Illinois Supreme Court Ruling

[ripper1]

The Illinois Supreme Court has ruled 6-1 that cuts to retiree health care benefits are unconstitutional. This could spell doom for legislatively passed cuts to pension fixes for the state as well as Chicago. Anyone close to the situation want to comment?

 

[eta2020]

The Illinois Supreme Court has ruled 6-1 that cuts to retiree health care benefits are unconstitutional. This could spell doom for legislatively passed cuts to pension fixes for the state as well as Chicago. Anyone close to the situation want to comment?

Well they can raise taxes in great state of Illinois/Chicago ........

 

[ripper1]

Well they can raise taxes in great state of Illinois/Chicago ........

Well, actually the can. Taxes in Illinois have been artificially low for years at 3% flat across the board.

 

[ERD50]

Well, actually the can. Taxes in Illinois have been artificially low for years at 3% flat across the board.

But it is at 5% now, which I don't think qualifies as 'artificially low', unless you compare to the highest states.

It is flat by the State constitution. So agree or not, that won't be an easy change.

-ERD50

 

[eta2020]

Illinois Now Has the Second-Highest Property Taxes in the Nation | Chicago magazine | Real Estate & Neighborhoods January 2014

It has huge property taxes and

Illinois has lowest credit rating of all 50 states

worst credit rating.

I feel bad for both tax payers and pensioners........ There is no simple solution here..... Raising taxes will not be simple thing to do and without a cost.

 

[steelyman]

When I leave IL (by choice, not due to taxes), I will have to pay tax on retirement income (e.g., pension, employer plan withdrawals). Currently, there is no IL tax on them (except Roth contributions).

 

[ripper1]

The wealthy elite here get a pretty good pass. Also 70% of big corporations through give backs, perks, and such pay 0.

 

[ERD50]

The wealthy elite here get a pretty good pass. ...

If you are referring to the flat tax, IL is hardly on outlier.

There are 7 states with flat rates @ 5.2 or lower (compared to IL 5% flat rate), and there are 7 states with no state income tax, and two that tax only interest and dividends.

-ERD50

 

[steelyman]

The Illinois Supreme Court has ruled 6-1 that cuts to retiree health care benefits are unconstitutional. This could spell doom for legislatively passed cuts to pension fixes for the state as well as Chicago. Anyone close to the situation want to comment?

It's not clear to me this is true (DON'T take my word). I received an update from the annuitants association that implied the lawsuits presented by retirees were overturned. I guess it's keep your eye on the news time.

Edit: I think they distinguish between health care and pensions, and this is about health care, for which we are already paying. Again... my word is not gospel.

 

[Texas Proud]

What some people do not get is that really rich people (and probably just rich people) can move a lot easier than others...


I saw the NJ gov (Christy) on TV recently... he was talking about the high tax in NJ... said that when it was raised before they had a good number of high income people just move.... said that a good number of them have more than one house and they can live somewhere else... said that if they lived less than 180 (ish, cannot remember the exact number) in the state they do not owe state income tax....


Taxing 'the rich' to pay for unsustainable spending will not work... look at Detroit as an example...

 

[bUU]

No question that the problems society faces are difficult, but the point implicit in the ruling (really, in the original constitutional clause the meaning of which has been upheld) is that such difficulties don't rationalize marginalizing less powerful people.

 

[ERD50]

No question that the problems society faces are difficult, but the point implicit in the ruling (really, in the original constitutional clause the meaning of which has been upheld) is that such difficulties don't rationalize marginalizing less powerful people.

Who are these 'less powerful' people you mention?

But I do agree with you, the SC upheld the wording of the State Constitution, and I'll assume that was the correct legal thing to do. Whether that is good for the IL is another matter, but that is not the for the SC decide.

-ERD50

 

[bUU]

Who are these 'less powerful' people you mention?

Do you ask because you genuinely don't know and cannot intuit it from the context of the discussion about the ruling? Or just to pick a fight?

http://www.chicagomag.com/Chicago-M...inois-A-Long-History-of-Underfunded-Pensions/

http://www.wbez.org/news/ghosts-illinois-pensions-past-104467

Personally, I'd prefer states pay living wages to all public employees, commensurate with no pension guarantees, as is the typical case in the private sector - thereby serving as a model for the private sector in terms of how to treat people. But if the state is going to, instead, capitalize on deferred promises such as pensions and retiree health benefits, then it must be held to account for those promises without equivocation.

