Is Math an Opinion? IL Policy's Ted Dabrowski on Public Sector Salaries and Pensions

On this edition of Against The Current, Dan Proft is joined by Illinois Policy Institute Vice President of Policy Ted Dabrowski for a discussion on public sector salaries and pensions in the City of Chicago and the State of Illinois in K-12 education, at the collegiate level--like explaining why an U of I administrator makes $900k--and for public safety personnel. Dabrowski frames the choices Illinois families and policymakers alike face and suggests the way back from the fiscal abyss for the worst-run, worst-rated major city and state in America.

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Dan Proft: Thank you for joining us on another edition of Against the Current; coming to you from the Skyline Club, on top of the Old Republic building in downtown Chicago. My name is Dan Proft, and our guest on this episode is Ted Dabrowski, who is the Vice President of Policy for the Illinois Policy Institute, the Free Market Think Tank, economic liberty orientated think tank in downtown Chicago. Ted, thanks so much for joining us, appreciate it. Ted Dabrowski: Thanks for having me. Dan Proft: There’s a lot to talk about. You’ve got judicial decisions, as relates to pensions, both at the state level, with regards to Chicago pensions coming on the heels of Illinois Supreme Court’s decision from just a year earlier on state pensions, and then you’ve got the Supreme Court decision because of these Scalia absence on the Friedrichs v. California Teachers Association, as it pertains to forced union dues; that’s a lot to talk about against the backdrop of the second teachers’ strike looming in less than four years, and an almost junk-rated city of Chicago, according to Fitch, mostly because of the inability to solve the pension problem, combined with a junk-rated Chicago public school system, combined with the state, that has the worst credit rating in the United States. So, some challenges I think is a fair assessment. Ted Dabrowski: Some pretty big challenges. Dan Proft: Yeah. So why don’t we start with Chicago public schools, and the looming teacher strike over the teachers’ unwillingness to increase their contribution from 2 percentage points of the 9 percentage points they pay into the pension system to not have the Chicago Public School System pick up the other 7 percentage points anymore, as it’s been the case for the past 3 decades. Of course, the management side wants them to pick it up, so they can start trying to make the math work, and the teachers don’t want to essentially take a pay cut to increase their contribution to their pensions. Why is the teachers’ position unreasonable? Why should they pick up the 7 percentage points that the school system has been picking up for these past 3 decades? Isn’t that just another promise that was made to them, like they say, the Constitution made a promise to them and it shall never be changed? Ted Dabrowski: It’s another perk that Chicago teachers have had for a long time. It was gained back in 1981, and the issue, I think, the bigger issue is that the Chicago teachers do pretty well when you compare them to big cities across the country. They have the highest salaries of any big school district in the nation, and so what’s amazing is… Dan Proft: So higher than New York, higher than California, higher than L.A, higher than Houston. Ted Dabrowski: Higher than Miami, etcetera. So, they do pretty well, and again, it’s something they’ve negotiated, but they’ve done well, and included in that is this teacher pension pickup. That’s fancy words for, “Look, teachers, you don’t have to pay your full pension share, full pension payment you’re required to pay. We, the School District, which means tax payers, will pay it on your behalf”. And that’s been going on for about 3 decades, and the School District is broke, any way you look at it, it’s broke. And so CPS, Claypool and others trying to fix the problem are asking the teachers just to pay their fair share. Dan Proft: And by the way, I had the opportunity on the morning show that I do on AM 560, Chicago’s Morning Answer, to speak with Jean-Claude Brizard, a couple of CPS superintendents ago; this is not the CPS superintendent that’s going to jail, for those of you scoring at home, but they were running billion dollar budget deficits when he arrived as Rahm Emanuel’s first Chicago Public School superintendent. Nothing has changed in the intervening 5 years; in fact, it’s gotten worse, so do we start with the pension pick up and the distribution of who’s picking it up, or do we start with the fact that 9% paying into your pension, that’s also insufficient. Ted Dabrowski: Right, that’s insufficient. I think that the bigger issue is that the School District has been mismanaged for a long time, and you’ve got issues from not funding pensions for nearly a decade, you’ve got issues of Barbara Byrd-Bennett being indicted for fraud. You’ve got a situation where you’ve got a Teachers’ Union that’s willing to strike two contracts in a row, and they’ve won the last contract. They won big; they strike, despite the fact that the city, or the district, was already billion dollars in the hole. They had no business striking then, and they have no business striking now. So really, what you’ve got is a situation… Dan Proft: But they strike because… they struck, they won, so they’re not incentivized to do anything other than strike if they don’t get what they want, because they figure that the politicians will bend over… Ted Dabrowski: Like they have… Dan Proft: Like Tiny Dancer did four years ago. Ted Dabrowski: And he’s even weak. If he was weak then, he’s even weaker now, given the situation he has at home. So this is a situation where the two big groups, the Administration and the Teachers’ Union, they collude when they need to, they strike when it makes sense to then, and in the end it’s all the kids who get left out, and I think that’s the whole sad part of the story, which is why many people talk about bankruptcy. If Rahm Emanuel doesn’t want to do something about the finances, if Karen Lewis doesn’t want to do something about the finances, let it go bankrupt, and finally get a situation where we can get a focus back on the kids and not on the adults. Dan Proft: Well, that’s what the Governor said, Governor Rauner has said, “Bankruptcy needs to be something that the city and CPS take under consideration”. They’ve rejected that because of course, nobody wants to be the person, or people in charge, right, to be taken over by the state, to go bankrupt on my watch; what does that say about my leadership and my management; making the tough decisions to bring us back from the precipice, just rather than pushing us over. So why not – and this is more of a political question than a policy one – but from Governor Rauner’s perspective I’ve offered to pitch in and help. I’ve offered, here are some options, and by the way, I have kind of a 30 year track, because the reason I’m 100 millionaire is because I’m pretty good at reading the balance sheets and understanding what the real world options are, and if they don’t want to entertain real world options, why not just wash your hands and just say, “Okay, geniuses, okay, Tiny Dancer, okay Karen Lewis, whatever, Forest Claypool, you figure it out. But you can come down to Springfield with your pickle buckets and panhandle outside the Capital, and we’re not giving you anymore money”. Ted Dabrowski: Yeah, and I think politically that’s where it goes. I think that’s where it goes, and the sad part is – and I think everybody knows this – is that, you know, we just had a massive property tax hike in Chicago; the largest on record, and that only solves a small part of the problem; we probably need to have another two of those to try to start getting toward balance, and so the sad part is that Chicagoians are already burned with all kinds of nickel and diming fees, and red light… you know, anything you want to talk about, there’s a fee or a tax for it. Chicagioans can’t afford more, and we’ve already heard about people leaving the city. Dan Proft: But at least Teachers’ Union is honest about… I mean, I give them credit… they’re kind of like Bernie Sanders; they are like the honest socialists, as opposed to the disingenuous