Posted October 20, 2015 11:10 am by Comments (12)

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“Seems that not all recent Illinois governors end up in prison, but perhaps they should be jailed for this crap.”

Actuary Mary Pat Campbell

 

By: Mark Glennon*

 

Former Illinois Governor Jim Edgar is getting lots of attention for his recent comments that Governor Rauner should give in to Democrat and public union positions to resolve the state’s budget impasse. Rauner shouldn’t “hold the budget hostage” by demanding reforms as a precondition to the tax increases that budget resolution necessarily entails, Edgar said.

 

Here’s why he has no credibility on that. Keep in mind that during most of his term as governor the economy was “like a rocket in flight,” as described by a counterpart governor at the time, Pete Wilson in California. Also keep in mind that Edgar’s Republican party had majority control of both houses of the legislature for much of his term.

 

First, Edgar is a leading culprit in today’s budget crisis. Pensions are central to our budget shortfall. What did Edgar do with pensions? The booklet he prepared as part of his duties of an outgoing governor said the following: “The governor approved the most significant increase in pension benefits for state workers in a quarter century.” The booklet also noted Edgar agreed to other improvements, like adding vision and dental coverage and long-term care insurance, as reported in the JournalStar.

 

Worse, Edgar is responsible for the infamous “Edgar Ramp,” the obscenely backloaded can-kick on pension funding enacted in 1994. It was central to the finding by the Securities & Exchange Commission that Illinois misled investors in connection with bond sales after Edgar left office. The Edgar Ramp was unworkable, the SEC basically said, and Illinois should have told bond buyers. The fraudulent nondisclosure was not Edgar’s fault, but the materiality of the Edgar Ramp to the fraud finding and the state’s financial mess is.

 

Second, he has no understanding of pensions whatsoever, and offers no real answers. Here’s what an actuary who follows the pension crisis closely, Mary Pat Campbell, said about some of Edgar’s recent comments on pensions: “Seems that not all recent Illinois governors end up in prison, but perhaps they should be jailed for this crap.” She went on in some detail about why his comments on pensions were so foolish, and concluded: “Shame on Gov. Edgar for mouthing the same bullshit everybody else does in favor of underfunding the pensions…. I guess ex-Gov. Edgar wants to cover his own ass for the pensions being underfunded in the go-go 90s, when he was governor….”

 

Edgar’s long-held solution to the pension crisis (which is the lion’s share of the budget crisis) is that we just have to pay up. How can we  just pay up? Neither Jim Edgar nor anybody else has ever offered any combination of tax increases and spending cuts that would allow us to “just pay up” as he wants. It’s impossible.

 

The central problem is Edgar’s long-standing allegiance to public unions. During Edgar’s term, and during Jim Thompson’s before him, governors had no real choice but to give in to whatever unions wanted. That may excuse some of his conduct during his day, but times have changed. Public unions can be reined in. If they aren’t now, Illinois is doomed. Edgar is behind the times.

 

Third, he’s biased because he’s soaking taxpayers. It’s genuinely difficult to see how anybody with a conscience, with things as bad as they are, can take from the state as much as Edgar does. For 20 years of service he collects a pension of $151,778. He began collecting his pension in 2001 at age 55. He’s also paid $71,760 to be Distinguished Fellow at the University of Illinois’ Institute of Government & Public Affairs. That’s according to a current salary database, although the Tax Foundation earlier reported that he was paid $177,630 for that position. Over $300,000 per year total comp from taxpayers (including his pension), they said.

 

What makes that so annoying is that, today, I see so many highly paid people taking big pay cuts to join the government because they want to help. They’ll get far lower pension benefits as Tier 2 employees than Tier 1s like Edgar get. Plenty more people volunteer loads of time for no pay through advisory boards and other activities.

 

I’m more interested in their opinions, and those of an honest actuary, than Jim Edgar’s

 

*Mark Glennon is founder of WirePoints. Opinions expressed are his own.

