Sun-Times

MAP Grant Solution Reached, Larger Questions Remain

Adam Doster — Mon, 19 Oct 2009 09:00:34 -0700

Half of the 2009 fall veto session is now on the books and one legislative priority lawmakers identified before they trekked down to Springfield -- funding for the Monetary Awards Program (MAP) -- has been partially resolved. Yesterday, Gov. Pat Quinn signed a law that gives him the authority to restore second semester funding for the need-based scholarships received by almost 140,000 college students. Earlier in the year, the Illinois Student Assistance Commission voted to eliminate grants for the entire spring 2010 term when it became clear the General Assembly was going to substantially reduce their budget.

Where that money will come from to reinstate the funding unfortunately remains a mystery.

Legislative leaders decided last week not to approve any new revenue to support ISAC, instead forcing Gov. Quinn to borrow. Specifically, he announced a plan to collect $1 billion from some of the state's roughly 600 "special funds" and devote one-fifth of that cash to the grants. Although the additional money must be repaid to its rightful agencies in 18 months, Quinn could use the windfall for "unmet needs" in the interim, possibly even paying down the state's backlog of medical bills.

Like most economic decisions made in Springfield these days, this "solution" isn't a sustainable one. The way our current tax system is structured, Illinois just doesn't generate enough money to pay for core services (like college aid) and the state's overhanging debt obligations. Until that is reformed, new problems will consistently arise. The Sun-Times drives the point home in an editorial today:

So where does this leave us today? How do we pay for scholarships, Medicare, public education and the rest?

By adopting a new tax system -- one that includes a tax increase and a new approach that places a greater burden on the rich than on the poor. For decades, Illinois has had one of the country's most unfair, regressive tax systems, charging everyone the same rate whether you make $1 million a year or $40,000 a year. [...]

Illinois needs a new tax system -- one that treats lower earners more fairly and generates more income. Until we get it, we'll keep romping in dreamland until the state goes broke.

Sun-Times Adds Voice To Tamms Debate

Adam Doster — Thu, 24 Sep 2009 08:58:56 -0700

By acknowledging that changes need to be made at the Tamms supermax facility in southern Illinois and outlining reforms to mitigate some of the prison's worst practices, the Department of Correction's interim director Michael Randle took an important first step to ensure human rights are upheld in Illinois. Still, the most vocal critics of the prison think that Randle's review overlooked some key problems in his review. And the Sun-Times agrees. Today, the editorial board emphasized that Randle and the state legislature have more work to do to address the facility's flawed review process and the way it houses and treats mentally ill inmates. Here's an excerpt:

Randle's reforms, laudable as they are, fall short because they rely on the good faith and professionalism of the director and his department to carry them out. They are not codified in the law, which would assure they remain in effect long after Randle and Gov. Quinn have moved on. Nor are they spelled out in the state's administrative code, which would give them the strength and protection of legislative oversight.

Randle's reforms do little to beef up the cursory quality of quarterly reviews conducted by prison staff to determine whether an inmate should remain at Tamms. The proof that such reviews are inadequate is in the numbers -- 194 prisoners have been at Tamms for at least five years, many of them unnecessarily so. When prison officials, at Randle's direction, finally began conducting special reviews of these 194 cases, they quickly identified at least 45 inmates they felt confident could be returned to less restrictive prisons -- and the special reviews continue.

Easily the biggest problem at Tamms, addressed only in part by Randle's reforms, is mental illness among inmates. The very actions that can land an inmate in Tamms, such as attacking a guard, can be signs of mental illness, and the intense social isolation of a supermax prison only exacerbates the problem. The solution to the problem, unfortunately, is undoubtedly expensive and politically unpopular, beginning with a dramatic increase in mental health services in our prisons and communities.

The paper also praises Sen. Dick Durbin for chairing a hearing last week in D.C. on mental illness in U.S. prisons. It's time state legislators do the same.

Sun-Times Takes Flawed Pension Story To WTTW

Adam Doster — Tue, 22 Sep 2009 08:14:06 -0700

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. BusinessWeek's 2005 feature on state pensions highlights the real story:

Take Illinois. The fifth-wealthiest state in total income, Illinois nevertheless has a 30-year history of shirking its pension promises. According to an analysis by the Civic Federation, a Chicago research group sponsored by the business community, since 1970 Illinois has not once paid its annual pension bill in full. Over the next 40 years the state will have to contribute $275.1 billion if it is to reach its goal of 90% funding -- and that's presuming no benefit changes are made. Through bull markets, bear markets, and sideways markets, the state has consistently lagged, and over time those delays have become more and more expensive. The culprit: reverse compounding. A pension plan's obligations are determined in part by the expected investment return on its assets. In the case of Illinois, that is 8%. So for every dollar not added to assets in time, the state is effectively borrowing from the pension plan at 8% interest. That's a high price in today's market, where municipal bonds typically pay closer to 6%. Illinois Governor Rod R. Blagojevich says that if the state follows its current spending plan, it will have paid $220 billion in interest before it fills the hole.

