Illinois Governor race

Illinois Governor Candidates Talk Pensions in First Debate

One of the hottest issues in the race for Illinois governor is also one where the candidates differ starkly: how to fix the state’s retirement system.

So it’s no surprise that pensions came up during the race’s first debate.

There were no revelations here; Pat Quinn and Bruce Rauner both used the time to double-down on their stances. From the Associated Press:

Quinn signed legislation last year that would fully fund the retirement systems by 2045, in part by cutting benefits. Public-employee unions have sued, saying the overhaul violates a provision of the constitution that says benefits can’t be reduced.

Rauner supports letting retirees keep the benefits they’ve been promised but freezing the systems and moving employees to a 401(k)-style plan in which workers are not guaranteed a certain level of benefits. He said that plan — similar to what most private-sector workers have — wouldn’t save much money to start but would save billions in the long term.

“I don’t believe it’s right to change the payments to a retiree after they are already retired, and that’s what Gov. Quinn did,” Rauner said.

But Quinn called Rauner’s plan “risky” because workers’ retirements would depend largely on market performance. He said he deserves credit for making Illinois’ full pension payment each year he’s been governor — something his predecessors didn’t do. That contributed to Illinois having the worst-funded pension systems of any state in the U.S.

Illinois’ pension reform law has spent the last 6 months being fast-tracked through lower courts. A ruling on the constitutionality of the law could come before the end of the year.

Governorship Presents Conflict of Interest For Bruce Rauner, Pension System

http://youtu.be/Ge1jo2KwyNA

Illinois’ GOP candidate for governor, Bruce Rauner, touts in a recent ad (above) that his investment firm, GTCR, made millions for the state by helping the Teacher’s Retirement System (TRS) invest its pension assets in private equity investments.

The investments apparently returned 17 percent – but returns aren’t the issue.

There may be a serious conflict of interest if Rauner is eventually elected governor. That’s because the governor appoints six trustees to the TRS Board—and GTCR still manages investments for the fund.

That wouldn’t be a big problem, except Rauner is still a partner at a GTCR subsidiary.

David Sirota explains:

Despite assertions that Rauner has retired from GTCR, SEC documents confirm that Rauner remains a partner in a GTCR subsidiary. There are other ownership stakes in GTCR funds listed in Rauner’s campaign finance disclosure forms. And according to state documents, GTCR currently manages Illinois pension funds, meaning that if elected, Rauner would appoint the board of a pension system that employs — and pays fees to — his firm.

If Rauner became governor, he would elect nearly half of the board of trustees of the Teacher’s Retirement System. From the TRS website:

TRS is governed by a 13-member Board of Trustees. Trustees include the state superintendent of education, six trustees appointed by the governor, four trustees elected by contributing TRS members, and two trustees elected by TRS annuitants. Two appointed positions are vacant.

As David Sirota writes, there are other issues surrounding Rauner’s tenure at GTCR, as well:

Rauner’s campaign ad comes as his investments hold center stage in a federal civil trial. Chicago’s NBC affiliate says that the suit involves allegations “that GTCR, the Chicago-based firm where Rauner served as managing partner for decades before retiring in 2012, may have masterminded an operation to allegedly avoid responsibility for the deaths of elderly patients residing in nursing homes it had invested in.” The Chicago Tribune says that GTCR is being “accused by attorneys for the estates of several former nursing home patients of engineering a complicated 2006 sale to avoid wrongful death judgments.”

GTCR denies the allegations.

Rauner promotes a pension plan that would freeze the pensions of current workers and shift all workers into a 401(k)-type plan.

Photo by By Steven Vance via Wikimedia Commons

Quinn: No Plan “B” On Pension Reform

Most experts agree that Illinois’ pension reform law, passed in December, currently stands on shaky ground after a July ruling from the Illinois Supreme Court extended constitutional protection to retiree health premiums.

But Illinois Gov. Pat Quinn isn’t ready to write off the law just yet. In recent interviews, he’s also been steadfast that he’s not ready to start drawing up a backup plan, either.

From the Associated Press:

Gov. Pat Quinn argued Friday that it makes no sense to develop a contingency plan.

The Chicago Democrat, who “fervently” believes the plan is constitutional, said in an Associated Press interview that he’d like to get feedback from the courts before proceeding despite Illinois’ urgent financial difficulties.

“You don’t exactly help your position before the court if you say, ‘Well I’ve got a plan b out here, maybe you could take that instead,’ and it’s not even passed by the Legislature,” Quinn said. “That’s a very bad strategic position …”

Quinn’s comments come as he faces a tough re-election challenge from Republican businessman Bruce Rauner (ROW-nur). He opposes the law Quinn signed in 2013.

After years of debate, lawmakers approved a plan that cuts benefits for most employees and retirees aimed reducing the state’s massive unfunded liability.

Unions sued over the law, saying it violates the Illinois Constitution.

But in a separate case on retiree health care, the Illinois Supreme Court in July ruled a law requiring retirees to pay more for health insurance was unconstitutional. The decision centered on the constitution’s strong protections for retirement benefits.

