Posts Tagged ‘Illinois’

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Pensions

Illinois has the most underfunded retirement system of any state in the country and the largest pension burden relative to state revenue. It also has the highest number of public-pension funds close to insolvency, such as the one for Chicago’s police and firefighters.

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Like many states, the funding of the retirement system in Illinois suffered from the decline in asset values following on from the financial crash of 2007-08. But the situation is even more dire in Illinois because lawmakers have repeatedly failed to fix the state’s revenues, especially the single-rate income tax.* This has made a bad situation even worse, with growing inequality in the state. Illinois now has the nation’s ninth-highest level of income inequality.

The only solution to the funding problem, at least in the short term, will come from increased revenues based on a progressive income tax. But the new governor of the state, Republican Bruce Rauner, has other plans. He has decided to attack public-sector unions, by issuing an executive order that allows state employees not to pay “fair share” fees related to collective bargaining and contract negotiations.

 

*A constitutional amendment that would have enabled Illinois to impose different rates on different levels of income is now sine die.

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It was a bad night for Democrats—and for neoclassical economists.

Republicans, as the world knows, took back the U.S. Senate, increased their majority in the U.S. House, and retained their hold on many state governorships. (That’s what happens when the Democratic Party runs away from its national standard-bearer and from the issues that have historically defined it as a political party, and fail to blame the GOP for blocking any further progress at the national level and within the states.)

But it’s also true that neoclassical economists—the group of economists who oppose minimum wages—also lost last night. Voters in all five states that had ballot initiatives to raise the minimum wage above the federal level and their current state levels approved the initiatives.

All four states passed the measures, most by significant margins. More than two-thirds of voters in Alaska agreed to raise minimum wage to $9.75 by 2016. Sixty-five percent of Arkansas voters set the state on course to adopt an $8.50 figure by 2017. In Nebraska, 59 percent said the number should be $9 an hour by 2016. Only South Dakota stood out with a slimmer margin; 53 percent voted to raise minimum wage to $8.50 an hour next year. In Alaska and South Dakota, minimum wage is now pegged to inflation, meaning that it will rise as the cost of living does.

And the fifth state, Illinois, where the ballot initiative was non-binding, also approved the measure—by 67 to 33 percent.

In addition, voters in San Francisco decided to start paying workers a nation-high $15 per hour and Massachusetts voters passed mandatory paid sick leave.

All in all, last night was a pretty bad night for neoclassical economists.

A recent paycheck for Delores Leonard shows her hourly wage of $8.25 for working at a McDonald's Restaurant, the minimum wage in Illinois, in Chicago

Delores Leonard lives with her two daughters in Chicago and has worked for seven years at McDonald’s.

Her Illinois minimum wage is $8.25 an hour. Assuming she works the same number of hours each week (and gets two weeks of unpaid vacation), her annual income after taxes is $14,626.

McDonald’s reported $7.2 billion in second quarter sales, which generated a net income of $1.39 billion. That’s a profit margin of 19.31 percent.

McDonald’s CEO Don Thompson took home total compensation of $9.5 million in 2013.

 

liberalfix

An hour-long interview today with hosts Keith Brekhus and Naomi Minogue and fellow Chicagoan Lorraine Chavez (campaign spokesperson last year for Fight for 15) on the current state of the U.S. and Illinois economies. The show will air this coming Friday night on Liberal Fix Radio.

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First, they came for the pensions of private-sector workers. And they won. Now, as in Detroit and Illinois, they’re after the pensions of public-sector workers. And they’re winning.

In the case of private-sector workers, the radical shift from defined-benefit to defined-contribution retirement plans has transferred all the risk to workers (who are forced to have the freedom to choose the appropriate investment strategy, in a financial casino they can barely understand and over which they have no control) and boosted the retained earnings of large employers (who no longer have to shell out as much for workers’ pensions). Public-sector unions were able to hold out a bit longer but now they’re being hit—in this case, by cuts in their contractually agreed-upon retirement funds.

What’s the problem? As Matt Taibi explains (in his inimitable fashion), Wall Street is ultimately behind the looting of American public-sector workers’ pension funds:

This is the third act in an improbable triple-fucking of ordinary people that Wall Street is seeking to pull off as a shocker epilogue to the crisis era. Five years ago this fall, an epidemic of fraud and thievery in the financial-services industry triggered the collapse of our economy. The resultant loss of tax revenue plunged states everywhere into spiraling fiscal crises, and local governments suffered huge losses in their retirement portfolios – remember, these public pension funds were some of the most frequently targeted suckers upon whom Wall Street dumped its fraud-riddled mortgage-backed securities in the pre-crash years.

Today, the same Wall Street crowd that caused the crash is not merely rolling in money again but aggressively counterattacking on the public-relations front. The battle increasingly centers around public funds like state and municipal pensions. This war isn’t just about money. Crucially, in ways invisible to most Americans, it’s also about blame. In state after state, politicians are following the Rhode Island playbook, using scare tactics and lavishly funded PR campaigns to cast teachers, firefighters and cops – not bankers – as the budget-devouring boogeymen responsible for the mounting fiscal problems of America’s states and cities.

Not only did these middle-class workers already lose huge chunks of retirement money to huckster financiers in the crash, and not only are they now being asked to take the long-term hit for those years of greed and speculative excess, but in many cases they’re also being forced to sit by and watch helplessly as Gordon Gekko wanna-be’s like Loeb or scorched-earth takeover artists like Bain Capital are put in charge of their retirement savings. . .

Now, though, states all over the country are claiming they not only need to abrogate legally binding contracts with state workers but also should seize retirement money from widows to finance years of illegal loans, giant fees to billionaires like Dan Loeb and billions in tax breaks to the Curt Schillings of the world. It ain’t right. If someone has to tighten a belt or two, let’s start there. If we’ve still got a problem after squaring those assholes away, that’s something that can be discussed. But asking cops, firefighters and teachers to take the first hit for a crisis caused by reckless pols and thieves on Wall Street is low, even by American standards.

Update

And, as reported on Thursday, “First came the State of Illinois, now comes the City of Chicago.”

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According to the Economic Policy Institute,

In the fourth quarter of 2012, nationwide unemployment rates were 6.3 percent for whites, 9.8 percent for Hispanics, and 14.0 percent for blacks. These elevated rates are projected to remain essentially unchanged at the end of 2013.

In Illinois, the unemployment rates were 7.0 percent for whites, 9.7 percent for Hispanics, and 17.6 percent for blacks.