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* Hannah Meisel at NPR Illinois recently interviewed all four legislative leaders. This post will focus on pensions…
“Right now I don’t get a sense of urgency out of the Democrats to say that we’re going to stop this insane, insane appropriation to our pension systems without at least reining in the cost,” Durkin said.
Durkin says he wants to at least try to pass the other option lawmakers could have gone with in 2013: a negotiated pension reform dubbed the “consideration model” in which organized labor would agree to certain cuts in pension benefits. Then Senate President John Cullerton championed the approach, but ultimately lost out to Madigan’s proposal.
McConchie agrees, noting the extreme political unlikelihood that Illinois’ constitution would be amended to weaken or remove the pension protection clause — an idea floated by groups like the libertarian-leaning Illinois Policy Institute. McConchie says attempting a negotiated settlement would at least help guarantee both the state’s pension systems and smaller municipal pension systems don’t implode for future generations of public employee retirees like teachers.
“We need to have reforms that actually get our pension systems onto the track that they can fulfill the promises that were made to the people who essentially have put all their eggs in that basket,” McConchie said. “These people do not qualify for Social Security…And if counted on this pension, we need to do what we can to guarantee them that their pension will be there long-term.”
* Here’s Senate President Don Harmon’s take from the audio recording…
Well, first of all, I am one of those who thinks a constitutional amendment would do nothing to erase the legacy debt. And I don’t even think a constitutional amendment would change benefits for people participating in the system. Those benefits are protected, not only by the Pension Clause, but also by the Contracts Clause of the state Constitution and the United States Constitution. So, there are a lot of people who would like to wish away the Constitution when it’s inconvenient.
But the short answer is, on the legacy debt, we’re going to have to pay it. The consideration model that has been in play may have worked at the time, but in the face of a seven to nothing Supreme Court decision that, as you said, pretty much closed the door on changing current benefits. It is ironclad.
But also lost in this entire conversation is the enormous reforms enacted in 2010 to create a second tier to pension benefits for every public employee in the state hired after January 1 of 2011. A much-reduced set of benefits, so low in fact, Social Security may ding us and force us to raise some of those benefits. That’s a $50 billion by the estimates I remember from the time, and it got almost no coverage in the press because it didn’t take any pensions away from anyone. But that transition from a tier one pension model to a tier two pension model will solve this problem over time. It’s a problem that took a century to get into this deeply, it’s going to take decades to get out.
posted by Rich Miller
Thursday, May 6, 21 @ 8:39 am
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Harmon is right, tier 2 is a huge problem and fixing it will probably result in changing the structure of the benefit. IPI and their lemmings in the GA can’t wish away the US Constitution much less try to overcome what would be a bloody ballot battle. Vote No is a powerful message just look at Fair Tax vote.
Comment by Obama’s Puppy Thursday, May 6, 21 @ 8:48 am
Durkin, what are you willing to propose for this “consideration”.
And for the love of Mike, be specific. Tell me what you are willing to give up in order for retirees to consider altering their benefits.
But you won’t, and you know it. You’re nothing but talk.
Now, go grab your shine box and hit Dabrowski’s loafers.
Comment by Flyin' Elvis'-Utah Chapter Thursday, May 6, 21 @ 8:48 am
Dear Leader Durkin,
=== Durkin says he wants to at least try to pass the other option lawmakers could have gone with in 2013: a negotiated pension reform dubbed the “consideration model” in which organized labor would agree to certain cuts in pension benefits. Then Senate President John Cullerton championed the approach, but ultimately lost out to Madigan’s proposal.===
Put your 60 in a zoom call. Otherwise, you got nothing.
Also, Leader Durkin, your phony isn’t going anywhere.
=== Well, first of all, I am one of those who thinks a constitutional amendment would do nothing to erase the legacy debt. And I don’t even think a constitutional amendment would change benefits for people participating in the system. Those benefits are protected, not only by the Pension Clause, but also by the Contracts Clause of the state Constitution and the United States Constitution. So, there are a lot of people who would like to wish away the Constitution when it’s inconvenient.
But the short answer is, on the legacy debt, we’re going to have to pay it. The consideration model that has been in play may have worked at the time, but in the face of a seven to nothing Supreme Court decision that, as you said, pretty much closed the door on changing current benefits. It is ironclad.===
Leader Durkin, either grasp realities or be a phony to the honesty of doing the doable… and truly ignorant to the reality of what is owed… is owed.
Be well. Good luck,
Your pal,
Oswego Willy
Comment by Oswego Willy Thursday, May 6, 21 @ 8:52 am
And that’s that on that
Comment by SWIL_Voter Thursday, May 6, 21 @ 8:53 am
Harmon is spot on with his statement on the enactment of Tier 2, and the patience needed to see this thru.
