Chicago Tribune

More State Pension Hyperbole

Adam Doster — Mon, 09 Nov 2009 10:50:41 -0800

This week, the 19-member Pension Modernization Task Force will finalize its report on how Illinois should reform its retirement benefit program for government employees. The panel includes lawmakers, labor leaders, business representatives, and public pensioners. Because they're still deliberating, we aren't sure exactly what their recommendations will be. But details are beginning to emerge. According to reporting from Doug Finke of the State Journal-Register, those hoping to move to a two-tiered system won't be happy with the results:

Another task force on Illinois’ massive state pension problems is set to wrap up its work next week, but it appears the group will not formally recommend changes to pension benefits as a way to save money. [...]

A draft copy of the task force report specifically blames lack of state funding — not too-generous benefits — for the financial problems facing the systems. The draft report says comparisons were made to public employee pension systems in other states and that Illinois’ systems “were generally found to be in the statistical median.”

The draft report also asserts that the cost of public pensions, measured as a percentage of payroll, are comparable to or less costly than private-sector retirement programs. The Civic Committee and Civic Federation of Chicago disagreed with that analysis. One version of the draft report included those disagreements; in another draft version circulated last week, the disagreements were deleted.

While we credited the Tribune editorial board for their TIF commentary today, their reaction to this news wasn't as reasonable. Blaming organized labor for stacking the panel and producing a "less than candid document," the paper blasts the report for failing to consider the size of pension benefit packages offered to state workers:

In a swift vote, though, the task force's labor sympathizers nixed all of [the proposed reforms]. In their view, the pension crisis has one root cause: Lawmakers haven't fully funded the system. In other words, taxpayers haven't put up enough money to pay all the benefits. The sheer size of those benefits? No problem there.

Amazingly, the Tribune declined to include any data about the average pensions received by Illinois state employees. Why? Because those numbers blow a huge hole in their argument.

Indeed, it's hard to make the case that overly-generous pension benefits are sucking the state dry. When you combine workers in all five plans, the average retired Illinois state employee takes in just $17,112 a year. Most of that money is generated from employee and employer contributions (with the remainder generated by interest). And because roughly 75 percent of Illinois workers (most of whom are teachers) don't pay Social Security taxes while employed, they don't get any Social Security benefits when they retire.

As we've said before, there a plenty of reform proposals that make good sense. But the reason we're facing a pension crisis in this state is that Illinois lawmakers have avoided raising adequate revenue by intentionally underfunding the system for almost 40 years. All the while, the employees themselves have continued making their full contributions.

If the Tribune thinks that hardworking state employees should live off of considerably less than $17,000 per year, that's fine. But their readers should be able to decide if that amount is too much. By leaving out those underlying numbers, the editorial board just perpetuates the myth that greedy state workers are driving the state into the ditch.

We'll offer a full analysis when the details of the report are released.

Tribune: Daley Has Gotten "Carried Away" With TIF

Josh Kalven — Mon, 09 Nov 2009 08:57:48 -0800

Since the Reader's Ben Joravsky and Mick Dumke published their latest report on Chicago's shady tax increment financing (TIF) system, we've noted the increasing media attention being devoted to the issue, with some reporters even going so far as to refer to as a "huge problem" for the city. Today, as the city budget hearings wind on, the Tribune editorial board does its part to keep the story alive in a piece titled, "It's Our Money." The board takes that reasonable (and familiar) position that, while TIF can be a valuable and effective economic development tool, Mayor Daley's use of it has gotten out of hand:

TIFs are meant to revitalize blighted areas that wouldn't otherwise be attractive to developers. By designating an area a TIF district, the city lays claim to the new tax dollars generated by rising property values there. Those dollars are supposed to be reinvested in the district to promote growth.

TIFs are one of the better redevelopment tools available to local governments. But Chicago has gotten carried away, creating a vast redevelopment wonderland controlled by the mayor. More than a third of the city, including the LaSalle financial district and most of the Loop, now falls within TIF districts. Though it stands to reason that an area that raises hundreds of millions of dollars in property taxes is no longer blighted, if it ever was, the Daley administration insists the TIFs are needed to keep those skyscrapers from falling into disrepair.

