Five ways unions will fight Illinois pension reform
EDEN MARTIN email@example.com August 10, 2013 8:48AM
The 2014 campaign for governor is now shaping up. The Democratic and Republican contenders are raising money and honing their messages. But the main issue is being framed by the leaders of Illinois’ public service unions — the representatives of public-sector workers for the state and Chicago — and their legislative allies.
Under fire from pension reformers and newspapers throughout the state, union leaders have cobbled together a plan not only to defeat serious pension reform but also to strengthen their position as claimants for the shrinking public funds controlled by state government and Chicago.
Detroit’s bankruptcy lends urgency to this effort. Union leaders in Illinois see that retired Detroit workers will have to bear a share of the pain in the form of reduced pensions. They intend to avoid that result here. Their plan has these elements:
1. Continue to fight real pension reform — of the kind favored by Speaker Mike Madigan. Keep the pension claims unreduced. Advance the “compromise” drafted by union leaders and embraced by Senate President John Cullerton: offer a small increase in contributions from current state workers, but no limits on COLAs, no extension of the retirement age, and no caps on wage levels used to calculate the pension annuities. Don’t even think of switching to defined contribution plans.
2. Obtain a state “guarantee” of the unfunded pension fund debt of $100 billion or so — as well as any future growth in that unfunded debt. Hang this albatross around the state’s fiscal neck. Give constitutional status to the guarantee so it can’t be changed.
3. Obtain a special funding mechanism, including a unique judicial enforcement provision, available to no other group of creditors except bondholders. Pensions before education; pensions before health care . . .
4. Enact a constitutional amendment permitting a progressive state income tax, rather than a flat tax — not for the purpose of collecting taxes for a fixed revenue need in a “fairer” way, but rather to raise massive amounts of new revenue. Use the new money to pay off not only the unreduced billions of pension obligations incurred for past years of service, but also the additional billions added each year. And no limits: make it a blank check — literally.
5. Then, when all this is tidied up at the state level, enact similar pension non-reforms for the City of Chicago and the Chicago Public Schools — and create similar special “guarantees” and funding enforcement mechanisms to compel Chicago taxpayers to fund the multibillion-dollar backlog of local pension debt. If property taxes in Chicago can’t be raised enough to pay the huge debt, then get the money from downstate and the suburban taxpayers through the new graduated income tax, and increase the state subsidies to Chicago.
That’s the plan. Five simple elements: No real pension reform; state assumption of the obligations; special judicial enforcement; graduated income taxes to produce lots more revenue; and similar guarantees, increased taxes and state subsidies for Chicago. And keep calling it a “compromise.”
There is a compromise deal that can be done here: real pension reform in return for improved funding — without any state guarantee, or special enforcement or blank-check tax amendment.
But the union/Cullerton plan is no compromise, unless you think Sherman “compromised” with Atlanta.