Illinois should put itself under receivership over pensions

Blogger two years ago

By John Ruberry

“As a result, Illinois government is a massive retirement system that, during work hours, also offers some services.” Chicago Tribune Editorial Board in 2016.

“You never let a serious crisis go to waste.” Rahm Emanuel in 2009.

Last week the president of the Illinois state Senate, Don Harmon (D-Oak Park), sent a letter the state congressional caucus, a gerrymandered lot–more on that latter–asking for $41 billion in aid in response to the COVID-19 outbreak.

The devil is in the details–Illinois is a hellish place—and in that letter from Harmon is a request of $10 billion to fund its woefully-underfinanced public pension plans.

Illinois’ pension crisis goes back decades. In 1989 Governor Jim Thompson, a Republican, signed into law an annual compounded three-percent cost-of-living-adjustment for the state’s public pensioners. But the funding wasn’t there. His successor, Jim Edgar, another Republican, seemingly placed a fix into the system in 1994, “the Edgar ramp,” which started with low payments for the 15 years of his plan. But by that time, when the “ramp” was to kick in, Great Recession arrived. And there were “pension contribution holidays” before then. When the 2008 economic collapse hit Rod Blagojevich, who was as bad as math as Edgar and Thompson, was governor.

In the early 1990s pension payments consumed four percent of the Illinois budget–now it’s 25 percent. The state-controlled public pension plans are only about 30 percent funded.

All that time–except for two years–powerful Chicago Democrat, Michael Madigan, has been speaker of the state House.

According to the Illinois Policy Institute, 19,000 state pensioners collect more than $100,000 annually. On average these pensioners paid a paltry $160,000 into their retirement plans. What a great deal!

New Jersey and Kentucky have public pension funding issues that are as bad, or perhaps slightly worse, than that of Illinois. Will they be asking for pension bailouts next?

Cutting the three-percent COLA has been tried–it was ruled unconstitutional in a unanimous decision by the Illinois Supreme Court because of the pension guarantee clause in the state constitution. Repealing that clause is the smart thing to do but it’s a politically tall hurdle. Such an amendment would likely have to pass both chambers of the General Assembly. Thanks to Madigan, a skilled gerrymanderer who is also the chairman of the state Democratic Party, there are Dem supermajorities in both chambers. Two attempts by petition to effectively ban gerrymandering by way of a constitutional amendment was struck down in court. Allies of Madigan were behind the anti-Fair Map suits. The petition process to amend the Illinois constitution is deeply flawed. 

The organized labor wing of the Democratic Party, the public sector unions, won’t remain quiet if pensions are challenged. Hey there unions, you contributed to this problem too. In 2005 most public service unions signed on to that year’s pension holiday.

Last week Fitch lowered its bond rating for Illinois to BBB- with a negative outlook. That’s one level above junk.

I’m against an Illinois pension bailout by the federal government. For the most part. But if such aid comes in the form of an International Monetary Fund-style rescue package with conditions that Illinois cleans its fiscal house, such as dropping the 3-percent COLA and taking aim at the top pension earners, those six-figure retirees, I’m willing to listen. 

But receivership is best. Okay, let me dream a bit. As Chicago architect Daniel Burnham said a century ago, “Make no little plans; they have no magic to stir men’s blood.” I know, states are viewed as sovereign entities and cannot, as Detroit did in 2013, declare bankruptcy. But what if Illinois agrees to a strings-attached receivership deal? An emergency manager can be appointed. Pritzker, or whoever is governor if receivership comes about, can still handle the ceremonial stuff, such as ribbon cutting for a new bridge and placing bets with other governors when Chicago sports teams are playing for a league championship.

Oh, I’m thinking loans from the feds, not handouts.

As badly funded as Illinois’ pension plans are, many local government pension systems are in worse shape. Illinois municipalities and government agencies, unlike those in Michigan, cannot do so under current state law. That needs to change too.

On a personal note, several friends and relatives of mine are collecting state pensions. Money that was taken from their checks every two weeks for their retirement was instead spent on lord-knows-what. They deserve to be angry and that fury needs to be directed at every Illinois governor from Thompson through Blagojevich. And of course at the Where’s Waldo of Illinois failure, Boss Michael Madigan. He deserves the most rage.

Let me be clear: I don’t take my pension reform views lightly.

Prior to Harmon’s bailout request, the latest pension fix idea was a constitutional amendment to eliminate the Illinois flat income tax guarantee and replace it with a graduated one. That amendment will be presented to Prairie State voters in November. My guess is that it will fail. And even if the graduated income tax amendment passes, the additional revenue won’t be enough. Illinois, which has had negative population growth for six straight years, can’t tax its way of the mess.

John Ruberry regularly blogs from Illinois at Marathon Pundit

I oppose Trump’s commutation of Blagojevich sentence

By John Ruberry

“I didn’t cross any lines I didn’t break any laws,” disgraced former Illinois governor told Rod Blagojevich Fox Chicago’s Larry Yellen in his first interview after his 14-year prison sentence was commuted by President Donald Trump.

Blago did both, which is why I oppose Trump’s commutation. I’m also on the other side of the opinions of my conservative friends and relatives here in the Land of Lincoln. Two of them are lawyers who have tried cases in front of now-retired federal judge James Zagel, a Ronald Reagan appointee. One of those attorneys remarked to me that he was “a hardass with a tin ear.” When I pointed out that one of the counts that the Chicago Democrat was convicted was for was attempting to extort a children’s hospital, he conceded, “Yeah, that was a bad one.”

So is trying to sell a US Senate seat to the highest bidder. As is lying to federal agents.

“I will govern as a reformer,” is what Blagojevich declared in his first inaugural address. His idea of reform was replacing the crooks and ward heelers surrounding his predecessor, Republican George H. Ryan, with his own crew of corruption. Blago’s friend and top aide Christopher Kelly was one of them. Shortly before he was to begin his five-year prison sentence, Kelly committed suicide. Two of Blagojevich’s chiefs of staff served time. Tony Rezko, his political fixer and fundraiser, served several years in federal prison. While they may have willingly been on board Blago’s corruption express, the former governor aided in ruining several lives.

Rezko of course was a key fundraiser in the early years of Barack Obama’s political career. The fixer and his wife played a role in the purchase of the Obamas’ Chicago mansion, the transaction has never been completely explained.

“He honestly believes he did nothing wrong,” Yellen told Mike Flannery this weekend about Blago on Flannery Fired Up

On my own blog I explained my opposition to the commutation with one caveat. If Blago spills the beans on what he knows about his political adversary, longtime state House speaker and Democratic Party chairman Michael Madigan, I’ll give Trump’s move a second thought. There is a current federal investigation of Illinois corruption and Boss Madigan’s name keeps coming up. True, whatever Blagojevich knows probably falls outside of the statute of limitations, but it can’t hurt either. Illinois needs to be power-scrubbed and sand-blasted. Illinois needs much more transparency. 

And as I’ve said many times, one way to finally clean up Illinois is to have judges like James Zagel impose maximum sentences on crooked pols and public workers. Fear is a powerful motivator. The 28-year sentence that former Detroit mayor Kwame Kilpatrick received–he had his hands in a lot more pots than Blagojevich–is a good example.

John Ruberry regularly blogs at Marathon Pundit.