Chicago Messes Its Bed, Then Asks Us To Clean It Up

The big issue in Springfield this week is the school funding bill, SB 1, which contains the new funding formula for schools. The governor claims, and he’s right, that the bill contains a provision that, in effect, diverts money from education to bail out the Chicago Public School pension system. Therefore, even though he’s willing to sign a bill containing the new funding formula, he’s not willing to sign bill containing this poison pill provision.

It’s being said that even though we’ve passed a budget, unless SB1 is signed by the governor, schools cannot open in the fall. I don’t agree with that, and I’ll tell you why shortly. However, before we get into the meat of the bill, I thought it’d be a good idea to give you a little bit of history about how the CPS pension system ended up in the condition that it’s in.

In 1995, a deal was struck between CPS and the State of Illinois, a deal which gave control of CPS to Mayor Richard M. Daley. Part of the arrangement called for the Chicago Board of Education to have the flexibility to mingle education funds with funds formerly earmarked only for pensions. As part of the deal, the General Assembly agreed to let CPS quit paying anything into the pension fund for 10 years and, instead, use the money for other things, like teacher salaries, with the hope that the state would boost its contributions in that period. (Yeah, right.)

In an article written by Greg Hinz in November of 2012 and published in Crain’s Chicago Business, the story continues. It’s a great article, and you should read the whole thing. Here’s a big part of it:

“For awhile, according to Mr. (Kevin) Huber (executive director of the Chicago Teachers’ Pension Fund), things worked out all right. With the stock market taking off in the late 1990s, CTPF’s “funded ratio” of assets to anticipated liabilities actually topped 100 percent for a couple of years…

But when the market dropped, so did the funded ratio. By 2005, it was down to 79 percent — due not only to the market decline but to the absence of a cumulative 2 billion dollar pension-payment holiday (emphasis mine).

In 2006, the board resumed making payments. Then came another crisis and a predictable response: Ron Huberman, CPS chief at the time, went to Springfield and got another, partial pension-payment holiday. This one lasted from 2011-13 and allowed the board to put in only $200 million a year — not the $600 million it was supposed to contribute.

Though then Chicago Teachers Union Vice President Jesse Sharkey says he recalls the union objected in Springfield, other sources say any objection was perfunctory. The key votes were 48-6-3 in the Senate and 92-17-7 in the House, which ought to tell you something.

Why wasn’t there a bigger fight? After all, the funded ratio, predictably, has kept dropping and was down to a miserable 59.76 percent in 2011.

Perhaps the reason is that, financial crisis or not and plummeting funded ratio or not, CPS kept delivering nice, sweet, across-the-board raises to CTU members like clockwork.

Between 1995 and 2011, the board agreed to annual pay increases of between 3 percent and 4 percent every year. And, I stress, those were across-the-board raises, above and beyond the “step” hikes for experience, obtaining a higher college degree, etc.

Put a different way: Between 1995 and 2011, any teacher on the payroll throughout that period was entitled to an 82 percent raise — before step hikes. (Again, emphasis mine)

When Mayor Rahm Emanuel came into office, his new board cancelled the last negotiated 4 percent hike, for 2011. But the horse was way, way, way out of the barn by then.

In 2014, the latest pension holiday will expire. That means CPS and taxpayers are on the hook for at least another $400 million or more in pension payments a year. That’s why you hear officials talking about a $1 billion CPS deficit next year.

The union’s Mr. Sharkey says the CTU clearly understands that no one in the union wants “an insolvent pension fund.” All sides need to sit down as a group and negotiate something, he says. CTPF’s Mr. Huber is holding out hope for a pending bill that would reduce the unfunded liability to zero by 2059 — if, that is, nearly bankrupt Illinois will pony up another $200 million or so a year, and if CPS increases its contributions 7 percent a year, every year.”

If Mr. Sharkey wanted to be honest about not wanting an insolvent pension fund, he’d have said that nobody wants an insolvent pension fund until his people can get every dime they can out of it before it completely collapsed.

So there you have the background. Chicago messed its own bed and now is holding a new funding formula hostage in order to force the rest of us agree to clean it up. You’ve heard them say that it’s not fair that they pay into their own pensions and also pay for downstate pensions with their income tax money. There are more than 2 billion reasons why that’s not true. Cry me a river.

Posted in Education, Public Pensions, Public Sector Unions | Tagged , , , , | 2 Comments

Frustrated? Call (217) 782-5350. Ask for Mike.

We have 19 days until the end of the legislative session, and how have we spent the month of May so far? We didn’t meet at all during the first week, and this past week was spent passing resolutions and making “points of personal privilege”. We didn’t vote on one bill, and didn’t go anywhere near talking about getting a budget. We were supposed to be in Springfield all week, but Friday session was cancelled.

