Guest editorial: Cooking the goose: Illinois pension crisis (part two of a two-part series)

By on July 7, 2011

by State Sen. Chris Lauzen (R-25)
I love teachers, respect state employees, appreciate local public employee unions’ accommodations, but fear that state worker union leadership is driving us off the cliff.

Victor Gotbaum, head of the New York based District 37 of the American Federation of State County and Municipal Employees, summarized the dilemma nicely 36 years ago; “We (state employee union members) have the ability, in a sense, to elect our own boss.”

Pat Quinn proved this statement in Illinois when he took his taxpayer-paid budget director to meet with the state employee unions in August 2010 (three months before the election), promised them that he would not layoff anyone, agreed to protect 12.25 percent raises over a 20-month period, received their endorsement, got millions in campaign contribution commitments, secured hundreds of volunteer-campaign workers, and won the governor’s race by less than 20,000 votes (less than 1 percent of total).

In the final analysis, if Illinois voters don’t check the single-minded political and fiscal influence of state public employee union leadership, it will be the bankers who will first drive up the cost of riskier, deficit-driven borrowing (already 2.5 percent higher in Illinois than the national norm) and eventually cut us off. This will come after enough employers-with-jobs, seniors-with-assets, and regular families simply leave our state because of ever-escalating property, income and sales tax increases.

It is merely stating the obvious that every dollar paid to a public employee must come from a local, state or federal taxpayer. This certainly does not make any public employee “bad,” and of course these folks pay their taxes, too. However, there is an important difference of perspective on taxation between people who pay 25 to 30 percent of their earnings for income, sales and property taxes and receive 100 percent of their pay from a government agency and those who do not.

No public employee needs to get angry or scared by what I’m saying, because nothing is going to change in Illinois as long as downtown Chicago politicians are in direct control of the Governor’s Office (Quinn), the House (Madigan), the Senate (Cullerton), and as long as the powerful state unions continue to favor one party over the other so completely. But, we should still be able to talk about the challenges facing all of us.

Government is the last monopoly. The biggest chunk of government spending is salaries, pensions and healthcare for current and retired workers. Unless these expenses are under control, government spending is out-of-control. If you wonder why your property value is going down but property taxes are going up, it’s because government spending is inexorably going up.

Some folks argue that public employees in Illinois have a guaranteed right to pensions, cost-of-living increases, healthcare benefits, etc. because of the 1970 Illinois Constitution. However, these same people usually don’t mention all of the increases to these benefits that occurred after that constitution was ratified. Here are only a few of many …

• Pension maximum raised from 60 to 75 percent (1971); that increase didn’t take long
• Annual cost-of-living increase raised 33 percent from 1.5 percent to 2 percent (1971)
• 85 sick days (1/2 year service) allowed for early retirement (1972)
• Cost-of-living increase raised 50 percent more from 2 percent to 3 percent (1978)
• Sick-leave credit doubled from 85 days to 170 (1984)
• Retiree healthcare premiums 75 percent subsidy (1991)

My point is, if some are going to insist on keeping the 1970 commitment (which I certainly understand), then let’s be sure to keep the entire commitment at the levels when the commitment was originally made. This would have a dramatic effect on reducing our staggering unfunded liabilities.

According to Barron’s Financial News, private employment today is 2 percent and millions of jobs below where it stood 10 years ago —a job loss over a 10-year period that is unprecedented since these statistics were first tallied in 1890. Despite more than $800 billion (more than 25 times the annual budget of Illinois) in “stimulus” spending and trillions more in national debt, we have regained just 1.8 million jobs lost in the Great Recession and its aftermath, or about one in five.

Yet, in Illinois the governor, ruling majorities, and their local enablers have raised taxes by 67 percent on individuals (where will any of us find an extra $1,200 to send Springfield next April?) and 46 percent on employers. The corporate income tax has brought in approximately $300 million, but Quinn has already doled out $250 million to a favorite few big companies which he hopes won’t bail out. In Motorola Mobility’s case, they can lay off 800 people out of their 3,300 and still receive $110 million of your money in a tax incentive.

It is government spending and tax policies like these that are cooking the goose laying the golden eggs to pay for Illinois government spending.