Brian's Column 12-05-2014

Veto session is finished for another year. Surprisingly, or maybe not depending on your favorite media sources, minimum wage did not come to a vote; never fear, though, Governor Quinn promises to raise minimum wage if it’s the last thing he does as Governor.  He’d better hurry up because he only has about a month left.

We did pass one bill, however, that I am not happy about.  Senate Bill 2758, which will take effect on June 1, 2015, creates the Secure Choice Savings Program. The irony of that name is the word choice—the bill mandates that employers of 25 or more employees participate (employees will automatically be enrolled having 3% deducted from their paycheck and sent to the state program, but they will have the option to opt out). And, of course, the other glaring irony is the word secure, and the word savings, for that matter.  Money in the hands of the Illinois government secure?  And whoever heard of the Illinois government saving money?  My apologies if I sound a bit skeptical.

The concept behind the bill, to help Illinois workers save for retirement, really isn’t so bad.  A recent Crain’s Chicago Business article quotes the bill’s sponsor State Senator Daniel Biss (D-Evanston) as saying that “of all the economic questions affecting the middle class, retirement is the one most under discussed.”  And he’s right—a recent AARP statistic shows that “45 percent of working-age households have NO retirement savings.”  That’s a pretty dismal number.  Sure, those folks have Social Security to fall back on, but the average monthly Social Security check is around $1,300. When was the last time you lived on $1,300 a month?

So yes, encouraging Illinois workers to save is a fantastic idea.  But one-size-fits-all legislation for every private employer and employee in the state was not the way to do it.  Have you heard about the Illinois pension mess? Or what about our unbalanced budget? Or our massive debt? And now we expect our state government to manage retirement funds for private sector employees.

In a May 7, 2014 Crain’s Chicago Business article, Philip O’Connor, Illinois’ director of insurance from 1979 to 1982, also questions Illinois’ ability to manage funds, saying that the “Illinois’ record managing its own public employee pension program suggests that managing private-sector retirement funds is the last swamp the state should be wading in.” O’Connor lists a few other problems with the bill, notably that it is “a government program that largely duplicates IRA services already available online,” that unintended enrollments will likely occur, that employees who opt in but then decide they can’t afford to have 3% taken out of their paycheck will face tax penalties if they withdraw early from their IRA, and that litigation will likely occur “over whether a state can compel participation in IRA programs Congress designed as voluntary.”

In addition, the program will cost $15 million to $20 million in startup fees, and while, according to an Illinois Policy article on December 2, the Office of Management and Budget’s note on the bill “indicates no fiscal impact on the theory that private interests or federal government will fund the program,” the bill does “allow the program to receive state funds, and you can bet the pressure will come to finance startup costs with general fund appropriations.”  In a time when we should be cutting spending, not increasing it, a bill that creates more spending is not good news for our state’s financial crisis.

The bill also brings the government into a role that “is not truly governmental,” according to the same Illinois Policy article.  And here’s the real catch—the administrative expenses, including the staff of the board, will be paid from a separate fund that does not require appropriations to spend from so, according to the Illinois Policy Institute, the staff of the board will essentially be “off the books.”  They are also not covered by the same personnel code as civil-service positions, so “they can easily be used as political operatives as they conduct their state business” since they are not given the same hiring and firing protections given to typical state employees.

Philip O’Connor in his May Crain’s article ends with a superb quote on the issue that would be a better fix than the one we’ve got: “Illinois would do better to focus on teaching students about saving, letting people keep more of their own money and helping employers educate employees.”  Perhaps if the state acted as more of a cheerleader than as a busybody trying to manage matters better left to the people, we would be in a better place than we are now.

As always, you can reach me or Sally at 815/232-0774 or email us at repstewart@gmail.com. You can also visit my website at www.repbrianstewart.com or follow me on Facebook, Twitter, and Google Plus.

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