The board goes on to call for more transparency: "Open the books, Mayor. Put everything out in the open so taxpayers can see how their dollars are spent."

It's great to see more and more voices in the local media speak up about the TIF "mission creep." A more transparent system is obviously needed. But we should also recognize that there are ways to scale back the system and lessen its drag on local taxing bodies. Learn more about them here.

Tribune: Blame Madigan The Taxman

Adam Doster — Thu, 10 Sep 2009 09:53:43 -0700

Following the lead of Sun-Times columnist Carol Marin, the Tribune editorial board directed their anger over the Cook County sales tax veto override failure at House Speaker Michael Madigan today, blaming the Chicago Democrat for bottling up a bill in Springfield that would have lowered the county's override threshold from a four-fifths majority to three-fifths. They also praise Sen. Dan Kotowski and Rep. Julie Hamos for their vow to revive the bill during the October veto session:

Why would Madigan entomb a common-sense measure to lower the threshold for a veto override?

Because Madigan wants to protect the thousands of Democratic patronage jobs in county government. Many of those payrollers donate money and campaign time to Madigan's party. Overriding Stroger's veto and lowering the sales tax would begin to force some economies -- such as eliminating a few do-little patronage jobs -- on Stroger's government.

So let's bestow on Madigan the honor he richly deserves: co-ownership of Stroger's galling tax hike. They're the taxmen.

As Rich Miller notes, Madigan is not colluding with Board President Todd Stroger. The Speaker has long opposed dropping the threshold, a point the Tribune and lawmakers omit. But there is no reason the will of the people and the elected officials they represent should be thwarted by laws that don't apply to any other level of government. And it's good to see the Tribune rally behind this reasonable legislative fix.

Is Obama's IL Support Really "Shaky"?

Adam Doster — Fri, 04 Sep 2009 10:45:35 -0700

In a front page story today, political reporter Rick Pearson examines a new Tribune/WGN poll of 700 registered Illinois voters and describes President Obama's home-state approval rating as "shaky." Here's an excerpt:

The results of the poll, conducted Aug. 27-31, indicate many of Obama's home-state voters have the same concerns that voters have shown in national polling, where confusion over a complicated health-care reform plan and continued worries about employment have taken an even greater toll on the president's approval rating.

Rich Miller offers a thoughtful critique of Pearson's summary over at Capitol Fax, pointing out that it's not particularly instructive to compare Obama's current approval ratings with those from February, when they were artificially high and the president hadn't yet endured any bruising legislative fights. After all, Obama only won the state with 61 percent of the vote in November.

He also knocks Pearson for his supposition that "Obama’s standing with home-state voters could create problems for Illinois Democrats, if it continues into next year’s general election." A downward trend is obviously never encouraging for a politician or a party. But the president is still broadly popular in the state (only 33 percent disapprove of his performance thus far) and will likely remain so, especially if some version of health care reform is approved.

Then there's Pearson's conclusion regarding independents:

Among the potentially troubling signs for Democrats that surfaced in the survey was the fact that only about half of voters who describe themselves as independents approved of Obama's job performance. Illinois has voted Democratic in recent elections, but independents remain a key swing block.

The Tribune did not release the survey's cross tabs, so we can't see the exact figure Pearson is referring to here. (Does "about half" mean slightly more than 50 percent? Slightly less?) But it's worth noting that, according to Illinois exit polls, 55 percent of self-described "Independents" supported Obama last November, compared to 43 percent for John McCain. Dropping a few percentage points is hardly definitive, let alone "potentially troubling."