socialists. Property tax increase – sure. Chicago Teachers’ Union is on board for that; Karen Lewis – yeah; Graduated State Income Tax – yeah; fine. Ted Dabrowski: Financial services is back. Dan Proft: Yeah, on Nassau Street, on the exchanges, financial transactions – good. They’re contemplating the institution of a new city income tax to layer on to all the other taxes – we’re open to that; all they care about is the revenue side; at least they’re genuine about it, so you can have an honest conversation. Tiny Dancer and the Chicago Democrats trying to cling to power, they understand the political difficulty of that, because they have to stand for election outside of 30,000 teachers, and so they play this game like something can be solved by getting a half of billion dollars every other month from the state of Illinois. Number 1 – it doesn’t solve it; number 2 – it’s not going to happen. So do you give the Teachers’ Union at least credit for being honest, so we can have an honest conversation? Like here is where they want to solve the problem; that’s one option. Confiscatory taxation on top of confiscatory taxation; and here’s another option, like you and the Illinois Policy Institute have charted, that presents a real choice for Chicago residents and Illinois residents to consider. Ted Dabrowski: I think you’re right, they are, to say, honest about their motives with you, and Karen Lewis is pretty clear about it, but I think that’s why we call them the most militant union in the US. They say what they want, they strike for it and they go for it. Dan Proft: And they unironically wear red shirts to their rallies. I mean, beat me over the head with a cudgel, I get it. Ted Dabrowski: I think the saddest part for me – and the parents haven’t figured it out yet – still the parents are still backing with the Union. In the first strike they did it still seems like they have backing, but at some point that’s going to break, and when people realize that those strikes mean bigger and bigger taxes, increase in property tax, especially for the low income families, right, because they may not pay property taxes because they’re owners, but they certainly pay higher rent; they certainly pay higher sales taxes, higher X, Y and Z, and at some point there’s got to be a connection. Dan Proft: But those are the unseen costs that they don’t kind of…are people connecting the dots. Because it seems to me what Karen Lewis is good at doing – and to some extent, Rahm is good at doing as well – is presenting it like Rahm and Karen Lewis are on the opposite sides. They’re not on the opposite sides. They’re fighting over who gets to be the central planner in charge, right? And so the free market perspective of the economic liberty movement, to some extent has to also bear some culpability for not charting a third way, and explaining to people that you’re getting played by both sides. They’re not looking out for your best interests, and they don’t have a plan that solves this without imposing additional duress on you, on your children, on the taxpayers read large, so that the city continues to shrink and the number of revenue producing wards continues to winnow, and we continue the death spiral to a place that you’re not going to be insulated from in terms of pain. Ted Dabrowski: No, I think you’re right, but these guys have always worked together. That’s why I said they collude. They’re like two monopolies, or an oligopoly, and they work together pretty closely; they choose to fight every once in a while, but never – and if you think about this, are the discussions and the fights about better outcomes – we don’t hear much about that; it’s all about who’s going to win the power struggles; whether it’s Rahm or there’s Karen Lewis; whether it’s Claypool, whether it’s Rauner in the takeover; but nobody’s talking about how to help the parents win. And what you’re right about is that really this is a battle over who controls billions of dollars in salary, and billions of dollars in pension payments. And Rahm loves to be in control of that, and so does Karen Lewis. Dan Proft: I know, the 6 billion dollars CPS budget; what is it, a third of it is salaries? Ted Dabrowski: Oh yeah, you’ve got over 2 billion, sure. And so that’s the control power, and so when we talk about, and you’re right, the free market movement that hasn’t done a great job in Chicago, in Illinois, about saying “Hey, it’s time we take the power out of Rahm Emanuel; it’s time we take the power away from Karen Lewis, and give it to the families; let them be in control of the dollars, and let them hold schools accountable”, and by that I mean the parent would have the ability to walk away from the school and use that public money for a private school, if he/she wasn’t having their kids’ needs met. Dan Proft: Or a public school. Ted Dabrowski: Or a public school. It could just be give them the power to walk, and when the parents have that power, then the public schools would have to listen. Dan Proft: Well, you say, you know, the parents side with Karen Lewis and the Teachers’ Union; well, that’s because they experienced the teachers. Right, their kids experienced the teachers, and so they like Mrs. Smith, who teaches 4th grade, and they like Mr. Jones, who teaches 8th grade. They know those two, so when Mrs. Smith or Mr. Jones or their local school principle says, “Are you going to throw in with me, or are you going to throw in with that little cleptocrat on the 5th floor of City Hall?”, that’s an easy choice. Ted Dabrowski: It is, but I think, though, more and more teachers are starting to realize; and if you’re a 35 year old teacher and you hear the arguments going on, you say, “Wait a minute, is there going to be a pension for me? I’m going to contribute for years; will there be a pension for me?”, and I got a call yesterday, as a matter of fact, from a teacher; she’s 67, retired from CPS, lives in the suburbs, and she’s scared to death whether her pension is going to be cut totally. Dan Proft: When did she retire? Ted Dabrowski: She retired just a few years ago. Dan Proft: So about the average age of 63, which is like the average age of a CPS teacher retiring? Ted Dabrowski: The average retirement age is closer to 60, so over half retire in their 50s, and you’re hitting on a good point, Dan. The reason these pensions are so expensive is because the average worker who works there is retiring in their 50s, most of them with full benefits, and because they get automatic costs for living adjustments, those pension benefits double after 25 years. It’s a fantastic gig, and it’s something that tax payers can’t afford. Dan Proft: Let’s talk numbers, kind of get out of the unfunded liabilities and the billions, and this and that, that don’t mean anything to most people, and you can’t kind of distill down to something they can’t relate to. Let’s relate it. So the Chicago public school teacher retiring in 2014 with 30 years in max out in terms of pension, what annual pension are they receiving? Ted Dabrowski: About 68,000. Dan Proft: $68,000? Ted Dabrowski: Right. $68,000. Dan Proft: Which is almost 40% more than the medium household income in Illinois? Ted Dabrowski: Sure, close. And you can compared a medium household income; that’s more than one person. Dan Proft: So maybe it’s 25% more than the medium household income in Chicago. It’s still a big number. I’ve looked at the work that you and Illinois Policy Institute has done, and I just want to relate these numbers because they are staggering for anybody that works in the private sector, and frankly, anybody that works. This is IPI numbers – a Chicago public school teacher retiring in 2014, 30 years in will have paid these around numbers, $133,000 into their pension, will receive 2.1 million dollars back, a 15,000% plus return on investment. Ted Dabrowski: And let me just say one thing, that that 133 is giving the teacher credit on having made the full payment, when in fact the school district was picking up… Dan Proft: Would they had made less than 25% of it. Ted Dabrowski: Correct. So it’s phenomenal. These are great returns. Dan Proft: You’re right. So how do we have a bankrupt school system, and a bankrupt city, and a bankrupt… I mean, come on? Ted Dabrowski: And how many people in the private sector have 2 million dollars from having