On this week’s edition of Illinois Rising, Dan Proft and Ted Dabrowski, VP of Policy, Illinois Policy Institute, talk to State Rep. Jeanne Ives (R-Wheaton) about this week’s session to pass a stopgap budget, funding for CPS, and how suburban constituents feel about the idea of bailing out Chicago. Ted discusses his new report showing that Illinois’ spending on state worker pay and benefits has increased 600 percent over the last 15 years turbo-charging the pension crisis. Meanwhile, spending on higher education decreased 8 percent and social service spending increased just 10 percent. Kris Zambo, owner of Dynamite Fireworks in Hammond, talks about the spike he sees in business from Illinois every July. The Brexit news might seem far removed from Chicago, but with Chicago and CPS near bankruptcy, it is more connected than one might think - #Chexit. A major stock market correction or another recession just might put the city over the edge. While on the cusp of bankruptcy, the city’s legislative leaders are tackling the big problems like adults exercising the freedom to make their own choices. New law just took effect in Chicago that raises the smoking age to 21. Happy Independence Day!
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Dan: Welcome to this edition ofIllinois Rising, Dan Proft, and joining me as co-host on this show is; TedDabrowski is the Vice President of Policy at the Online Policy Institute,illinoispolicy.org. Ted, thanks for beingwith us— Ted: Thank you. Dan: Appreciate it. So the stopgap budget, it’s not ideal, thusthe name ‘stopgap’. It is what isfeasible, politics being the art of the possible. It is what is feasible when you have a reformgovernor and in intransigent super majority of Democrats, lorded over by thelongest serving state house speaker in Illinois history and a center presidentwho’s been in the general assembly for 40 years. So it’s not the perfect vision of what freemarket types and structural reform types like us would want, but perhaps ajudicious compromise, given the options that the governor had. With legislative leaders willing to play thegame of ‘chicken’, who gets blamed if the schools don’t open, were it not forthe stopgap measure. Ted: Yeah, we haven’t had a budgetfor a whole year. We’ve had bickering,fighting, a lot of positioning. Rightfully so, I think, for Governor Rauner not to give in on full yearbudget that, again, is a deficit spending, raises taxes, et cetera. So we need a stopgap at least to get kids inschool and to make sure we fund social services, but going after that we havefolks on real business. Dan: And for more on this we’re nowhappy to be joined by state representative Jeanne Ives, she’s a Republican fromWheaton. And Jeanne, thanks for joiningus, appreciate it. Jeanne: Thank you for having me. Dan: So the stopgap budget again,you’re of the structural reform minded legislator, which is in too short asupply in Springfield. But this is asituation where the governor is dealing with super majorities so the otherparty that aren’t willing to negotiate structural reform that are willing toallow social service providers to close and universities to lay off employeesand schools not to open, and so he crafts the best compromise available for theshort term in advance of the November election. Jeanne: Yes, you have it right there, it’sexactly what this is, this is a complete compromise. It does not have any of its reform so wereally need to get back and talk about doing that long term. But the good thing about this stopgap atleast is that it basically doesn’t have a whole lot of general spending in there, except for education, the rest is really coming from severalfunds and other state funds. So beforewe cobble together some bills that, you know, take your motor fuel tax and gaveit to you, or it took your sales tax and gave it to the right people or lotteryfunds, those are other state funds. Sobasically the stopgap says, “Look, we’re not going to play that game again inseparate bills, we’re going to fund this all for six months and get back to thetable for a long term solution. On the K Through 12Education side though, this is the most money we’ve had, ever goingthrough K Through 12 education, in fact, it’s a total of 11.1 billiondollars. That’s just over a billion morethan we had in FY16, all going for Pre-K Through 12. So he added additional funds even above whathe wanted for education, he added another about 250 million more for just KThrough 12 education Ted: Now, Jeanne, the big, bigbattle going on all the time was a bailout of CPS and whether that was going tohappen or not. How do you feel thatthat’s been handled, given the fact that most people in Illinois don’t want tobailout a CPS that has been, in many ways, corrupt, has misspent, mismanagedand really made a mess of itself for so long? Jeanne: Well, if you’re sitting in my seat,where I sit and knowing the