1) Illinois teachers’ pensions are in the news today (“School districts escape pension penalties with help of state loopholes“) because, even though the state passed a law in 2005 to eliminate pension spiking —
the 2005 law required a cost shift: Local districts had to use their own taxpayer dollars to make extra pension payments when raises higher than 6 percent were given to departing educators. Those extra payments, commonly referred to as penalties, cover the higher pension costs resulting from big raises and are designed to curtail big salary spikes. TRS calls the payments “excess salary increase” contributions.
the TRS, the Teacher’s Retirement System, has made a habit of waiving these payments:
Over the decade, suburban Chicago and downstate districts actually piled up almost $150 million in penalties — extra payments required to cover the higher costs of pensions resulting from large raises.
But districts paid only about a quarter of that after TRS used exemptions to shave the bills. Dozens of districts didn’t have to pay a dime in penalties after giving hefty raises.
The rationale for the exemptions is, in part, that some of these spikes were promised in contracts that were agreed to prior to 2005, but — really? 3/4ths of the penalties waived? Small wonder the plan is massively underfunded.
2) Oh, and by the way, Cook County bumped its sales take up by a full percentage point, from 0.75% to 1.75%. That’s on top of the state sales tax of 6.25%, a regional 1.25% for mass transit, and another 1% for the city itself, which brings the total to 10.25% for the city of Chicago, the highest in the nation, and nearly that in the ‘burbs (varies by suburb). (“Chicago will have nation’s highest big-city sales tax rate come January“)
3) And did you know that Chicago has been so spendthrift that it’s now reduced to issuing taxable bonds to pay for its day-to-day spending? (“Cash-strapped Chicago borrows at rates approaching 8 percent“)
Mayor Rahm Emanuel’s decision to borrow for costs such as debt payments, bank fees and penalty payments on old deals gone bad — the kind of bills cities typically pay with operating funds — will cost Chicago more than $500 million in interest over the next three decades.
Data released Thursday show the city is paying rates that approach 8 percent on the $743 million in taxable debt sold Wednesday. Chicago’s borrowing costs have risen dramatically relative to other borrowers as its credit rating has deteriorated.
Oh, and, not to be outdone, the Chicago Public Schools just authorized $1.2 billion in new bonds (“Chicago’s school board authorizes $1.2B in new bonds“), though at least part of this is to fund infrastructure spending and to refinance old debt, and they’re hoping that they’ll avoid some of this debt by getting a state bailout — that is, “in part as a hedge against the possibility that state lawmakers won’t come through with help for the financially ailing district.” But see #4.
4) But, best of all, Illinois is now engaged in its own version of a budget showdown/government shutdown, as Governor Rauner accuses “Democratic House Speaker Michael Madigan of purposely standing in the way of a budget deal in order to create enough chaos to force a tax increase” and Madigan in turn claims that
Democrats sent Rauner a budget but that the governor decided to veto most of it instead of using his powers to choose what should be funded and what should be cut. That proposal, like the spending plan Rauner put forth in February, was several billion dollars short.
— that is, Illinois has a line-item veto and Madigan’s demand was for Rauner to do the trimming unilaterally that the Democrats were unable to do, rather than vetoing the whole budget to demand a better one.
And, as always, it’s not the road construction companies or the state employees bearing the brunt, but rather
Without a full budget, social service agencies that rely on tax dollars soon will begin to run out of money and may have to lay off workers and cut services ranging from home care for the elderly to therapy for patients with autism.
So, yes, I know, the people of Illinois have gotten the government they deserve, as the Democrats in the state House have re-elected Madigan as speaker year after year, Rauner replaced the ineffectual Quinn and corrupt Blago, and voters in Chicago re-elected Emmanuel, and Daley before him. (As for Cook County, the Board President won her election due to popular anger at predecessor’s tax increase; she ended it, but then concluded it was necessary after all, especially due to the pension payments.) But while the remaining 49 states enjoy their schadenfreude, those of us who are stuck in Illinois (for job and/or family reasons), are f*#!ed.
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