their career sitting there waiting for their retirement? Dan Proft: What’s the private sector counterpart? I think you guys have this too. So if you wanted the average retiree kind of same-similar situated, if you wanted to receive 2.1 million dollars in pension benefits back, pay yourself 70 grand+ a year in retirement, how much would you have had to contribute into your 401? Ted Dabrowski: Around one and a half million dollars, because interest rates are so low, so you’d have to put in a lot of money just to get that. Dan Proft: So in the private sector it’s one and a half million dollars in for 2.1 back; at CPS it’s 133 in for 2.1 million back. Ted Dabrowski: Correct, and this is phenomenal. And it’s not sustainable, I mean, don’t forget the reason why it’s so high. That 2.1 million is because they get that 3% automatic bump in their pension benefit each period. Dan Proft: The cost of living adjustment turned out to be an annuity because that’s seven times the rate of inflation for the last decade. Ted Dabrowski: Correct. And so basically, somebody’s pension benefit doubles over 25 years. It’s phenomenal. Dan Proft: And this is the case – not to get too far field off of teachers and CPS's; that’s really kind of at bar with the strike looming in May – but the numbers for Chicago firefighters, for Chicago police officers, for city of Chicago municipal employees, for city of Chicago laborers, and the laboring public sector, they’re basically the same. Ted Dabrowski: Pretty similar, yeah; of course, Chicago police and fire will be a little higher. But basically it’s the same, and you’re talking about the average career worker getting somewhere in 2 million dollars and more in retirement; and it’s really hard to ask taxpayers who are struggling to pay that over and over again. Dan Proft: And so, when you look at these numbers, the public sector union, a lot of the ranking file, the response is “Wait a second; why are you attacking teachers, and firefighters and police officers? Don’t you respect the job we do?” And even if you say you respect the job that we do, “Hey look, we play by the rules that were set forward by the politicians that set the rules, so why should we take a haircut, when they made a promise and we relied on that promise?” Ted Dabrowski: I think it’s a good argument. Look, I always want to blame the people who set the laws. It’s the politicians who agreed to bad deals. I think everybody fights for their own special interest, whether it’s the Teachers’ Union, or an employee wanting a raise, or better terms, so I think it’s important that we don’t vilify teachers or cops; my kids go to the public schools. I love my kids’ teachers. I think they do a great job, but the bottom line is this is not about that. This is about the state’s ability, and people’s ability, and taxpayers’ ability to pay for these benefits, and so I don’t think we should vilify them, but I think there has to be realization that the agreement, whatever it was… we should meet whatever obligations we made; whatever’s been promised and has been earned we should pay. But going forward we need to strike a new deal, and I think that’s what this whole discussion is about. Striking a new deal that’s fair for the public sector workers, but also fair for the tax payers that fund them. Dan Proft: Yeah, I just want to emphasize that, because this seems to get lost in the conversation; I have the opportunity to talk to and hear from the public sector workers a lot in my radio program, and they don’t seem to hear it when I say “Wait a second, whatever you’ve earned, even if it was a bad deal, you should get, because there was reliance created by the state, you did anticipate these benefits, you earned the benefits, you should receive what you’ve earned. Full stop; however, at a date into the future, certain, like a year from now, there’s a new deal for the existent workers who have not earned those benefits, because they haven’t worked those days in the future yet, as well as for new hires, that is not going to be the same deal that you have now”, and point of fact, don’t we have that with the state employers with the tier 2 for new higher at this point, even at present? Ted Dabrowski: Yeah, so of course, tier 2 is a brand new employee, but I think what we’re saying is that for even existing employees – and this happens in the private sector every day. The private sector can’t take away benefits you’ve already earned. That would be a huge problem, and that shouldn’t happen here in Illinois either, at the state or city level. But going forward, we have to have a deal that allows the state budget, the city budgets – because we haven’t talked about cities; this is a huge problem all across Illinois with pensions for firemen and policemen… Dan Proft: And nationally. Ted Dabrowski: And nationally, of course. It’s a huge problem everywhere, and it’s pushing up property taxes – I’d like to talk about that in a minute, about all the taxes that are going up, but at some point there has to be another deal, because here’s the issue; right now you and I are saying we want to protect benefits we’ve already earned; if we ever go into bankruptcy courts, federal courts don’t care about state Constitution; federal courts trump the state Constitution, so like you saw in Detroit, like you’ve seen in Alabama, like you’ve seen in Rhode Island, pensions have been cut as a result of bankruptcies, and so if the public sector union workers don’t finally realize that they can actually have their pensions cut under bankruptcy, they’re going to get hit with exactly what they don’t want to see. Dan Proft: So many of them are listening to their public sector union bosses, rather than looking at the math and just taking a common sense approach to it to say “Do I really want to pay Russian roulette with my retirement?”. It’s not roulette; it’s Russian roulette, because all it takes is one federal bankruptcy judge to say, for example, “Yeah, states cannot go bankrupt under federal bankruptcy code”. But if pension funds go upside down and they can no longer pay out beneficiaries, then I’m going to say that pension funds are separate and distinct from the state, and instead of checks in the mail you get IOUs until they figure it out. Ted Dabrowski: Or you have a 15% - 20% haircut. And I think that’s a real distinct possibility. That’s why I think at some point, and I think the state ruling recently that came out last week… Dan Proft: This is on Chicago pensions. Ted Dabrowski: On Chicago pensions; where it starts to say that things like pension benefits can’t be collectively bargained if there’s some exchange, some consideration given for changes in the pension benefits… Dan Proft: Simple contract law theory. Ted Dabrowski: Exactly. And that being the case, I think behooves the unions. And let’s talk about Chicago policemen and firemen. You were talking about teachers and others. The worst funded pensions in Illinois right now are the Chicago fire and police pensions. They have about 25 cents of every dollar they should have in their account. So imagine, you have your 401(k), you open it up and you think you have $100,000. You open it and there’re only 25,000. You’re missing three quarters of the money. That’s exactly what’s happening to policemen and firemen right now. And I don’t know why they’re not jumping up and down and saying “I want a new deal. I want something better. Promise me what I’ve earned, but give me a new deal going forward”. And I think that’s what they should be fighting for, because they run the big risk of having a massive haircut. Dan Proft: If you have a police fund or a firefighter pension fund that’s only a quarter funded, are those pension funds salvageable. Ted Dabrowski: I think, we’ve run numbers, I think we can salvage them, but it’s painful, right? And you’ve got to have a long term process, but you got end the game now. But effectively, in any private sector scenario, they’re bankrupt; they’re done. They would have been closed up if they were part of a private sector group, they would have been closed, liquidated and gone. So it’s something, I think, they have a huge interest in hitting the table and negotiating. I think the way to look at this, Dan, if we can stop the bleeding now, and move to a new 401(k), stop playing go and forth for all