Comment by the Edge Thursday, May 6, 21 @ 8:59 am
Finally, someone talks about the reform that has taken place. Senator Harmon is exactly right. And…well said as usual, OW
Comment by Exit 59 Thursday, May 6, 21 @ 9:01 am
For some reason there is a teacher shortage in this state.
Comment by Flyin' Elvis'-Utah Chapter Thursday, May 6, 21 @ 9:15 am
Can’t disagree with anything that Harmon is saying. This should be the go to response anytime someone brings up “pension reform.”
Durkin is simply pandering pretending that a solution exists but the Democrats are keeping it from happening. And that’s the best spin you can possibly put on it. Because the other interpretation is that although we have tried and were unsuccessful in slashing earned pension benefits, we will not be deterred in accomplishing that goal.
Comment by Pundent Thursday, May 6, 21 @ 9:16 am
There is nothing to do Constitutionally that would allow us to evade our pension debt obligations. Anyone who tells you different is playing political games.
Comment by walker Thursday, May 6, 21 @ 9:18 am
Slowly bumping up employee contributions could help (even if only a little) and isn’t unconstitutional.
Comment by Shemp Thursday, May 6, 21 @ 9:18 am
Agree with President Harmon’s take all the way. It is worth noting that Leader McConchie said a lot of the right things too. Refreshing to see that he understands the reality of the problem and is not trying to hand wave it away.
Comment by SAP Thursday, May 6, 21 @ 9:21 am
== Slowly bumping up employee contributions could help (even if only a little) and isn’t unconstitutional.==
Would love to see the math on that lol
Comment by SWIL_Voter Thursday, May 6, 21 @ 9:28 am
We have been going over and over the pension reform sham forever. Tier 2 solved the problem. Unfortunately, it takes 30 years.
Comment by Ducky LaMoore Thursday, May 6, 21 @ 9:31 am
== Durkin says he wants to at least try to pass the other option lawmakers could have gone with in 2013: a negotiated pension reform dubbed the “consideration model” in which organized labor would agree to certain cuts in pension benefits. ==
Durkin overlooks a key point: the person is an individual contract with each employee; the union has no right to negotiate changes.
Harmon has this one right.
Comment by RNUG Thursday, May 6, 21 @ 9:33 am
=But that transition from a tier one pension model to a tier two pension model will solve this problem over time. =
That’s ridiculous. As constituted, the pensions can never be paid in full, and some future event–the next recession, bond vigilantes, a tax revolt, unacceptable cuts to public safety and education–will precipitate the final crisis that brings the whole house of cards down.
The Biden bailout will allow pols to kick the can again, but that’s just a temporary reprieve.
In the meantime, more people leave the state and fewer and fewer resources are invested in the future of Illinois.
Comment by Realist Thursday, May 6, 21 @ 9:37 am
== Slowly bumping up employee contributions could help (even if only a little) and isn’t unconstitutional. ==
Non-starter. The IL SC was clear that the pension rules in place at hiring apply and can’t be unilaterally changed; that would include the contribution percentage.
What WOULD be legal is an increase in contributions in exchange for an increase in benefits, but each employee would have to individually opt in. This has been done in the past, both increases and reductions. In the early 1970’s, employees were given the option of switching from the non-coordinated State Only pension to the coordinated State pension and Social Security; State benefit levels went down with a corresponding decrease in employee contributions to the State pension. Late on, another time, the annual pension increase (on some systems) was boosted in exchange for an increase in employee contributions.
The key difference: all the changes were voluntary and all required an opt in.
Comment by RNUG Thursday, May 6, 21 @ 9:43 am
=== bond vigilantes===
LOL
Illinois bonds are the safest as any out there. Within the constitution alone makes it so.
That’s adorbs… “bond vigilantes”
It’s a racket. As long as those buying the bonds understand Illinois’ constitution, they’ll keep buying
Comment by Oswego Willy Thursday, May 6, 21 @ 9:47 am
First, some shout outs to OW, Walker, Pundent, the Edge, and Flyin Elvis. Just very well stated folks.
=there are a lot of people who would like to wish away the Constitution when it’s inconvenient.=
This every single solitary day.
Tier 2 has driven down annual costs in a big way.
I, along with others here, have repeatedly stated that the problem is the legacy debt. If only the current pensioners were paid and everyone else lost the pension a debt payment north of $7 billion per annum will still have to be paid.
Take the legacy debt out of the equation (which you really cannot do other than for funzies) and you have a very affordable state pension system.
Comment by JS Mill Thursday, May 6, 21 @ 9:48 am
RNUG couldn’t the state also do a change to allow for different selection of different retirement plans, similar to the 3 choices offered by SURS giving employees the option to choose the plan and contribution level that aligns with that plan? This allows over time for a gradual change in plan and contribution level.
