Illinois Govt Employees Sue to Retain Exorbitant Unsustainable Pensions

http://www.suntimes.com/news/politics/25237710-418/public-sector-unions-file-suit-over-pension-reform.html

And so it begins...

The plaintiffs will lose. The pension reform bill simply took away automatic cola increases, and without the same the entire fund was at risk of solvency. With the increased income tax and the pension bill, the fund is secure and solvent and the Plaintiff's legal basis is undermined because the constitutional argument will fail when the bill actually saves the pension. When superintendants of school are getting paid 300k, and elementary school teachers get 100k and 75% pension guarantees, the system needed the bill and the reform has overwhelmingly been accepted by taxpayers. The public employees do have legitimate complaints about legislators stealing from the pension funds over a 25 year period, but this lawsuit would have been successful if they filed it when the funds were being used for other purposes, but now the very foundation of the pensions were at risk, and the bill meets constitutional test of not lessening the pension, rather allow the pension to survive.

http://billmoyers.com/2013/09/30/matt-taibbi-on-wall-streets-campaign-to-loot-public-pensions/

Matt Taibbi on Wall Street’s Campaign to Loot Public Pensions
September 30, 2013
by Joshua Holland

“Five years ago this fall, an epidemic of fraud and thievery in the financial-services industry triggered the collapse of our economy,” writes Rolling Stone’s Matt Taibbi. “Today, the same Wall Street crowd that caused the crash is not merely rolling in money again but aggressively counterattacking on the public-relations front. The battle increasingly centers around public funds like state and municipal pensions.”

State and local governments were hit hard in the crash as tax revenues dwindled. At the same time, public pension funds across the United States had been heavily invested in Wall Street’s AAA-rated “toxic securities,” and when the house of cards fell it left significant gaps in their funding.

But Wall Street would not be shamed for the economic pain it had inflicted. At the same time as leading hedge funds financed a campaign advocating cuts to the benefits retirees expected to receive, they lobbied lawmakers to relax the rules governing pension fund investments so that they could siphon off a chunk of the $2.6 trillion that remains under public pension funds’ management.

And, as Taibbi writes…

This war isn’t just about money. Crucially, in ways invisible to most Americans, it’s also about blame. In state after state, politicians are… using scare tactics and lavishly funded PR campaigns to cast teachers, firefighters and cops – not bankers – as the budget-devouring boogeymen responsible for the mounting fiscal problems of America’s states and cities.

Moyers & Company’s Joshua Holland caught up with Matt Taibbi last week to discuss this vexing story. Below is a lightly edited transcript of our conversation..."

The bankers have their share of the blame, but in the state of Illinois it was politicians who robbed the pension funds to pay for other things and stay elected. 25 years of the state not meeting their obligation for contribution, while the employees dutifully made their contributions......it is morally repulsive that those employees are getting the shaft, but that battle should have been fought 25 years ago when the contributions were not made in a timely fashion.....the bankers had nothing to do with that fraud.

You mean like social security ?

That doesn't fit her narrative and they don't produce pieces that examine govt malfeasance on the sites she reads.

"...Matt, a lot of states and localities do have big gaps in their pension funding. Let me start by asking you, whose fault is that?

Taibbi: Well, there are primarily two reasons why most states’ pension funds are depleted. One huge reason is that a lot of states and municipalities have not been making their required contributions into the funds every year. They’re mandated by law to throw in a little bit of money. Most of the funds are actually funded by the workers themselves — they make a small percentage contribution of their incomes into the funds – but there’s also a taxpayer contribution, and the states were supposed to have put that money in for years and years and years. What they’ve been doing, in many cases, is just not doing that. Politicians have been taking that money and spending it on other stuff — building things, stadiums, swimming pools, new athletic complexes, giving out tax breaks to influential donors, things like that. So that’s one problem.

The other huge problem is that a lot of pension funds were targeted as institutional investors by financial companies and banks in the pre-crash years and they bought mortgage-backed securities, which subsequently blew up. So they were buying a fraudulent product, which ended up depleting the fund.

Holland: And this is one of the key issues: the rating agencies were in cahoots with Wall Street, and they would bless these piles of toxic securities as triple-A rated securities. A lot of pension funds are required to invest only in highly rated investments. So they were basically cooking the books so that pensions could buy into this junk.

It blew up in their face, and now we have this so-called pension crisis, and it seems that there’s a push to run in there and loot it. And it strikes me, reading your piece, that there’s kind of a confluence of ideology and greed going on here. For some time, the right has been making public sector workers into the new welfare queens, living large off the public teat — never mind that, according to economist Dean Baker, the average public employee’s pension was just $22,000 dollars in 2007, and a lot of them aren’t even eligible for Social Security.

So there’s that ideological component, and then there’s a kind of shock doctrine going on, where we have this contrived crisis and then these sharks just move right in to feed..."

So there’s that ideological component, and then there’s a kind of shock doctrine going on, where we have this contrived crisis and then these sharks just move right in to feed..."

The Illinois pension crisis was neither contrived, nor did it have much to do with banks, it entirely rested on the shoulders of fast eddie and the democratic control of the Illinois house and senate who year after year fell short on the state's contribution in the budgets, with the groupthink that they would catch up next year. Republicans and Democrats sat in the governor's office and approved these budgets which were doomed. The sad thing which your article points out is that many of these government employees made every one of their contributions, as did many local government units, but the state cheated.....and everybody participated, and the banks might have less than 10% responsibility for the shortfall, yet these employees basically will never have the bargained cola increases. Twenty years from now in real dollars with the certainty of inflation, many retiring babyboomers will be facing half of what they had worked for 35 years contributing to the fund........but again, if the state had not raised the income tax and killed these cola increases, the pension would be insolvent. Actually, the state is financially in the best place it has been in 30 years with this pension bill. A judge in Illinois no longer can work for eight years and get a 140k pension......they need to work 30 years and anything less than that will be a prorated reduction......sanity.