Turelli for Tomorrow

272 E. Deerpath Road • Suite 120 • Lake Forest, Illinois 60045 • 847.604.5053
www.turelli4tomorrow.com

LAUREN TURELLI ADDRESSES PENSIONS

CRISIS, HIGHLIGHTS REP. KAREN MAY’S
CAREER-LONG RECORD OF INACTION

HOW SERIOUS IS OUR PENSIONS PROBLEM ?

Pensions represent a massive fiscal cancer that looms over Illinois.
Conservative estimates put Illinois’s unfunded pension liabilities anywhere from $60 to
$80 billion. Some experts have claimed the state is deliberately undervaluing the
commitment, and that state and local governments together owe closer to $200 billion.
NPR (3/24/10) and Chicago Tribune (8/13/10)

Our pension funds may run dry in less than ten short years.
According to a model recently put forth by a Northwestern University analyst, the
“projected day of reckoning” when our pensions funds simply run out of money could
come as soon as 2018 without serious reforms. Illinois would be the first state to run dry.
National Bureau of Economic Research (5/15/10)

Faced with crisis, lawmakers passed only the beginnings of a partial fix.
The emergency reforms rushed through by the General Assembly this March to prevent a
downgrading of Illinois’s credit rating was just a “small step”—according to a
nonpartisan watchdog group—and its reductions in future benefits don’t impact the
massive shortfall owed on already-earned benefits.
Sun-Times (3/25/10) and Illinois Policy Institute (4/14/10)

H OW DID WE GET INTO THIS MESS ?

Our extremely generous pension benefits literally create millionaires.
“Nearly 4,000” of retired Illinois government workers receive six-figure pensions, and
over 2,000 of those beneficiaries have collected over $1 million in total benefits. Public
employees in our state receive retirement benefits far out of alignment with those offered
in the private sector and even by other states’ programs.
Sun-Times (9/11/09)
Government officials help one another game the system—even in our own backyard.
This past July, a Tribune investigation shone unwanted light on Highland Park officials
who paid Park Department executives hundreds of thousands of extraneous dollars—over
$435,000 in one case—in the midst of a recession. Why the excessive compensation? To
boost employees’ output from the pension calculation formulas upon retirement. These
shady practices are simply the way business is done throughout our public sector.
Chicago Tribune (7/31/10)

Springfield has long refused to fully account for the expensive benefits.
As the Civic Committee of the Commercial Club of Chicago wrote in its comprehensive
2009 review of state finances, Illinois has “systematically underfunded its pensions for
years.” Our career politicians have used accounting gimmicks to downplay our fiscal
woes to ease their reelection, drifting further and “further away from an actuarially-sound
funding plan.”
Commercial Club of Chicago (2/09)

Elected officials systematically raid the pension funds to finance unrelated spending.
Recent number crunching revealed that politicians have emptied out more than 60% of
the pension funds’ balances to cover myriad holes they’ve left elsewhere in the budget.
Past attempts at “fixes” have only pushed off the costs until today and did nothing to keep
politicians’ hands out of the pension accounts.
Chicago Tribune (3/6/10)

W HAT HAS R EP . M AY DONE ABOUT THIS CRISIS ?

May supports borrowing schemes that delay tough decisions at taxpayer expense.
Representative May has—through her actions in the General Assembly and as advertised
in her constituent newsletters—repeatedly backed short-term borrowing to cover budget
shortfalls, indicating a preference for punting on the issue to tackling our crisis head-on
with substantive reform. Seeming to ignore the future costs of borrowing, May has even
applauded these schemes as a “step in the right direction.”
Karen May e-Newsletter (6/26/09; 7/3/09)

May repeatedly, disingenuously claims to have sponsored bills she simply did not.
When constituents demanded real action to end, one item in Representative May’s ten-
point response claimed she co-sponsored a sensible bill that would modernize the formula
with which retirement benefits are calculated. The state’s official website disagrees: May
is not listed as a sponsor, and the bill has been buried in committee with no action since
its first reading more than three months ago. Similarly, May recently claimed to have
“sponsored” PA 96-0889: a claim equally unsubstantiated in the legislative record.
Karen May e-Newsletter (8/6/10), Annual Report (8/26/10), and ILGA Bill Status (HB6866; SB1946)

May avoids taking the initiative on pensions, even when sitting on a key committee.
Except for a minor modification—which failed to pass—Representative May has been
the chief sponsor of just one substantive bill relating to Illinois pensions over the last
eight years (see below). This complete lack of leadership stands in particularly stark relief
given her seat on a pension subcommittee since 2007.
Karen May e-Newsletter (2/07) and ILGA Member Tracker
 The solitary pension-related bill May introduced would exacerbate underfunding.
In February 2010, cheered by municipal interest groups, Representative May sponsored a
bill to cap the pension contributions required of local governments. While relieving
pressure on local governments is an admirable goal, May failed to address in any way
where the funding gap she’d create could be made up. In a newsletter, May called her
legislation a “vehicle” that was still being negotiated; her negotiations apparently went
nowhere, as the bill has been buried in committee since March.
Karen May e-Newsletter (3/4/10), ILGA Bill Status (HB5297)

T IME FOR REAL REFORM : L AUREN ’ S P LAN

LAUREN WILL ADVOCATE FOR THE FOLLOWING IMMEDIATE REFORMS IN
HER FIRST WEEKS AS STATE REPRESENTATIVE:
 As part of last spring’s stab at reform, the legislature implemented a cost-saving measure that
shifted the annual benefit increases away from annual compounding to a more reasonable rate.
However, our career legislators tacked on an exemption for judges and General Assembly
members themselves. Lauren will immediately work to remove this “politicians’
exception” and bring politicians’ increases in line with the new, more modest formula that
other retirees have accepted. Bloomberg Businessweek (3/25/10)

