In early January, thousands of Illinois public sector workers protested the continued attacks against their retirement savings in state pensions. In the latest pension battle, the unconstitutional “reform” proposed by Governor Quinn and state lawmakers would have seriously jeopardized the security of retirement for millions of public sector workers in the state.
Government employees – represented by unions and the We Are One Coalition – made telephone calls, sent emails, and traveled to Springfield to let lawmakers know that state workers will defend their retirement dignity and security. For the time being, they were able to stop the austerity plans of Quinn and state lawmakers, but this assault on worker livelihoods will not go away anytime soon.
Government employees in Illinois are ineligible for social security and rely on the state pension system, to which they have consistently contributed 7% to 9% of their earnings per year. The state saves billions by not having to pay into social security for its employees, and for decades the Illinois legislature has failed to pay its share of payments for its pension systems, essentially borrowing from the pension fund for other purposes. The regressive tax structure, which hits working people harder than the 1%, has failed to meet state expenditures, hence the need to raid worker pensions. Moreover, contrary to public perception, the Illinois pension system is in the bottom one-fifth of all state pension systems for government workers (See the Powerpoint presentation by Maria Owens in the linked forum).
The real issue, therefore, is that the current crisis is a revenue problem, not a spending problem. According to Ron Baiman (Chicago Political Economy Group), Illinois’ overall tax share is $4.4 billion less than the average for states, relative to income, and it has a low corporate tax rate compared to Wisconsin and Indiana. The state also has the 12th lowest tax rate on the top 1% and the 3rd highest tax rate on the bottom 20% of earners (due to its regressive flat tax). Closing corporate tax loopholes alone would eliminate 74% of pension under-funding.
The banks and the policies of the 1% brought the economy to its knees in 2008, hurting the most vulnerable the most, yet the 1% expects workers to sacrifice now with attacks upon their livelihood.
See the Powerpoint presentations, as well as the video below, from the January 2nd forum “Funding Strong Schools and Fair Pensions: Fixing Illinois’ Revenue Problem”.
Dr. William Barclay, “A Speculation Sales Tax”
Dr. Ron Baiman, “Closing Tax Loopholes in Illinois”
Fred Klonsky on the Politics of Pension Reforms
The We Are One Coalition, consisting of Illinois public sector unions, determined that Governor Quinn’s last proposal would slash retirement benefits significantly, forcing sacrifice upon workers who were not part of the problem. The most significant finding of the coalition study is that retirees in the TRS and SURS pension programs would lose 28% to 31% of their purchasing power into retirement. Previous proposals also included significant benefit erosions, higher employee contributions, and an increase in the retirement age to 67 years.
The We Are One Coalition offered a counterproposal to the plans of Governor Quinn and legislators. It proposed the concession that state employees contribute more to their state pensions, a 2% increase in monthly payments, in exchange for the state guaranteeing its contributions and the closing of corporate tax loopholes. Apparently some business press commentators think these measures too radical for passage. However, tax breaks granted to corporations and the wealthy, such as the Chicago Mercantile Exchange and Penny Pritzker, are deemed just fine.
The We Are One proposals, especially the closing of tax loopholes and the guarantee of state funding of the pension system, would go a long way to solving the current crisis. But there are other measures that could avoid increasing member contributions by 2%, which according to Fred Klonsky, would not make a dent in unfunded pension liabilities. Illinois is one of only 7 states with a regressive state income tax, which takes a greater relative proportion of income from workers than it does for the wealthy. 34 states use a progressive income tax, which would be fairer in addition to bringing in more state revenue for necessary state spending. A progressive tax bill is routinely sent to the Illinois legislature and deserves our support.
There are solutions to the current crisis, here and now. The wealthy and corporations are not paying their fair share, and those that represent them want workers to pick up the tab.
We Are One Coalitionwhite papers
“Funding Strong Schools and Fair Pensions: Fixing Illinois’ Revenue Problem” (January 2, 2013). Northern Illinois Jobs with Justice.
For regular reporting on the politics of pension reform, see Fred Klonsky’s blog.