Pensions & Other Promises, & How to Pay for Them

Chuck Sauer’s campaign (state rep, 70th District) sent me his responses to questions from the NIU Annuitants Association regarding state pension funding and benefits. They invited me to share these responses. Plus, this all flipped my tax-relief rant switch to the “on” position (which, yes, is indeed located next to the ComEd 25% rate-increase rant switch). So here goes:

Sauer began with a general declaration that promises should be kept, and he aligned himself with families and working people. Then he addressed each of three specific questions.

1. Do you have any intent to modify the state pension program to either decrease or increase the pensions of current State University retirees?

No, I do not intend to support modifications in the state pension program that would serve to decrease the pensions of current State University retirees, nor will I support decreases in the pensions of currently-vested State University employees. These retirees and current employees deserve and are entitled to the pensions that they bargained for, and to which the State of Illinois agreed. As State Representative, I will begin immediate, bi-partisan efforts to fully fund pension programs to recommended levels, even if that means cutting back other expenditures and/or identifying new sources of revenue.

2. Do you favor leaving the annual 3% cost of living clause as is?

Yes, I do favor leaving the annual 3% cost of living clause as it is, unless there are significant economic changes which compel an increase.

3. Do you have any agenda to modify future pension plans for new hires in to the State University Retirement System?

No, I do not have a specific “agenda” to modify future pension plans for new hires. But given a realistic understanding of the state’s financial condition and current trends in both public and private pension programs, I will consider options presented by those most closely affected by this issue, including members of the NIU Annuitants Association. Together, we need to determine a workable plan that will allow us to continue to attract quality employees, while remaining cognizant of other needs.

Answering the Annuitants’ questions just got Mr. Sauer warmed up. He went on to condemn the partisan “blame game,” saying there was plenty of it to go around; and to call on elected state officials, including our governor, to make the decisions required to bring stability and equity to state finances.

For example, while I intend to fight for significant cuts in Illinois’ unfair and regressive property tax system, I will also work for a more fair and progressive income tax system. Those who take a simplistic stand against all taxes, or against all program cuts, are engaging in demagoguery at the expense of truth and fairness.

Speaking as a homeowner whose annual property tax more than doubled in the past dozen years–so much for tax caps!–I believe we need to look very closely at our options. Nobody wants to pay a higher income tax rate but at least that kind of tax is stable and related to the amount of money you’re actually bringing in. Here are a couple other ideas:

    Get the State of Illinois to keep another promise, that of being the primary source of funding for schools. The state funds at about 36% on average. They should be funding at 50%. Taxpayers, through property taxes, currently provide about 53% of the funds for schools. How long can we afford to pick up the slack?

    Consider whether we in Illinois goofed by removing taxation of corporate personal property. In Indiana, business brings in about 60% of annual property tax revenues, households about 40%. Locally, those proportions are just about the opposite. What appears to account for the difference is that Indiana taxes not only real property but also personal property (i.e., equipment), which accounts for almost half of the business tax revenues in that state. If you think about the incredible complexity involved in carving out the Illinois share of corporate income tax of multi-state and multi-national corporations, plus the incredible variety and amount of tax expenditures on behalf of luring and retaining business in Illinois, it might make better sense to shift back to collecting the corporate personal property tax. Of course, the tax expenditures themselves deserve some scrutiny.

    Find some way to deal with market hysteria. If we are going to continue to rely so heavily on property taxes to fund services, we must ensure that homeowners don’t get taxed out of their homes and neighborhoods. The Tax Reform Action Coalition (TRAC) recommends “acquisition-based” assessment of property, which puts an arbitrary limit on annual assessment increases (say, 2% per year) until the property is sold, at which time the property is re-assessed to the value at the actual purchase price.

You know, just as kind of an aside here I’m going to mention another idea from Hoosierland that I really liked when I lived there. Don’t know if they still do this, but they used to base license plate fees on the book value of the vehicle. I remember I once paid about $25 for my VW beetle while my dad paid something over a hundred for his mid-size sedan (around 1980). If we adopted the right formula we could give the people who need it a break. And if we were really clever, we’d construct the formula to help turn the tollways into freeways now that logistics are such a big business in so many areas of Illinois.

[Full disclosures: I met Chuck Sauer at Corn Fest last month, very much like him for the job and support his campaign.]

Cross-posted at SoapBlox-Chicago.