numbers that I know, I can’t deny that to somedegree Chicago’s getting what it wants. They’re getting an additional hundred million dollars from an equity grant to deal with poverty. Their getting relief on a hold harmless they’re going to get that, they’re getting a specific 25 million dollars morefor early childhood education. And thenon top of it, part of this whole package of bills includes a 205-million-dollarpayment to their pension fund. And that’sin lieu of them eventually getting some measure of pension reform, that part ofthe bill is going to be held until we get a pension reform bill that thegovernor agrees with. So that’s a nicelittle give, I agree, but to some extent you know Chicago’s coming out with400 million more. Dan: The other thing that is includedis the authority for Chicago to raise property taxes above the cap toessentially ‘heal thyself’, you know, you got yourself into this mess, theseare schools you’ve run for a hundred years. So you have to go to your taxpayers and impose the burden and feel theresponse. And as a Chicago home ownerI’m not ecstatic about that but I can understand the idea that this is a localproblem and so Round Way Beach residents or Wheaton residents shouldn’t be onthe hook for increased property taxes to fund CPS. Chicago residents should, and if they don’tlike it then they can do something about their political leadership. Jeanne: Well, you’re absolutely right andactually as a Chicago property owner you haven’t been paying your fair share,let me just tell you— Dan: I feel like I have. Jeanne: Because the truth—yeah, I bet youdo. The truth is Chicago public schoolshave not run a referendum, we can find out, we can go way back in history, past1980, they have never ran a referendum which is typically what happens in yoursuburbs and your down state schools. Weneed something for our schools or run a referendum, yeah, it may take threetries to get it through but we’ll eventually fund our schools. Chicago’s never run a referendum, they haveextremely low property taxes, especially for the residential, when you look ata percentage of the value of the home compared to all other sorts ofdistricts. And it’s time for thoseChicagoans to actually pay for their schools. Now theflip side of this is, the reason they are asking us for permission to raisethe property taxes, it looks like—and really what the bill is it says that thisis not in vote of the city council as much as this is a vote of Chicago publicschools which raises the question of giving them relief from PTEL. PTEL was enacted to limit the amount of therise of property taxes across the state in a lot of different districts, this will be an additional carve-out, just like debt service, or they can go pastPTEL to raise the money they want for a specific line item on pensions. Most of us think that’s a fair thing to dogiven the situation that they have. Ted: Now, Jeanne, there’s all thistalk about what’s happening for CPS but if we look back not so long ago therewas a lot more money being asked for CPS. There wasn’t this concept of pushing the responsibility to Chicago if itwants a tax increase. So I see that as,despite where we are in this whole battle, a positive move in that Raunerstayed strong and has at least pushed back a lot of what people are trying toshove on him basically. If we go back,they wanted him to sign any budget, just sign anything and what we’re seeing isat least— Dan: Like one that was seven billiondollars out of balance. Ted: Exactly, and he’s held off ofthat now, of course, we have a long way to go and a lot remains to be seen, butI do see a few positive signs out of this. And certainly the fact that we’re going to get schools funded and kidsback in school. Jeanne: Yeah, there’s some things to likeabout this program, I think Chicago should pay for itself too, so there aredefinitely things to like about it. I mean, the formula is in the ink though, still remainswhere on top of everything else I just talked about they’re still going to gettheir 256 million dollars in those block grants that they get that theynecessarily shouldn’t get. So there’s alot of other things we have to weave through, in terms of the school fundingformula changes, in terms of reform, period. When Chicago’s spending over $16,000 per child and they want this additionalcash just for pensions you wonder why it can’t be carved out a budget that isthat rich. Quite frankly, it’s the sameargument I have when we want to give out math grants to students, when weshould be giving every student a math grant by simply lowering the cost ofhigher education. Most of our highereducation institutions are the highest in the conference by literally two tothree thousand dollars, while the average math grant is twenty-seven hundred. My point to you is the overall cost has tocome down, it has to come down. Dan: And for those who say, wellRauner should have