Progress Illinois

Earlier this week, the State Journal-Register asked the candidates contending for their respective Illinois gubernatorial party nominations a series of questions about state pension system. According to the paper, most called it their "high" or "highest" priority. If the pols want to get a better sense of what type of shape the system is in, they should flip through the report released today by the Pension Modernization Task Force, a 19-member group assembled by Gov. Quinn earlier this year.

Some members of the media have already maligned the 19-member coalition. Most notably, the Tribune called the report a "less than candid document" even before it was released. But as the debate moves forward about how to crawl out from under the staggering accumulated debt, it will be essential reading. Here's what the panel concluded:

Unfunded liability growth:

Between the FY 1996 and FY 2008, Illinois' total unfunded pension liability ballooned by $35.7 billion. The primary cause was insufficient contributions from the state, which added $18.8 billion to the shortfall.  From the paper:

The deadly combination of nearly 30 years of systematic State underfunding of its employer contributions to the pension systems, followed by the cataclysmic decline in asset values caused by the national meltdown in financial markets over the last year, combined to create an all-time high in the State's unfunded pension liability. (Page 44)

Other factors -- including "more retirements than expected, rates of mortality that did not meet actuarial projections, and terminations that did not meet actuarial projections" -- added $8.5 billion to the tally.  The size of the pension benefits played only a marginal role, according to the report. "In sum," the task force writes, "the main culprit is the State’s inability to fund its pension systems according to actuarial [sic] principals."

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Combing through the Illinois political coverage today, we found ourselves frustrated by a handful of things.  Here's a rundown:

Stantis on early prisoner release

Tribune political cartoonist Scott Stantis published a brutal cartoon about the state's early prisoner release plan this morning (you can view it here).  It depicts a pack of snarling dogs leading a group of ominous-looking animals -- snakes, bats, etc. -- out of a prison cell. On a stool next to the door, a quivering piece of jello with the label "Quinn for Illinois" says "I'm pretty sure this will work ... unless it doesn't."

Where to begin ...

On the merits, the cartoon is wildly sensationalistic. The 1,000 inmates being released (62 this week) are nonviolent offenders serving sentences less than one year long. These are not hardened criminals -- many are likely in for drug offenses -- and they were scheduled for release anyway.

And why are the animals so darkly colored? "Without knowing the race of the prisoners being released," quips The Beachwood Reporter's Steve Rhodes, "it's never a good idea to depict criminals as dark animals when the incarcerated are disproportionately people of color." Indeed.

Sweeny on Jim Ryan

Next up is the latest column from the Rockford Register Star's Chuck Sweeny, which runs down Republican gubernatorial candidate Jim Ryan's "proposals to return the state to solvency."

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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.

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In less than a month, the Illinois Pension Modernization Task Force will present to the General Assembly and Gov. Quinn its recommendations for reforming the state's pension system. The issue has attracted a good deal of attention over the past few weeks, thanks in large part to a Sun-Times series that detailed isolated cases of abuses.

This morning, Chicago Public Radio's Eight Forty-Eight hosted a lengthy roundtable discussion exploring the flaws in the system and the reforms that are currently being proposed. Participants included task force chair David Vaught, Civic Federation president Laurence Msall, DePaul University economics professor Tom Mondschean, and AFSCME Council 31 executive director Henry Bayer. One point on which all the guests agreed is that a large and growing unfunded pension liability is perhaps the biggest problem facing the state. Yet, most of the reforms discussed focused on reducing the size of benefits offered to new workers.

To his credit, Bayer called out the panel's other guests (namely Msall) for suggesting that overly-generous benefits are breaking the system. Indeed, as we've pointed out repeatedly, while about one percent of Illinois pensioners receive more than $100,000 per year, the large majority receive less than $25,000.  Listen to this excerpt from Bayer's remarks:

Internal mp3

BAYER: We are critical of the current system as well. But we think that the solution to the problem is to fund the pension system. The reason why the state has such a huge unfunded liability is not because the pensions are too rich. The reason is the state hasn’t fulfilled its obligations. [… ]

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Since it was published last week, the Sun-Times has received a lot of publicity for its four-part series on the state's pension system. For instance, the AP picked up the story on the national level and some local editorial boards decried the "golden public pensions" highlighted by the paper. Even Gov. Quinn -- who is waiting to hear back from a pension reform task force -- responded that "we have to do something about it."

While we agree with the governor that some of the "abuses" reported by the Sun-Times need to be addressed, we read the series a bit differently than most.

Particularly we took issue with the articles' sensational style ("Want to retire with a fat pension?" the first piece read. "Get a government job in Illinois") combined with the absence of important context. (While highlighting the 4,000 pensioners who receive more than $100,000 per year, for example, the reporters' never mentioned that the average pension is under $20,000.)  As a result, the series left the general impression that greedy state workers are sucking the state dry.  In fact, only a small minority of retired state employees receive such exorbitant pensions.