benefits earned going forward, then what we do is we treat the unfunded liability as debt. Chicago just has a bunch of debt and it’s going to take years to pay that debt off; but I think it can work with Chicago’s numbers if we stop the pain. Dan Proft: Then you can start to bend the cost curve and catch up. Ted Dabrowski: Exactly, but it’s not just police and fire, you have to do that for teachers’ pensions and for the other pensions in Chicago, so it has to be a whole deal, because remember, you have one taxpayer in Chicago, and that one taxpayer has to pay all those pensions and Cook County pensions as well, and of course, the shortfall at the state-level; so we have to be careful to respect the taxpayers in Chicago. Dan Proft: It seems to me the taxpayers are starting to understand what is in the offing, and I just look at out-migration; is there any better indication of the vitality of a community, county or state than whether people choose to live there or not, and in 2015, according to the census, Cook County lost more population than any other county in the country; this against the backdrop of the state of Illinois continues to compete with New Jersey for the largest out-migration year after year. Ted Dabrowski: I think that’s the biggest issue, and it’s something that we talk a lot about as respecting the taxpayer. And I don’t think Rahm Emanuel, Michael Madigan, they don’t understand… sorry, they may understand, but they don’t care; it doesn’t fit into the political calculus, but the reality is that people are leaving and I think more telling them the 2015 numbers is the out-migration that occurred between 2000 and 2010 by middle class Blacks. 180,000 blacks were lost during that period, and if you look at what happened in Detroit; first you lost the White taxpayers when you had the White Flight, but the problem really happened in Detroit when the middle-class Blacks left. And then the tax base was gone, and I think Chicago has to start thinking about how to protect its residents – doesn’t matter what color they are – but if you don’t protect your tax base you’re done. And we’re entering that spiral today. Dan Proft: Well that’s interesting, so I have a conversation with my aldermen; I’m in the 42nd ward when, you know, the wards that looks fancy on the outside, and you hear this propaganda from the likes of a Brendan Reilly, who’s just a toady for Madigan and for Tiny Dancer. Well, look at the planters on Michigan Avenue, and look at the tower cranes with new rental units going up in Streeterville. Everything’s on the up and up, and my response to them is, even let’s accept your premise, that this ward, one of 50 wards, is on the up and up; explain to me how you think – let’s say there’s 10 wards, 20% the city, that are kind of revenue producing wards that have substantial economical activity ongoing – so you’re telling me that 80% of the city can burn to the ground around us and we’re not going to be impacted? Do you really believe that? Does anybody really believe that except a craven feudal lord, which is what these aldermen are? Ted Dabrowski: I remember the first time I went to Detroit right after the bankruptcy, and I came back and wrote about it, and the lessons I learned from it, as it relates to Chicago; a lot of pushback, you know, Chicago is not a Detroit. Dan Proft: No, never happen here. Ted Dabrowski: And listen, Chicago’s not a Detroit when you think about the diversification of businesses; you walk down in the loop here, it’s hot, man, it’s rocking, it’s a lot of stuff going on, but I think what people forget is bankruptcy is not about what you look like; bankruptcy is whether you can afford to pay your debts. It’s simply that, and you take the best paid athletes in the nation. A lot of them go bankrupt; they’re making 100 million dollars, but they go bankrupt because they don’t manage their spending, and I think that’s where Chicago is. Dan Proft: Yeah, how can they be bankrupt? They’ve got a nice home, they’ve got a nice car and they wear nice clothes? How can they be bankrupt? How can Antoine Walker – he’s an NBA champion – how can he go bankrupt? Terrible investments; he put his money to use in all the wrong places. That’s how you can go bankrupt. Ted Dabrowski: And I think that’s where Chicago is. Chicago is exactly there. And let me make one other point, and I think this is important. Chicago’s got a big footprint. We used to have 3.5 million people, right? We’re down way below that. The population in Chicago now is below the 1920s. That’s a massive change. We still have that same infrastructure, and I don’t just mean physical infrastructure, like the highways and all that. We have the same public sector infrastructure, and that public sector infrastructure’s not shrinking fast enough with the city. What it’s doing is it keeps growing; the cost of that infrastructure, the unions, the teachers, the police and fire; it’s too expensive. It’s outpacing the growth of what people make in the city, and that’s what’s going to break us. Dan Proft: So you wanted to talk about the taxation that your median Chicago resident faces. Let’s talk about it. Ted Dabrowski: What you see in Chicago is a lot of people saying “Oh, property taxes are much, much lower in Chicago than they are in the suburbs. Dan Proft: Subsidized by commercial. Ted Dabrowski: Subsidized by commercial one, but two, they are relatively lower, but what people don’t talk about is the… you know, Daley was a genius. We all know that. He knew that he shouldn’t go after property taxes, so what he did, and the other who followed, is they came up with a bottled water tax, and a dollar tier tax, then you had to add the red light cameras, they had every kind of tax and fee to hide the fact that the raising taxes on you. And it’s really hard to track what’s going on, so we did all the numbers, and it’s amazing how much higher, when you take all the taxes that there are in Chicago than in any other city – Evanston’s a competitor – but any other city in Illinois, the taxes are tremendously high. So I think there’s a lot of deceit, the press hasn’t wanted to talk about it properly, none of the politicians want to talk about it, but Chicagoians are taxed up the zahzoo, and in the end, middle class families know it; I think, when we talked about the Black families earlier, schools aren’t working for them, crime is certainly hurting them, and taxes are going against them; why stay? And I think that’s a question that people ask themselves. Dan Proft: Sure, and they ask themselves and they’re answering in the negative. Why stay? It makes no sense not to stay. Ted Dabrowski: And it’s not easy for people to leave, right? It’s hard to pick up and leave. Dan Proft: Right, sure. You laid down routes, you made an investment here, it is a great city, it’s a beautiful city, it’s a fun city; great restaurants and night life and arts and culture. Why do I want to leave here? I don’t want to leave here, but you’re making it such as I can’t make it make sense to be here. And frankly, even someone like me - who does relatively well, because I’ve got phony baloney job on the radio that pays me a lot of money and I work 20 hours a week - even me, I say, “Gosh, move over to Northwest Indiana and lower my cost of living by 40%, my muffling it up by 40%? What am I doing here? Ted Dabrowski: You’re hitting on the issue that recently I was in South Chicago, and I met with this company, Modern Drop Forge – they’re a big steel stamp planter, steel stamper – and they tried to stay in Illinois, they worked hard, nobody paid attention to them; this is a year and a half ago; and so they finally looked at Indiana, and Indiana opened their arms, said come here, the company eventually moved there. I was at there, I think I was telling you about this. I went to their new facility, this massive, beautiful huge facility; state of the art, and a lot of the workers who didn’t want to move to Indiana from Chicago, they went and they looked at the house prices and said wow; they looked at the property taxes, much lower; school choice. Dan Proft: And what you get for those numbers in terms of home and property. Ted Dabrowski: It’s a huge home, and he said he took his wife, this worker who didn’t want to go, he took his wife; they moved. And they’re so happy; and I saw him at