just dug in and given nothing and Republican legislatorsshould just hold the line and give nothing, it’s problematic on twolevels. One is, it’s easy to point tosolutions, you say this is a problem, this is what we should do. It’s a lot more difficult to get from here tothere and we can’t get from here to there with representing so many suburbancommunities and downstate communities. So if you want to do something rather than just say here’s what youshould be doing you Republicans in the super minority, then you got to win moreelections. That means people that arecurrently represented by Democrats that are bellyaching about compromises thatthe governor makes and Republicans make, maybe they should look at their localrepresentation see if it’s not time to switch it out. Jeanne: Absolutely. There’s no doubt we need to flipcontrol. If you want real reform this isgoing to just continue to fester with marginal solutions all day long, until weactually have a political change in the state of Illinois. Dan: Yeah, I think it’s three words,it’s ‘flip the house’. Staterepresentative Jeanne Ives, Republican from Wheaton, thanks for joining us,appreciate it. Jeanne: Thank you. Dan: Dan Proft back with Ted Dabrowski, vicepresident of Policy at the Illinois Policy Institute and, Ted, one of thetalking points you hear from republicans in particular is that Illinois doesn’thave a revenue problem, it has a spending problem. And that’s a nice aphorism but we need alittle bit more meat to that so people get a true appreciation of just what thespending problem is as compared to the revenue problem. Because democrats like to say, “Well, it’s alittle bit of both,” there’s a middle way where we’ve got to have more revenueand then we’ve got to be responsible with spending. We get more revenue, we don’t get theresponsible spending. You’ve actuallylooked into this to put some numbers to that cliché, so what are the numbers? Ted: So we went back when Mike Madigan startedback in 1983, just to see what did the revenues look like, were we always apoor state, the poor state government never had enough money. And so we ran those numbers and it’s beenamazing that time and time again taxpayers will put in more and more money intothe government to fund all these services. And, in fact, it was much higher than inflation, much higher thanpopulation growth, it’s been a big, big number such that if the state revenueshad grown at just the rate of inflation—I should say it differently, the stategovernment revenues have grown so fast that over the 33 years we’ve had 265billion dollars more to spend, or we spent 265 billion more, than had it grownat just inflation. In other words, we’vehad a ton of money. The question thenis; where did it go and how was it spent? Dan: And so, where did it go and how was it beingspent, and how is it that despite that growth in revenue over the last threedecades we find ourselves with the state that has the worst credit rating inthe country, 200 billion dollars plus in debt and the highest unfundedliabilities when it comes to matters like public sector pensions. So all that money, where did it go if itdidn’t go for these big ticket items in state government? Ted: Well, so you know they love to say that wedon’t have enough money for social services, we don’t have enough money forhigher education, for K through 12, and when you look at the numbers, all thatmoney has not gone that much to those areas, it’s all gone to pay pensions andit’s all gone to pay for compensation at the government level and it’s gone topay for retiree healthcare and things like that for government workers. So it’s really been totally skewed such thatif you look at the graphs, the charts of these numbers, it’s massive how muchmoney have gone to government workers and how little is going to the peoplethat the democrats pretend they support. Dan: Well ok, so put some numbers to thatstatement so that people have an appreciation for it because the money has goneto government workers, gone to the public sector and yet, I go back to say,“Wait a second, so the benefits are so generous that despite a per ponderous ofthe money going to salaries and benefits for state workers, we still have thelargest unfunded pension liability in the country for state workers, we stillhave problems financing our personnel obligations, as it were. Ted: I’ll give you the numbers, right? So if you go back to just 2000 over the last15 years, 2000 to 2015, the amount of money we’ve put into pensions in thattime period is up 600%. Dan: In real terms adjusted for inflation? Ted: In real terms, yeah, but it’s just 600% upwhen you compare one period to the other. You look at higher education during that same time period it is down,it’s negative eight percent. So one itemis up 600%, the other one is down eight percent, that shows you the massivediscrepancy between where the money is going. And