After 30 years of the state's procrastination, the pension burden has grown backbreaking. Illinois' five pension funds are $35 billion in the red, a serious shortfall for a state with a general operating budget of $43 billion this year. Illinois owes $2.6 billion this year, and within five years that will reach $4 billion annually. By comparison the state will spend $5.9 billion total on kindergarten through 12th-grade education next year. "If we were a business we wouldn't be in Chapter 11, we'd be in Chapter 13," says Ralph M. Martire, executive director of the Center for Tax & Budget Accountability, a Chicago-based nonprofit think tank. "We'd have to liquidate." Illinois is not a fast-growing state that can hope that future population and tax growth will bail it out. D'Arcy of the University of Illinois calculates that Illinois should be 97%-funded based on the rate of its income growth. Instead, retirement funds are 62%-funded.

The problem has only gotten worse in recent years as state lawmakers have continued to borrow against the pension system to pay off their bills.

Some sacrifices will need to be made to put the state back on a path to financial stability. This will likely include some reforms to the pension system. But the Sun-Times' generalizations on this issue did the debate a disservice.

Sun-Times Calls Public Option "Essential"

Progress Illinois — Fri, 18 Sep 2009 09:17:25 -0700

The Sun-Times has a solid editorial today on the health care battle in D.C. in which they vocally support the inclusion of a public option in any reform package:

It should be clear why we need radical reform, but in case it isn't, here's a quick rundown.

In Illinois alone, average health insurance premiums for families have shot up nearly 90 percent since 2000. Last year, more than 1.5 million Illinois residents had no health insurance.

And the largest health insurer in the state -- BlueCross BlueShield of Illinois -- holds more than 50 percent of the market, hardly the best competitive situation.

Far from being anti-business, we think the public option is good for business, small ones in particular.

The Sun-Times goes on to dismiss the idea of creating a "trigger" for the public option, which would essentially delay the implementation of the program in order to give the insurance industry a chance to make coverage more affordable. The editorial board also provides a concise rejection of alternative proposals to create regional health care cooperatives. Read the whole thing here.

Sun-Times Misdiagnoses "Pension Crisis"

Adam Doster — Tue, 15 Sep 2009 11:24:34 -0700

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:

We were also curious how many pensioners make less than $25,000 per year, as the Sun-Times lowest is delineation is $50,000. Unfortunately, their search function crashes consistently after a certain number of clicks, making it impossible to search through the data to find the dividing point. But, the sample size of survirors is small enough that we could crunch those numbers. Of the 55,272 spouses in the paper's database, 54,698 earn less than $25,000 per year (90.6 percent), while a mere 574 earn more than $50,000 per year (1.02 percent). The remainder, 4,597 survivors, fall somewhere in the middle, bringing home between $25,000 and $50,000 (8.3 percent) annually:

Not once in the entire series are these facts mentioned. Indeed, the paper (and its editorial board) uses their "findings" to argue for a series of pension reforms designed to fix what they call "a pension crisis." Their ideas?

-Create a two-tier pension system (We've outlined the concerns about this approach before. The Sun-Times also writes that "a two-tier system would save the state money eventually but wouldn't address the current pension debt.)

-End the current guaranteed 3 percent annual increases (We dealt with the horrible math underlying this proposal yesterday.)

-Raise minimum retirement ages (This is reasonable enough, although forcing people to work 10 or 15 extra years when the vast majority will only earn about $20,000 per year after retirement -- for a total savings of $11.5 billion in state contributions, according to the Civic Federation -- is a bit callous.)

-Tax pension earnings (If structured progressively, as Mark Brown suggested this weekend, this could be a useful tool for curbing the 4,000 gratuitous pensions over $100,000, money which could then be used to pay down the state's pension debts. But it would be ludicrous to tax public pensions for everybody else when the state does not tax virtually any other form of retirement income.)

-End double-dipping (This is a worthy reform.)

-End the current union-perk loophole (This is also a worthy reform.)

The state of Illinois does have a pension crisis. But that crisis was caused by lawmakers, who skipped payments and used the pension system as a credit card instead of raising sustainable revenue to pay for worthy expenditures. Reforming the state's tax structure is the most fair and responsible method for closing the state's pension deficit. Cutting the size and scope of employee benefit packages is just not.