Whether that is good for the IL is another matter

A determination that very naturally should be made on moral, not financial, grounds - moral grounds clearly being the context of the establishment of the provision, as per the evidence provided via the delegate, and financial grounds seems to be those for which the more recent legislative action were grounded in.

 

[ERD50]

Do you ask because you genuinely don't know and cannot intuit it from the context of the discussion about the ruling?

I think I understand 'who' you are talking about from context. But the description of 'less powerful' throws me off.

Those state pensioners belonged to powerful unions that contributed to the campaigns of the officials who got elected and then made decisions on those benefits. The unions have much more power than the typical taxpayer in IL.

I think a strong case can be made that the under-funding of these pensions was a collusion between the union leaders and the politicians. To keep them fully funded would have forced raising taxes in real time, and that would have brought more attention to the benefits, and likely the voters would have said 'we can't afford this - stop increasing benefits!'. But knowing they had the protection of the Constitution, they could kick the can down the road, and the bill comes due after they are out of office/retired.

Personally, I'd prefer states pay living wages to all public employees, commensurate with no pension guarantees ...

I agree that pension promises should be taken out of the equation - no one can predict the future, so don't promise it, especially when those promises will need to be kept by a different group than who made them. But I think wages should be based on a fiscally sound approach - pay no more than the market will bear, not some artificial determination of what constitutes a 'living wage'. I don't care for price fixing of any kind.

A determination that very naturally should be made on moral, not financial, grounds -

Now I lost your context. If you are talking the SC, I think they should make the determination solely on legal grounds, in keeping with the concept of division of powers.

As far as legislatures, I don't think you can realistically separate moral from financial grounds. You need to work within the resources you have. Isn't it also immoral to promise something you can't deliver?

If IL simply raises taxes to pay for everything w/o making other cuts, they run the risk of driving enough business and taxpayers out and decreasing the tax base. Which means raising tax rates higher on the remaining tax payers to capture the same revenue, and so on. A downward spiral.

-ERD50

 

[bUU]

I think I understand 'who' you are talking about from context. But the description of 'less powerful' throws me off.

One would hope that the examples in the quoted material, of where those you are trying to call "powerful" have had promises to them abrogated, would have helped set you back straight, rather than inspiring baseless conspiracy nonsense.

As far as legislatures, I don't think you can realistically separate moral from financial grounds. You need to work within the resources you have. Isn't it also immoral to promise something you can't deliver?

The unfounded leap to the assumption that that which is morally grounded cannot be delivered is telling. It seems to be nothing more than pre-registration of a baseless rationalization. We're not talking about that which cannot be done, but rather that which is merely difficult. It's a shame to see moral grounding discarded by such quick deference to doing what's easy. Or that simply makes things easier for some.

 

[pb4uski]

When I leave IL (by choice, not due to taxes), I will have to pay tax on retirement income (e.g., pension, employer plan withdrawals). Currently, there is no IL tax on them (except Roth contributions).

Are you sure about that? I know our state used to tax retirement income of non-residents if the person was a resident based on where the retirement income was earned (or deferred) even if they were no longer resident in the state. It was challenged in the courts and the state lost. They can only tax retirement income of residents, not of non-residents.

Also see http://hodgsonruss.com/Home/Practic...es/WhatRetirementIncomeIsExemptFromStateTaxes

In determining in what jurisdictions retirement benefits are taxable, the answer for income from qualified plans, simplified employee pensions, section 403(a) qualified annuity plans, section 403(b) annuity contracts, IRAs, individual retirement annuities, section 457(b) plans, governmental plans, and section 501(c)(18) trusts is simple: The individual is taxable only in the state where he resides. Conversely, when dealing with retirement benefits from any other deferred compensation plan, the plan must be placed under a microscope when benefits are sourced in a state other than the retiree’s current state of residence.

 

[steelyman]

Are you sure about that? I know our state used to tax retirement income of non-residents if the person was a resident based on where the retirement income was earned (or deferred) even if they were no longer resident in the state. It was challenged in the courts and the state lost. They can only tax retirement income of residents, not of non-residents.

No, I am not sure (I haven't yet filed in my new state). What I believe is I will pay tax in the new state, but not Illinois. They (NC) appear to have an exemption, even for out-of-state income. I will be a resident there.

 

[JoeWras]

Grew up in IL. Now live in NC. We pay a lot of income tax here in NC. But property tax is much lower. I will be paying a lot in income tax through retirement here in NC. It will be something that may cause us to move. We shall see. We just had some tax reform and I need to study the effects of it as I move to retirement.