 

 

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anonymous
Private sector pay, compared to public sector pay at the same EDUCATION levels is disperse. Especially at the profesional levels. Do you REALLY want to compare EDGARS salary and pension to an equivilant CEO in private industry? Or did you just compare Edgar to an everyday working slob? When retirement benifits are compared the salary advantage the private employee has, is too often ignored. Besides; All NEW hire public employee retirements in Illinois are teir 2 benifits. Not much better than SS. and not much to get worked up against. The pensions that you rail against have been statutorily neutered.
Rex the Wonder Dog!

Private sector pay, compared to public sector pay at the same EDUCATION levels is disperse.
Public sector compensation is 2-20 times more than the private sector, especially at the GED/HS diploma level of cop and FF, and in most muni’s those two occupations account for 50%-90% of all general fund revenue.

Jim Palermo

Rex, is it your contention that a person making $50,000 in the private sector would make between $100,000 to $1 million in the public sector? You need to show your math.

Rex

A cop or FF with just a GED makes $200K in base salary and benefits in nearly every major metro in the USA, it can be over $300K with OT. In real life a GED job does not usually pay much above minimum wage, or about $15K per year. 20 times $15K= $300K.

anonymous

Rex a states attorney with a Doctorate in Jurisprudence and 25 years of experiance makes around 100k working for the govt. How much does a similar lawyer make in Private practice? The pension helps make up for the difference in salary.

nixit71
Unfortunately, IL doesn’t tax retirement income. So when you say “the pension helps make up for the difference in salary”, it means that Rex (in your example) has a large portion of his lifetime earnings un-taxed just because he happens to get paid back for that difference in retirement. We all defer compensation by contributing to our pensions and 401ks during our careers. But the public sector argues that they ALSO take a discount in salary, essentially receiving below fair market value for their services today in exchange for a more lucrative retirement package. So when exactly do they plan… Read more »
mark glennon

The opposite is now true. Everybody hired since 2010 is a Tier 2 pensioner with benefits so small they may be less than Social Security, which has created a whole new risk to the system. Those Tier 2 workers pay not just for their own pension but an additional amount to subsidize the pension debt, which is owed entirely to Tier1 for work already performed.

anonymous

How are we gonna get decent lawyers…or profesionals for that matter… to work for the State…..if we are now offering tier 2 retirement and salarys much lower than private sector. As we have reduced pensions are we prepared to increase salaries? Or are quality profesionals simply not desired or pursued for Illinois Goverment positions?

nixit71
If you’ve seen the number of lawyers doing document coding for $30/hr in the private sector with crappy benefits, I’d wager that the state will have little trouble finding candidates. These jobs are often viewed as stepping stones into other govt positions from political to mgmt to judicial anyway, and there’s always a new crop of lawyers eager to make their mark. I knew some women who worked for the AG for a short time right after law school. New, excited employees eager to work the trade. Unfortunately, their managers, usually 40 something women, never wanted to improve processes or… Read more »
mark glennon

Respectfully, I think you are missing the point about Edgar. The point is that he has no credibility because he is among those intent on collecting every dime he can from taxpayers.

And I totally agree about Tier 2, and have written repeatedly about that. Not only are their benefits neutered, but they must pay in extra to help fund the liability to Tier 1 people like Edgar.

nixit71
Another fun way to think of Edgar’s pension of $151,778… In order for a private sector worker to equal Edgar’s RETIREMENT take home pay this year, after maxing out their 401k contribution @ $17,500, he/she would have to gross over $190,000. So the private sector worker would need a 25% raise above Edgar’s gross pension just to equal Edgar’s un-taxed, 3% COLA-fortified pension after taxes. Then, to keep pace with Edgar, you would need yearly 4% raises. Private sector worker would max out his SS contributions to the tune of $7,300+ every year. Except he’ll be lucky to get a… Read more »
nixit71

…”Un-taxed” by the State of Illinois, that is.

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