A press release from Taxpayers United of America:
Don’t be Fooled by Pro-State Income Tax Propaganda
Chicago—Illinois’ political bosses have a lot of bad news in store for taxpayers in 2016, no doubt, but the worst trick up their sleeves is the looming threat of confiscating vast sums of taxpayer dollars by implementing changes to the state’s income taxes, according to Jared Labell, director of operations for Taxpayers United of America (TUA).
“The recurring theme from many of the political elite, government unions, and phony government watchdog groups has been to balk at any discussion of reforming Illinois’ unrestrained spending and unfunded liabilities, instead shifting the focus to raising more revenue by increasing the Illinois state personal and corporate income tax rates.
This is not only a foolish policy, considering Illinois’ recent history with state income tax hikes, but some politicians in Springfield have gone a step further and suggested imposing a new state income tax on retirement benefits as well,” said Labell.
Unfortunately, this is not simply a partisan issuem but rather the most important struggle this year – between
- those who champion the taxpayers and
- those who ingratiate themselves with the state.
Barb Wheeler
For instance, it’s expected that most of the Democratic Caucus in the Illinois General Assembly will support this new state income tax on retirement benefits.
But even Republicans can’t be relied upon to reject this destructive new income tax.
“Rep. Barbara Wheeler (R-Crystal Lake), has voiced support for a new Illinois state income tax on retirement benefits.
“In remarks printed by the Northwest Herald within the last week, Wheeler stated that she is against taxing private sector pensions, but would support a new state income tax on government pensions,” said Labell.
Wheeler went on to say that,
“Nobody likes the word ‘tax,’ but I do believe it’s the kind of back-door pension reform the state desperately needs because so much of our budget goes into paying pension [sic].”
“Besides the questionable legality of such a proposal, the claim that a new income tax – whether it be on private sector or government pensions – will help solve the government pension fiasco in Illinois is extremely dubious.
“The 2011 67% income tax hike was a complete and total failure for Illinois in numerous ways.
“Not only did the state apply 90% of those newly generated taxpayer dollars to the government pensions, but its effect on the unfunded government pension liabilities, now totaling more than $111 billion, was negligible, and an abject failure of policy.
“More taxpayers left the state, the economy has worsened, and Illinois’ credit rating has plummeted.”
An Associated Press analysis of state records reported two weeks ago by The Daily Herald showed at least $4 billion in cash in 531 separate accounts for special state funds.
While raiding such funds has become commonplace, and perceived as a deceptive practice to perpetuate, Illinois taxpayers would be much better off if those billions of taxpayers’ dollars were put to use now, rather than squeezing taxpayers for untold billions more of their hard-earned dollars.
Taxpayer Education Foundation (TEF), the research organization arm of TUA, has reported on this story and proposed abolishing these special state funds for more than a decade.
David McSweeney
Unlike Wheeler, Rep. David McSweeney (R-Barrington Hills), is opposed to a retirement income tax and filed House Resolution 8907 on December 2 to state his opposition, and has since been joined by 41 of his colleagues from both parties.
TUA released a report concerning local government pensions January 6, 2016 – one of the leading factors driving the demand for increasing the state income tax and imposing a new income tax on retirement benefits. TUA’s analysis covers Lincolnshire, Deerfield, and Highland Park government pensions. That data is available on our website, taxpayersunited.org.
“Now is the ideal time to hold elected officials responsible for their records and the policies they support. Illinois taxpayers are encouraged to contact their members of the Illinois General Assembly and demand that they prevent the enactment of one of the worst tax policies possible for the state’s long-term financial health: raising the Illinois state income tax and creating a new state income tax on retirement benefits,” Labell concluded.
If these politi-fools can’t FORCE enough overtaxed people to leave the state, then they will FORCE them into the welfare poorhouse.
It’s no wonder that they are worried about security at board meetings, I would be too.
The root cause of the unfunded pension liability (taxpayer IOU) problem is legislative pension benefit hikes to underfunded pensions over a 45 year time frame from 1970 to present.
The best way to fix the unfunded pension liability (taxpayer IOU) problem in a fair manner to taxpayers is to scale back the pension benefit hikes, which were never affordable in the first place (pensions were underfunded at the time of the hikes).