Comment by illinifan Thursday, May 6, 21 @ 9:48 am
Let’s be clear;
If y’all are still “people are leaving”… and you are still here like an in-law uncle complaining…
Just leave.
Don’t be like Kass… complaining about Chicago.., then moving TO Chicago.
Leave already.
Comment by Oswego Willy Thursday, May 6, 21 @ 9:49 am
“bond vigilantes, tax revolt”
And your handle is Realist?????
Comment by Flyin' Elvis'-Utah Chapter Thursday, May 6, 21 @ 9:52 am
=== organized labor would agree to certain cuts in pension benefits ===
1) I was never represented by “organized labor” and they can’t make an agreement for me or others who don’t belong (GQP enjoyed diminishing the number of union folks with their Janus ruling and efforts to reclassify employees).
2) The GQP would not offer or agree with a Dem offer that comes near compensating for the sacrifices the GQP and their benefactors are looking for.
=== But the short answer is, on the legacy debt, we’re going to have to pay it. ===
Yes. While Tier 2 put the system on the path for solvency, it didn’t address the debt caused by decisions of politicians to not pay what was owed to the pension system so they could keep taxes low.
=== But that transition from a tier one pension model to a tier two pension model will solve this problem over time. ===
Too bad we can’t tax the politicians for every time they mention pension theft. The debt would be paid in short order.
Comment by Norseman Thursday, May 6, 21 @ 9:53 am
==appropriation to our pension systems without at least reining in the cost==
That’s interesting considering Durkin’s silence when the legislature skipped or underpaid their ‘appropriation’ from 1985 to 2012
Comment by Jocko Thursday, May 6, 21 @ 10:06 am
“… A much-reduced set of benefits, so low in fact, Social Security may ding us and force us to raise some of those benefits. …”
Tier 2 implementation gets so little notice. If SSA forces a change, I wonder how much press will Tier 2 will get then? Something I learned recently it’s an employer’s responsibility to pay Feds the appropriate amount of FICA per employee. If Feds say IL hasn’t paid enough, IL will need to make up of the difference of any past payment (not the employee). The other option would be to raise the Tier 2 benefit. This statement by Senator Harmon seems to imply a risk in the budget.
Comment by From DaZoo Thursday, May 6, 21 @ 10:39 am
The people are leaving argument is fascinating — it suggests that the person making the argument is aware of concepts like choice and the free market but hasn’t applied any of those concepts to the available labor pool for public jobs. I know it is a lot to ask, but people need to understand that the demands placed on our system of government in the 21st century require trained, skilled, and educated professionals. Those professionals are going to understand when they’re getting a bad deal and they’re not going to consider what Tier 2 is offering impressive, especially not at the exact same contribution rate as Tier 1 and there are a lot of factors that may result in people leaving state employment voluntarily for other opportunities and taking their contributions with them. Especially if the idea is to treat public employees as if they are so privileged to do our bidding that they must suffer hardships for doing so.
Even autocrats ruling with divine right still had to pay people for their labor.
It is nice to have adults in the room to contrast the childish imaginations of the Illinois GOP who still believe in magic even if it’s only the kind of magic that screws other people.
Comment by Candy Dogood Thursday, May 6, 21 @ 10:51 am
Every time RNUG posts here, I get smarter.
Thank you.
“Harmon has this one right.” +1
Glad Cullerton was stopped then and is gone now.
Comment by Scott Fawell's Cellmate Thursday, May 6, 21 @ 10:52 am
Reality check! I recognize we got to pay out what’s due to those who are already retired and those who are already paying into the system. What’s wrong with changing benefits for those who do get hired onto the public payroll? Isn’t the future workforce the ones we must work on?
Comment by Levois J Thursday, May 6, 21 @ 10:58 am
== RNUG couldn’t the state also do a change to allow for different selection of different retirement plans, similar to the 3 choices offered by SURS giving employees the option to choose the plan and contribution level that aligns with that plan? ==
Yes, offering new choices that are voluntary would be legal.
Comment by RNUG Thursday, May 6, 21 @ 11:11 am
===Isn’t the future workforce the ones we must work on?===
Already taken care of in Tier 2. Try reading a bit more slowly.
Comment by Rich Miller Thursday, May 6, 21 @ 11:13 am
===the pensions can never be paid in full===
Never is a long time. Lots of things can happen prior to a default, including shifting away from pre-funding pensions. Simply paying pensioners like active employees would cost less annually, but it is much more expensive in the long term. But that might be preferable to tax increases or severe cuts in services.
Comment by Jibba Thursday, May 6, 21 @ 11:25 am
==The current trend shows that IL is 2nd in the nation in population loss==
Mostly because someone has to be, but in absolute terms, the amount of net population loss is very low (And given the difficulties in last year’s census, may not have even happened).