What blows me away about IL is the retiree income exemptions. Right now, as I manage my Dad's finances, it is great! Way to go IL for giving Dad a breatk!

But boy there are so many different chickens of all types coming back to roost. So many things favor the pensioner in IL. Great idea, but it is scary when the pool of payers keeps shrinking.

 

[longranger]

This topic makes my stomach hurt. I think the appropriate legal decision was made but so what? The financial obligations of municipalities, states and federal government to pensioners are so daunting. No one I have seriously discussed this with sees a soft landing scenario without new categories of bankruptcy or hyperinflation.

 

[ERD50]

This topic makes my stomach hurt. I think the appropriate legal decision was made but so what? The financial obligations of municipalities, states and federal government to pensioners are so daunting. No one I have seriously discussed this with sees a soft landing scenario without new categories of bankruptcy or hyperinflation.

I think it is very important, not a 'so what' at all, that the appropriate legal decision was made (assuming that's the case, I'm not a lawyer). We don't want a break down of our government - the SC should decide based on legality, not whether they (or you or I) think it is right/wrong.

Maybe you just mean in the overall scheme of things - I agree, it appears to be a big problem and a soft landing may not be possible.

One would hope that the examples in the quoted material, of where those you are trying to call "powerful" have had promises to them abrogated, would have helped set you back straight, rather than inspiring baseless conspiracy nonsense. ...

When it comes to Illinois politics, the terms 'baseless' and 'nonsense' don't apply to conspiracy theories - conspiracies are the very basis of much of the politics here, and one reason so many of our recent governors have served jail time - all on Federal charges, I believe. As one radio pundit puts it, 'Our Attorney General can't find a single crooked politician in one of the most corrupt political states in the country!'. And it is awful 'comfy' that the Attorney General is the daughter of Michael Madigan, who has been Speaker of the Illinois House of Representatives for most of the last quarter century. Is she going to investigate her father?

We don't need conspiracy theories in IL, we have plenty of conspiracies to go around w/o needing to theorize about them.


-ERD50

 

[ERhoosier]

What some people do not get is that really rich people (and probably just rich people) can move a lot easier than others...

Taxing 'the rich' to pay for unsustainable spending will not work... look at Detroit as an example...

So true. Having grown up in Metro Detroit I watched as 1st the wealthy, then the UMC, and finally the MC migrated out to the suburbs...or out of the state entirely. MI was 1 of just 3 states to lose population in 2010 US census when other states were growing.
Michigan One of Only Three States to Lose Population Since 2010 Census
As some in the Chicago media have noted that it may be well on its way to following Detroit into bankruptcy.
Supreme Court throws wet rag on pension plan - Chicago Sun-Times
Although the issue is still working its way through the courts, bankruptcy has generally been held to be a Federal issue and so trumps state laws. If Chicago eventually follows Detroit into insolvency, the IL Supreme Court ruling may have as little practical impact as a similar constitutional provision had in MI or CA laws did in the Stockton case.
Bankruptcy
Appeals court to hear Detroit bankruptcy case
Judge rules Stockton, Calif., to enter bankruptcy - Businessweek

 

[longranger]

I did not mean to trivialize the importance of adhering to the law. I am deeply concerned for both the pensioners and society at large. These programs were designed to be front funded. It is just beyond my understanding how corrupt our government has been to be able to underfund these programs so severely.

 

[gcgang]

With all this talk of retirement taxation, maybe the State can get around the Court decision by paying full retirement benefits but implementing a tax on them.

 

[Chuckanut]

I did not mean to trivialize the importance of adhering to the law. I am deeply concerned for both the pensioners and society at large. These programs were designed to be front funded. It is just beyond my understanding how corrupt our government has been to be able to underfund these programs so severely.

One of the sad things is that some of the entities that have underfunded their pension plans have also elected NOT to participate in Social Security. The gubmint entity saved their contribution to SS at the same time they were underfunding their own pension system. Or am I wrong?

In any event the poor employee finds out not only may the pension reduced (see Detroit), but they don't qualify for much of a SS benefit.

 

[steelyman]

With all this talk of retirement taxation, maybe the State can get around the Court decision by paying full retirement benefits but implementing a tax on them.

That's what I thought too, and before I retired (I still do). All retirement income, for both the public and private sectors. This was proposed as part of a joint study by economists, along with other reforms such as phasing in defined contributions and moving to a progressive tax. Those ideas did not gain traction.

I think I misread what the annuitants' association sent me.