Recently the suburban Daily Herald newspaper published a letter from a Naperville man named Glen Brown. In the letter (see below) Mr. Brown wonders why there is so much attention being paid to pension reform (SB 512) when there are so many more urgent items that should be addressed by our intrepid legislators. In fact Mr. Brown calls pension reform such as SB512 “ill-advised.”
Nowhere in his letter does Mr. Brown say he is a retired teacher from Leyden High School but based upon the facts I believe this is the same man. If not then this anatomy would apply to many other teacher letters-to-the-editor that I have seen over the years.
So here is the letter. The numbers in parentheses were added to reference my comments below the letter.
“Shouldn’t our state legislators be discussing stagnant or falling wages and a more equitable tax system in Illinois(1), the state’s crumbling infrastructure, economic growth, debt payments, public education(2), and sustainable energy sources(3) instead of ill-advised pension reform such as SB 512?
Shouldn’t they be creating a jobs’ reform bill and awarding employers with tax credits for creating jobs(4) in Illinois? Shouldn’t they be working together to establish a revenue system with a balanced but low and broad tax base to spread the burden of taxes to multiple citizen payers and restructuring the state’s antiquated single-rate income-tax method, and considering the taxation of services in Illinois to reflect its 2011 economy and increase the state’s cash flow (5)?
Shouldn’t our state legislators be raising taxes on the wealthy (6) (their tax rates are the lowest they have been in 80 years) and eliminating their deductions and loopholes, while cutting taxes for the middle class and expanding the Earned Income Tax Credit for the poor (7) ?
What does pension sustainability have to do with a state’s deficit reduction (8) when it is a symptom of more substantial issues that need to be addressed, of which many are in a cause-and-effect relationship with a public pension’s solvency? Will focusing on public pensions’ unfunded liability (pension plans will always have liabilities) (9) revive the Illinois economy and produce jobs? Are Illinois legislators holding the public employees’ pensions hostage the way a certain fanatical and pigheaded minority (10) held the “debt ceiling” hostage at the federal level?
Illinois’ public pensions are not in any imminent danger of financial collapse. Pension fund liabilities are long-term and do not face an urgent liquidity crisis today, tomorrow, or in the immediate future.
1. A “more equitable tax system in Illinois.”
See right off the bat Mr. Brown and I agree. Let’s start making the tax system more equitable by taxing teacher and other public pensions. That would add about $500 million to the state’s “cash flow” as Mr. Brown suggested in #5 below.
2. “state legislators (should) be discussing…education”
Yes indeed they should be discussing Illinois’ ridiculous $30 billion/yr K-12 system and comparing it to other states like WI, MO and Indiana. Why for example should WI have only one teacher with a salary over $100,000 when in 2010 IL had 6,855 teachers with salaries over $100,000. Perhaps a closer look at Mr. Browns $463,000 over his last four years would be a good place to start. After all where in the private sector would an English teacher like Mr. Brown make $121,000 for a 34-week, 170 day work year (185 day contract minus 15 days sick leave)? And they may also want to ask why WI teachers have to work to 65 before receiving full pension as opposed to 55 in IL. Based upon Mr. Brown’s pension that 10-year age difference at retirement alone would save $1.5 million over the expected lifetime of a 55 year old.
3. More “sustainable energy sources instead of ill-advised pension reform such as SB 512.”
Ah yes, the “sustainable energy sources” that are only sustained by taxpayers paying directly thru higher electricity costs and indirectly thru higher taxes to pay for the tax credits issued to politically friendly crony-capitalists. As we know here at Championnews wind power doesn’t work and will not work for the foreseeable future (see here). Perhaps if we taxed Mr. Brown’s pension to pay for the wind power he would be less enthusiastic about a 2,500 year old technology that doesn’t work.
4. State legislators (should) be “awarding employers with tax credits for creating jobs.”
Straight from the Obama/Geithner playbook, tax credits for jobs continues to be the Hail Mary pass of progressive economic thinking. Like Obama and Geithner, Brown has no experience in the business world and obviously has no idea why businessmen hire new employees. They hire because business is expanding not because they might get a small tax credit. So what would happen if this type of law were passed would be tax credits going to employers who were going to hire anyway. In other words a complete waste of taxpayer dollars. This is another in a long line of progressive ad verecundiam fallacies i.e. “appeal to improper authority.” Examples of these fallacious arguments would be asking Mike Ditka to explain the Theory of Relativity or asking Einstein to predict the Super Bowl winner or asking Obama/Geithner/Brown to devise effective business tax policy.