I’ll tell you the biggest issue we haven’t understood yet as a stateis what’s happened when we didn’t fund pensions, when we made these pensionobligations get bigger and bigger by not putting the money in, where did themoney go? It’s not like the governmentburned it, it’s not like they wasted it, threw it away. They were using it to pay higher and highersalaries. And higher and higher salariesmeant higher future pension benefits. Dan: Right. Ted: So we had this combination of not only notfunding pensions, but we’re also jacking up salaries, which in the end justturbo charged the problem. Dan: Right, and so you look at today and stateworkers are making, by some estimates, 27% more than their private sectorcounterparts before you get to the guaranteed seven figure pensions and theCadillac healthcare plans. Ted: And free retiree healthcare and—yeah, it’samazing. Let me give you an example ofhow these tax hikes work and the other side’s claims that they need more moneyfor social services and things like that. In 2011, the democrats fought and got a massive tax increase, they got31 billion in additional dollars from 2011 through 2014. And so you would think that with all that newmoney they would be funding K through 12 education, higher education, socialservices— Dan: How about just paying bills, we’ve got— Ted: We’re paying bills. Dan: We’re tracking north of 10 billion dollarsin unpaid at present. Ted: And paying bills, but with all that money,what happened with that money? Thepayments to pensions doubled, they went up over 100% and at that same timeperiod, those four years, K through 12 education was negative, it went down,the same thing for higher education. Sothey say what they need the money for, they want to cry poor, but they’ll neveruse it where they’re supposed to use it. They’re going to put it into the areas which are government sectoremployees, the same people that get the politicians elected, that’s who theytake care of with all that money. Dan: So we’re all here to service the publicsector unions and their membership, and this is not to say that every stateworker is onboard with the political agenda AFSCEME or SEIU or theTeacher’s Union, every teacher’s onboard with the Teacher’s Union, I knowthey’re not. But unfortunately, theirvoices are rather muted relative to the voices and the political influence ofleadership, particular because of, as you suggest, the financing of campaignsthat is done by the public sector unions. So that’s what we’re here for and that’s what people need to understand,fundamentally, that we’re all just here to be spare parts for public sectorunion salaries and benefits. Ted: Yeah, and there’s just so much money whenyou talk about what taxpayers are putting up, we have the highest propertytaxes in the nation, we have the fifth highest total state local tax burden onindividuals— Dan: And we also have the highest paid publicsector workers in the country. Ted: Yeah, so you put all those together andyou— Dan: At least adjust it for cost of living. Ted: Yeah, and then you add back the free retireehealthcare, the Cadillac healthcare plans and the big pensions, you start tofigure out where your money is going. And I think we collectively have not done a good job of making thatclear that these taxes are not going to fund social services or education,they’re going to pay for government bureaucrats and workers. And again, like you said, maybe it’s not thegovernment workers fault, they are the beneficiaries of great negotiation bythe unions but— Dan: Yeah. And they’re trying to maximize their earnings like anybody does in anyprofession and that’s fine. Except tothe point where you’ve got this scam that’s being run on 95% of the populationfor the benefit of five percent because they can count so many Springfieldpoliticians as holy unsubsidiaries of their union. Ted: And they’re well organized, and I thinkAFSCME, the largest public sector union in Illinois is kind of proof of thatright there, they’re extremely powerful, they’re organized, they’ve got thebacking of Cullerton and Madigan. Andthey’re going to demand more and more, despite the fact the state’s goingbankrupt. Dan: And so we have a pending labor impassebetween the governor and AFSCME, representing 37,000 state workers, for theirnext contract. Whereas governor Raunerhas been able to negotiate 18 different collective bargaining units withsmaller units of public sector workers in different public sector unions, wagefreeze and those 18 contracts successfully negotiated. AFSCME is asking for a 29% pay increase overthe life of their next contract, against the backdrop of other public sectorunion employees taking a wage freeze and against the backdrop of the worstfinanced, worst run state government, not just in the country at present, butin the country in the last 25 years. Nostate has had a credit rating worse than Illinois’ at present