Sun-Times Pension Reporting Continues To Lack Context

Adam Doster — Mon, 14 Sep 2009 09:20:32 -0700

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. Take a glance at the Social Security Cost of Living Adjustment stats to see why. Over the past 10 years, the average annual COLA increase was 3.03 percent. Stretch all the way back to 1975 and and the average is even higher (4.43 percent). The argument that the Illinois increases are too large simply doesn't hold water.

Let's be clear: Lawmakers and other powerful players in state government should not be able to abuse the system and bilk taxpayers for benefits they did not earn. But well-intentioned reforms need to be structured so as not to unfairly strip benefits from the state's honorable employees.

The Sun-Times Sensationalizes State Pensions

Adam Doster — Fri, 11 Sep 2009 12:18:13 -0700

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. While those 4,000 pensions may be too large, it's important to remember that they represent slightly more than one percent of the 374,041 retirement accounts reviewed by the paper.

Indeed, the truth is that the overwhelming majority of government jobs in Illinois don't leave you with a fat pension. As we've noted before, those enrolled in the State Employees Retirement System of Illinois take home, on average, $20,436 in retirement for over 24 years of service. When you combine workers in all five pension plans, the average retired Illinois state worker gets just $17,112 a year. Of course, these figures appear nowhere in the Sun-Times piece.

The article also fails to mention that 75 percent of Illinois workers (most of whom are teachers) don't pay Social Security taxes while employed, therefore they don't get any Social Security benefits when they retire.

The problem with the pension system, which we've explored repeatedly, isn't necessarily that the packages offered are too generous -- it's lawmakers' bad habit of borrowing against the funds to cover other expenses (and avoid raising the income tax). On that note, state legislators ought to look to their own generous benefits calculations before pushing teachers and other moderate-income state employees into a two-tiered system.

Apparently, today's Sun-Times article is the first in a four-part series. It would be nice to see them call out lawmakers' pension-relate gimmicks and double talk more explicitly in future installments.

UPDATE (4:45 pm): After a back-and-forth with Anders Lindall at AFSCME Council 31, we now realize that the $800 million per month figure flaunted by the Sun-Times is misleading as well. It seems the paper conflated the total of all benefits paid out each month to the 374,000 beneficiaries with the amount that must be covered by state and local taxing bodies. The pension systems generate revenue through three sources -- employer contributions, employee contributions, and investment gains.The latter two don't cost the state any money. As such, that total cost is inflated.

Our Flawed Tax Structure

Josh Kalven — Tue, 08 Sep 2009 09:26:52 -0700

In a lengthy editorial published on Saturday, the Sun-Times reiterated its support for reforming Illinois' regressive tax structure. Particularly helpful were the following grafs (emphasis added):

At first glance, a flat tax might seem fair enough -- the rich will pay more anyway because they earn more. Three percent of $40,000 is only $1,200, while three percent of $400,000 is a whopping $12,000. But when a family earns only $40,000, every dollar must be spent on absolute necessities, such as rent, food and winter boots. When a family earns $400,000, much of that money is spent on discretionary expenditures, such as vacations and health clubs. A progressive or graduated tax -- meaning a higher tax rate on higher incomes -- recognizes this disparity in ability to pay.

The sales tax in Illinois also is flawed because it applies to only a narrow band of things we spend money on. The state taxes most goods, such as food and clothes, which poor people can't do without, but largely spares more discretionary consumer services, such as health clubs, lawn care and parking garages.

This may have made sense in the 1960s, when the sale of goods represented 32 percent of economic activity in Illinois, but that has dropped to just 12 percent, according to the Center for Tax and Budget Account- ability. Meanwhile, the service sector is growing quickly and now accounts for about 44 percent of the Illinois economy, according to the Illinois Commission on Government Forecasting and Accountability. Expanding the sales tax, it should be noted, could generate enough new revenue to allow lowering the sales tax rate overall.

To boil that down:

- A flat income tax rate, coupled with a high sales tax on goods, puts a much greater burden on Illinois' low-earners.

- By raising the income tax rate on high-earners and expanding the sales tax to consumer services, we can solve Illinois' financial crisis while lowering the burden on the less fortunate.

Those are crucial points that need to be pounded home -- again and again -- by progressive tax reform advocates in Illinois. It's great to see the Sun-Times laying them out so clearly.

Their editorial also touched on the interplay between the tax proposals put forward by the two Democratic gubernatorial candidates -- incumbent Pat Quinn and challenger Dan Hynes. We'll have more thoughts on that later today.

