QUOTE OF THE DAY
Chicago Tribune: Quinn, Republicans hope for pension breakthrough Saturday
After months of posturing without results, Democratic Gov. Pat Quinn joined suburban Republican legislators Friday to announce that a key sticking point has been removed from talks on how to improve the financial condition of the state's heavily indebted government worker pension system.
The governor declared that Democratic House Speaker Michael Madigan has temporarily dropped his push to shift the retirement costs of suburban and downstate teachers away from the state and onto local school districts. Republicans have opposed that provision, saying it would lead to property tax increases outside of Chicago.
The move set the stage for a last-ditch summit Saturday in hopes of cutting a pension deal before the new General Assembly is sworn in Wednesday. When Quinn and legislative leaders sit down behind closed doors at the Thompson Center in Chicago, they'll be working off a list of ideas that range from freezing cost-of-living increases for retirees for as long as six years to allowing the retirement systems to sue if the annual pension payment is skipped, according to a memo obtained by the Tribune.
Reuters: Teacher cost shift tabled in Illinois pension reform
Illinois Governor Pat Quinn said on Friday he is optimistic that state lawmakers will pass pension reform legislation next week after a controversial but key component of the plan was dropped.
The Democratic governor said powerful House Speaker Michael Madigan told him he will defer a measure to gradually shift state payments for teacher pensions onto local school districts until a later date.
"That's a major, I think, step forward for all of us to put together a plan, a bipartisan plan, to do what the people of Illinois want," Quinn said after meeting with DuPage County officials.
Chicago Tribune: Quinn, leaders to meet this weekend in search of pension fix
Gov. Pat Quinn and legislative leaders plan to meet Saturday to try to come up with a compromise to fix financially broken government worker pension systems as the clock ticks down toward the end of the lame-duck session.
The talks are scheduled as House Speaker Michael Madigan has indicated a willingness to explore backing off a provision that would shift the pension costs for suburban and Downstate teachers away from the state and onto local school districts. Critics fear such a move would result in property tax increases.
A Madigan spokesman today indicated the governor and the speaker have been talking.
“Madigan said, ‘I told him to pass whatever he can pass,’’’ Brown said Madigan told Quinn. “If that means we defer the cost shift for some other day, to get other things passed, we’ll try to get other things passed.”
Chicago Tribune: Long odds for major Illinois pension fix
There is much hype and hope in political circles that a lame-duck General Assembly will spend the next few days fixing the financially troubled government worker pension systems that threaten to drag the state over what Gov. Pat Quinn described as Illinois' own version of the fiscal cliff.
The odds appear to be long, however, that lawmakers will strike a grand bargain solving all of the state's pension woes before the new session starts Wednesday and the latest round of political pressure that's been building for months evaporates. After all, it took decades for the retirement funds to get in such bad shape, so it's likely to take longer than a week to untangle the mess, pension and political experts say.
Solutions are varied and complex — there are 17 sets of laws governing retirement funds that touch teachers, police, firefighters, state employees and others. And so far, there's little agreement on how to get there. In the short term, legislators at best might reach a narrower agreement affecting a handful of pension plans that could later be adapted for other parts of the retirement system.
Fox Illinois: Lawmaker says fully funded Illinois pensions ‘impossible’
Illinois has not paid what it owes its five pensions systems, and it’s unlikely lawmakers will want to pay any more than they have to in the future.
“One-hundred-percent funding is impossible,” said state Sen. Pam Althoff, R-Crystal Lake. “As much as anyone would like to fully fund the pension systems, it is just not practical and impossible to implement.”
A new report from the Illinois Auditor General’s office suggests lawmakers fully fund two of the state’s five pension systems — the Teachers’ Retirement System, the State Universities Retirement System. The report suggests leaving the State Employees Retirement System, the General Assembly Retirement System and the Judges’ Retirement system with a target of 90 percent funded.
Chicago Tribune: The pension spike survives
Seven years ago, Illinois lawmakers tried to curb the practice of "pension spiking" by school districts.
Local districts would award huge pay hikes in the final years of a teacher's or administrator's career, which boosted his pension payout. The school district had to pay only for the short-term spike in pay, but the state pension fund was on the hook for years, even decades, of higher pension payments based on salary. Local school boards got to play Santa Claus and send the bill to Springfield.
In 2005, lawmakers capped the pension fund exposure to this scam. The pension impact of any annual pay hike above 6 percent in the last four years of an educator's employment would have to be covered by the local school district. But with compounding, that still meant an employee's pay could rise a whopping 26 percent over four years — with the pension costs picked up by the state-funded pension system.
So how has this played out? Exactly like you'd expect. Some local districts spike pay as much as they can under the law.