The only way to scale pay pension benefit hikes retroactively is to repeal in its entirety the pension sentence added to the Illinois State Constitution on December 15, 1970.
That sentence is:
“Membership in any pension ore 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.”
The only way to repeal the sentence is for the Illinois State House ta pass a House Joint Resolution Constitutional Amendment (HJRCA), or for the Illinois State Senate to pass a Senate Joint Resolution Constitutional Amendment (SJRCA).
Then the Governor signs the HJRCA or SJRCA.
Then the amendment is put on an election ballot for voter approval.
Then voters pass the amendment.
The the amendment becomes law rectifying a 45 year taxpayer injustice.
There is HJRCA legislation in the 99th Illinois General Assembly (State Senators and Representatives elected for the 2015 – 2016 term) to do just that.
It is HJRCA 0009 (HJRCA 9) Conamend – Repeal Pension Rights.
That is Constitutional Amendment to Repeal Pension Rights.
Better wording would be a constitutional amendment to repeal pension wrongs.
Synopsis as introduced:
“Proposes to amend the General Provisions Article of the Illinois Constitution.
Repeals a provision that specifies that 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.”
Effective upon being declared adopted.”
The House Sponsors are Republican Joe Sosnowski (69th District – Rockford) and Republican Tom Morrison (54th District – Palatine).
Representative Sosnowski’s district is partially in Boone and Winnebago Counties.
Representative Morrison’s district is entirely in Cook County.
They are the only two sponsors of the bill.
There is no McHenry County sponsor of HJRCA 9 in the 99th General Assembly.
The bill was filed January 23, 2015 by Representative Sosnowski.
The bill was read in full a first time on January 23, 2015.
The bill was referred to the Rules Committee on January 23, 2015.
House Speaker Michael Madigan has notoriously tight control of the House Rules Committee.
This is the same Michael Madigan that was an elected delegate at the constitutional convention in which the pension sentence was approved for place on the December 15, 1970 election ballot.
This is the same Michael Madigan that was first elected to office as State Representative in 1970, taking office in 1971 in the 77th General Assembly (1971 – 1972).
The pension sentence has been one of the keys to Michael Madigan’s power as House Speaker, which is the most powerful position in the Illinois State House, the House leader elected by House members.
Michael Madigan has been Speaker of the House for the 83rd General Assembly – 88th General Assembly, and 90th General Assembly to 99th General Assembly.
83rd General Assembly 1983 & 1994
84th General Assembly 1985 & 1986
85th General Assembly 1987 & 1988
86th General Assembly 1989 & 1990
87th General Assembly 1991 & 1992
88th General Assembly 1993 & 1994
90th General Assembly 1997 & 1998
91st General Assembly 1999 & 2000
92nd General Assembly 2001 & 2002
93rd General Assembly 2003 & 2004
94th General Assembly 2005 & 2006
95th General Assembly 2007 & 2008
96th General Assembly 2009 & 2010
97th General Assembly 2011 & 2012
98th General Assembly 2013 & 2014
99th General Assembly 2015 & 2016
Michael Madigan has been House Speaker for 16 General Assemblies.
That’s 32 years as House Speaker.
There were literally hundreds of legislative pension and retiree healthcare hikes during that period that span Governors Richard Ogilvie, Dan Walker, Jim Thompson, Jim Edgar, George Ryan, Rod Blagojevich, Pat Quinn, and now Bruce Rauner.
The laws which Speaker Madigan is very influential in passing allow legislative pension and retiree healthcare benefit hikes even though current pensions and retiree healthcare funds are not fully funded.
And the newly passed pension and retiree healthcare hikes themselves did not have to be properly funded.
And the newly passed pension and retiree healthcare hikes could occur as salary and current benefit hikes were also occurring.
Legislation with a lack of transparency and explanation to the voters as to what was occurring.
+++++++
Republican State Senator Matt Murphy (27th District – Palatine) sponsored SJRCA 20, Pension Funding and Fairness, in the 98th General Assembly (2013 & 2014).
He was the only sponsor and the bill never made it to a first reading.
