Revamping Teacher Pensions, State Budget Problems, Coal, GM Labeling and the Affordable Care Act

Q: You favor shifting the cost of educator pensions from the state to the local school districts. Isn’t that going to result in huge increases in property taxes?

A: Shifting local pension obligations back on local school districts is a controversial issue. Right now, Central Illinois is subsidizing pensions for educators in the Chicago collar communities. Other than Chicago, all pension systems in Illinois are one for teachers, and we pay a disproportionate share. We have fewer teachers than the suburban collar communities, and teachers in the collar communities earn higher salaries . . . six figure salaries. We are paying more into the system, way in excess of what we are taking out. We are paying that excess to support teachers in northern wealthy school districts. The total of what the state pays into the teacher pension system is nine percent, so by shifting 1 percent a year to the local school districts, you’d have that transfer to local districts done in under ten years.

That will be a burden to the school districts, so at the state level we have to figure out a way to help subsidize schools and maybe we do that by increasing the general state aid formula. We in central Illinois would do far better if we’d increase the general state aid. We need to reduce the burden of education from property taxes and shift to supporting schools through income taxes where the wealthier yearly incomes pay more. Those wealthier incomes are not necessarily in central Illinois. Using property taxes to fund schools is unfair.

Q: We have so many tax loopholes in Illinois, why don’t we just wipe the slate clean and tax individuals and corporations by a uniform tax structure?

A: We did close a very important loophole last year (Senate voted on it) that gave tax credits to oil companies that brought in offshore oil from the Gulf of Mexico and got a tax incentive. It did not create any new Illinois jobs, did nothing for the Illinois economy and no one could figure out why it was put into effect. So we got rid of it and it’s worth a couple hundred million dollars. But in terms of other tax loopholes, you have to ask ‘What is the public benefit?’ If it’s a tax incentive to help create jobs, then it’s important. Last year we reauthorized the research and development tax credit. That’s a tax loophole, but it’s an important one. With Caterpillar Inc. here, their multi-million-dollar research and development program is a huge economic development tool for us in the Peoria area. Peoria has more Ph.D. researchers and scientists than any community our size. We’ve got the Ag Lab, Caterpillar, the University of Illinois College of Medicine, and Bradley University. We have to continue with that synergy for our community, so you can’t just say all tax loopholes are bad.

Q: Should there be tax transparency?

A: Sure. In the Senate, we passed a bill last year that didn’t go anywhere in the House calling for state tax transparency for publicly traded corporations. I support transparency in just about any endeavor. I think if we really want to be transparent in the political process, we should require all candidates to disclose income tax information . . . not give our tax returns to the public but answer basic questions. We do some of that with economic interest disclosure forms.

Q: Illinois is getting slammed with lower credit ratings, and the state’s fiscal situation is among the worst in the nation. Our state pension system is in a shambles. How did we get into this mess?

A: We didn’t really take money out of the pension system. What we did was we didn’t make our full payment. It was during the time the state had big capital projects. But it goes back to Otto Kerner and before that. People decided there were higher priorities than making pension payments, and they felt they were justified. It’s hard to look back to a different set of circumstances and say it was right or wrong. In the 1990’s, Gov. Edgar and the Legislature reformed the pension system and refinanced it over a period of four decades. Part of the idea was we expected relatively flat payments for about 15 years and then a ramp up. In the 90’s, the economy was doing relatively well. The pensions are greatly affected by the stock market because that’s where the funds are invested and there was tremendous growth in the late 90’s. For 15 years, we systematically underfunded the pension system. Some years they took what was called a pension holiday and skipped those payments. But, the ramp hit three years ago, and that ramp was pretty drastic. But since I’ve been in the Legislature, we’ve made our full payment every year . . . but for two years we borrowed the money to make the payment. This year, we made a full payment but we made it because of the temporary tax increase (5 percent income tax). The increase in the temporary tax was about what the payment was to the pension system . . . $5.1 billion. This next year we’re looking at something just short of $7 billion. When you have a $34 billion budget and you’re making a $7 billion payment, that’s a pretty significant part of the budget. So, the system is out of whack because we’ve missed payments, we’ve underfunded it, we’ve done things that shouldn’t have been done. In addition, the Legislature at times gave something called a pension sweetener. We allowed school districts, for example, to reward superintendents by giving them a bump on their last day of pay and it doesn’t cost the school district anything. It costs the pension system. (We’ve now changed the law and prohibit this practice. We now average final salaries over a longer period to calculate pension.) All this has added up to the perfect storm creating a non-sustainable pension system and now we have to correct that.

