by Dana Heupel
It is often amazing — and sometimes amusing — how the public perception of an issue can be driven by exaggerations, simplifications or outright lies.
For instance, let’s take what Gov. Pat Quinn has said are the two primary issues facing the spring session of the Illinois General Assembly: Medicaid and state employee pensions.
Quinn has called for lawmakers to come up with a $2.7 billion cut in Illinois’ share of benefits for recipients of Medicaid, the federal-state program that provides medical care for the poor. This fiscal year, the state is expected to spend $8.6 billion on Medicaid from its general fund, according to a report from the Chicago-based Civic Federation, which predicts that spending will increase 41 percent over the next five years. The number of Medicaid enrollees in Illinois has jumped from 1.4 million in 2000 to 2.7 million now, and it climbed more than 16 percent during the worst of the recession.
The governor advocated for the $2.7 billion cut in his February 22 budget speech and appointed a bipartisan committee to study the issue and suggest cuts. Then, a week later, the Obama administration approved the state’s request to investigate potential fraud after a survey sent to Medicaid recipients several months earlier revealed 6,000 out-of-state addresses, according to the Associated Press.
All well and good. But nearly every news report linked the two facts, creating the impression for those who aren’t paying close attention — which is more than most of us in the media would like to admit —that at best, the state’s Medicaid problem could be solved by ferreting out fraud, and at worst, that most Medicaid recipients are gaming the system and shouldn’t be receiving benefits. Does some fraud exist? Almost certainly. Are the state’s Medicaid expenses too high? Perhaps. But the losses from fraud don’t come anywhere close to equaling the proposed reduction in expenses.
On to state employee pensions. After reducing the benefits for employees hired after January 1, 2011, Quinn has called for further reforms because the state’s payments to the five employee pension systems will rise more than $1 billion next fiscal year to $6.8 billion, and the systems’ unfunded liabilities total more than $85 billion. The Civic Federation calculates that by 2017, the state’s annual contribution will climb to $7.7 billion.
Enter talk radio hosts, newspaper editorial boards and some politicians, who throw out descriptions of the pensions earned by public employees as “excessive” or “Cadillac plans.” Writers of letters to the editor and commenters on news websites pick up the drumbeat, and before long, there appears to be a public outcry to cut the pensions of public employees, or at least reduce the benefits they can earn in the future.
The poster children for the outcry are two lobbyists for the Illinois Federation of Teachers who took advantage of existing law to qualify for state Teachers’ Retirement System pensions after substitute teaching for one day. That loophole has since been closed, but the incidents still surface in many discussions about public employee pensions.
Much has been written about the fact that the pension underfunding occurred because the state didn’t make the required payments into the pension systems for many years. It’s also been noted that the Illinois Constitution may well protect benefits from being “diminished or impaired.” Less publicized, however, is that the state’s pension payments are not increasing because of higher benefits but primarily because in 1995, legislators and Gov. Jim Edgar established a 50-year payment plan to bring the systems to 90 percent funding by 2045. That plan called for the payments to “ramp up” over time, sort of like a balloon mortgage. The state’s increased costs are due to that “ramp,” as well as debt service on loans the state took out to make some pension payments. Advocates for reform discuss such options as increasing employee payments, reducing benefits or raising the retirement age, among others. Seldom mentioned is that the increasing payment ramp could be restructured or the optimal funding level reduced.
As for the “Cadillac” part, according to an August 2011 report by the Center for Tax and Budget Accountability, the typical retiree who receives a pension from the State Employees Retirement System but does not receive Social Security gets $24,640 a year. A typical retiree who receives Social Security gets $23,790. A typical retiree in the state Teacher’s Retirement System receives checks totaling $44,844. (Public school employees cannot participate in Social Security.) The center cites a 2010 report from the Illinois comptroller that lists Illinois in the bottom fifth of all states for retirement benefits paid to an average state worker, although changes enacted since then in some other states may have altered that ranking.
Other than planning how to prevent future abuses, the fact that two lobbyists were able to legally game the system should not be a part of the financial discussion. But it often is.
In a similar vein is a proposal to end half-tuition waivers for children of employees who have worked at least seven years for public universities. Rep. Luis Arroyo, a Democrat from Chicago who sponsored the legislation that passed a House committee in March, claimed the waivers cost the state $387 million a year. The Illinois Board of Higher Education then reported that it was more like $8 million, affecting about 2,000 students.
Arroyo also talked about how “the professor who makes $300,000 to $400,000 a year can send his whole family to college for half price.” While figures from Fiscal Year 2009 compiled by the St. Louis Post-Dispatch did show more than 65 university employees who earned $300,000 or more, the vast majority were physicians who practice and teach at the hospital at the University of Illinois Chicago. Furthermore, David Steelman, who is in charge of government relations for Western Illinois University, told the Springfield State Journal-Register that while “it is technically possible for a president or vice president or a high paid employee to utilize these waivers, the fact is, they just don’t.”
It may well be that Arroyo’s legislation is just a payback for university officials who have complained about scholarships awarded by legislators, which cost universities about $13.5 million a year. Nevertheless, Arroyo’s misstatements — intentional or not — feed another public perception.
Admittedly, it is sometimes difficult for the news media to fully report all of the factors involved in an issue, and even when they do, readers, listeners and viewers often latch onto the most sensational and disregard the others. But when public perception is guided by simplification, exaggeration or lies, the result is often bad public policy.
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In the interest of full disclosure, I am a member of the State Universities Retirement System and could receive a small pension if I fulfill the vesting requirements. I have never taken advantage of a university tuition waiver. D.H.
Illinois Issues, April 2012