Article VIII, Section 5 of the Illinois Constitution states the following in plain language regarding pensions of public workers like teachers, police and firefighters in Illinois:
Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.
Yet SB512, a bill that would increase pension deductions by 50-100% for these hard working public employees, leaving open the possibility to raise them again every three years until public pensions are destroyed, is being rammed through the Illinois House despite furious opposition from labor unions.
The following is some background, some facts, and some action from a teacher's perspective...
Background
The primary sponsor of the bill is Republican Tom Cross, but Democratic Speaker of the House Mike Madigan is also pushing the deal. The spin goes like this: Illinois is broke and faces an $85 billion dollar unfunded liability! AND it's all the fault of those "sweet" public employee pensions!
Although people like teachers never missed a single payment into their pension fund, consistently contributing 9.4% of their income from their very first paycheck until their retirement, the state continued to use the pension fund as a credit card, failing to make their modest contribution through "pension holidays" or partial payments, thereby chronically underfunding state pensions. So now that there's a "crisis" the state has no choice and can't afford those sweet pension deals anymore. Legislators have to break the promise of the Illinois Constitution not to "diminish or impair" pension benefits and make those over paid public employees pay 50-100% more, with the option to "review" (a.k.a. raise) this contribution level every three years until pensions will be impossible to earn.
Who's pushing this? Millionaires and Billionaires at the Commercial Club of Chicago:
The Commercial Club is the longtime voice of Chicago’s union-busting robber barons. Its members have included railcar builder George Pullman, who called in federal troops to break a strike at his company town, resulting in the deaths of 13 workers. They’ve also included Montgomery Ward Sewell Avery, who was arrested by National Guardsmen when he defied President Franklin D. Roosevelt’s orders to allow unionization at his business.
And the best part of this is that the very people decrying the ills of defined benefit "sweet deal" pension plans are the very same individuals with - wait for it - defined benefit actual sweet deal pension plans that no teacher I know will ever come close to. Take for example, this guy:
Chairman of the Civic Committee of the Commercial Club: Abbott Laboratories CEO Miles D. White. When he retires, he will draw on not one but two defined-benefit pensions worth a combined $20 million. All this for a guy whose company’s stock fell 11% last year, and who announced the layoff of 1,900 employees in January (1,000 of them in Lake County)—a cut that followed 3,000 layoffs last September. Never fear, however; Miles White believes in shared sacrifice: His total compensation declined 8 percent last year—to $20.2 million.
The Facts
So first, is changing pension rules in midstream constitutional? According to attorney Eric Madiar, Chief Legal Counsel to Illinois Senate President John Cullerton, definitely not:
Madiar’s 76-page analysis of this clause is comprehensive and concludes that welching on public pension promises is not an option for Illinois as some legal and civic commentators have suggested.
But what about that $85 billion in unfunded liabilities the state owes pension funds? Note the term "unfunded liabilities" used here. If you own a home with a mortgage you have a large unfunded liability. Unfunded pensions liabilities include every person who may be eligible for benefits ever - those currently receiving benefits and those just starting careers 35 years away from retirement. "Unfunded liabilities" is a scam used to drum up a convenient crisis that can only be solved by whacking public labor unions by making their pension benefit unobtainable.
So what about those overly generous public employee pensions that we can't afford? The median teacher pension is just under $42,000. How sustainable is this? From Teachers Retirement System (TRS) of Illinois (PDF):
The Teachers’ Retirement System Board of Trustees reported total assets of $37.3 billion at the end of March 2011, a 23 percent increase over the assets held by TRS in 2009 during the depths of the world financial crisis. During the first nine months of fiscal year 2011, the investment rate of return for TRS was 21.38 percent, besting the current target investment rate of 8.5 percent.
According to a town hall presentation by TRS Executive Director Dick Ingram (PDF), in FY2010 TRS had $6.8 billion in revenues and paid out $3.9 billion in benefits.
Additionally, most public employee in Illinois such as teachers are not eligible for Social Security. This means that they rely on their pensions for their retirement security. This also means the state of Illinois has saved billions by not paying into Social Security.
Action
Illinois labor unions have joined together and are working together to put pressure on legislators to kill SB512. "We are One - Illinois" has been running great TV and radio spots in Illinois has a good website with more information. But the corporate union haters are running their own smear campaign as well and threatening legislators with retribution should they not pass this bill decimating public pensions.
After days of delays and cancellations, yesterday the Illinois House Personnel and Pensions Committee passed SB512 out of committee on a vote of 6-2-1. Democratic Representatives Elaine Nekritz, Dan Burke, and Kevin McCarthy voting in the affirmative and Progressive Democrat Daniel Biss voting "present" - come on Daniel! Now the bill is before the House and was expected to be voted on today. It wasn't. However the legislative session goes through May 31st and the legislature is staying in session over the weekend.
If you live in Illinois, here is what you can do to help:
1. CALL YOUR REPRESENTATIVE: 1 888-412-6570. Once you give your zip code, this line will automatically connect you with your rep or senator's office. Leave a message like this:
Please Vote NO on SB 512. I am your constituent and asking you to NOT vote for any bill that diminishes the pension benefits of current or retired teachers. This Bill is unfair and is unconstitutional!
2. Ask everyone you know to call his or her legislators today – Both House Representative and Senator
3. EMAIL your legislators. Use this link to the Illinois Education Association contact your legislator tool.
Sat May 28, 2011 at 9:02 AM PT: The IL House is back in session now. If you live in IL, call now!
Here's a fact sheet (PDF) from IFT.
Here's a fact sheet (PDF) from IEA.
Sat May 28, 2011 at 1:21 PM PT: The House adjourned today without taking up a vote on SB512! If you live in IL keep up the calls: 1-888-412-6570.