Health Care Round-Up: Foster's Town Hall, Pressuring Lipinski, WTTW's Roundtable

Adam Doster — Thu, 03 Sep 2009 13:59:09 -0700

Some members of Senate Finance Committee may be looking to pare down the size of the upper chamber's health care package and the White House is deliberating if they would accept such a deal. Back home, lawmakers are staking out their positions as well. Here's the latest in local health care news:

Foster's Tele-Town Hall

Rep. Bill Foster, a potential swing vote, clarified his stance on many health reform issues during a tele-town hall meeting with constituents last night. The Geneva Democrat reiterated his support for a public option, albeit one that operates on a level playing field with private insurance companies. He also expressed openness to a few funding mechanisms, including a surtax on the top 1 percent of the nation's wage earners or a tax on high-level health insurance policies that currently are provided tax free. For reformers, this should come as a good sign.

The National Republican Congressional Committee isn't too happy with his willingness to back reform, targeting him earlier this week with a ridiculous ad that falsely claims House Democrats are going to cut Medicare by $500 billion dollars.

Pressure On Lipinski

Rep. Dan Lipinski, another supporter of a "level-playing field" public option, is starting to send out signals that the cost of the health care package could determine his vote. In early August, the 3rd district representative issued a statement acknowledging that "it is critical that this bill constitutes real reform and avoids pouring more money into a broken system." On Tuesday, he penned a column in the Southwest News-Herald echoing the same theme. As the August recess comes to a close, organizers from the Campaign for a Better Health Care are looking to apply some pressure to the Democrat to endorse a more robust public option, which the Congressional Budget Office thinks would save money. From a press release:

The people of Illinois' 3rd Congressional District, like all Americans, deserve real reform. Call Congressman Lipinski today - tell him:

-You want quality, affordable health care that you can rely on and you expect him to support HR3200.

-You expect him to be on the side of hard working Americans, and not on the side of the insurance industry.

-Health care reform must ensure our freedom of choice - WE want to be the ones to choose a robust public option or a private plan, whichever is right for us and our families.

WTTW's Roundtable

WTTW's Chicago Tonight devoted its entire show on Tuesday night to the subject of health care, convening a panel that included Sen. Dick Durbin and representatives from the American Medical Association, Blue Cross/Blue Shield of Illinois, and the Metropolitan Chicago Healthcare Council. There were plenty of interesting moments throughout the hour. For instance, the insurance industry rep at one point attempted to claim that his company was not technically a for-profit entity, despite the fact its top executive makes in excess of $10 million per year. Below is another relevant exchange, in which Durbin responds to an audience member's suggestion that he consider a bill allowing people to buy health insurance policies across state lines, a major plank of the Republican alternative authored by Rep. Mark Kirk. Watch it (full video here):

Real People Continue To Demand Real Reform

The Sargent Shriver National Center on Poverty Law and United Action for Power and Justice have released the latest videos in their Real People Demand Real Reform video series. Check them out below, the first which deals with "affordability and stability" and the second which details the experiences of small business owners with the health insurance industry:

Greising: Olympic Secrecy "Doesn't Smell Very Good"

Josh Kalven — Mon, 24 Aug 2009 09:46:00 -0700

This month, Tribune business columnist David Greising has written two pieces urging more disclosure on the part of Chicago's Olympic bid committee and, in doing so, spurred a lengthy editorial from his paper on the topic. On Friday, he appeared on Chicago Tonight's "Week in Review" show to discuss the games and continued to push back against the committee's assurances that they are being "open and transparent." Watch it (full video here):

GRIESING: It's interesting. I've talked to people at the Olympic committee -- Chicago 2016 -- and they all believe that they've been the most open and transparent group that has ever been seen in the face of the Olympic movement.

And yet, a few weeks away, 40-some days away from the October 2 vote, we still don't know who these insurance companies are that are supposed to be backing -- guaranteeing the bid. We have no idea who any of the developers are of the Olympic Village. The guarantee they're looking for -- the unlimited guarantee from the city -- we don't know much about. We've had a little bit of corruption -- not corruption, conflicts of interest pop up with this Michael Scott -- this Olympic committee member who is involved in a development near the village.

It's just all kind of stirring around and it doesn't smell very good to longtime Chicagoans.

As Greising goes on to note in the above video, the 50 ward meetings held by the bid committee are almost finished. Today, a Tribune news article concludes that "many city residents want continued scrutiny of Olympic operations":

To date, the 2016 team has been slow to disclose certain key pieces of information, including its 2008 tax forms, which would detail revenues, expenses and compensation for the highest-paid employees and contractors.

