State pensions for public employees, particularly teachers, were in the news again this week when Crain’s Chicago Business published excerpts from an interview with TRS Executive Director Richard Ingram.
The Crain’s report had an attention-getting headline: Head of teacher pension fund says state will need to cut COLAs.
Ingram’s comments, especially about COLAs (the annual three percent compounded Cost of Living Adjustment for TRS pensions) generated angst among many IEA members.
“Look at every other state that’s done pension reform – what have they done? They’ve changed the COLA because that’s where the cost is,” Mr. Ingram said, noting that 25 percent of TRS payments are for cost-of-living increases on pension benefits.
Changes in cost-of-living adjustments could be targeted so they have the least impact on the oldest retirees and those with the lowest incomes, he said.
“If that is where we need to go in Illinois, then we can do it in a manner that is targeted and effective and protects those that need it the most and, at least to a large extent, get the job done,” Mr. Ingram said.
Asked by IEA to explain his remarks, Ingram said he was not advocating or proposing a change to the COLAs for TRS annuitants.
IEA President Cinda Klickna, a TRS Trustee, said IEA and the other members of the Illinois labor coalition remain strongly opposed to the proposals that have been made in the legislature to change pension benefits. The coalition continues to insist that the following must be in any plan going forward:
1. A guarantee that the state will pay its portion as required. That hasn’t happened for decades, as legislatures have diverted money to other programs.
2. A true look at revenue by closing loopholes for big corporations that hurt taxpayers of Illinois. Many loopholes exist, and closing a few would generate money to help pay down the pension debt.
3. No inclusion of current retirees, who are living on an earned and needed pension and cannot re-enter the job market.
4. With a guarantee that the state would pay its portion, the members would be willing to help the state by paying more, even though they have contributed their portion over the years. (This increase may differ for the various pension plans.)
The Crain’s report came without warning and IEA leaders immediately contacted Ingram and asked him, on behalf of IEA members, to explain what was said to Crain’s and whether a change of position was being expressed about TRS and state pensions.
His emailed response is below, in its entirety:
Thanks for your email. Let me see if I can address the issues that you raise.
Nowhere in any of these comments did I advocate or propose a change in the COLA for TRS members. The article clearly states that TRS is neutral on legislative proposals related to our member’s benefits. Neither I nor TRS has advocated for any benefit changes or reductions. Crain’s had no illusions that I was advocating for changes to the COLA or any other specific proposal for that matter, and they stated that in the article.
Moreover, you cannot “propose” something that was proposed by legislators in May of 2012, when Senate Bill 1673 was amended. The stakeholders close to this issue; labor, the retirement systems, legislators, and the Governor’s staff have all known for months that the COLA was the main target of the lawmakers discussing potential changes to the pension code.
The proposals to change the COLA made back in May have steadily advanced through the legislative process. As it currently sits in the House, Senate Bill 1673 is now one roll call away from being sent to the governor’s desk for his action – and Gov. Quinn has said he would sign the bill into law.
The interview with Crain’s did cover a wide range of issues related to pension changes. I framed them, as I do in any public discussion, by my consistent focus on the simple and merciless equation that we have to balance, Contributions or Revenue (C) + Investment Income (I) = Benefits (B). We discussed the left side of the equation first.
Going through that equation item by item, we agreed that no one should expect the equation to be balanced by higher returns from TRS’s investment program. We cannot invest our way out of this hole. Our long term performance is top quartile already and our recent action to lower the assumed return in our actuarial model argues that we are more than holding up our part of the deal in that area already.
We then spoke about contributions, or revenue, including proposals (or the lack thereof) to generate additional revenues to help Illinois meet its budget shortfalls, including pension costs. We spoke specifically about the idea of the graduated income tax and loophole closing. The fact remains that right now there are no legislative proposals for more revenue under active consideration and there are multiple claims on any incremental revenue that would be generated if there were. For example, a generally accepted estimate of the additional revenue expected to be generated by a graduated income tax is somewhere around $2.5B annually. That is what TRS would need above current revenue projections over the next 30 years. TRS is not the only budget challenge the state has.
Only after discussing the first two items did we get to the benefit side of the equation. Reading the article you will see that even without the benefit of any description of the full conversation being included in the article, as we pivoted to discuss proposals regarding benefits my quote is “IF (benefit costs) is where we need to go…”, i.e., if revenues are not forthcoming to solve the problem, only then did we discuss benefit costs and proposed changes and their impact. I did point out that if they were focusing on the COLA, then there were smarter and better ways to approach any COLA changes than what is currently in the proposal and what other states have done in this area. While not the only element we need to talk about, everyone knows – and has known for months – that the COLA is the largest cost driver. It represents 22-25% of the cost of the benefit. Other factors, for example, increased member contributions have and should be part of the discussion, but our funding hole is so deep that changes to the COLA must be part of the solution in any scenario. It is the only way that the math can work.