the new plant, he’s ecstatic, and that’s what people are experiencing, and we shouldn’t force people to look at those alternatives, but I think what we’re doing is we’re making it such that people… people don’t move because their taxes are high. People move because things get difficult, the opportunities aren’t there, it gets too costly; they finally make a calculus and some way say “Hey, I’m going to go somewhere where there’s a new opportunity”. Whether it’s Atlanta, Houston, Dallas, whatever. Dan Proft: Well right, it’s cumulative. It’s not a single tax, it’s not that if I don’t have a city sticker, my fine is going to be like $42,000 to make the numbers work for the city for one year additional. It’s just the cumulative impact of every time you turn around, you’re just being fleeced. Ted Dabrowski: So it comes around to that’s why we need these massive reforms, and until we get them… Dan Proft: Which, by the way, the funny thing is, the other side, that has been unwilling to advance these structural reforms says we need these structural reforms. What did Rahm come in on? He came in on a wave of here’s a tough guy, he was the Chief of Staff to the President of the United States, and he’s going to make these tough decisions. He’s going to endure the political capital that must be spent to make the difficult decisions to bring the city back, to right the financial ship; and he hasn’t done it. Ted Dabrowski: This is Rahm though, right? He was the guy that was going to let nominate crisis go to waste. Dan Proft: The tutu should have been the leading indicator that this was not a tough guy. Ted Dabrowski: A lot of people were excited, and it’s amazing, because he actually did something that is pretty bold when he first came in. He went down to Springfield, and he sounded like he was proposing the Illinois Policy Institute’s ideas. He talked about COLA – Cost of Living Reforms – producing them, he talked about bringing retirement agents down, and he talked about optional 401(k) style plans for workers. That was awesome, he actually went down to Springfield and did that, and Daley didn’t do that, he didn’t go down to Springfield. So there was a lot of hope in the beginning, but quickly, once the negotiations got tough, once Karen Lewis put her foot down, he caved. Dan Proft: Well the 401(k) thing was interesting, because the response you get from a lot of people is “I don’t want to be subject to market fluctuations; I guess it’s okay if everybody else who is not in the public sectors is subject to market fluctuations with respect that they’re 401(k)s, but we want a guarantee, the define benefit plan”, and so the response to that, that we want this guarantee, 401(k) doesn’t work for us, at the university level, this is kind of an under-reported story, but you were the first one to kind of alert me to this. There are thousands of actual university employees, public employees in this state who are part of a 401(k) retirement system within the larger public university system, so number 1 – is it working for them? – number 2 – if it is, why don’t we scale it? Ted Dabrowski: Well, what’s amazing is that somewhere along the way, 1998, not Mike Madigan, but a guy named Robert Madigan, he passed a law that allowed university professors to have a 401(k) style plan. Why? University professors wanted that portability. They wanted to control their retirement fund. They wanted it to be in their name that they could take when they left the state if they left. Now what’s amazing is that we would allow a professor to have that, right, but not a Chicago fireman, a policeman, or a teacher, who should have their ownership, their own title and control over that money; rather than being dependant on Madigan or Rahm Emanuel, these university professors can take their money and nobody can touch it. And what’s interesting about that whole thing is we’re sitting again almost on record highs in the stock market; these guys are doing really well. The money that’s in there is going up, and despite the massive recovery of the stock market, Illinois’ pensions continue to do worse and worse. Dan Proft: The public sector pension funds. Ted Dabrowski: The public sector pensions get worse despite this massive improvement in the stock market. Dan Proft: So I guess the argument would be made, wait a second, if Dan Proft with his financial guy can figure out where to put his money and how to distribute risk and how to have a balanced portfolio, then why can’t a Chicago police officer, Chicago firefighter, Chicago teacher do the same thing? They can do the same thing. I’m no smarter than they are. My financial advisors are no smarter than the financial advisors they could have access to. Ted Dabrowski: They make it so easy now to invest. You just call Charles Schwab, you call Fidelity, and they make it easy. I think that’s the whole thing, you know, public sector employees have gotten so in bed with the government, that they’re letting the government control their lives for them, including their retirement lives, and the government’s made a disaster of that, and people are scared that they may not have a retirement. We argue that the workers should have control; they should have that freedom to control their own retirement account. If they want the state to manage them, let them. But for those who want something different, give them the option; it’s only fair. Dan Proft: I want to go back to the Chicago public school system for a second, because we got a couple of things, a couple of chiblits that are always advanced by the Teachers’ Union, and their acolytes that need to be addressed. One is this idea the state’s not paying; it’s fair share the CPS, that’s the problem. Why don’t we just start there? Let’s do one at a time. So CPS receives a majority of its funding from the state, which is materially different than all the Collar County districts – well, most of the Collar County districts – and for the Collar County districts that it’s not materially different, that are majority funded by the state, they end up – districts like Matteson; low income – they end up subsidizing; so you have low income people in Matteson subsidizing people in Chicago. Ted Dabrowski: Well, let me just hit the first point. We’ve run the numbers, we’re going to be releasing them pretty soon. What Forest Claypool says, he’s using a logic that I don’t think makes sense, but let’s follow him with his logic; he says they have 20% of the students; they should get 20% of what the state doles out, to all the districts; and he says that that’s not true; well, we’ve run the numbers, and if you take the last ten years, including pensions, because he argues that Chicago public school district pays their own pensions, whereas the state pays the pension for all the other school districts; he says that’s unfair; and you could, at face value, agree with that; what Forest Claypool doesn't tell you is that the funding formulas for education more than make up for what the city looses on a pension, so bottom line is that we ran the numbers for the last 10 years; they’ve gotten more than their share every single year in the last 10 years, with the exception of this past year. They’ve gotten more on average than all the other school districts. So they’re getting their share, and I think we’re going to debunk his myth. He has to stop complaining that he needs a state bailout and start focusing on what reforms he can pass in Chicago. I think that’s where he really needs to focus on. Dan Proft: And so let’s just kind of again do this; like a little bit of classroom math – not common core style either, because I don’t know how to do math common core style – but the city of Chicago spends around 15 grand – a little bit north of that, but let’s use round numbers – 15 grand per kid per year. So classroom of 30 – keep it simple – that’s 450 grand per classroom in the city of Chicago; 650 schools, a little bit less than 400,000 kids like it normally used to be, because of the exodus from Chicago; so $450,000 per classroom; the teacher all-in cost the district $120k a year; let’s say you spend another 50 grand on supplies, because that’s 150. It’s a $1,700 per kid for the pension pick up, for the pension costs, so again, let’s round up to 2 grand; so that’s another 60 grand. So it gets me to 210; let’s say