ILLINOIS PENSION REFORM: ROAD TO NOWHERE


banner james carlini - Carlini's CornerBy James Carlini

The latest attempts at putting Illinois back on the right road to fiscal solvency and promote a more enticing image to attract businesses should be accompanied by the song by the Talking Heads’ “We’re On a Road to Nowhere”

We’re on a road to nowhere….. After a 66% tax increase in state income tax, we are still billions of dollars behind in state budget deficits.

We’re on a road to nowhere….. After tolls on all Illinois Tollways just about doubled, we are still billions of dollars behind in budget deficits.

We’re on a road to nowhere…..We are the one of the worst states for creating a positive business climate and yet we keep raising taxes and fees instead of cutting them.

Taking that ride to nowhere is the Illinois taxpayer.  Where is the reform?  Reform means you have to really make some reforms and change the way you do business.

In the Talking Heads video, you see a guy running in place.  That’s the Illinois economy on the tax treadmill.  That is the state going nowhere when it comes to improving its economic viability and reducing its liabilities like large underfunded pensions.

ILLINOIS PENSION REFORM?  WE’RE STILL ON THE ROAD

We’re on a road to nowhere…..when it comes to pension reform.  The latest plans do not reflect what needs to be done: Cutting the loopholes not only for future pension recipients, but to all those already collecting multiple pensions and pensions over $100,000 a year.

There are two plans being kicked around: the Madigan (Illinois House) Plan and the Cullerton (state Senate) Plan.  The Madigan Plan is a better plan with some real reform, but the Cullerton Plan just “takes care of” the unions.

Some seem to forget that these are pensions, not lottery payouts.  There are jobs that do not demand a lot of skill, yet you could wind up with $60,000 to $75,000 a year plus healthcare as well as a COLA (Cost Of Living Adjustment) 2-3% raise every year, just for “making change” at a Toll booth.

Making change?  Hey, that’s a part-time, minimum-wage, high-school kid’s job at McDonald’s, making change for the customer.

There also should not be the ability to work one job for twenty years and then get another job (while collecting the first pension) and accruing another pension.  Pick one or the other.

There are other loopholes that need to be addressed, but they aren’t in the current proposals.

Another wage and pension issue is the “cost-of-living” issue.  The “Cost-of-living” can be used as a double-edged sword.  The unions are always fighting for more money based on the cost-of-living in Illinois and that’s fine.  If the pension is going to be sent to someone who moved out of the state, then there should be a “cost-of-living” tax on that pension for two reasons:

–          The money getting paid out is not being re-circulated into the economy that it was earned in.  That is a real loss to the state.

–          If the person is living in a state with a cheaper cost-of-living, then the argument of “cost-of-living” swings the other way with “you don’t need as much to live there” so the pension is reduced.

Too radical?  Some states already tax out-of-state pensioners and they just don’t focus on the former public sector employee.  Someone who earned a pension in the private sector, who then moves out-of-state, is also required to pay back some money.

Regional economies are more fragile than what most people think.  When you start taking out the money generated by those on pensions, it can really affect two economies: the one that they originally earned it in, and the one they are now spending it in.

There needs to be some re-thinking as to providing a pension or setting up a 401K Plan approach to employees.

ILLINOIS IS NOT THE ONLY STATE

If you are reading this and you are from another state, don’t get too haughty and think your state is that much better off.  Some of them aren’t.

California, New York, New Jersey, and a couple of others could also adopt, “We’re On a Road to Nowhere” for their state song as well.  Their deficits are huge and the only way they are going to improve is to look at real reform in pensions as well as other budget expenditures.

CARLINI-ISM :  Pensions are not lottery payouts and should not pay more to a person than when they actually worked the job.

Follow daily Carlini-isms at www.TWITTER.com/JAMESCARLINI

Copyright 2013 – James Carlini

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