sinceMassachusetts in 1992, and they want a 29% increase. It seems to me that is where the rubber reallymeets the road, even before the November election and the outcome, even withdemocrat supermajorities, this is where the governor is the negotiator for thetaxpayers, with respect to AFSCME and this is where he pushes his chips all in,or should. Ted: Absolutely, and when we put this all downit’s a lot of numbers, a lot of figures, a lot of budget numbers, but it’sabout people being tasked with paying more and more taxes to fund thesebenefits. And it’s not fair totaxpayers, they can’t afford any more, we have not seen household incomes inIllinois grow in the last 10 years, so virtually flat when adjusted forinflation. And we know the job situationhas been horrible, the manufacturing situation has been horrible, so we can’tcontinue to put this on the backs of taxpayers. Look, the unions and the union members got the deal that they got, it’sbeen a great deal for them, but it’s no longer affordable for taxpayers. Dan: And, again, just to put an exclamation pointon it, so we dispel some of the myths that are promulgated by the unions andtheir beholden politicians. We’re talking,not about pay earned, benefits earned, this is all prospective to start to bendthe cost curve and to bring it in line with what we can afford and frankly, toborrow the argument the left legs use; what’s fair, what’s proper. Nobody’s talking about taking away thebenefits you have earned from working or taking for....people who havenot yet been hired in for work if you’re an employee that you have not yetdone, prospectively. We can change theterms of compensation just like the private sector can change, and does, changethe terms of compensation for employees when the business climate changes intheir sector. That’s also fair becausethat’s the experience of the other 95% of Illinois families. Ted: You know, things change and we know thatIllinois is not what it used to be and in order to get back to where we want tobe, which is a high growth state, a beacon of opportunity in the Midwest. We’re going to have to change the way we dothings and we can’t continue on the same path we’ve been on. We haven’t had a balanced budget in 15 years,you mentioned the credit ratings, all those things are exemplary of theproblems and the mess we’ve made and we’ve got to turn it around. And that means going forward, fixing things. Dan: Dan Proft back with TedDabrowski, Vice President Policy at the Illinois Policy Institute. And, Ted, big fourth of July plans Monday? Ted: Yeah, I just up little cubs anda lot of fun with family and have some fireworks. Dan: You should take a look at thestudy that was done by Grammarly that finds that White Sox fans are smarterthan Cubs fans, they make fewer mistakes per hundred words than Cubs fans. I just thought I’d direct your attention tothat as a more well-spoken Sox fan. Ted: I’ll take that intoconsideration. Dan: Something for you to aspire to. Ted: I also heard there’s poetry inthe— Dan: Poetry readings, yes they’repaying off. So no Cubs game, nofireworks at Wrigley Field. We do havefireworks at Comiskey when Tod Fraser hits a home run but that’s limitedbecause outside of Comiskey Park no fireworks allowed, no fireworks forconsumers in the state of Illinois, one of only seven states to prohibit thesale of fireworks. And I tell you whatthat turns out to be, great news for people who own fireworks businesses acrossthe border in Indiana. And we’re happyto be joined by one such individual, his name is Chris Zambo. He’s the owner of the appropriately titledDynamite Fireworks, in Hammond, Indiana. My best Jimmy Walker impersonation, Chris, thanks for joining us,appreciate it. Chris: Appreciate the opportunity. Dan: So the ban on the purchase offireworks in Illinois has been good news for your business and continues to be,I presume? Chris: Sure, can’t deny that. Roughly 60% of our business comes from overthe Illinois border. Dan: And so what would happen to yourbusiness, do you think, if say for example, in the south suburbs a fireworksoutfit were allowed to open up in the state of Illinois? Chris: That’s an excellent question. First off, fireworks have been legal inIndiana just over 10 years now, the market’s expanded every year. But there’s a relationship that gets builtwith the clientele becomes a trust issue, you go back to the stores that youtrust to have the highest quality and the safety that you want for the family. Even if stores were to open, fireworks wereto go legal in Illinois, I think it would take time before it would even impactme, the relatively small number of fireworks stores in Indiana. Ted: So, Chris, I imagine that’s akey point you having those relationships, but I also imagine that peoplecrossing the border to by gasoline, beer, cigarettes, all that also brings yousome traffic. There’s a lot of people wholeave Southside