we throw another 50 in for the building of the infrastructure and all that – per kid – so that’s 260. Where’s the other 200 grand per classroom in Chicago go? Does anybody know? Because I asked Karen Lewis this question, I asked Forest Claypool this question, I asked aldermen in the city of Chicago this question. Nobody has the answer to this question. And the other thing that’s even more infuriating than not having the answer is nobody much seems to care. Ted Dabrowski: It kind of reminds me, after they closed the 50 schools and – I forgot who did the analysis – but they couldn’t find the computers, they couldn’t find a lot of the supplies, they were gone; and they can’t track themselves. I think the biggest issue was CPS, is that they’re too damn big, right? It’s a monolith, and they can’t manage themselves, and I think that’s the big issue. Dan Proft: So at the state-level or at the city-level, because the dynamics are very similar? Illinois Policy Institute, what’s a path forward? Everybody gets the benefits they’ve earned up to a date certain; what’s the path forward? What does that look in terms of retirement age? Pension contribution, all of the cost of living adjustments, all of the drivers for cost in the system? What should that look like, that is respectful and reasonable that we can potentially afford, that provides that balance? Ted Dabrowski: So let’s come back to that state university retirement system plan that’s a 401(k). That thing’s been around for 17 years. You’ve got about 1700-1800 workers and retirees in it. What that plan does, and the people who are on that 401(k) style plan, they don’t get social security, so the 401(k) style plan they get is robust enough to meet IRS standards, and to give a sufficient retirement. And what it does is the state puts in 7% into the 401(k) every paycheck, and the employee puts in 8%, so every paycheck period, 15% is going into their retirement account. And that’s been deemed good enough, and has been around for a long time, and many people get it. So we think that’s a good basis for creating a plan for all workers, new workers, and for benefits going for choosing some starting date; we think that would be a great start. You know, there could be debates on how to structure it, but we think that’s a really good start because going forward, what it would mean is that all the benefits that have been earned, any worker or retiree would continue to get… retirees wouldn’t be affected by this plan, but all workers would have earned their benefits up to a point, then going forward, everything goes into a 401(k) style plan. So it’s a fair plan, you respect retirement ages, you respect all that, and it does a lot to fix the problem in Illinois. We’ve run numbers and it depends on how strict we are with the terms, but we believe that we can cut the unfunded liability by 30-40%, which is pretty massive, and we can create a repayment plan on the rest of the debt that gets us out of this problem; in 30 years, but in one that there’s control and certainty, rather than the one we have today which is uncertain. Dan Proft: And to repeat just for emphasis, that means you’re not messing with the retirement age, you’re not messing with COLA's, or the other component parts of a person’s employment or retirement? Ted Dabrowski: Correct. I think what you want to do is leave what people have earned, because I think it’s all a question of constitutionality. Dan Proft: But even prospectively, even for the new hires today. Ted Dabrowski: Well the new hires today are looking for 401(k) plans. Dan Proft: Right, but you’re saying “Hey, if you have 30 years in and you’re 50, 55, 60, whatever, because you’ve got the 401(k), we’ve more or less achieved a solomonic balance of – we’re paying 7%, you’re paying 8%; you’re managing your funds; not defined benefit, it’s defined contribution like it exists in the private sectors, to the extent that even those exist in the private sector today – and everybody’s charting their own course. Ted Dabrowski: Right, and then from then on we just manage the debt that we have and the outstanding liabilities, but we don’t keep creating these unfunded liabilities which we’ve seen just keep growing every single year. They grow out of control. It’s like a mortgage that grows every year, rather than paying it down, it just keeps growing and growing, no matter how much you put in it. That would be the example of a home owner. You keep paying down your debt and it keeps getting bigger, and you can’t get control of it. Dan Proft: Right, and it would also obviate the need to make our mortgage payment with a credit card, which is essentially what we’re doing now, to the extent that we still get credit card companies that will issue us credit cards effectively, because at some point the bond markets are going to seize up and they’re going to disallow borrowing, except that usurious Soprano rates, like CPS just did. Ted Dabrowski: Here’s another point I wanted to make. So we talked about this 401(k) style plan already existing in Illinois; so it’s like some pipe dream we have; this is something that’s a legitimate plan that works, and if it’s good enough for our university professors, why isn’t it good enough for anybody else? But it’s not just Illinois that’s done this; we’ve had massive reforms across the country, and Michigan actually started this. In 1997 they moved all their employees to 401(k) style plans; back in 1997. Dan Proft: Michigan, big union state. Ted Dabrowski: Big union state, 1997, and so they got ahead of this long time ago. Let me give you another state that did a big change. They did a hybrid half, pension half 401(k) style plan, and that was Rhode Island. Democratically controlled legislature, they got it passed; big reform, very painful, but they did it. And Alaska has passed in 2006 a 401(k) style plan for new employees, and most recently Oklahoma passed one. So this is something that’s happening across the country. It’s not some dream, it’s happening. Dan Proft: So the question I’m sure a lot of people are thinking is “If it’s happening across the country and it’s working for 17,000 university professors who are not bitching about it – at least we don’t hear from them bitching about it – why haven’t we scaled it already?” Ted Dabrowski: Well, I think it’s been easy for Karen Lewis and others to say the rich aren’t paying enough. All we need are more taxes. And unfortunately, the union members have bought that argument. They’ve bough that argument that the taxes need to go up. There’s a solution, there’s a promise been made; don’t change what we got as a promise, no matter whether it’s 20 years into the future. Let’s just raise taxes to solve our problems, and at some point there’s going to be revolt. It’s not a big revolt, it’s a quiet revolt by people just leaving the state, leaving the city over and over again. Dan Proft: Isn’t that the problem? Again, it’s a political problem, but people leave the state; we essentially have a hollowing out in the city and the state. People that are insulated from bad public policy, the very rich and the very poor, that are beneficiary to the transfer payments, they don’t feel it, they don’t live in the world of trying to make ends meet, and so that’s what you’re left with, and frankly, that’s the constituency of the left. That’s the constituency of the established power structure in Chicago and the General Assembly. Ted Dabrowski: I think the big issue that’s going to continue to drive change are the property taxes. We’re seeing places, like you said, Matteson, and nearby - Southland – communities, where the tax rates on property, so the effective tax rate on a home is about 4-5% of the value. So if somebody would have tried to buy that house today would have to pay the cash for that home, they’d have to pay the value for that home, and within 20 years, because of taxes, they would have repaid for that home again. Dan Proft: So for most people with a 30 year mortgage, they pay for their home twice. What you’re saying is in Illinois and a lot of regions you’re going to pay for your house the third time because of the property taxes. Ted Dabrowski: Exactly, and that’s why people are starting to walk away from their homes in the Southland area. So you got a place where the manufacturing companies have gone. You