The Sun-Times' flawed emphasis was brought home again on Friday when reporter Chris Fusco served as a panelist on WTTW's Chicago Tonight. Asked to comment on his work, Fusco vaguely declared that the pension system is "broken" and will take major reforms to fix. Watch it:

When you look at the system structurally, it is broken and it is going to come at the expense of taxpayers -- road projects, education dollars. And if something isn’t done from this point on to do something about it, it's going to cost us.

By highlighting the sliver of exorbitant pension packages and simultaneously declaring the system broken, readers are left to think that large payouts are the foremost contributor to the state's pension debt. 

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I've spent some time the past few days reviewing the Sun-Times package on the state's pension program, noting that the paper has used sensational headlines and ignored important context to dramatize the system's deficiencies. In their fourth and final piece of the series today, the reporters go back to the same well.

Twice, the Sun-Times refers to the pension packages that state employees receive as "lucrative." They deploy the adjective first to rebuke a (legitimate) point raised by American Federation of State, County, and Municipal Employees Council 31 spokesperson Anders Lindall, who tells the paper that "those individuals [making $100,000 per year or more] represent just 1 percent of all public pension earners." Here is the other example:

At the same time, pension plans for government workers continued to provide lucrative benefits -- from the ability to retire at 50 to yearly pension increases of 3 percent for most retirees 60 and older.

Unfortunately, the paper does not provide its readers with any data to back up these claims. Why don't they? Because the statistics just don't bear out their overblown thesis.

Check out this graph we compiled using the raw data the Sun-Times obtained from the state, which is online and behind a small pay wall. Combining both pensioners and spouses that are granted state retirement money, a mere 3,987 (1 percent) have pensions greater than $100,000 per year. What's more, only 65,985 (17.47 percent) have pensions worth between $50,000 and $100,000. That leaves a whopping 307,672 (81.47) percent who take in less than $50,000 per year:

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Over the weekend, the Sun-Times continued its investigative series on the state pension system. In the latest installments, the paper rolled out more examples of clout-heavy bureaucrats and pols who have retired from one job only to land another covered under a separate pension plan. Additionally, five dozen pensioners are collecting payments based on salaries from labor unions, lobbying groups, and other non-governmental organizations. While their reporting should certainly spur debate about how to close certain loopholes in the system, the Sun-Times leaves out important context, failing to point out yet again that rank-and-file workers -- the majority who pay into the pension funds --  aren't reaping anywhere near these sorts of rewards.

Yesterday, columnist Mark Brown attempted to imagine some potential legislative reforms that could bring the pension payouts "under control." Some of his suggestions deserve consideration. Raising the retirement age five years to 55, which is in line with most private sector jobs, could save the state money in the long-run. He also proposes taxing any retirement income over $75,000, which would "capture some of the excessive public pension income -- as well as more well-to-do private sector retiree benefits." Lawmakers could then use the resulting revenue to pay down the state's hefty and long-ignored pension obligations.

But one of Brown's ideas is notably off-base. "Next, we could get rid of the automatic 3 percent annual increases for government retirees," he suggests, "and replace it with a capped, inflation-based cost-of-living factor." In its original primer on the state pension system, the Sun-Times reporters laid the groundwork for this proposal:

It's rare for private pension plans to provide automatic raises. Social Security payments began automatically going up each year in 1975, but that's based on the actual cost of living, which has usually been less than 3 percent. And those automatic increases now face the possibility of being suspended for two years.

But the paper's suggestion that the state pension system offers more generous annual increases than Social Security is just plain false. 

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In what they call a "a first-of-its-kind Sun-Times analysis," reporters Tim Novak, Art Golab, and Chris Fusco have unearthed some eye-opening statistics about the "17 largest retirement plans for government workers in Chicago, Cook County, and the state of Illinois." According to their research, 3,958 retired politicians, judges, school administrators, and other government employees have pensions that pay them at least $100,000 a year. Some big names are cashing in too, including Sen. Roland Burris, former Gov. Jim Thompson, former State Comptroller Dawn Clark Netsch, and former State Treasurer Judy Baar Topinka. The report points out that, in aggregate, pension payments cost state and local governments $800 million a month. (See update below.)

The piece certainly highlights some problems with the system. One example is the generous retirement packages that state lawmakers bestow upon themselves. After 20 years of government service, members of the General Assembly -- who make at least $71,000 a year for the part-time work -- can collect a pension based on 85 percent of their highest  salary (compared with 75 percent for most other government workers). According to an AFSCME analysis of State Employees Retirement System data, the average monthly payout for beneficiaries of the General Assembly Retirement System (GARS) is $4,003, even though the average length of (part-time) service is only 14 years.

That being said, the article's lede -- "Want to retire with a fat pension? Get a government job in Illinois" -- is totally over the top.

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