5. Taxing services to “increase the state’s cash flow?”
This is another progressive idea that could be summarized as “raise taxes and they will come.” This was the policy of former Michigan Governor Jennifer Granholm who concluded the reason business’ were not moving to MI was that state services were inadequate and only by raising taxes could new business be encouraged to move to MI. Like Obama, a Harvard Law grad with no business experience, she was spectacularly wrong as evidenced by MI 11.0% unemployment rate.
6. IL should be “raising taxes on the wealthy.”
How about raising taxes on “millionaires” as Mr. Obama wants to do? Let’s tarts with pension millionaires like Mr. Brown and his projected $3.5 million in pension income based upon his current $87,000 pension.
7. Provide more help “for the poor.”
Yes, I agree, we should implement taxes on all IL public pensions and restore the $456 million in cuts to student transportation, Dept. of Aging, mental health and disabilities, Public Health, Children and Family Services and the homeless. In fact taxing and suspending the COLA only on teachers with pensions over $100,000 would provide enough funds to restore the $17 million in cuts to the Department of Aging and the $6 million in cuts to the Department of Children and Family Services. Perhaps Mr. Brown thinks funding a $12,000 cost-of-living-adjustment for Mr. Tapas Das Gupta’s $414,000 pension is a worthwhile tax expenditure but providing for the homeless is not.
8.What does pension sustainability have to do with a state’s deficit reduction (8)?
Well Mr. Brown, pension sustainability is eating the budget alive as you can readily see in the chart below. Please note that the $6.8 billion tax increase implemented last year will just cover the pension obligation next year. Then also notice that in 2015 when the supposedly “temporary” tax increase expires the pension obligation jumps to $7.9 billion. The $6.8 billion for next year represents about 20% of the General Fund Revenue. That’s 20% of the budget to pay for pensions for 5% of Illinois workers.
9. “pension plans will always have liabilities”
Yes they will Mr. Brown – the only question is how big are those (taxpayer) pension liabilities? At the end of 2010 they were $135 billion according the state actuaries but perhaps as much as $270 billion by critics. And those numbers do not include taxpayer liabilities of $17 billion for Pension Obligation Bonds and perhaps another $40 billion for retiree health care. Notice that all of these liabilities, somewhere in the range of $200 to $325 billion, are TAXPAYER liabilities and not employee/retiree liabilities. That is the problem.
10. “a certain fanatical and pigheaded minority.”
Mr. Brown, that’s no way to talk about the Illinois Education Association. If you keep that up you will be persona non grata next summer at the IEA “Solidarity” picnic. Who knows, those kind of comments may drive one of the 30 teacher union bosses with TRS pensions over $100,000 to rip the “Raise Taxes” lapel pin off of your “Occupy Wall Street” t-shirt.
In the end Mr. Brown’s position represents that of a large group of entitled political elitists, usually public employees, who think all solutions lead to tax increases and/or targeted Progressive tax credits which is the same thing. In spite of Solyandra he wants more tax money for ineffective and unworkable green projects; in spite of $6.8 billion in new taxes in IL he wants more taxes on the “rich” and new sales taxes on services; without any experience in business matters he wants tax credits for hiring even though it is useless as a job creating function.
What the rest of us want is fewer Mr. Brown’s in public “service”; lower salaries for the fewer Mr. Brown’s that remain; lesser pensions and health care cost for the fewer Mr. Brown’s that remain; more work (hrs./day, days per year) from the Mr. Brown’s that remain: fewer public functions (regulations) for the fewer Mr. Brown’s to perform/monitor/watch.
And most importantly more transparency at every level of government so we never again have to deal with $200 billion liabilities that no one knew was coming except union bosses and their paid henchmen, the politicians of Illinois.
Bill Zettler is a free-lance writer and consultant specializing in public sector compensation. He can be contacted at this email address.