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While Illinois Hits Bottom, Lawmakers Get Top Dollar

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This story is courtesy of the Better Government Association:

Newly re-elected lawmakers returning to the General Assembly will enjoy a measure of financial security that few other people have —especially when compared to peers in other state governments, many private sector professionals or regular folks.

In fact, Illinois’ legislators are among the highest paid lawmakers in the country, and their benefits include retiree healthcare and pensions valued at more than $1 million for the longest-serving incumbents, according to the Better Government Association examination of lawmakers’ annual payouts.

Their annual salary is $67,836, but about three-fourths of General Assembly members also get additional cash compensation for leadership positions ranging from $10,327 for chairing a committee to $27,476 for a top General Assembly job.

In the current fiscal year, these leadership stipends boosted average pay to $77,382, according to data obtained by the BGA under the Illinois Freedom of Information Act from the Illinois Comptroller. In contrast, Illinois workers make an average $46,550, according to the U.S. Bureau of Labor Statistics.

In the House of Representatives, the average annual pay with stipends is $76,296. Average Senate pay is $79,652, based on the Comptroller’s data.

Their annual salary without stipends is the fifth highest in the country, according to the Empire Center for New York State Policy, a project of Manhattan Institute for Policy Research. Third highest is Michigan, where legislators receive $71,685 annually not including stipends, topped by Pennsylvania, New York and California.

But despite getting top salaries, Illinois lawmakers delivered a bottom ranking performance. “Illinois is among the worst states in the nation with regard to its fiscal condition,” according to a July report by the State Budget Crisis Task Force. The group is co-chaired by former Federal Reserve Board Chairman Paul Volcker and former New York Lieutenant Governor Richard Ravitch.

Citing a “culture of budget gimmickry and short-sightedness,” the task force noted that Illinois put off funding pensions, piled up debt, and failed to develop a broad enough tax base to keep up with spending. The result is sobering:

“Illinois’ past fiscal choices and future threats challenge the state’s ability to meet its population’s basic needs, let alone accommodate future growth,” the report states. “Infrastructure is deteriorating. Education is threatened. Public safety, public health, and care for the needy all are at risk. Taxpayers and the state’s competitiveness are also at risk.”
Mindful of the fiscal mess and the fact that many taxpayers are struggling, lawmakers voted in each of the last four years to forego cost of living increases and to take 12 furlough days, effectively reducing base pay by 4.6 percent to $64,716. The cut does not affect pension calculations.

“I’m concerned we could have gone farther,” says State Rep. Michelle Mussman, (Dem-56th), who was reelected for a second term in the November election. After furlough cuts, she makes $64,716.

Mussman introduced a bill last year with a bipartisan coalition that would have permanently cut salaries by 10 percent and eliminated cost of living increases. The bill passed the House but stalled in the Senate.

“There’s still a perception that we didn’t do anything,” Mussman says. “Unfortunately, I think it continues to erode the public’s faith in the Assembly to do anything that’s in the better common interest. It’s a matter of trust.”

House Minority Leader Tom Cross (R-Plainfield) pushed for the furlough cuts and introduced a bill in January that would have eliminated pensions for new legislators. The bill never made it to a vote. House Speaker Michael Madigan (D-Chicago) has “no opinion” on salaries, according to a spokesman.

Madigan and Cross each make $95,312 including a $27,476 stipend, as do Senate President John Cullerton (D-Chicago) and Minority Leader Christine Radogno (R-Lemont).

Lawmakers earn the equivalent of a full-time salary for a job that allows some of them to run businesses or practice law on the side. Forty-seven percent of Illinois lawmakers listed “full-time legislator” as their occupation, according to a 2008 survey, the most recent available, by the National Conference of State Legislatures. A significant minority--nearly 19 percent—listed their occupation as attorney. Others listed such occupations as business owner or manager, real estate, agriculture and educator.

They meet in Springfield from January through May and throughout the rest of the year as required, typically in fall for veto sessions. But legislators also work outside of sessions and in their districts.

“We’ve seen the time demands for being a legislator in all states increase dramatically over the last 20 years,” says Morgan Cullen, a NCSL policy analyst tracking legislative compensation. “Constituent outreach has grown, issues are more complex, and with campaigning and raising money there’s a lot more responsibilities associated with being a legislator.”

The NCSL includes Illinois among 10 state legislatures requiring 80 percent or more of a full-time job, along with Michigan, Ohio and Wisconsin in the Midwest region.

“While the position of senator has historically been considered a part time occupation, you would be hard pressed to find a legislator who isn’t spending more than 40 hours a week fulfilling the duties related to the position,” President Cullerton said through a spokeswoman.

