Monday, June 24, 2013

Pensions! Pensions! Pensions!

Pension reform for public employees in Illinois is an unfortunate probability, but I think it is necessary. I currently work in a quasi-temporary position at a public institution in Illinois--it's actually the same job I had as a graduate research assistant--and most of my non-student coworkers are classed as state employees and are subject to the pending pension reform. (Technically, I am a state employee, too, but I am not directly affected by any pending reforms because I'm not included in any retirement scheme, and if I were to become a full-blown employee today, I would already have been grandsonned out of the system.) My coworkers are upset about the possibility that the state legislature might, and probably will, eventually reduce their pension benefits significantly

They have reason to be upset. They have worked for years under the promise of a pension and free health care in retirement (which, I understand, was part of the promise for state workers). They are not eligible for social security benefits. They are not to blame for the pension crisis, either: state lawmakers refused to fund the pensions during good times. And they believe "the media" and state politicians demonizes them as lazy, greedy persons. According to one of them, Governor Pat Quinn recently gave a speech to a high school graduating class in which he said something to the effect that the money the state owes on pension obligations could pay for each Illinois high school graduate to go to college. If he really did say that, that's a strikingly disingenuous statement. Even if the numbers match up, I find it hard to believe that if the state were suddenly to be absolved of its obligations, it would spend all the savings on higher ed for all. 

If I were them, I would be upset, too. And I realize that what I am about to say is easy for me to say because I was not the one to whom promises were made. But.....I think some sort of reform and reduction of benefits is probably necessary for the state's fiscal health. I buy the claim that the state cannot afford to pay its bills, and that its bond rating stands to suffer. A lower bond rating might not seem like a big deal--and I confess I don't understand all of the economics behind it--but I imagine it makes paying for basic services very difficult and at some point someone is going to have to pay, and I suspect the people who will have to pay are going to be those least able to afford it: the poor who receive state-provided welfare benefits like food stamps and poorer taxpayers, who in Illinois's flat-tax scheme, stand to pay more and more of what they cannot afford. (Illinois does have an earned income credit, which "progressivizes" the state flat tax a bit, but on balance, it remains a flat tax.) I also suspect that some sort of sustainable reform is necessary to save the pensions. It does little good to get a pension now and then find that in 10 years, the pension be reduced even more dramatically than is now proposed or be abrogated altogether. 90 percent of a loaf is better than half a loaf, or no loaf at all. 

Now, there's a lot I don't know. As much as I buy the claim that there is a real problem, I don't know how big or imminent the problem is. The message "we need to reform pensions" is very congenial to the message that "we need to break public employees unions," and although I'm on the fence about how much or whether I support public employee unions, I also need to acknowledge there is this other interest at play. Perhaps I am buying too readily into the right-of-center (but not, I insist, "right wing"'s more credible than that) messaging, but my impression is that the spokespersons for the public employees don't question the basic premise that there is a problem, and these same spokespersons vow to challenge in court any reform that actually passes that in any way reduces benefits. (They're not necessarily wrong to do so. My understanding is that the Illinois constitution guarantees these pension obligations, and I imagine there might be federal issues involved, say, under the contracts clause, and their spokespersons' job is to promote the interests of the workers, not of the public.)

Also, perhaps there are reasonable opportunities to fix the "crisis" that are unexplored. A friend of mine, for example, believes that Illinois could just raise the corporate income tax. I'm skeptical for a lot of reasons--I have a lot of practical reservations about the utility of corporate income taxes in general, and I strongly suspect my friend doesn't even know how much tax receipts would increase--but maybe he's right. This isn't fair to public employees. But it might be necessary.

 UPDATE, 7-2-2013:  I've updated this post, primarily by adding in a few paragraph breaks and one or two qualifications to what I've written.

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