I’m going to lay this directly at the feet of the Speaker. He controls what goes on in the House, and I think he decided to show everyone, including his own caucus, that he can jam up the works any time he wants. Here’s my latest episode of “Riding Shotgun with Steve”, where I expand upon that thought:

Riding Shotgun Ep. 2

Watch this video on YouTube.
Posted in Illinois Budget | Tagged , , , | 3 Comments

Why I’m Not Taking a Pension

Last week I told you that I have elected to opt out of the General Assembly Retirement System (GARS), and thus will not be eligible for the legislative pension. There are a number of reasons why, and I’d like to let you know what they are.

  • I don’t believe that anyone in elective office, from dog catcher to President of the United States, should be eligible for a public pension. If we want to get serious about making sure that elective public service doesn’t become a career, we can start by making it less comfortable for politicians to stay in office.
  • As a legislator, I’m going to have to make some tough choices regarding the state’s pension system. By not taking a pension for myself, I’ll be able to make choices that aren’t colored by my own interests. I can look state workers in the eye and tell them that I’m not asking them to make any greater sacrifice than I am.
  • At 16% funding, GARS is the worst-funded of the state’s five retirement systems. The fact that almost half of the General Assembly has opted out means that fewer and fewer members will be contributing to and subsidizing the pensions of those we replace. As of February of 2015, 37 state legislators (29 House, 8 Senate) had opted out of GARS. As I write this, 12 members of the incoming Republican class have already opted out, and I’m confident that more will follow. What this means is that while all of the pension systems are in dire straits, GARS is on the fast-track to insolvency.

There is one other thing I just found out. GARS is the only system among the 5 state public pension systems that allows members to opt-out. (The State University Retirement System (SURS) has a limited op-out provision, allowing them to put their money into a defined contribution style plan.) Those who opt out of GARS must then choose to either participate in Social Security or the state employees’ deferred compensation plan. Under the deferred comp plan, I can, as someone over 55, contribute up to $24,000 per year into the plan. I won’t pay taxes on the money until I take it out.

The bottom line is that instead of contributing 11½% of my legislative salary into a pension plan that’s on the road to insolvency, or 7.65% to Social Security (matched with money the state doesn’t have), I can put over a third of my pay into my own account which I control. Even though there’s no state matching contribution, that’s a no-brainer.

The question I have: if this is such a great deal for the General Assembly, why isn’t it offered to the rest of the state workforce as well? Obviously, if employees were allowed to opt-out, fewer participants would mean lower contributions needed to prop up the system. Therefore, new employees are chained like galley slaves to a sinking ship they can’t escape.

Without true pension reform, and a plan to get the underfunding off the budget, Illinois will soon run out of options.

Posted in Public Pensions | Tagged , | 1 Comment

Opting Out of the Legislative Pension

Early on in the campaign, I said that, if elected, I would not take a legislative pension.

Pension Election

Posted in Uncategorized | 1 Comment

Moving From Campaigning to Representing

State SealI’ve waited to discuss the outcome of the election, not because I didn’t feel that I owed you a comment, but to allow it to sink in. The days since November 8 have been a whirlwind, but now the dust has settled.

First and foremost, I want to thank my wife Deb for her support and understanding during all these months of solitary dinners and neglected household chores. Throughout the campaign she was my gracious silence, and my rock.

To those who supported me with their votes, I simply say that I will do my best to justify your confidence. For those who didn’t, I ask that you give me the opportunity to show you that I am representing you as well. To all the citizens of the 63rd District, I want you to know that your interests will always come before mine or those of anyone else.

On election night I received a very gracious phone call from John Bartman congratulating me on my win. He’s to be commended for standing up and taking on the challenge of running for this office, and I wish him nothing but the best.

Much has been said about the amount of money spent on this race, and it’s something that I cannot leave without comment.

This is the first time in my recollection that there has been anything like this in McHenry County. We’ve seen other races where millions have been spent, but we never thought it would happen here. But it did.

At the outset, I insisted that my campaign maintain a positive message, that it focus on the issues that confront us all: property taxes, business-friendly reforms and jobs. For the most part, that became the theme of the campaign and I’m proud of that. Both sides threw some elbows, but I insisted that this race would not become personal, and it didn’t. To his credit, John’s campaign held to the high ground as well. That can’t be said for most of the other races in this State.

The thing that embarrasses me is the sheer volume of mail pieces, radio ads and other media that blanketed the District. I know that name recognition is key to anyone getting elected to public office. But I also know that there’s a point of diminishing returns, and that point was reached weeks ago. The fact that there were millions of dollars available to spend doesn’t mean that they needed to be spent. While I was the beneficiary of many of those dollars, in no way does that make it any less disturbing. On behalf of those who thought that more was better, I apologize.

Finally, to those who’ll say that my election was bought and paid for, let me say this: I’m not so naïve as to not know where the bulk of my funding came from. But while the money might have been theirs, the message was mine. I’m going to Springfield with that message and will work to move the needle toward lower property taxes, less regulation and more opportunity for the people of the 63rd District and for the State of Illinois. My loyalty is to you and to those principles, and no other. McHenry County voters have long insisted upon independence from their representatives; I wouldn’t have it any other way.

Posted in 2016 Election | 2 Comments