At the end of 2014, the temporary tax sunsets. Can the Legislature reauthorize it? Yes. It could be made permanent if the Legislature chooses and the governor signs it. Gov. Thompson had a temporary tax and when Gov. Edgar was elected he made it permanent. But here’s the point we need to consider. At a 5 percent individual income tax rate, we’re still below all the other surrounding states except for Indiana where we’re just a little bit higher. One thing to consider is we need to decrease the burden of education on property taxes and shift support for education to income taxes. Property taxes are way too high no matter where you live. Using property taxes to fund schools is very digressive.

Q: Does it make sense to allow hospitals to pick and choose what aspect of the Affordable Care Act to implement?

A: Our hospitals locally have really embraced the Affordable Care Act. OSF is one of 30 grant recipients for setting up their ACA. Methodist is also moving forward with this. The most progress with the ACA has been with the medical community. They have moved forward at a very rapid pace, whether setting up their ACA system or electronic medical records. People may still say they don’t want socialized medicine, but this is not socialized medicine. This is a public-private partnership. This is something Richard Nixon embraced, Bob Dole embraced. To my friends who disparage the Affordable Care Act, I say if we destroy this, the only place we have left to go is a single-payer system. All you do is take Medicare and drop the age limit. So let’s make this thing work. The Affordable Care Act was negotiated and worked out, signed by Obama and upheld by the Supreme Court. There will be a lot of skirmishes along the way but overall the Affordable Care Act tries to fix a system that right now wastes a lot of resources because we have such a large pool of uninsured. When the uninsured get sick and go to the emergency room, there is cost shifting. Anyone who has private insurance, either a policy of their own or a policy through their employer . . . those are the people bearing the brunt of the cost shifting because you really can’t cost shift against Medicaid and Medicare. Just in Illinois, we spend about $90 billion a year on health care. That’s public and private dollars. OK, that’s three times the state budget. Do you think there is a better way to allocate those resources and actually have good health care? The Affordable Care Act really embraces outcomes. People need to become familiar with ACOs, Accountable Care Organizations. All hospitals are now gearing up to become ACOs. The focus is now on the outcome of whatever is delivered in terms of health care. That’s very different than just a fee for service system where you pay every time you see a health care professional. The payment will move toward rewarding outcomes.

Q: What is the status of your bill to label genetically modified food?

A: I have drafted a bill requiring products with GM foods in them to be labeled. As the chair of the Agriculture Committee, it will come to my committee and I’ll put it in subcommittee and we will have the subcommittee working this summer to set up hearings throughout the state so we can actually have testimony on this issue. It’s an issue the public generally does not understand and this will give an opportunity for both proponents and opponents to come forward and state their positions.

Q: What is your position on the two obsolete coal-fired electric generating facilities in central Illinois?

A: An efficient coal-fired power plant emits 100 to 200 tons of sulfur dioxide a year. Edwards and Powerton emit in the 12,000 range. Even with scrubbers, there are problems because the coal ash becomes more laden with toxins.

We need to make sure we can use Illinois coal in a safe way. It’s an issue we have to resolve. We will have increased energy needs in the future, and I’ve been a big proponent of clean alternative energy. Not only solar but wind energy. It’s good that we give incentives to solar and wind, but understand we can’t meet the capacity needs of this state just with those sources. We still have to rely on the heavy producing plants in our state but we have to give incentives so companies can put new technology into their facilities. That’s why I supported Tenaska to construct a $3.5 billion clean coal plant in Taylorville.