SJRCA 20 took an entirely different approach to pension fairness.
Here is a fair way to look at the pension problem.
There are 19 public sector pension systems in Illinois.
For each pension system, lay out the Tier I benefit formula in 1970, and the Tier 1 benefit formula in 2016.
We look only at Tier 1, because Tier II aka Tier 2 benefits are for employees whom began their career January 1, 2011 or after.
Such a comparison would not even accounting for all the salary hikes which are also part of the problem.
Then run some test numbers and look at how much more generous pensions are in 2015 as compared to 1970.
Bill Zettler did just that for TRS (public school teachers and administrators), which is the largest pension system.
He compared benefits in 1970 to benefits in 2011.
Huge difference.
Each of the pension systems has unique benefits.
Here are the 19 pension systems.
Chicago Fire
Chicago Laborers (LABF)
Chicago Municipal (MEABF)
Chicago Police
Chicago Parks
Chicago Public Schools (CTPF)
Cook County
County County Forest Preserve
Metropolitan Water Reclamation District (MWRDRF)
Downstate Police
Downstate Fire
Illinois Municipal Retirement Fund (IMRF)
General Assembly Retirement Sysetem (GARS)
Judges Retirement System (JRS)
State Employees Retirement System (SERS)
State University Retirement System (SURS)
Teachers Retirement System of the State of Illinois (TRS)
Chicago Transit Authority (CTA)
Regional Transit Authority (RTA) – includes Metra & PACE
There may be some additional transit pension funds in Illinois.
17 of those 19 funds, excluding the transit pension funds, have a $158 Billion unfunded liability as of the end of 2014.
That is only the unfunded pension liability, not including the unfunded retiree healthcare liability.
And of course that doesn’t include all the state and municipal bond debt.
What does all that mean?
Zero chance all the pensions, retiree healthcare, and bond debt will all be paid.
Zero.
How it will play out is anyone’s guess.
The article above mentions the unfunded liability is $111 Billion.
The $111 Billion refers to the 5 “state” pension systems (GARS, JRS, SERS, SURS, & TRS) as of June 30, 2015.
That is 5 of the 19 public sector pension systems in Illinois.
More specifically, the $111 Billion unfunded liability is based on the market value of assets without smoothing.
Source (the $111 Billion is actually documented in several sources):
Commission on Government Forecasting and Accountability
November 2015
Special Pension Briefing
Page 2
(There are several actuarial methods and many actuarial assumptions to choose from when making the pension laws and even after the laws are made that go into calculating the unfunded liability, and that is a major concern when estimating the liability).
++++++
To smooth or not to smooth.
Interestingly the $111 Billion Unfunded liability for the 5 state pension systems shows up in another report.
$111 Billion is the Unfunded liability as of June 30, 2014 (not 2015) with the assets at ACTUARIAL value WITH asset smoothing.
Looking at the unfunded liability another way on the same June 30, 2014 date, using the assets at MARKET value WITHOUT asset smoothing, the unfunded liability of the 5 “state” pension systems was $104.6 Billion.
So to compare unfunded liability from year to year, to be most accurate one should note the methods and assumptions utilized, as the unfunded liability changes based on the methods and assumptions used.
Source:
Commission on Government Forecasting and Accountability (COGFA)
February 2015 (date of report)
Illinois State Retirement Systems
Financial Condition as of June 30, 2014
++++++
The $158 Billion unfunded liability mentioned in the comment above is for 17 of the 19 public sector pensions in Illinois.
Source:
Illinois Department of Insurance
Public Pension Division
2015 Biennial Report (covering the years 2013 – 2014)
Presented October 1, 2015 to Governor Bruce Rauner and the Illinois General Assembly
The report lists 672 pension funds and retirement systems, consisting of 657 Downstate Police and Downstate Fire pension funds, and 15 Statewide, Cook County, and Chicago pension funds.
The 657 Downstate Police and Downstate Fire pension funds are typically referred to as Downstate Police and Downstate Fire, 2 different pension systems, when listing the 17 pension systems in Illinois (which becomes 19 pension systems when CTA & RTA / Metra / PACE are included).