South Side resident Kay Carroll called for independent oversight during the recent Bronzeville meeting. "Chicago doesn't have a sterling reputation about making good financial decisions," she said, citing the selling of valuable assets and a number of City Hall scandals.

Tribune To Pat Ryan: "Don't Sugarcoat [The Olympic] Risk"

Josh Kalven — Wed, 19 Aug 2009 15:21:18 -0700

In recent weeks, we've watched Tribune business columnist David Greising wake up to the idea that, if Chicago wins the 2016 Olympic bid, it could become just the latest venue for closed-door cronyism, corruption, and mismanagement. More specifically, Greising has urged Mayor Daley and the bid committee to commit to a fully transparent process and subject the process to the Freedom of Information Act. Now the Tribune editorial board has joined the chorus:

Aldermen and citizens need to be confident that the Games will come off without the city taking a bath. Because if and when Daley signs an agreement in Copenhagen guaranteeing that Chicago will deliver the Olympics -- no matter the cost -- those aldermen and citizens will be sitting in the tub.

Our advice to Chicago 2016 head Pat Ryan as he tries to sell an Olympics to Chicago: Be candid. Be specific. Don't sugarcoat risk.

Read their entire list of suggestions for Ryan.

Greising Calls Chicago 2016's Bluff On Secrecy

Angela Caputo — Fri, 14 Aug 2009 10:28:47 -0700

In today's paper, Tribune business columnist David Griesing whacks the Chicago 2016 bid committee for being so discreet about their Olympic fundraising and explains to the public why they don't have to accept the shroud of secrecy. A choice excerpt:

Now, [bid committee chair Pat] Ryan is a phenomenally successful insurance executive. He knows a deal breaker when he sees it, and he knows he needs the city's financial guarantee for the Games or there is no Chicago Olympics.

Ryan and Mayor Richard Daley, who want the Olympics so badly, will do about anything to get that guarantee. And that is why -- in exchange for a government guarantee in a city and state with a corruption-riddled track record -- citizens must insist on access to the Olympic committee's records.

This is called negotiating leverage, and taxpayers and citizens, in those rare moments when they have leverage, are fools if they do not use it.

Access to the Olympic committee's records is within the reach of the people who are being asked to guarantee the Games. All the City Council has to do -- at hearings next month -- is ask.

Go read the whole thing here.

Greising: Subject Olympic Committee To FOIA

Angela Caputo — Tue, 11 Aug 2009 11:52:12 -0700

After insisting for months that Chicago taxpayers wouldn't be on the hook for more than $500 million in cost overruns should the city land the 2016 Olympics, Mayor Daley reneged on this promise in June when he agreed to sign a blanket financial guarantee at the urging of the International Olympic Committee. The flip-flop galvanized longtime opponents of the city's bid and also drew criticism from some unlikely sources, including Tribune business columnist David Greising who lambasted Daley in a June 19 column. "The same sort of hubris has caught up with other Olympic cities that lived to regret the cost," Griesing wrote.

In the months since, Greising has clearly continued to think hard about whether taxpayers can trust Daley -- and his secretive, closed-door management style -- with such a massive undertaking. In his column today, he offers city officials and the Chicago 2016 bid committee a way to build confidence among the public:

If Chicago's taxpayers are to offer an indispensable guarantee, they should get more than the world's biggest swim and track meet. They should get, in fact, a tool that will provide a close-up view into the wheeling, the dealing, the high jinks and palm greasing that will make the 2016 Games uniquely Chicago [...]

In other words, the City Council should insist -- and Chicago 2016 should agree -- that the organizing committee become subject to the Illinois Freedom of Information Act [...]

Chicago 2016's demand that it needs an unlimited financial guarantee, not to mention $500 million from the city and $250 million from the state, makes organizing a Chicago Olympics a very public matter [...]

Openness should be the price of putting taxpayers on the hook for the 2016 Games.

Greising's call comes at an important time. Indeed, Chicago 2016 representatives are already rebuffing the need for transparency.