Chicago or Chicago in general to go buy things in Indiana. Is that benefitting you as well? Chris: Yeah, it’s 100% true, guys. The liquor sales, the gas station sales, thecigarette sales, conveniently enough on the border here you get a highconcentration of all those and all the fireworks stores kind of mix in withthose. So we do get a lot of trafficfrom those businesses. In addition, theIllinoisans and even Wisconsin folks and Iowa folks making the trip, do spend alot of money on other businesses in Indiana when they get here because they’reeating at the restaurants and even shopping at the grocery stores and the localWalmart, so we do have refer to it as fireworks tourism. Dan: Yeah. Playing some cards over at the Horse Shoeperhaps as well. According to the Chicago Tribune, Indiana has gainedabout two and a half million dollars in tax revenue each year since it loosenedits fireworks laws, as you said, about 10 years ago, and levied a 5% fee onsales. We actually have a state senatorwho’s introduced a bill that would have legalized fireworks that are bannedunder state law and levied an additional 3.75% sales tax upon them. But you make the point that when it’srelatively competitive in terms of price, you go where you have arelationship. So even if that happenedtomorrow in Illinois, which is unlikely, you and the small group of fireworkspurveyors in Indiana are going to be ok. Chris: I agree 100%, we’ve been inbusiness at this store for over 20 years and my family’s been in the businessfor 40 years so we definitely have a reputation. A lot of the major stores here, again, forthe safety oriented consumer want to stick with who they know because you’redealing with a device that could be dangerous especially if you don’t know whatyou’re doing, you’re doing it once a year. So you want that good advice, you want the quality product that’s notgoing to backfire. But if done right,you know, and it’s done with the quality store behind you it could be extremelyfun and have really fabulous results. Dan: So the argument—those thatsupport a ban is always the safety argument, right? And so, you’ve given some indication, but howdo you respond from a policy perspective to the safety argument? Is there any evidence that say Illinoisanswho buy fireworks in Indiana and come over here to deploy them are any saferthan Hoosiers who do the same things legally in Indiana? Chris: I think that’s an excellent point,it definitely comes down to the user. The devices you buy, if you buy high quality, comes down to the userusing common sense and having some familiarity with these items, not pushingbeyond their limits of knowledge or expertise. But I will tell you that the federal government has stepped in with aton of laws on fireworks and fireworks safety over the last few years. The Consumer Protection Safety Commissionregulates things like wick speed and design and the industry has respondedappropriately, the fireworks are much safer than they were 10 years ago. The wicks are a lot longer, they’re slowerburning and even sparklers have moved away from metal sparklers where most ofthe burns would come from to wood stick sparklers. So they’ve taken out a lot of the risk, notall of it, but definitely a lot of the risk has been mitigated. Dan: That is still good advice perthe Darwin Awards to not blow off M80’s in your hand, I presume. Chris: Absolutely. And that’s better—an excellent point as well,the fireworks that you see on those crazy websites and, unfortunately, thefront page of some news stories, have nothing to do with anything we sell here,we sell a consumer firework. Thefireworks that predominate issues arise from the 1.3 G professional gradefireworks, the actual Comiskey Park type fireworks. Those make their way into the consumers’ handsand it’s bad news because they don’t have the same design, they’re 50 timesmore powerful and there’s plenty of laws on the books already about that. And they just need to clean that stuff offthe street and I guarantee 90, 98% of all those front page stories would goaway. Dan: Alright, he’s Chris Zambo, theowner of Dynamite Fireworks in Hammond, Indiana. Chris, thanks for doing this, have a safe andsuccessful four. Chris: Thank, guys, happy fourth of July Dan: Dan Proft back with TedDabrowski, Vice President of Policy, Illinois Policy Institute. Ted, obviously, some jittery days in themarket after the Brexit vote to leave the EU. And then it was course correction, I think a lot of it was a bit of hysteriabecause all of the experts in the big government elites expected the vote to beremain, and so were back on their heels when the people had something else inmind. But it speaks to the public sectorpension problem we have in Chicago with police and fire pensions less than 30%funded, death spirals. And with theChicago Teachers Union pensions not much better. And part of what isn’t discussed enough whenyou talk