Furthermore 1 of the 19 pension systems, IMRF, consists of 3,255 funds amongst 2,981 employers (some employers have multiple funds amongst Regular, SLEP, and ECO).
SELP = Sheriff’s Lawn Enforcement Plan.
ECO = Elected County Official.
IMRF = Illinois Municipal Retirement Fund.
Since each of the 3,255 IMRF funds has its own funding level, and each of the 657 Downstate Police and Downstate Fire pension funds has its own funding level, here is the grand total to track:
3,255 (IMRF)
0,657 (Downstate Police, Downstate Fire)
0,016 The other pension systems
3,928 Total public sector pension funding levels to track in Illinois
Breakdown of the 16 other pension systems:
01. Chicago Fire
02. Chicago Laborers aka LABF
03. Chicago Municipal aka MEABF
04. Chicago Police
05. Chicago Park District
06. Chicago Public Schools aka CTPF
07. Cook County
08. Cook County Forest Preserve
09. Metropolitan Water Reclamation District aka MWRDRF
10. General Assembly Retirement System aka GARS
11. Judges Retirement System aka JRS
12. State Employees Retirement System aka SERS
13. State University Retirement System aka SURS
14. Teachers Retirement System of the State of Illinois aka TRS
15. Chicago Transit Authority aka CTA
16. Regional Transit Authority aka TRA / Metra / PACE.
There actually may be a few more mass transit pension funds somewhere in Illinois.
++++++++
If there are 3,928 pension funds to track, how many different issuers of municipal and state bonds are there to track?
Thousands.
And that doesn’t include retiree healthcare systems.
+++++
That’s a lot of taxpayer money that current and future pensioners and municipal and state bondholders are expecting with no plan as to how the taxpayers are going to pay all of it.
There never was a plan.
That’s because no one looked at the overall problem, just there little sliver of the pie, or it was just done to get votes, campaign contributions, and election assistance.
The people who got us into this problem have not even taken responsibility for the problem, ownership of the problem, much less a sustainable plan to get us out of the problem.
Many of the people that got us into this problem are long gone from elected office.
It’s a problem 45 years in the making.
I like tax fighters but the group on this post is plainly missing THE issue: public vs. private pensions.
Public pensions are sinking Illinois into a debt death-spiral.
Public sector pension recipients are fond of screaming “don’t touch my pension” (whether they really made their own contributions or were the beneficiaries of payments made FOR them by their employers via taxpayers).
And the IL Supreme Court has agreed saying, basically, pensions are sacrosanct and may not be diminished or impaired.
Okay, so what to do about six-figure public pensioners who retire at 50 or 55 and live until 85 or longer with their 3% compounding COLA?
These tax-eaters usually collect WAY more than what they actually put into their pension accounts … way more; and simply continue to outlive their pension funds.
Taxpayers, of course, pick up the remainder, which is killing this state and its annual budgets.
Some think it is time to separate the private retirement savings of typical taxpayers — who should not be taxed on their earned retirement benefits — from those “earning” a Cadillac pension via the taxpayers.
Big public sector pensions ought to pay their fair share.
So the idea that a big government public sector pensioner should have to pay (finally) on his/her pension payments, starting at $90,000 or so, is not offensive to anyone except those who have already been feeding at the trough of government … for many, many years.
There are probably not too many who would be bothered by taxing high public pensions, but, if Barb Wheeler believes that only public pension can be taxed, I believe she is forgetting the uniformity clause in the Illinois State Constitution:
ARTICLE IX
REVENUE
SECTION 2. NON-PROPERTY TAXES – CLASSIFICATION, EXEMPTIONS, DEDUCTIONS, ALLOWANCES AND CREDITS
In any law classifying the subjects or objects of non-property taxes or fees, the classes shall be reasonable and the subjects and objects within each class shall be taxed uniformly. Exemptions, deductions, credits, refunds and other allowances shall be reasonable.
If public sector pensions only are taxed (not private sector pensions) the unions and some public sector pension group will sue and this being Illinois with the pension sentence added to the state constitution on December 15, 1970, and the judges deciding the case in the courts being public sector pension recipients, there’s a good chance they will win.