Memo To Fran Spielman: What About TIF?

Josh Kalven — Tue, 25 Aug 2009 08:55:25 -0700

Kudos to the Sun-Times for their headline on today's article previewing Mayor Daley's public budget hearing tonight: "A Meter Culpa From The Mayor." Heh.

But then come these passages from Fran Spielman's actual article:

With a $520 million shortfall that can only be filled by tax increases and spending cuts, three nights of public hearings on Daley's preliminary 2010 budget are expected to turn into giant gripe sessions before City Hall lowers the boom. [...]

Even after wringing concessions from organized labor and drying up a "rainy day" fund created by the parking meter deal, Chicago has a $520 million budget shortfall in 2010.

With no obvious untapped sources of revenue, Civic Federation President Laurence Msall has warned that city government will be "forced to re-invent itself in the way it delivers services and eliminates services not critical." [Emphasis added]

By asserting that tax increases and spending cuts are the sole avenues available to close next year's budget deficit, Spielman reinforces the myth that Mayor Daley's overgrown tax increment financing (TIF) system simply can't be used to relieve pressure on the city's operating budget. It's a myth the mayor has worked hard to erect and preserve. Indeed, any mention of dipping into his TIF piggy bank is met with red-faced derision.

But as we laid out earlier this summer, there are several avenues available to Chicago aldermen to free up TIF funds for operating expenses. Here's the short version:

1) Release some surplus funds: Daley’s 150-plus TIF districts ended 2008 with $1 billion in aggregate unspent revenue. Numerous other Illinois municipalities have shown how easy it is to release these surplus funds back to local taxing bodies. Yet that possibility is rarely discussed when it comes to the Chicago system.

2) Retire some elderly TIFs: Under Illinois law, TIF districts have a lifespan of 23 years and individual municipalities can extend them up to 35 years if they wish. But assuming a TIF district has served its purpose (i.e. spurred redevelopment), there is no reason it can't be expired early, thereby providing a boost in revenue.

3) Index the tax base: At the time a TIF district is created, the amount local taxing bodies can levy from the enclosed properties is capped. Over the ensuing decades, as inflation rises, the value of that capped revenue erodes. One easy fix would be to index the TIF tax base to inflation, just as Massachusetts and California do.

The 2010 budget process will hopefully spur a lively debate among the mayor, aldermen, and the public about the city's priorities in these tough economic times. Scaling back and reforming the TIF system should be part of that conversation, no matter how badly Daley wants to keep it out.

Spielman Reports From Her Walled Garden

Adam Doster — Fri, 10 Apr 2009 12:28:58 -0700

After uncovering a trail of official paperwork using the Freedom of Information Act earlier this week, Alex Parker of the Chi-Town Daily News explained in great detail how the Chicago Department of Public Health lost more than $1 million in state funding thanks to problems with its new, $16 million billing system. Parker's article came on the heels of mental health advocates' sit-in at Mayor Daley's office in protest of the city's plan to close four mental health clinics to make up for the funding cut. This one-two punch appears to have forced the Daley administration to reassess the consolidation plan and ultimately spare the clinics.

But reading Fran Spielman's coverage of the clinic controversy in the Sun-Times, you'd miss much of that story. From her article yesterday:

Earlier this week, mental health advocates and patients held a noisy City Hall demonstration that included a brief sit-in at the mayor’s office. They argued that a flawed Health Department billing system triggered the cuts and that the cuts could be reversed if the billing problems were corrected.

They "argued"? Parker's article establishes that state officials warned the Chicago Department of Public Health in early 2008 that the billing problems could result in future funding issues. Furthermore, there's no argument about whether the state funding will eventually return to previous levels once the billing system is working properly.

Without acknowledging the Daily News story -- either with a link online or a reference in print -- we can't help but wonder if Spielman even read Parker's piece.

To the Tribune's credit, Hal Dardick's April 8 story on the clinics points out that Parker first disclosed the department's internal documents. But just like their print competitor, the paper doesn't provide a link for readers to go see the original story on their own.

Back in June, we highlighted blogger Kiyoshi Martinez's criticism of the Chicago dailies, which he described as "walled gardens" unwilling to "link outside of their Web site to local bloggers or other Chicago-media sites." The mental health clinics story perfectly exhibits this phenomenon. Because of the paper's reticence to understand or utilize the new media tools available to them, their readers are left with a flat story that ignores the context provided by rival outlets. It's a shame, not only because online sources send their readers to the Sun-Times on a daily basis, but because the journalism itself suffers.