Quinn has drawn criticism for the lack of backup preparations. Last week, a columnist for the Chicago Tribune wrote:

Gov. Pat Quinn says he doesn’t need a “Plan B” to address the problem because he believes the Illinois Supreme Court will uphold the pension reform law he signed in December.

[…]

Quinn’s faith in the Illinois Supreme Court is farfetched. In July, the court issued a thumping 6-1 ruling striking down a previous legislative effort to cut health care subsidies to state retirees and employing language that seemed to serve as a funeral oration for the pension reform law.

Addressing the state’s “but we can’t afford to provide the benefits we promised!” argument, the majority wrote that the unequivocal pension protection clause in the Illinois Constitution “was aimed at protecting the right to receive the promised retirement benefits, not the adequacy of the funding to pay for them.”

Even if Quinn genuinely has hope that the court will gymnastically OK the pending law nevertheless, he still owes it to us to reveal what he proposes to do when — I mean if — those hopes are dashed.

As Pension360 has covered, pensions are becoming a bigger part of the race for Illinois governor in light of the July court ruling that opened the door for reworked reform measures.

Do Illinois’ Candidates For Governor Need A Pension “Reality Check”?

Pensions are one of many issues taking a prominent hold in the race for the Illinois governorship.

Both candidates, Pat Quinn and Bruce Rauner, recently sat down in front of the Chicago Tribune’s editorial board for an informal debate on, among other issues, how they would each handle the state’s pension crisis.

One member of the Chicago Tribune’s editorial board, Eric Zorn, listened to both sides. Now he says both Quinn and Rauner need to stop living in their “pension fantasies”.

On Quinn, Zorn writes:

Gov. Pat Quinn says he doesn’t need a “Plan B” to address the problem because he believes the Illinois Supreme Court will uphold the pension reform law he signed in December.

[…]

Quinn’s faith in the Illinois Supreme Court is farfetched. In July, the court issued a thumping 6-1 ruling striking down a previous legislative effort to cut health care subsidies to state retirees and employing language that seemed to serve as a funeral oration for the pension reform law.

Addressing the state’s “but we can’t afford to provide the benefits we promised!” argument, the majority wrote that the unequivocal pension protection clause in the Illinois Constitution “was aimed at protecting the right to receive the promised retirement benefits, not the adequacy of the funding to pay for them.”

Even if Quinn genuinely has hope that the court will gymnastically OK the pending law nevertheless, he still owes it to us to reveal what he proposes to do when — I mean if — those hopes are dashed.

Zorn then shifts to Rauner and his plan to shift Illinois workers into a 401(k)-style system:

Rauner owes it to us to explain why his ideas — he admits they’ve yet to rise to the level of a plan — are any more likely to survive court challenges than the bipartisan reform law, which he strenuously opposed.

…When I asked if joining such a plan would be mandatory, spokesman Mike Schrimpf echoed word-for-word the dodge Rauner employed in his Tribune candidate questionnaire: “We need to wait to see the parameters of what the Supreme Court says in order to carefully craft a plan that will pass constitutional muster.”

Mandatory enrollment of current public employees into 401(k)-style accounts by which they will ultimately fund their own retirements would likely not pass that muster. They’re generally not as lucrative for employees as plans that guarantee monthly pension payments.

Rauner knows this. It’s why he’s promised to allow police officers and firefighters to keep their “special retirement” that includes a standard pension, and why he projects “billions” in savings.

Zorn also decried the administrative costs associated with 401(k) plans. You can read his full editorial here (subscription required).

Photo by Chris Eaves via Flickr CC License

Illinois Gov. Quinn Accuses Challenger Bruce Rauner Of Paying Off Lawmakers To Vote Against Pension Reform Bill

Things got heated on Tuesday when Illinois Gov. Pat Quinn and challenger Bruce Rauner met for a face-to-face debate in front of the Chicago Tribune editorial board.

[Watch the full video here.]

The session lasted 80 minutes but arguably the most interesting point came when Quinn dropped an intriguing allegation: that Bruce Rauner had offered to pay off lawmakers to vote against the pension reform bill passed by Illinois last December. From the Chicago Tribune:

Quinn said that in December, during the heat of negotiations over a measure to drastically change public employee pension benefits, House Republican leader Jim Durkin told him that Rauner was offering campaign cash to GOP lawmakers to vote against the bill.

Rauner acknowledged working against the pension bill, which Quinn signed into law, but denied the governor’s allegation. Durkin aides referred calls to the state Republican Party, which did not directly address Quinn’s allegation in an emailed statement.

Bruce Rauner has proposed a plan to freeze the pensions of all current state employees and switch them into a 401(k)-style plan.

But Rauner has softened his stance in recent days, perhaps because he doesn’t want to alienate voters in what’s shaping out to be a close race.

During a public appearance Wednesday, Rauner said the following, according to WUIS:

“I’m a believer that we need to protect the pensions for the police officers, and give them a special retirement beyond what’s standardly done in other pensions.”

He didn’t clarify exactly what he meant by the statement.

Photo by Chris Eaves via Flickr CC License