+++++
Here is how the teacher union commonly addresses the unfunded liability pension issue:
“‘Illinois is in this situation because the state hasn’t met its obligation to the system,’ said Charlie McBarron, a spokesman for the Illinois Education Association, an union that represents many of the state’s teachers.
‘Going forward, the state needs to continue to meet its obligations and, as has been suggested, (reschedule the debt payments) which would ease the stress on the system.'”
http://www.dailyherald.com/article/20151209/news/151208861
+++++
That’s the official position of the largest statewide teacher union in Illinois, which is the state affiliate of the National Education Association (NEA), which is the largest teacher union in the United States.
The other main teacher union in Illinois is the Illinois Federation of Teachers (IFT), which is state affiliate of the American Federation of Teachers (AFT).
++++++++++
The teacher union knew fully well at the time they lobbied state representatives and senators for legislative pension benefit hikes, that pensions were already underfunded.
They didn’t care.
They applied more pressure to the state politicians to hike benefits than to fully fund pensions.
Instead of foregoing benefit hikes and applying pressure to fully fund pensions.
It’s a classic case of wanting to have your cake and eat it too.
We want our pension benefit hikes, we want our retiree benefit hikes, we want our salary hikes, we want our current benefit hikes, we want our pensions paid in full, we want it all.
The teacher unions, and other unions, were instrumental in creating this problem.
They were relying that irregardless how high pension benefits went, how high salaries went (final average salary is part of the pension formula), the state constitution guarantees the benefits.
They ignored long term sustainability of the pension systems focusing instead on legislative pension benefit hikes to underfunded pensions.
The rank and file teachers elect union board members at the local, regional, state, and national levels.
Thus the teachers as a whole are complicit and agreeable to the comments by Charlie McBarron, as he and others have been making such compliments for years.
They will stop at nothing to ensure taxes are hiked to pay for those legislative pension benefit hikes to underfunded pensions.
++++++++
“Rescheduling debt payments” is just more kicking the can down the road.
Rather than dealing with the root cause, legislative pension benefit hikes to underfunded pensions, the teacher union and thus the teachers want to kick the can down the road to future taxpayers, while in the meantime the overall unfunded liability grows.
It’s the Jim Edgar 50 year pension ramp all over again, which was a 15 year ramp from 1996 – 2010.
The Edgar Ramp was Public Act 88-0593 (PA 88-0593), signed into law by Governor Jim Edgar on August 22, 1994.
The 15 year ramp was followed by a 35 year level percent of payroll, to make it a 50 year ramp.
The Edgar ramp was butchered by future legislation.
It never ends.
Uniformity clause specifically does NOT apply to property taxes.
It would be possible to grant newly tailored exemptions to households without public pension holder members.
**The root cause of the unfunded pension liability (taxpayer IOU) problem is legislative pension benefit hikes to underfunded pensions over a 45 year time frame from 1970 to present.**
False, again.
Continuing to state the same thing over and over again doesn’t make it true.
Benefit hikes have played a relatively small role in the unfunded liability.
Once again, you can read about in COGFA’s report here (take a look at page 31):
http://cgfa.ilga.gov/Upload/FinConditionILStateRetirementSysFeb2015.pdf
Now, Rep. Wheeler is wrong, as it doesn’t make any sense (and very possibly isn’t constitutional, as Cal pointed out) to treat retirement income differently based on the source (i.e. public sector pensions vs private sector pensions vs IRAs, etc).
But joining the rest of the country in taxing retirement income makes a lot of sense.
**It would be possible to grant newly tailored exemptions to households without public pension holder members.**
LOL – so you’re going to tax all retirement income, but then grant a new property tax exemption to anyone that doesn’t have a public pension?
Sucks to be anyone that rents.
Or lives in a nursing home.
Or lives with their kid.
Here’s another public sector pension fund.
Chicago Housing Authority Employees’ Retirement Plan and Trust.
That makes 20 public sector pension systems to track in Illinois, and 3,929 public sector pension funding levels.
The Better Government Association is reporting the pensions.
The largest pension is $53,341, and that could be due to a number of reasons (benefit levels, years of service, final average salary, when the pension fund began, etc.).