A spokeswoman for Radogno said, “For most lawmakers this is not a part-time job. The time requirements preclude holding another job.”

Along with the equivalent of a full-time salary, lawmakers enjoy:

Health insurance: Legislators pay $684 to $1,014 annually for a single premium depending on salary and type of plan. That compares favorably with the average annual single premium of $951 in a 2012 national survey of U.S. public and private employers by the Kaiser Family Foundation.

About two-thirds of employers offer health care benefits, but only 28 percent of those employers also extend them to part time workers, the survey found.

Retiree healthcare: Illinois is one of only two Midwest states, with Ohio, that subsidizes healthcare for retired legislators, according to the Midwest office of NCSG.

Until last year, retiree healthcare was free. Under current law, retirees pay premiums on a sliding scale depending on length of service and ability to pay. This benefit is rarely offered in the private sector, according to the Employee Benefit Research Institute (EBRI).

“Most U.S. private-sector workers will never become eligible for health insurance in retirement through a former employer,” states an EBRI study in 2008. “Fewer employers are offering health benefits to future retirees; eligibility criteria are becoming harder to meet; and employer subsidies are disappearing.”

Kaiser’s 2012 survey of public and private employers found that only 25 percent of large employers that offer health benefits extend them to retirees.

Pensions: Starting in 2011, new legislators must work at least 10 years to retire with a pension, but most legislators are grandfathered under an earlier plan. They can retire with as few as four years of service at age 62, or at age 55 after eight years. They receive 85 percent of their final salary after 20 years. And retirees under both the old and new plans get 3 percent cost of living increases compounded annually.

“The pensions are extremely good compared with other states,” says suburban Chicago pension consultant William Zettler, who has worked as an independent consultant for the BGA and is also a proponent of overhauling the state’s public pension system.

Pensions are an increasingly rare benefit in the private sector. Only 15 percent of private workers participate in employment-based defined benefit plans, according to EBRI.

The average annual benefit for retired lawmakers as of June 30, 2011 was $52,188, according to the General Assembly Retirement System (GARS). But a 2011 BGA investigation found that six-figure pensions were not uncommon for the state’s top office holders including some former lawmakers. Nine percent of the 286 retirees covered by the General Assembly Retirement System (GARS) enjoyed annual pensions of more than $100,000.

Participants contribute as much as 11.5 percent of their salary, but the payback is lucrative for long serving incumbents.

For instance, a 62-year-old committee chair retiring after 20 years would get a first-year benefit of $66,438. A comparable annuity with 3 percent compounded interest would cost $1.6 million, according to Racine, Wis.-based Financial Service Group, Inc., a financial planning firm. The lawmaker’s contributions--a maximum of about $180,000 based on current salary over 20 years—would be earned back in less than three years.

“All of the attention is on public salaries,” says Financial Service Group founder Michael Haubrich, a certified financial planner. “The real issue is these benefits, and they’re simply not sustainable.”

Proponents of good pay and benefits argue that lawmakers merit compensation commensurate with their responsibilities as directors of a multi-billion operation.

“If you pay them very little, as is the case in many states, how much time can they devote to it?” says political science professor Christopher Mooney, at the University of Illinois at Springfield, Institute of Government and Public Affairs. “They’re either independently wealthy or retired, and you’ve got a very limited pool. If we have a more diverse legislature, we’re more likely to get policies that reflect values of the state.”

“I personally think if you’re going to ask people to do a job, you’ve got to pay them for what they’re asked to do,” he says.

Comparisons with the private sector aren’t easy because there are no formal requirements for legislative seats other than age and residency. Arguably, a lawmaker’s job involves a basic understanding of business, financial and legal principles as well as administrative and management skills.

A lawmaker’s average salary of $77,382 (including stipends) pays less than the two highest-paying job sectors in Illinois--management jobs, which average $100,440 annually, and legal jobs at $110,070, according to the U.S. Bureau of Labor Statistics. But lawmakers make more than business and financial operations workers, who as a group average $68,730 annually.

Mooney says lawmakers risk voter backlash when they vote themselves higher salaries. “There’s a strong argument that says they’re underpaid because it’s politically poisonous to vote yourselves a raise,” he says.

In some states including Illinois, lawmakers circumvent the issue by adopting an automatic cost of living increase. Salaries go up unless the legislature votes to suspend the pay hike.

Other states rely on recommendations from compensation boards or commissions, or they peg salaries to a percentage of other state office holder pay, such as judges.

In 2009, Illinois abolished its 12-member Compensation Review Board. The last time lawmakers got a raise was in 2008.

Help the BGA shine a light on government and hold public officials accountable by becoming a member, contributor or tipster. Details at www.bettergov.org.

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