27 billion.

(Editor’s note: Italics added for emphasis)

Chicagoans- be prepared to bust out those wallets very shortly.

To wrap things up, one sentence in that Tribune piece really stood out for me. Byrne, Heinzmann, and Secter wrote:

But the events of this week show that tragedy can strike anywhere, and calibrating how and where to stretch those resources is difficult in a city with a deeply entrenched culture of violence.

(Editor’s note: Italics added for emphasis)

“Culture of violence?”

Sounds like Second City Cop wasn’t too far off the mark with that “Culture of Death” comment the other day.

Watch your six, Chicago.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

Source:

Byrne, John, Heinzmann, David and Secter, Bob. “Street violence spurs shift in police strategy.” Chicago Tribune. 31 Jan. 2013. (http://www.chicagotribune.com/news/local/ct-met-emanuel-mccarthy-officers-reassigned-20130201,0,7276684,full.story). 1 Feb. 2013.

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Illinois’ Total Unfunded Liabilities: $275 Billion

The following bit about Illinois’ total unfunded liabilities from a January 28 Investor’s Business Daily editorial was so depressing to read that I originally planned to blog about it much earlier this morning- but needed to step away. From the IBD website:

A recent release by the Illinois Policy Institute shows this [$96.8 billion unfunded debt to five state pension systems] is only the tip of the iceberg and when you add in other liabilities such as $54 billion in unfunded liabilities for retiree health insurance and $15 billion in pension bonds that Gov. Pat Quinn and his immediate predecessor, former Gov. Rod Blagojevich, issued to avoid pension reform, Illinois’ total unfunded liabilities amount to $275 billion, or $58,000 in debt for each and every household in the state.

(Editor’s note: Italics added for emphasis)

So what’s it going to be, Illinois? Since a booming economy seems unlikely to return anytime soon, will the Democrat-dominated Illinois General Assembly finally enact significant spending cuts? Raise fees and taxes through the roof? Throw public sector retirees “under the bus?”

They’re going to have to do something real quick.

Or watch the whole thing unravel.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

Source:

“Obama’s Illinois Downgrade Makes It America’s Greece.” Investor’s Business Daily. 28 Jan. 2013. (http://news.investors.com/ibd-editorials/012813-642237-credit-downgrade-illinois-standard-poors-worst.htm). 31 Jan. 2013.

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Christopher E. Hill, Editor
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