Comment by Arsenal Thursday, May 6, 21 @ 11:27 am
==Isn’t the future workforce the ones we must work on?==
To add to Rich and Durkin’s comments. What’s your suggestion to address the current (and future) teacher shortage? Gift cards? Having them sign contracts written in invisible ink?
Comment by Jocko Thursday, May 6, 21 @ 11:28 am
===“Illinois lost almost 2% of its residents from 2010 to 2020 … .===
Illinois actually lost 0.14%, not 2.00%. 18,000 decrease from 12,830,632 to 12,812,508 - do the arithmetic - a 2% loss would have been 12,537,898. This is Capitol Fax Blog, not a cable news show. Be accurate.
Comment by Anyone Remember Thursday, May 6, 21 @ 11:29 am
==It’s a problem that took a century to get into this deeply, it’s going to take decades to get out.==
Someone probably said that in 1970, then in 1995, and now again in 2020. He does have a point though as we’re spent 2.5 decades getting out and we’ve got another 2.5 decades of getting out.
==Social Security may ding us and force us to raise some of those benefits==
Kinda glossed over that important tidbit. If we’re sure we’re going to get dinged, then deal with that problem now.
Comment by City Zen Thursday, May 6, 21 @ 11:42 am
== What’s wrong with changing benefits for those who do get hired onto the public payroll? ==
Tier 2 was implemented for new hires in 2011. The benefits are so low that, at some point in the future, the Federal government may intervene and force higher benefits in order for it to continue to qualify as a pension plan.
Given the above, what is your proposal for future retirement plans for government employees?
Straight 401K? That expense must be paid monthly, the Feds won’t let you skip it, and will cost more than the current system because the State will have to pay into the existing systems while also paying into the 401K accounts (technically a 457 plan for government employees).
So what is your plan?
Comment by RNUG Thursday, May 6, 21 @ 12:43 pm
Tier 2 might provide some relief for the pension funding issue, but it is definitely increasing the teacher shortage i Illinois.
Comment by Seymourkid Thursday, May 6, 21 @ 1:08 pm
If Illinois converted to a 401k style deferred compensation system for teachers, the school districts would immediately have to start contributing to social security. The cost of doing so would be more than the cost of continuing the pension. Thats the reason there are problems with the Tier II plan. Based on current projections, it will pay less than social security.
This isn’t an issue for state employees who are already covered by social security, so you could convert them to a 401k style plan, but that makes little sense. Tier II is basically self-funded by the employee contribuitions once all the Tier I people are gone.
Comment by Pelonski Thursday, May 6, 21 @ 1:46 pm
==the school districts would immediately have to start contributing to social security. The cost of doing so would be more than the cost of continuing the pension.==
The current normal cost for TRS participants is close to 11%, which is the equivalent of social security and a 4.5% 401(k) match. Granted, the state picks up nearly all of that normal cost now, but the total cost isn’t as far off as you think.
Comment by City Zen Thursday, May 6, 21 @ 2:19 pm
City Zen
You forgot the employee’s social security contribution. For each $10,000 of pay, the teacher will see a $765 reduction in net income. For a teacher making $50,000, that is a $3,825 reduction in net income - over $300/month. So the answer to underfunded teacher pensions … is to make the teachers pay more, suffer a net income reduction?
Comment by Anyone Remember Thursday, May 6, 21 @ 2:25 pm
=and a 4.5% 401(k) match.=
And who pays the match? The state? I kid, the state politicians haven’t been reliable for more than 100 years. That is why the solution isn’t to diminish, it is to pay.
Comment by JS Mill Thursday, May 6, 21 @ 4:18 pm
==And who pays the match? The state?==
True. I’m just saying there is no cost difference anymore. Plus the state would absolve itself of any further funding responsibilities once that match is made.
Comment by City Zen Thursday, May 6, 21 @ 4:34 pm
There is a simple easy legal way to impose a back door increase in employee contributions: Reduce annual salary increases by one percentage point and apply this savings to pensions. Good luck to whoever tries this.
Comment by Anonymous Thursday, May 6, 21 @ 4:42 pm
===Reduce annual salary increases by one percentage point===
The state doesn’t pay or negotiate wages, each individual district does. Some districts get very small if any increases, others get very generous ones. Then what about districts that use merit pay for salary increases.
Comment by Person 8 Thursday, May 6, 21 @ 4:56 pm
The - City Zen - dorm room is still open.
Must be taking summer school classes.
Comment by Oswego Willy Thursday, May 6, 21 @ 5:00 pm
7.65 plus 4.5 is not 11 but 12.15 — I don’t know what City Zen’s point is. Anyway, I agree with RNUG
Comment by Fred Thursday, May 6, 21 @ 9:04 pm
Stop the outsourcing, e.g. with social services, and start hiring in-house employees for that….who will pay directly into the pension system. That’s how to provide breathing room on this.
Comment by Angry Chicagoan Thursday, May 6, 21 @ 9:13 pm