about pension reform, are these rosy projections that the publicsector unions and the politicians make about the return on investment theyanticipate on an annualized basis for the pension funds that they invest. Projecting a seven and a half percent returnin perpetuity that just doesn’t happen. Andit creates more opportunities for games by politicians, less contingencyplanning and a heightened risk of exacerbating the unfunded liabilities wealready have. Ted: Exactly. The way these pension funds work for themoney to be there 20 years from now, 30 years from now, 10 years from now, theemployees have to put in some money, the employer has to put in some money andthen they count on the investments in the stock market, the bond markets to makeup a huge part of that income that’s eventually used to pay out pensions. Dan: And then the other thing thathappens too is now—one of the things that happens you are projecting thisreturn, you’re not getting this return. So then what do you do? Youengage in riskier investments, higher reward potential, higher loss potentialand then you spiral the problem even more. You know, go invest in— Ted: Junk Bonds, Chicago Junk Bonds. Dan: Yeah, right. Or you make private equity plays, you know,you get outside, even with the professional managers, you get outside thatspace where you’re comfortable and you get a little bit too far out in the riskportfolio because you’re trying to make numbers that are very difficult to makein perpetuity with the ups and downs of economic cycles. Ted: Let’s add one more thing, thosepension funds can take riskier and riskier bets because they know if the get itwrong taxpayers are going to bail them out. Dan: That’s the moral hazard. Ted: So this is the whole problem sowhat was interesting about Brexit was it reminded us that these rosyprojections that these pension funds are depending on, those things can changedramatically. We’ve been on a nice runsince the great recession, stock markets are up, returns are up, I thinkeverybody feels it in their 401Ks, but when you start getting these 500 and 700point drops in one day and you start thinking about the potential impact of thenext recession, maybe Brexit’s all hysteria but can it lead to the nextrecession? And then you start to say,“Hmm, how much can Chicago pension funds handle a recession, how much can theyhandle a big drop in the stock market?” Dan: How much can they handle slowgrowth? I mean, the US economy isgrowing at an anemic rate and has been for some time when the Fed no longerkeeps interest rates at artificial lows and that may not happen this calendaryear but it’s going to happen at some point. You can only manipulate monetary policy for so long to such aneffect. And so what if it’s even slowgrowth instead of a seven and a half percent return, it’s a two percent returnone year, one percent return, not even saying negative returns, which, ofcourse, happen. And you’re 30% funded,you’re 50% funded? I mean, you’re likethe problem gambler, I got to keep chasing, I got to make better bets, I got tomake bigger bets. Ted: And that’s where we are, andeverybody seem to have ignored what happened this past year in terms of returnsin Chicago. Most of their pension fundsreturned somewhere around one percent to negative one percent so even withoutthe hysteria Brexit they still hardly made any money. And every year they don’t make money theyjust put some more and more pressure. Dan: And let’s remember too theseexamples, and this is the work of Illinois Policy Institute, but they can’t berepeated enough because this is a way to take the billions, the numbers that weuse in unfunded liabilities and all of the jargon and just make it realsimple. Chicago teacher retiring after30 years today puts a hundred and forty grand in, and really a fraction of thatbecause CPS for the last 30 years has been covering two thirds of the teachercontribution. But ok, hundred and fortyin, let’s say, and two point one million out, hundred and forty in two pointone million out. That is five to seventimes what somebody listening to this show in the private sector with a matchin their 401K, you know, kind of an industry normal match in their 401K in theprivate sector somewhere, can anticipate. That is unsustainable, unsustainable. And I guess the part that we don’t talk about enough because nobodywants to be the bad guy and say, we’re going to have to adjust what you expectto enjoy in retirement. Ted: I can say the same way but withdifferent numbers, most of these teachers and most of these workers retire intheir 50s with full benefits, 54, 55, 56. Now you can imagine a lot of them are spending more time in retirementcollecting this guaranteed benefit than they are working because people areliving longer and longer. And so thefact of these benefits compound every year with a three percent addition to theamount every year, they’re living longer