Illinois Governor's Proposed Changes to Public Workers' Pensions and Benefits Would Bring Them Closer Inline with Private Sector Workers, Whose Wages are Taxed to Compensate the Public Sector with a Standard of Living Greatly Exceeding Their Own

10 Things You Should Know About Gov. Rauner's Pension Reform Proposal

July 10, 2015 

Reboot Illinois - The pension reform plan proposed by Governor Rauner could impact more than just public pensions. State and local public workers in Illinois would lose collective bargaining rights for pensions, wages, work hours and tenure through this single reform.

The plan, which Rauner announced Wednesday, contains significant pension reforms, but also contains other measures that Rauner has tried unsuccessfully to get through the legislature. A higher standard of proof for employee injury claims and bankruptcy eligibility for Illinois municipalities are among them. It also allocates funds from a Chicago casino for Chicago police and firefighter pensions even though legislation for a city casino has not been debated during Rauner's time in office.

While Rauner said his bill includes suggestions from Senate President John Cullerton and Cook County President Toni Preckwinkle, it quickly became clear that it was not a collaborative effort.

From Natasha Korecki of the Chicago Sun-Times, who quotes Cullerton's spokeswoman, Rikeesha Phelon:

President Cullerton recognizes that the governor is accepting of many of the principles he's outlined but the specifics that the governor is advancing is far away from policies that Cullerton could support.

To simply co-opt language that the Senate President has used and call that negotiation, really does change the definition of negotiation and compromise. You can't simply co-opt language and pay lip service to someone's leadership and call that a negotiation.

Here are the main points of Rauner's proposal:

1. Removes pensions, wages, hours of work and employee tenure from the collective bargaining process.

2. Applies changes to items removed from collective bargaining:

Wages would not decline for five years.

Vacation resets to two weeks for members with less than 15 years of service, and three weeks for those who have more than 15 years of service.

Adjusts vacancy and overtime rights.

Overtime pay would kick in at 40 hours instead of 37.5 hours, matching federal law.

3. Offers incentives for employees to move to the lower benefit plan:

Salary package - $2,000 transition bonus, one-time $3,000 salary increase, overtime pay at 37.5 hours and no additional vacation days.

Vacation package - $2,000 transition bonus, one-time $2,000 salary increase, overtime pay at 37.5 hours and two additional weeks of vacation

Overtime/vacancy package - $2,000 transition bonus, no salary increase, overtime pay at 37.5 hours, two additional weeks of vacation; priority rights in work schedule, vacation, overtime and "bumping."

4. Those now eligible for the highest pension benefits (in the Tier 1 plan that applies to employees hired before 2011) would have to choose between switching to a reduced cost of living adjustment in retirement or agreeing that all future salary increases will be excluded from their pension calculations. Under current law, they receive a 3 percent, annually compounded increase in their pension every year. The new formula would grant annual, non-compounded increases of the lesser of 3 percent or half the U.S. Consumer Price Index.

5. Employees in Cook County would have to choose between the pension plan introduced by the county—except for the aforementioned collective bargaining changes—or choose between a reduced COLA benefit or agree that all future salary increases are excluded from pension benefit calculations.

6. The funding schedule for Chicago Police and Fire pensions would change from the current target of 90 percent by 2040 to 90 percent by 2055, including a five-year period from fiscal year 2016 to fiscal year 2021 where mandatory pension payments are set in statute.

7. Downstate police and fire pension funding schedules would also change to 90 percent funded by 2055.

8. Transfers the investment assets of 642 individual downstate police and fire pension funds to the $35.6 billion Illinois Municipal Retirement Fund. The state's police and fire pension funds would remain independent entities administered apart from IMRF.

9. Changes the definition of catastrophic injury in the Public Safety Employee Benefit Act so it clearly states that such an injury would preclude the injured employee from performing gainful work.

10. Newly hired public safety employees would receive Tier 3 benefits, which is a hybrid defined-benefit and defined-contribution plan with local control on defined contribution benefits.

Check out Reboot Illinois to see four more ways Rauner's pension reforms could impact you, including effects on schools and teachers.

Time to abolish public employee unions?

February 23, 2011

Hot Air - How did Wisconsin and so many other states get to the point of being held hostage to public-sector unions?  Jonah Goldberg gives an instructional tour of the history of the labor-government relationship, which only goes back for most of the country to 1962.  President John Kennedy lifted the ban on public-sector unions at the federal level in that year, but not because civil-service employees faced poor working conditions or uncertain status.  Kennedy liked how the labor movement could feed his party’s needs for support and funding through unionization, Goldberg argues, which put us on an inexorable path to bankruptcy:

Government workers were making good salaries in 1962 when President Kennedy lifted, by executive order (so much for democracy), the federal ban on government unions. Civil-service regulations and similar laws had guaranteed good working conditions for generations.
The argument for public unionization wasn’t moral, economic, or intellectual. It was rankly political.

Traditional organized labor, the backbone of the Democratic party, was beginning to lose ground. As Daniel DiSalvo wrote in “The Trouble with Public Sector Unions,” in the fall issue of National Affairs, JFK saw how in states such as New York and Wisconsin, where public unions were already in place, local liberal pols benefited politically and financially. He took the idea national.

The plan worked perfectly — too perfectly. Public-union membership skyrocketed, and government-union support for the party of government skyrocketed with it. From 1989 to 2004, AFSCME — the American Federation of State, County, and Municipal Employees — gave nearly $40 million to candidates in federal elections, with 98.5 percent going to Democrats, according to the Center for Responsive Politics.