Since we deregulated the electric industry, we took away one of the tools industry used to put capital back into their industry. Now we are saying we will buy electricity at the cheapest cost possible. So we can take a power plant in New Mexico and not care about how much pollution it creates. We just want its cheap power. The Tenaska plan said we will require a certain percent of green generation. That is the collateral to back up the investment. If you go to the bank to borrow $5 billion to build a clean electric generation plant, the bank will want to know what your collateral is. I’ve always been a supporter of deregulation and we’ve seen deregulation bring down the price. I also was a supporter of aggregation. The generation is deregulated but the transmission is still regulated. Now we have to create an incentive to be sure we get the capital investment in new clean technology.

Q: So you won’t write these plants off. You’ll look for incentives to modernize them.

A: Yes. We need the jobs and we need to look into ways to tap into Illinois coal but still be clean burning. I’ve been asked to be the chief sponsor of the natural gas infrastructure bill to improve the gas lines throughout the state. The old pipes we’re using to transmit natural gas are leaking . . . the equivalent of 40,000 cars on the road. Plus, the cost of natural gas is at an all-time low. This is like the smart grid for gas. (We passed the legislation for the smart grid for electricity but the ICC blocked it.)

Q: The pesticide Drift Watch site seems to be largely ignored by pesticide applicators. What are your ideas for making it more effective?

A: I’m going to ask the Department of Agriculture to give us a report on how the implementation of Drift Watch is going. If it is not producing the kind of results we were promised, we may have to look at mandating involvement by all those in the industry including aerial sprayers.

There is ongoing controversy with the landfill in Peoria.

We have to work with the Coulters who own Peoria Disposal Co. Keystone needs a location for its waste. We have to work in a high tech way to deal with those wastes. We are fortunate to have a locally owned landfill operator that does what I’ve seen them do when I’ve visited their sites and talked with their scientists. Just shipping our waste someplace else and its out of sight out of mind, doesn’t resolve any issues.

Q: OK, we have to deal with our waste but should we be accepting waste from other areas?

A: As long as we have the ability to properly dispose of that in a legal way . . . then it is a business. It has to be safe, but my experience with PDC is that we are very fortunate to have a locally-owned company that does this in a responsible way to protect our environment and allow companies like Keystone to survive. The jobs at Keystone are important. That’s 1,000 people who would never get that kind of high paying job again.

Q: Are we bringing in waste in an approved, environmentally safe way?

A: The EPA has laws, both federal and state that spell out how you have to handle certain wastes. As long as companies are abiding by the law, then companies can properly operate. If laws need to be changed, that’s what we do but if you expect companies to comply with the law you also have to say if they comply with the law they have a right to do business.

1 comment for “Revamping Teacher Pensions, State Budget Problems, Coal, GM Labeling and the Affordable Care Act

  1. wordfan
    March 4, 2013 at 1:26 am


    By including the Tenaska issue is your article, I guess you must know something that I do not. Since the latest version of their bill did not include coal but natural gas.

    I know it gets confusing, they have had so many propositions and legislation out there. I have worked for many years to bring the issues of their proposals to light.

    I do not endorse them or their proposals.

    There is a shell bill out there now, but I fear it will have the same legislatively mandated purchase of power from them which would increase the cost of power to everyone in Illinois at above market prices for 30 years to a company that has a history of selling its plants to overseas investors.

    I, for one, do not want my tax money and rate money to go towards a coal chemical plant that can’t financially survive on its own. To a so called “Clean coal” technology that is actually a coal to chemical plant.

    Think about it… the components of coal do not change, and since the amount of pollutants going up the stack are less… where are those compounds going? I ran the numbers… and looked into the company and the industry… the currently running coal gasification plants rely on the toxic chemicals for a high percentage of their income. In Tenaska’s case, that income is insulated from offsetting the cost of the power. Tenaska profits, we pay…

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