 In its comprehensive analysis, the Civic Committee’s Pension Modernization Task Force cited
common ways in which the system is vulnerable to abuse. Two types of “double-dipping” are
among these frequent abuses: pensioners collecting two pensions simultaneously and retirees
who earn both a pension and a salary by working as an independent contractor after their
normal retirement. Last spring’s reform only cracked down on full-time employees who also
receive a pension; this simply isn’t enough. Lauren will immediately work to extend the
reforms to part-time “contractors” who simultaneously collect a pension and salary.
Pension Modernization Committee Minority Report (11/09) and State Journal-Review (3/24/10)

 The Civic Committee also outlined abuses relating to end-of-career compensation “spiking”
intended to throw off the formula and help pensioners accrue outsized benefits. These spikes
often come in the form of extraneous salary, and in some outrageous examples even involve the
remittance of extra salary to increase benefits after an employee has stopped working. Lauren
will immediately work to modify the pension equations, protecting benefit calculations
from this expensive and unethical tampering.
Pension Modernization Committee Minority Report (11/09)

 Too often, our career politicians use expensive borrowing schemes to delay tough decisions in
the interest of preserving their own careers. Record borrowing has harmed our state’s credit
rating and is not a sustainable solution for these obligations. As your State Representative,
Lauren will put taxpayers’ interests before her political interests. Lauren will vigorously
oppose issuing any more bonds until tangible steps have been made to put pension
funding on a more sustainable path. Chicago Tribune (8/30/10)

 
AS STATE REPRESENTATIVE, LAUREN WILL INVESTIGATE THE FOLLOWING
LONGER-TERM STEPS TO SHORE UP OUR PENSIONS OBLIGATIONS:
 First and foremost, for far too long Springfield politicians have generated financial schemes
that are designed for to optimize media play but fall short of basic accounting standards. Lauren
thinks it’s time to realign our priorities with the real world—specifically, Lauren will work to
create an actuarial commission that would review the state’s fiscal obligations and make
concrete recommendations. Once the commission is up and running, Lauren commits to voting
in accordance with its actuarial suggestions. _

 One of the central problems is that, particularly in weaker economic times, Illinois simply
cannot afford to offer pension benefits that are so far out of alignment with private sector
retirement plans. Following the steps that thousands of Illinois businesses have undertaken,
Lauren supports a gradual shift from our current “defined benefit” plans to a “defined
contribution” system akin to a 401(k). This transition towards a less-costly, more financially
flexible system has proven to be an acceptable compromise across America: more than half of
surveyed employers offer only defined contribution options—leading one analysis to term this
policy “overwhelmingly prevalent”—and it’s time that we look seriously at adopting a similar
plan in Illinois. Pension Modernization Committee Minority Report (11/09)

 As a former teacher, Lauren acknowledges the extent to which hard-working state employees
have planned for retirement with specific benefits in mind. It would be extremely unfair to pull
the rug out from under current retirees who have long planned for specific benefits. Bearing in
mind that that our politicians—not our pensioners—are ultimately responsible for the
present crisis, Lauren will vote against any effort to reduce pension benefits for those who
have already retired. _

 While distasteful, adjusting future benefits for those still working represents a crucial step to
reduce the crushing burden on our system. However, given her background, Lauren personally
understands the need to respect the binding nature of collectively bargained agreements.
Lauren will work to investigate a compromise solution that increases employee
contributions along a sliding scale, ensuring that the amount of an employee’s increase is
proportional with how long they have to adjust their plans. Acknowledging that Springfield
has created a situation so unsustainable that all must share in the sacrifice, this middle road
balances the need to shore up our bottom line with our obligation to state workers better than
the across-the-board increases often advocated by advocates of reform. _
Pension Modernization Committee Minority Report (11/09)

 Finally, just as the pension crisis that plagues Illinois was not conceived in isolation, neither
can it be tackled without a serious commitment to living within our means. Protecting pension
funds will remove a key fiscal crutch on which Springfield habitually leans to bail out its
unbalanced budgets. A fiscal conservative who will work to reduce non-essential
expenditures in every corner of the state budget, Lauren understands that pension reform
must be followed up with a serious commitment to reducing unsustainable spending.
Lauren supports the Illinois Policy Institute’s call for a “Pension Funding & Fairness Act,”
which would cap spending increases at inflation plus population growth—and earmark the
surplus for a Budget Stabilization Fund, used to ensure we meet our obligations to retirees— as
one innovative approach to the fiscal sensibility Illinois so sorely needs.
IPI “Policy Point” (1/19/10)
 Turelli for Tomorrow
272 E. Deerpath Road • Suite 120 • Lake Forest, Illinois 60045 • 847.604.5053
www.turelli4tomorrow.com

Karen May and the Illinois Pension Crisis:

A Career of Inaction
An impending fiscal disaster didn’t merit Karen May’s attention
during the ten years she has represented us.

A wave of bad press caught her attention in less than a week.

2000 2002 2004 2006 2008 2010

No bills introduced, sponsored, or co-sponsored that

Jul. 2010
Nov. 2000 would help to make Illinois pensions more sustainable Tribune expose
Rep. May
reveals huge
elected
abuses in
May’s own
Highland Park
 
Aug. 2010
  Issues a weak
and vague
response: her
  first stab at a
comprehensive
  solutions in a
decade in
  Springfield.

Lauren Turelli is meeting our pension crisis head-on with real

reform—not lip service designed only to save her political skin.  
 
Paid for by Turelli for Tomorrow. A copy of our report is/will be on file with the Illinois State Board of Elections.