Why would local government unions give so much in federal elections? Because government workers have an inherent interest in boosting the amount of federal tax dollars their local governments get. Put simply, people in the government business support the party of government. Which is why, as the Manhattan Institute’s Steven Malanga has been chronicling for years, public unions are the country’s foremost advocates for increased taxes at all levels of government.

The problem goes beyond the financial footing of governments, although we have begun to finally appreciate just how damaging that has been.  Thanks to the political clout of public-employee unions (PEUs), the states and the federal government have acted as bill collectors from their own employees to feed union coffers through closed-shop rules.  That power has allowed unions to get outrageous pension benefits with little or no contribution from their members, as we have seen in Wisconsin, California, and many of the rest of the states burdened with defined-benefit pension plans.

The unions act, in effect, as a workaround to state legislatures on budgeting and bureaucratic management.  This process has become entirely transparent in Wisconsin, where Senate Democrats insist that Governor Scott Walker has to negotiate budget proposals not with them but with union leaders — effectively giving the unions a veto power on the business of the legislature.  Small wonder President Franklin Delano Roosevelt warned about allowing government workers to unionize, saying “the process of collective bargaining, as usually understood, cannot be transplanted into the public service.”

Walker’s proposal in Wisconsin approaches this key problem in a moderate manner.  It does not ban PEUs, as the unions claim, or even collective bargaining.  It does, however, limit the collective bargaining to wages only, and it also takes the state out of the business of collecting union dues.  Walker’s bill would end the requirement of state workers to join the unions at all, making the public sector in Wisconsin (but not the private sector) a “right to work arena,” which it should have been all along.  That’s a reasonable intermediate step to abolishing PEUs, and should address the imbalance in control of public policy.

Rauner pension plan would end union negotiations, freeze pay

Rauner's plan to fix Illinois pension crisis would end collective bargaining, freeze wages 

July 12, 2015

AP - Gov. Bruce Rauner says Illinois could save billions of dollars each year through an ambitious new plan to address hugely underfunded pension systems, a proposal he describes as "fair and reasonable" for both government workers and taxpayers.

But labor unions and their supporters — including Democrats who run the Legislature — say it's the latest attempt by the Republican to attach union-busting measures to broader policy changes.

The legislation would prohibit state employee unions from collective bargaining on issues such as wages, vacation and overtime, and would freeze salaries for five years beginning this month. It would then offer workers the option of getting raises, more vacation or more overtime — but only if they agree to switch to a less-generous pension plan.

Democratic leaders declared the plan all but dead last week, while labor unions called it "unconstitutional, unfair to workers and retirees, and a waste of taxpayer dollars and time."

"Instead of continuing his one-man political campaign to stomp out the rights of average people, Gov. Rauner should be working with legislators of both parties to find real solutions and revenue for the critical programs Illinois families depend on," said Illinois AFL-CIO spokesman Bill Looby.

Rauner, a businessman in his first elected office, insists there's a lot for Democrats to like in the 485-page measure. Included are changes to Chicago pensions sought by Mayor Rahm Emanuel — language Emanuel described as "a good thing." The bill also would affect pensions of police, firefighters and teachers outside Chicago.

It comes as lawmakers are fighting over a state budget and months after the Illinois Supreme Court threw out a 2013 pension overhaul, saying it violated a clause of the state constitution that says benefits can't be reduced.

Illinois' pension debt is now more than $100 billion, while retirement systems in Chicago and statewide hold a small fraction of the money needed to pay out as promised. Here's a closer look at Rauner's plan:

STATE EMPLOYEES

The legislation would provide state employees with incentives to switch to the pension plan the Legislature adopted for workers hired in 2011 or later.

The so-called "Tier II" pension plan requires employees to work longer before they may retire. It also provides smaller cost-of-living increases in retirement than the plan most workers are on, which provides 3 percent increases each year, compounded annually.

Workers who switch to the less-generous pension plan may choose from three incentive packages. They offer various increases in salary, vacation or overtime earnings, plus a $2000 "transition bonus."

Rauner says giving workers a choice in benefits is a nod to Senate President John Cullerton, who has long argued the approach is the only constitutional pension solution. But Rikeesha Phelon, spokeswoman for the Chicago Democrat, called Rauner's comments "lip service." She said taking power away from unions and freezing salaries of working people isn't what Cullerton had in mind.

TEACHERS

Teachers across Illinois, state university employees, legislators and police and firefighters outside Chicago also would be given a choice in pension benefits.

They could choose to switch from the 3 percent cost-of-living increase, compounded annually, to an increase of either 3 percent or half the consumer price index — whichever is lower — that's not compounded. The other option is to base pension benefits off of salary earned to this point, and not on any future salary increases.

CHICAGO

Rauner's plan would give Chicago and other local governments until 2055 — rather than 2040 — to get their police and fire pension systems to 90 percent funding, thereby reducing the annual payment. It also states that revenue from a future Chicago casino, which the Legislature would still need to approve, would go to the police and fire pensions.

The governor also is proposing the state pick up the employer costs for Chicago Public Schools' teacher pensions. Currently those costs are covered by Chicago taxpayers, even though the state makes the payments for other Illinois school districts.

PUBLIC SAFETY

New police officers and firefighters would be put into a so-called "Tier 3" plan, which would be a hybrid of a pension plan and a 401(k)-style defined contribution plan.

LOCAL BANKRUPTCY

Rauner wants to give local governments the ability to file Chapter 9 bankruptcy — an idea he's pitched as a possible solution to Chicago Public Schools' financial mess.

Emanuel has said it's "the wrong thing to do." Madigan also indicated he opposes the idea.