Taxpayer Limited Liability Pension Reform Bill – Part 3

From the archive:

What happens if agreement is not reached

E. IF IT IS IN THE YELLOW PAGES PRIVATIZE IT:

This was former FL Gov. Jeb Bush’s rule on reducing state costs and influence. All we would need to do this is hire one of his former assistants to head up the program in IL. Some functions that come quickly to mind are janitorial services, trucking, IT services, phone banks, corrections, Tollways, Lotto etc. Illinois State Police functions could be outsourced to county sheriff’s departments if the sub contract cost is lower.

Education credits for home schooling and private schools are another area ripe for savings in direct payroll as well as pensions and fringe benefits. Make teachers of non-academic subjects (Drivers Ed, Music, Art etc.) and non-tenured college faculty sub-contractors rather than employees. Sub-contracting is already done at the community college level why not at K-12 and at 4-year institutions?

(Argument for: the ultimate solution to high pension costs is to eliminate employees. Once an employee is fired or sub-contracted your pension costs go to zero.)

F. COST SAVING OPTIONS IF AGREEMENT NOT REACHED:

  1. Salary cuts, furloughs and layoffs.
  2. Health insurance contribution increased substantially including retirees.
  3. Vacations cut.
  4. Sick days retirement accruals eliminated completely.
  5. Holidays cut from 12 to 8.
  6. Life insurance eliminated.
  7. Outsourcing begins including Drivers Ed back to private sector.
  8. 100% of pension costs transferred to local school districts.
  9. Tenure law opened for revision including elimination or severe limits.
  10. Collective bargaining law reopened for revision.
  11. Open Meetings Act expanded to include public participation in all labor contracts.
  12. New law requiring voter approval of all contracts increasing costs more then the Cost-of Living.
  13. End of career (last 5 years) raises limited to cost-of-living.
  14. Option to pay all pension amounts over $75,000/yr with state IOU’s.
  15. Education funding frozen or cut.
  16. Allow Community Colleges to offer 4-year degrees thus lowering state costs by cutting enrollment at high cost state universities.
  17. Initiate change arbitrarily and let the courts decide if it’s legal (see LEGAL OPTIONS BELOW).
  18. Begin Constitutional Amendment process (300,000 signatures or 60% vote in House and Senate).

(Argument for: if pension costs cannot be limited then they must come out of current budgeted items. Legal changes must be made to minimize liability.)

G. REVIEW OF LEGAL OPTIONS:

Legal opinions are varied. The Chicago law firm Sidley Austin has studied the issue and are convinced in-place changes to pension rules (higher contribution rates, later retirements, etc.) can be made without abrogating the Constitutional guarantee. Their reading of the law says that employee’s pension accruals are guaranteed but only up to the day changes are implemented. From that point forward, the new rules apply.

On the other hand Professor Amy Monahan of the University of Minnesota Law School says no, whatever the rules were in place when they were hired are guaranteed until they retire. Therefore interim changes cannot be made.

They both agree that a Constitutional Amendment can make serious changes including eliminating the guarantee and imposing draconian limits including reverting to the previous legal framework called “gratuity pensions” which were not and are not guaranteed at all. Texas and Indiana have “gratuity” pension systems.

There is also the question of changes being made against the constitutional contract guarantee if it is “to serve an important public purpose” or if the original contractual obligation “had effects that were unforeseen and unintended by the legislature”. One would think state de facto or de jure bankruptcy was “unforeseen and unintended.”

CONCLUSION:

The electorate is angry and much more knowledgeable of pension abuses now than they were just a few years ago. There is no doubt in my mind that a constitutional amendment will happen sometime between now and 2015 if a reasonable limit is not established soon for taxpayer pension liabilities. We need a plan similar to this, severely limiting taxpayer liability going forward or a serious conflict will arise and it will be ugly and drawn out.

If in 1970 politicians had told us that at some time in the future pension tax payments would reach 82% of state employees pay would we have voted for the constitutional amendment?  Of course not. And that 82% is what we are currently paying for – hold on – the politicians pensions in the General Assembly Retirement System.

Ironic? No, infuriating.

Just because something is legal does not mean it is not corrupt. The state pension system is corrupt and needs to be changed. If it isn’t Illinois will see an exodus unlike anything it has seen before. And it won’t be the poor people leaving either. It will be the taxpaying public.

At that point the only way to pay Illinois bills will be to tax moving vans.

Bill Zettler is a free-lance writer and consultant specializing in public sector compensation. He can be contacted at this email address.

This article originally posted on March 4th of this year.

 

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