see the big swaths of land just empty, and you’re starting to see now these nice big homes that have collapsed in value, and people walking away because they can’t afford it anymore. Between the mortgage and a second mortgage being the property taxes, they’re leaving. Dan Proft: And here’s something else I hear too, a lot of small and mid-sized businesses, 25 to 250 employees, they don’t make headlines when they leave, they don’t make headlines when they lay people off, they’re not big enough, but they’re impactful. They represent three quarters of the jobs in the state. They’re just quietly closing up shop, or they’re downsizing, and kind of methodically moving operations somewhere else. And it’s one of those things, like the old kind of sun also rises, how did you go bankrupt - gradually, then suddenly. So it’s kind of the whole thing, it’s like wait a second. Where did all the businesses in Elk Grove Village and the ring suburbs around O’Hare go? Well they slowly moved out over the course of the last ten years. Now how do you get them back? Ted Dabrowski: That’s really hard, and that’s why I always argue that… I talk a lot about the one reform that we can do tomorrow, and it can be agreed upon all the parties as new employees. Move to 401(k) style plans tomorrow. New employees don’t have a contract, they’re not protected by the Constitution, they would just enter with a new contract. Make it a reasonable, fair, 401(k) style plan. Then people would say “That wouldn’t save a whole lot of money”, but I’m saying “It may not save a whole lot of money, but that sure would send a different message than any message that we’ve sent over the last 25 years”; and that would send a message to the rating agencies, that reform is coming, that’d send a message to future employers, people that want to live in Illinois, but we’ve got to send a positive message, and right now there’s no positive message, and we know with the budget flight there’s no positive message. We need a positive message. Dan Proft: I want to level-up one level of education; the post secondary education in universities, we’ve talk about this cadre of university of professors in a 401(k) system, okay, but a lot of the discussion and the consternation in the context of this current state budget impasse is about universities, and they’re not receiving the funding they’ve become accustomed to from the state, and so there’s the prospect of laying off employees, and there’s a protest on campuses, state colleges, universities, and it’s all directed at the state of Illinois; what are they doing, they’re divesting from higher education. Well, it turns out, and this is some good work that’s been done by State Representative Mark Badneck - who’s a Freshman Republican from Oswego, Plainfield area - it turns out that if you do a little bit of comparison, in terms of what the state of Illinois provides in per pupil support, as compared to their conference peers – whether it’s Illinois State in the Missouri valley, or University of Illinois in the big 10 – it turns out we’re providing almost twice as much state support for pupil than the conference peers in other states, and yet tuition at our state schools is still 40% higher than their peers, their conference peers in those states. Explain that dynamic. Ted Dabrowski: Well, we looked at the numbers in higher education, and it’s easy to blame the lack of a budget right now. It’s easy to do that because it’s easy to point the finger at somebody. Dan Proft: That’s why they’re doing it. Ted Dabrowski: And that’s why they’re doing it, and of course, no budget has created a crack, sorry, is showing all the cracks that exist in higher-ed. But this problem has been building for 10 or 15 years or more, right, and a lot of it has to do with how much public funding is making it to education from the federal government and the state. And what these universities are doing is they’re taking all the available money they can find, and they’re hiring administrative staffs that are much too large, they’re bloated, and they’re paying massive salaries and massive pensions. And so when you look at what’s happening, it’s tuition's are having a double, not because education’s doing that much better; it’s all going to fund big, big administrations and super big pensions. Dan Proft: And we saw… we’re talking about the Chicago teachers’ strike in the not too distant past. How about the U of IC 1,100 professorate strike that was just two years ago – 2014. And they wanted to lift the floor for essentially part-time adjunct facility from 30 grand to 45 grand; 50% increase in base salary, and of course, that levels all the way up; we increase the floor here, and that increases the floor at every rung above that. And so how do we get out of that trap? Ted Dabrowski: It’s the same issues we’re talking. We’re talking pensions again. Dan Proft: Well, we’re talking salaries plus pensions. Ted Dabrowski: What happens is that these salaries are high and so what’s happened now is that when you take the state appropriations to go to education, higher-ed, they’ve actually grown a lot in the past decade. They’ve grown about 60% in the last decade; from 2.6 billion to over 4 billion. So it’s a big chunk of change; the problem has been is that 50% of all that money, 50% of what the state appropriates isn’t making it to higher-ed, it’s going to pay for pensions, and I was amazed when we did our work the other day, to find community colleges; community colleges pay their top person $500,000 a year. Dan Proft: You mean like the president of the university. Ted Dabrowski: The president, right. And of course, like you said, all those salaries get scaled up. Dan Proft: Tell us the story just for illustrative purposes, because it speaks to a larger cultural problem. In your research, the white paper that I read that you did in concert with colleagues at Illinois Policy Institute, a $900,000 administrator at the University of Illinois? Ted Dabrowski: Yeah, $900,000. Dan Proft: What the frack does that administrator do that warrants $900,000?! Ted Dabrowski: Included in that was a roughly $450,000 retention bonus after few years. Dan Proft: Okay, so what the frack does that administrator making 400 grand do that warrants a $450,000 retention bonus? Ted Dabrowski: Exactly. That person will probably get somewhere in the range of who knows, 8 to 9 to 10 million dollars in pensions. Think about that money, how many kids, how many scholarships that would fund in a given year for kids that tend Chicago State; that one person. Dan Proft: But they don’t hear, I mean you may hear it incredulously, but you’re going to hear it. Well, you want to attract and attain talents in academia, don’t you? Ted Dabrowski: So you can say that, now the question is, to how many people do you pay that? There’s a great study done by the Illinois General Auditor, and he looked at the number of administrators that these universities have, and it’s amazing. We looked at Chicago State… Dan Proft: This is like the Teldar Paper story, like all these vice-presidents, they just send memos back and forth; I can’t figure out what they do; this is the Michael Douglas moment? Ted Dabrowski: Well, nobody knows what they do, but they’re walking around through halls, but the point was, for Chicago State, they have one administrator for every 18 students. Dan Proft: Not one professor. Ted Dabrowski: No, they have one faculty member for every 16 students. So it’s almost the same number. Dan Proft: One administrator per every professor? Ted Dabrowski: Yes, so you could be sitting in a class, and your professor would be giving you a lesson, and there’d be an administrator right there watching over, making sure things are good. Dan Proft: A supervisor. Ted Dabrowski: You know, and again, a lot of that is because federal mandates, etcetera, but you can’t have that kind of bloat and not expect your tuition's to double, as they have in Chicago state, to the point where – here’s the sad part – the tuition's have gotten so high that you can’t have a kid who wants to work and go to school, because it’s just too expensive. And that’s why they’ve come to rely on scholarships. They’ve come to rely on free money because it’s no longer affordable. If these community colleges were meant for these kids to have an opportunity, why