and longer, it’s just outstripping thetaxpayers’ ability to pay for it. Andagain, it’s not the teacher’s fault, not the public sector workers’ fault, thisis the benefits they get but it’s no longer affordable for taxpayers. Dan: Right. As we say over and over and over again, we’llcontinue ‘til it bores a hole in people’s heads, math is not an opinion, mathis not a partisan statement, it’s just math. Dan: Dan Proft back with TedDabrowski, Vice President of Policy at the Illinois Policy Institute, thisedition of Illinois Rising. And, Ted,you had the city of Chicago taking up all the big issues, Ed Burke and the chargeto ban smokeless tobacco, which— Ted: It’s crucial. Dan: Right, yeah. And it imperils—Addison Russell and JohnLakin, I’m still waiting for Ed Burke to throw either one of them out of thegame for using smokeless tobacco during a Cubs game. I want to see how the fans would react tothat. And then there’s this; new law inChicago, not Illinois, although it’s pending in Illinois, new law in Chicago,you have to be 21 to buy cigarettes. Youhave to be 18 to serve our country in the military, go to war for our country,you have to be 21 to buy cigarettes in Chicago. Ted: It’s amazing how our leaders inChicago and the other big cities can find time to spend on this but not fix thereal problems that we have that we talk about all the time on these shows. And they find it so easy to take awaypeople’s freedoms, right? Like you said,you can go to war but you can’t smoke. Can you smoke while you’re on the battlefield? Dan: I don’t know, that’s a goodquestion. If you are from Chicago, andyou’re deployed in a theatre of battle and Ed Burke finds out that you havepurchased cigarettes and are smoking, will he issue a fine against you inabsentia? That’s a good question, Iwould hope so because you want to enforce the law. So I’d like to see Ed Burke do that or maybewait until you return, if you hopefully do return, and then you couldadjudicate the case before some kangaroo court in the city when you get backfrom serving our country. This is thesilliness of it, but this is Chicago, this is silly city and Ed Burke and theseother professional meddlers who know better how to manage your life than youdo, who know the best choices you should make—also, what choices do theymake? Whatever nutty idea comes out ofNew York Ed Burke immediately turns around and introduces an ordinance in thecity of Chicago. Ted: Sugary drinks, right? Dan: Right, yeah. The nanny state and these meddlesomeindividuals and the other thing too, in addition to kind of the falseprotecting people, protecting our future, protecting our young from decisionsthey want to make. Especially relativeto the ability to vote, the ability to serve and die for our country. But in addition to that it’s scam, right? On one hand they say don’t smoke andcertainly don’t purchase cigarettes if you’re under 21. On the other hand, they’re reliant on peopledoing precisely that because they budget for and spend money they expect torealize from tobacco taxes before you’ve ever even thought about purchasingcigarettes. Ted: We need those revenues,right? That’s how we balance ourbudgets, or same thing on liquor and all these other sin taxes. They hate those sins but they love the taxrevenues. Dan: Red light cameras, speedcameras. Don’t speed, don’t blow throughred lights, don’t smoke, don’t drink, don’t gamble, except we need you to doall of those things. We’re betting,speaking of gambling, that you will do all of those things because we budgetfor the anticipated revenue. Now theynormally budget wrong and then just deficit spend because they don’t understandthe concept of elasticity of demand because nobody in the city councilapparently passed an Econ 101 course or they don’t care. I don’t know which, you choose, they’recraven or they’re ignorant or some combination of the two. But that’s the scam. So it’s insulting on one hand just from kindof a moral perspective about people’s dominion over their own lives, individualsovereignty, and also the scam they run on people. Ted: Dan, I would take this fromcigarettes all the way to things like school choice. They don’t believe that parents would be ableto choose a better school than the one they’re in, they just don’t have highexpectations of the people that live in their city. And I think it’s a damning thing that they doand I think it just overall just diminishes people’s quality of life andfreedom. Dan: Human beings are means to mypolitical ends, that’s what they are, they are liabilities to be managed,that’s the philosophy of the Chicago democrat left, as exemplified byBurke. They’re not assets to be developed,to empower with choices to develop, right? And that’s a big difference and it’s a big difference in world views andit turns out that policies that flow from those different world views result invery different societies in which we live.