As the executive director of TRS I must be realistic about the provisions of Senate Bill 1673. As I note above it is a roll call vote away from potential passage. We have to prepare for the possibility that it becomes law and ignoring it won’t make it go away. TRS must face reality and the reality is that all of our members must be prepared to deal with this potential change, no matter how they feel about it.
Everything I said to Crain’s is factual and relevant to a discussion about the realities that surround us. I did not advocate for a change in the COLA. I did not propose a change in the COLA. I did respond to questions about a change in the COLA that legislators have been talking about for more than a year and explain why it is part of the proposed legislation.
Dick Ingram
Executive Director
Teachers Retirement System
of the State of Illinois
Illinois Education Association is an association of more than 130,000 members composed of Illinois elementary and secondary teachers, higher education faculty and staff, educational support professionals, retired educators and college students preparing to become teachers.
I am extremely disappointed with Mr. Ingram’s remarks to this Chicago magazine; he lends credence to an unfair solution to a problem politicians created! Mr. Ingram needs to be reminded that he is a spokesperson for retirees who are guarantted by the ILLINOIS CONSTITUTION that there will be NO reduction in their retirement benefits. Who pays HIS salary? Why should I have go back to work in Nevada teaching Driver Education “to keep up with the Jones”? Ingram should keep his “opinions” to himself! Disgusting!!!! Perhaps, Mr. Ingram needs to go to work for Wall Street selling mutual funds!
This “explanation” makes it clear Mr. Ingram does not understand or is being disingenuous about the political ramifications and the potential damage his comments have created. Instead he’s still trying to justify giving ammunition to those who are actively trying to eliminate the constitutionally protected benefits he is suppose to safeguard. Saying his comments are “factually accurate” rings hollow, instead appearing as defensively trying to deflect from the damaging headline he created that reads “Head of teacher pension fund says state will need to cut COLAs.” It also shows absolutely no remorse for his comments, regardless of their intention or context.
As this is not the first time Mr. Ingram has made politically damaging statements regarding TRS benefits such as this, IEA needs to follow IFT’s lead and unequivocally call for Mr. Ingram’s resignation.
I believe that TRS has a Public Information employee. Instead of Mr. Ingram having to translate and spin his own statements, please use our employed staff to make public comments. We elect the trustees. They hire the Executive Director. Perhaps Mr. Ingram once again “misunderstood” the impact of his statements. Anytime the spin is longer than the message perhaps it should not have been made, AGAIN!!
Bob,
I couldn’t agree with you more. As I was reading his comments, I too, thought that this explanation was much too long. He doth “protest” too much?????????
paula mueller
No way no how do you cut current retirees COLA!!!! Mr Ingram needs to find another job before he sells us down the river.
I’m extremely disappointed in the message Mr. Ingram gave to a magazine that is looking for a way to continue the bash public pensions message. He can clarify all he wants but he should have known they would take the 10 words he uttered about COLA, and make at the main focus and headline of the article. Interviewing with Crains in the first place was a mistake and perhaps he should have checked with the TRS Board before agreeing to an interview – and at least the board could have helped him prepare some talking points. When we have friends like this, who needs enemies?
Tell Ingram to shut his mouth. No one with any credibility negotiates in the press, before the bargaining starts! Ingram just isn’t very good at his job. Isn’t there someone who could really stick up for teachers? With Ingram directing the board, who does the legislature need on the other side?
Mr. Ingram also talked about the idea of shifting Pension Costs to school districts…he likes that idea because, like IMRF, TRS could force districts to make their payments. AND he also seemed favorable to the “choice’ concept…MAKING retirees chose between their COLA or “acess” to health insurance…perhaps the most un-Consitution idea of them all!!!
And don’t doubt for a minute folks that come Nvember 17th , when the Veto seioon begins…that we won’t hear Mr. Ingram quoted by those who want to screw with our pensions. So…thanks so much Dick!
Dick,
Don’t allow Crain to get away with false statements about COLA that they claim are yours.
Robert
The Crain’s article sounds like advocacy for taking away COLA to me. Mr. Ingram’s rationalization does not explain away what he said. I am concerned that the TRS Executive Director is not on our side on this issue. Why is he in that position????
Thanks for posting this!
Of course, Mr. Ingram’s comments are factually accurate, even if they are painful for us to hear.
I trust our TRS trustees will work with Mr. Ingram to help him understand what effect his words have on all of us, and how his comments could be used by those who do not necessarily have our best interests at heart.
Thank you for this clarification.
I appreciate the background information from Mr. Ingram’s interview with Crain’s.
I believe that the TRS board will address these comments and future comments behind closed doors.
We have a tough fight ahead of us to preserve our defined benefit pension, let’s stay unified and trust that those leaders who can address these bumps in the road will, I have that trust.
Fool me once, shame on you. Fool me twice, shame on me. Have Ingram pack his bags, Cinda.