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My pension deal predictions

Updated: May 31, 2013 2:23AM



Friday is the last scheduled day of the legislative session in Springfield, and — as of this writing — we do not know whether Speaker Mike Madigan’s pension reform bill, shot down in the Senate late Thursday, might come up for reconsideration. So should a columnist predict what will or may happen? Or pontificate about what should happen? Or speculate about why?

Causation is generally the hardest thing to figure out. When it comes to the legislature, causation is motive.

Three rules help guide analysis. First, prefer simple explanations to complex ones. Politics trumps policy: Who gets what, when, and how — and how much.

Second, the Democrats run Springfield.

Third, the unions, over time, have been the major source of Democratic support.

Ergo, nothing major happens without union support — or at least acquiescence.

Suppose the Madigan pension bill passes. How could that be explained?

Start with the speaker. He wins praise from business, civic groups, the editorial boards. Historians will credit him with saving the state financially — at least for a while. Union criticism won’t hurt him because his House majority and speakership are secure, thanks to redistricting. The next governor will have a better state credit rating and more money to spend.

Senate President John Cullerton? He fought the good fight for the unions. And he doesn’t give up the constitutional arguments — just leaves them for the courts.

Local school districts? They avoid the hated “cost shift” in which the cost of pensions is shifted to them from the state.

Mayor Rahm Emanuel? He gets a precedent and momentum to reform Chicago’s pensions.

The unions? It will look like they got thumped. But look more closely:

1. They preserve the pension system rather than shift to a defined contribution system the way the private sector largely has.

2. They get an explicit state contractual guarantee of the pension fund liabilities, and a funding mechanism that gives priority to pensions over any other state program except paying off bonds. Let’s say the unfunded liabilities are shaved to about $80 billion. That’s still growing at about 8 percent per year — maybe more depending on how assets perform and actuarial assumptions pan out. That liability, whatever it turns out to be, will have to be funded no matter what the impact may be on funding for education, health care, social services, law enforcement. . . . No matter whether a tax increase is required — or how large.

3. A major embarrassment to organized labor (and the Democrats) is taken off the political table.

4. The unions retain the ability to litigate the constitutionality of the Madigan bill. Given the way its reform provisions work — diminishing benefits some workers have already earned — those arguments are not trivial. (The constitutionality of the bill is also in doubt because it failed to pass the House by the 60 percent required to enact a debt guarantee.)

5. Best of all from the standpoint of the union leaders, they will avoid the beating they would inevitably take from their members if they agreed to a compromise that included any trimming of pensions. Better to have it done to you than agree to have it done. They fought the good fight; they can litigate to their hearts’ content; and if they lose they get the special state guarantee.

So if the Madigan bill is enacted, you won’t hear any public gloating from the union leadership. They’ll grouse about unconstitutionality, and moan about unfairness. But privately, they’ll be popping champagne corks.



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