have we priced them out of touch? Dan Proft: So at the post-secondary educational level, where there’s community colleges, and we have some good community colleges, you know, 50 somewhat community colleges that provide… at least you can get your gen-ed requirements knocked out at a lower cost/credit hour at the community college before you go on to a four year university. But what you’re suggesting is that actually that’s not even the case anymore, and oh, by the way, because K-12 education, if so subpar, a lot of the costs at the freshman sophomore post-secondary education level is remediation, you’re paying for high school twice. I mean, if you talk to community college presidents, and university presidents, college presidents in the state, they’ll tell you the one in three kids that are going on at post-secondary education, I’m paying for them to do high school again for the first year, because they’re not prepared to do post-secondary work; so we’re paying for high school twice, and then we’re paying for administrators layered on to kids that are going to post-secondary education, not ready for the work, and then we wonder why the medieval poetry major can’t get a job when they get out of NIU, Illinois State, or U of I, or wherever, or Northwestern, for that matter. Ted Dabrowski: I think you’re capturing the problem really well, and what’s really scary is that not only can’t they get a job, but many of them have debt that they’ll never going to be able to repay, and that’s why you’re seeing these problems, right? You’re seeing trillions of dollars maybe becoming the next big problem in our country, with all this student debt the kids can’t pay back. A lot of it, again, bring it back around, a lot of it driven by pensions. Dan Proft: Fundamentally, if we’re thinking about K-12 education, and we’re thinking about higher education, with the bleak financial picture that we’ve painted, and the systems that have effectively been set up – let’s be just real honest about it – have effectively been set up to pay generous salaries and benefits to the adults in the system, not to educate children and to program for success in life. Ted Dabrowski: The Jerry Jones Program. Dan Proft: Clearly that’s not happening for the majority, then if there was one or two things where you could wave a magic wand at the Illinois Policy Institute and say this is the way to kind of a halt and do a 180, take a step back, and then chart a completely different course, what are those one or two things that get us off this path to ruin that we’re on, and onto a path of fulfilling the mission as stated of K-12 and post-secondary education? Ted Dabrowski: I think K-12 – I’m huge in empowering parents; I’m speaking generally, off course of some great public schools; and there’s people who are dedicated… Dan Proft: As there are at the post-secondary level. Ted Dabrowski: Listen, it’s not that people aren’t dedicated and they don’t care. I think systemically, and I think CPS, I’m sure there’s thousands of teachers and employees that care, I think the system is broken. The system – I’d say – is morally bankrupt. And it’s not going to work, and so until you get into a situation, and again, we’re seeing this happen again, same like we talked about 401(k)s, we’re seeing the same thing for school choice plans. Parents should be given the choice over where their kids go to school, and that’s one super empowering for parents who feel like they’ve been just totally left out of this, and that they think that more money is the solution, rather than being given a choice and control over their children’s education. So I think that’s number one. And we just saw Nevada, all of its 500,000 public school students have been given the choice of a voucher up to that $5,000; all of them. It’s amazing, state-wide, amazing. There’s now 26 states that offer school choice. Why isn’t Illinois one of them? Why isn’t Chicago one of them? Dan Proft: So that’s K-12 at the university level the problem is choice, right? Because Illinois, all the auto makers in the 70's have been insulated from competition, and kids are taking their GI bill, their Pell Grant, their stafford loan money, and they’re not going to school in Illinois. Ted Dabrowski: Right, they’re going outside, and they’re not coming back, and I think that higher-ed is a bigger problem, because it’s also a federal piece to it. You’ve got all that federal money, the schools know it, the schools know that the kids can borrow, and so therefore they raise their tuition and their hiring their jobs program to match that. So I think we need to stop a lot of what’s been happening there, and that would allow the cost come down dramatically; if we didn’t have all these subsidies feeding the cost up; but until we do that, I think it’s going to be tough. With that said, there’s a lot that can be done locally, because we don’t have to pay the salaries that we pay, and 2, we don’t have to have the administrative bloat that we have; and we certainly don’t need to have the pensions that we have. There’s no reason why people are getting 7 and 8 and 10 and 12 million dollar pensions. Dan Proft: So other than scaling the 1,700, go back to the 1,700 person university professors in a 401(k) style program, would you say that the state should starve the beast of academia? And force them to make changes that they’re otherwise not inclined to make, as long as you keep the spigot open? Ted Dabrowski: Well, sadly, that’s what’s happening, right? And it shouldn’t be that way; you’ve got a lot of people in pain now. You’ve got kids who thought they had a scholarship, now they don’t. They don’t care about those problems; then they had to have a plan. You’ve got teachers, professors who thought they had a job; they may lose them. And the way it’s happening now it shouldn’t be happening. It should be the administrations taking control of what they do and running an efficient system, but they’ve never been forced to do it, and Governor Rauner and the budget impasse is making them do that. They don’t like it, they don’t like having a gun to their head, but it’s forcing them to look at their costs, and it’s how it may happen. Dan Proft: So effectively, I mean, this K-12 or university, the common denominator is you have to have families be the accountability mechanism to how their tax dollars are being spent for the experience of their children, they have to be an accountability mechanism for their own local K-12 schools, they have to be an accountability mechanism for the universities they send their kids, for those kids to go onto post-secondary education. Ted Dabrowski: That’s absolutely right, and it’s interesting when you think about Chicago, and this comes back again empowering parents, families, the residents. Not the bureaucrats. When you look at the Laquan McDonald case, right, and you’ve got a Chicago, a police force and or mayor, or a attorney general who can hide information from the public for more than a year. When you have a situation where a school district can strike two times in a row on families; when you have a police force, when you try to take the problems of a Jason Van Dyke and discipline him – the police officer that shot Laquan McDonald, but you can’t use his old history of complaints, there’s a lot of things that the public is not seeing, and they seeded that too much of their power is residence to the Government, and a lot of what we’re talking about today is giving the power back to the residents. Give it back to the families, at least give it back to the people. Dan Proft: He is Ted Dabrowski, he’s the Vice- President of Policy at the Illinois Policy Institute. Nobody does more numbers, reality based research on these intractable problems in terms of the quality of public education in the state from pre-k through post-secondary than Ted and his team at the Illinois Policy Institute. You should read their stuff religiously so you’re empowered with the information they have researched and called to be that accountability mechanism that we’re talking about. Pleased to have Ted Dabrowski, Vice- President of Policy from the Illinois Policy Institute on this edition of Against The Current. Thank you for joining us, Ted, thank you. Ted Dabrowski: Dan, I appreciate it.

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