Daily Herald: Retired teachers balk at proposal to shift pension costs
Retired teachers and local Aurora residents had their own ideas for Nekritz and Chapa LaVia on Wednesday. All the ideas carried a theme similar to battle recently seen with the fiscal cliff tug-of-war in Congress. Teachers said Illinois doesn't have a pension problem; it has a revenue problem. To earn more revenue the state must either create new taxes or close tax loopholes for the wealthy, they said.
The Pantagraph: Senate endorses limited pension reform; workers protest
The Illinois Senate on Thursday again endorsed a limited fix to the state’s massively under-funded retirement systems, but it remains unclear if any significant pension reform legislation will emerge during the legislature’s lame-duck session.
Just hours before the Senate vote, the Statehouse had been packed by teachers and state workers from throughout Illinois opposing the Senate proposal and other pension reform measures pending before the General Assembly.
Senate President John Cullerton, D-Chicago, said the Senate plan — first approved in May but never taken up in the House — needed two small “technical” clarifications before the House could take it up when members return on Sunday for the final three days of the lame-duck session.
WirePoints: Only a devastating shock will get real action on Illinois pensions, but what?
“I think it’s going to reach a point where there’s either social disorder or bankruptcy before people will act.”
That’s what Richard Ravich said about Illinois. He led the New York Metropolitan Transit Authority during that city’s financial crisis of the mid-1970s and co-authored a the recent bipartisan State Budget Crisis Task Force report along with former Fed chief Paul Volker.
WirePoints: Five reasons why defined benefit pension plans are poison and must be replaced ASAP
The pensions at the center of the storm for Illinois and its localities are “defined benefit” plans — pensioners receive fixed amounts each month for the rest of their lives. Those amounts are usually subject to automatic annual increases or cost of living adjustments. Here are five reasons why defined benefit plans are hopelessly flawed and should be scrapped and replaced as rapidly as fairness and the law allow:
Illinois Policy: Illinois already has a model for pension reform: self-managed retirement plans
Illinois' five public pension systems are broke. The systems are expected to pay out more than $600 billion between now and 2045, but have just $62 billion in the bank. None of the state's pension systems have enough money on hand to pay benefits to the people who have already retired, let alone those still working.
In order to avoid collapse, Illinois must move away from its broken, politician-controlled, defined-benefit plan toward a worker-controlled, defined-contribution plan for all future work.
Illinois Policy: The Illinois pension pot: the less you put in, the less you earn
An 8 percent return on $62 billion is a lot less than an 8 percent return on $159 billion. Because the pension systems can't earn interest on money that isn't there, it's earning absolutely nothing on the unfunded liability.
Altogether, the pension systems miss out on more than $7.6 billion per year in investment returns. That works out to nearly $21 million per day that the state loses as a result of the pension shortfall.
Of course, the first step to get out of the pension debt hole is stop digging. The only way to keep the pension liability from growing further is to shift government workers to a defined-contribution plan for all future work. That means taking control over retirement savings away from the politicians and giving it back to workers. The longer the state goes without comprehensive pension reform, the worse the cost of inaction will grow.
Illinois Policy: Illinois pensions: a dangerous game of guesswork
In the mid-1990s, Illinois lawmakers were facing a serious problem: the unfunded liability of the state’s five public pension systems. By 1996, the state’s unfunded pension liability stood at $20 billion. As a way to combat this growing problem, the state created a repayment schedule, often called the “pension ramp.” The pension ramp promised to get the systems 90 percent funded by 2045.
According to the repayment schedule, by now the five systems should be nearly 57-percent funded. Instead, the systems are just 39-percent funded and the state’s pension debt has grown to $95 billion. So what happened?
Illinois Policy: Pension reform bill "more of the same"
State Rep. Elaine Nekritz, state Rep. Daniel Biss and several of their rank-and-file colleagues recently unveiled a new pension reform proposal. These lawmakers should be commended for stepping forward with a plan, rather than waiting on their political leaders to get around to fixing the problem. Unfortunately, the Nekritz-Biss plan falls short of fixing the state’s massive pension problem.
The proposal makes clear that lawmakers still do not understand the full scope of Illinois’ retirement debt crisis. Under new accounting rules, the state’s five pension systems are underfunded by more than $200 billion. That’s on top of the $15 billion of principal remaining on the pension obligation bonds sold under the Blagojevich and Quinn administrations. And on top of the $54 billion the state owes for unfunded retiree health benefits!
Despite this massive retirement debt, lawmakers continue to pursue plans that preserve too much of the existing, broken system. Government unions and taxpayers alike have long decried politicians’ mismanagement of the state’s pension funds – so why would “reform” keep more of the same?
CARTOON OF THE DAY