On a related note, check back tomorrow for our dispatch from a meeting tonight between Chicago 2016 officials and several South Side communities.

Chapman Misdiagnoses His "Problem Child"

Adam Doster — Fri, 31 Jul 2009 08:19:13 -0700

Study after study these past few months have demonstrated the global economic crisis' devastating impact on state budgets. It's no secret why. Just as demand for government-backed safety-net services is growing, tax revenues are plummeting across the board. And Illinois is right in the thick of it, with lower-than-expected returns on personal income, corporate income, and sales taxes.

In his Tribune column yesterday, Steve Chapman acknowledged this dynamic. But he went on to argue that overspending by state lawmakers is the real culprit:

The crisis in state budgets is not an accident, and it wasn't unforeseeable. For years, most states have spent like there's no tomorrow, and now tomorrow is here. They bring to mind the lament of Mickey Mantle, who said, "If I knew I was going to live this long, I'd have taken better care of myself." [...]

Illinois is another problem child. The state's general fund appropriation is some two-thirds higher today than it would be if the state had just kept those outlays in line with inflation over the last two decades. That increase, as in California, is the difference between a gaping deficit and a comfortable surplus.

Unfortunately, Chapman grossly oversimplifies how Illinois' state budget operates.

First, the facts. The Bureau of Economic Analysis tracks General Fund spending as a factor of the state's GDP. Between 1997 and 2007, the most recent year for which data was available, spending in Illinois increased by just five one‐hundredths of one percent (from 3.35 to 3.4 percent). Despite boasting the nation's 5th largest population, the Prairie State ranks 45th in spending.

Now let's dig a little deeper. Almost all of that spending growth has been concentrated in sectors over which the Illinois legislature has little control or that are tied to federal matching fund requirements. Check out the figure below from the Center for Tax and Budget Accountability's 2008 Citizens Budget Guide (PDF). Excluding health care, pensions, and education, it shows that General Fund expenditures between 1995 and 2006, adjusted for inflation using the Employment Cost Index, plummeted by almost $2.2 billion dollars. (Click the image for larger version.)

State agencies have bore the brunt. Using the same inflation comparison, appropriations between 2002 and 2007 dropped 2.69 percent for the Department of Human Services, 6.44 percent for the Department of Corrections, 7.1 percent for DCFS, and 7.79 percent for higher education. That in part explains why the number of government workers in Illinois has shrunk by 22 percent over the past eight years.

To be sure, health care spending is on the rise. But it's not necessarily because the state is too generous in the coverage it provides.

Take Illinois' Medicaid obligations, for example, 57 percent of which are paid for by the state. Between 1980 and 2005, over 15 percent of Illinois private sector workers lost their employer-provided health insurance. Lawmakers from both parties quickly realized that the income eligibility thresholds were too low at a time when demand for government-run coverage was growing. Due to the combination of slightly higher eligibility levels and rising health care costs, Illinois increased inflation-adjusted spending 4.34 percent between 2002 and 2007. But it's tough to argue that ensuring more struggling state residents -- at a time when the federal government refused to do so -- was bad public policy.

Meanwhile, inflation-adjusted education appropriations grew by $850 million between 1995 and 2006 here in Illinois. But it's hard to argue that we're spending too much. We still rank 49th in the amount of funding provided for K-12 education nationwide.

As a libertarian, Chapman isn't going to be on the front lines campaigning for a more progressive income tax. But if he wanted to cast blame on anything other than this year's recession, one major culprit could have been the state's broken tax structure. As this CTBA report (PDF) shows, between 1999 and 2005, revenues from the four major Illinois tax sources did not even keep pace with inflation. (Click the image for larger version.)

Without enough money coming in, lawmakers irresponsibly skipped pension payments, a main contributor to the state's bond downgrade on Wednesday. But they couldn't skimp out on matching funds nor cut much deeper in many departments than the state already has. The decision to use the pension system as a credit card rather than reform the tax structure, along with the greater economic climate, is the reason the state faces a multi-billion deficit next year, even after drastic cuts.