New Law Allows Fix for Pension Benefit Calculation Errors

The Governor signed a bill that allows erroneously calculated pension benefits to be corrected if the mistake was the consequence of a clerical or administrative error. Prior to the change in law, a mistake could only be corrected if discovered during a 35 day administrative review period beginning at the time the benefit was awarded. Under the new law, corrections can be made to the benefit of the pension fund or the retiree:

“This seems like a common sense way to make it legal to fix obvious errors,” Luppino-Esposito said. “There doesn’t seem to be a lot to it except just allowing wrongs to be righted and there’s not much to criticize there.” 

The new law changes the language of existing legislation to enable a process where the situation can be set right if errors were found and correct monies determined. If a pension beneficiary is found to have been shorted, he or she may receive a lump sum making up the difference. Alternately, if it’s determined that too much money was paid out, the beneficiary would be asked to return a lump sum to the state.

There is a "safe harbor" provision that exempts pensioners from having to refund overpayments if the overpayment was the result of a clerical or administrative error that went undiscovered for three years or longer. In those situations, the benefit would only be adjusted downward going forward.

The article only mentions the applicability of the new law to the state funds. The law also applies to downstate and suburban municipal police and fire funds. My organization supported the bill for this reason. It's certainly not an earth-shattering change to Illinois pension law, but it's certainly a sensible addition to the Illinois Pension Code that should have been introduced years ago. 

Context is important, though. Just a few short years ago, the only pension changes passed by the General Assembly typically involved benefit sweeteners. It can't be overstated how dramatically pension politics has changed in Illinois. Hopefully the change didn't come too late for Illinois taxpayers. 

What's Causing Blue State Out Migration?

The Upshot has an interesting story about the fairly significant out migration from blue states to red states. Here's, well, the upshot:

Over the last few decades, residents of many traditionally liberal states have moved to states that were once more conservative. And this pattern has played an important role in helping the Democratic Party win the last two presidential elections and four of the last six. The growth of the Latino population and the social liberalism of the millennial generation may receive more attention, but the growing diaspora of blue-state America matters as well. 

The migration helped President Obama win Colorado, Florida and Virginia in both 2008 and 2012. In 2014, the influx of blue-state natives gives Democrats a better chance to win Senate races in Colorado, Georgia and North Carolina, among other places. 

The spread of people born in New York State offers a particularly telling example: Of the 20 million Americans alive today who were born in New York, nearly one in six now live in the South. That would have been almost unthinkable 50 years ago, when the share was one in 25.

So what is the presumptive cause of this out migration? Is it the result of public policies pursued by blue states? Matthew Yglesias over at Vox posits a theory in a post entitled "The Biggest Thing That Blue States Are Screwing Up." 

Conservatives, of course, tend to think they know the answer — Americans are fleeing the high taxes and malgovernment of blue America. The city of Detroit often comes up in this context, and it is certainly true that malgovernment (among other things) has made that city and several others into an increasingly undesirable place to live. 

On the other hand, if Detroit were the typical blue American city then houses in the Mission and Park Slope would be cheaper than houses in the suburbs of Atlanta and Dallas. The truth is that while there are pockets of economic pain all around the country, in general Blue America seems like a pretty nice place where wages, incomes, health outcomes, and education levels are generally higher.

So why does everyone leave? Well precisely because houses in Blue America generally aren't cheap like Detroit. They're more often expensive like San Francisco. As Dylan Matthews wrote last week, coastal states are generally more expensive.

Note that Yglesias' analysis focuses almost exclusively on coastal states. He mentions Detroit as an outlier with its own unique set of problems that have actually driven the cost of housing down. 

Where would Illinois fit within the premise that blue state out migration is caused by an absence of affordable housing? It's been widely reported that Illinois has seen a notable increase in the number of people leaving the state:

Illinois has experienced what is called out-migration for years, but Thursday's data, released by the U.S. Census Bureau, appears to portray a state that is picking up where it left off before the economic downturn, according to a person who has studied Midwest population trends. 

Illinois' net loss of 39,562 people between July 1, 2012, and July 1, 2013, far exceeded the next nearest state, Michigan. It saw a net loss of just more than 11,000 people during the same period.

Could the lack of low-cost housing be contributing to the outflow of residents? Generally speaking, the answer appears to be no. The median value of an owner-occupied home in Illinois is actually less than the national average by about $20 thousand. The median cost of renting is also slightly below the national average. 

Data provided by AreaVibes, Inc.

Of course, these data points don't hold true for Chicago. Both the cost of owner-occupied housing and rentals exceed the national average. Housing costs could be a factor in the out migration trends for Cook County, which are running well ahead of the highly populated collar counties. 

Forbes has a terrific interactive map that allows for a county-by-county analysis of out migration and where departing Illinoisans are heading. The map shows that some collar counties have experienced a growth (or have at least broken even) in population in recent years at the same time that Cook County is losing residents. Out migration from Cook to the collar counties likely plays a role in this growth. But certainly higher than average housing costs might be a cause of out migration from Cook County, particularly with respect to Chicago residents.

The out migration that bedevils Illinois likely has multiple causes. Housing costs in Cook County might be one of them, but factors like high property tax rates, political dysfunction, and the general sense that Illinois isn't hospitable to business growth likely play a role as well.

Quinn Vetoes Ridesharing Regulations

Update 2: Apparently some Uber supporters are behaving obnoxiously using social media:

Gotta agree with Representative Zalewski. There's no reason for taunting or harassing on this or any other issue. Besides, this issue isn't over, and taunting the sponsor isn't the most intelligent thing to do if you happen to be on the other side of the issue. 

Update: Per the Illinois Observer, Representative Zalewski, a very serious and hard-working legislator, may be looking into an override of the Governor's veto.  

The Illinois taxi industry was expecting an amendatory veto of the legislation proposing state regulations on ridesharing services. They received a full-boat veto instead. Why? The Governor is embracing local control. From the Governor's veto message:

The principle of home rule is an important one. In ratifying the current Illinois Constitution in 1970, the people of our State endorsed home rule for units of local government. This transformational approach to reallocating the balance of power towards local government and away from the State is perhaps the most significant innovation of the Constitution of 1970. Under Article VII, any home rule unit of government is authorized to: “exercise any power and perform any function pertaining to its government and affairs including, but not limited to, the power to regulate for the protection of the public health, safety, morals and welfare; to license; to tax; and to incur debt.” Illinois Constitution of 1970, Article VII, Section 6 (a).

Notably, the City of Chicago, as a home rule municipality, has already enacted an ordinance, scheduled to take effect on August 26, 2014, that addresses many of the same concerns that this bill is designed to address.
Other units of local government may also wish to adopt consumer protections and other regulations to ensure a level playing field for all market participants. Such other units of local government may – or may not – follow the approach that the City of Chicago will adopt.

Given how new the technology is and that the City of Chicago’s new ordinance has not yet even taken effect, it would be premature – and perhaps counterproductive – to enact a rigid statewide regulatory model at this time. It would be more prudent to carefully monitor the City of Chicago's experience and the success and challenges it faces in enforcing its new ordinance. Similarly, lawmakers and the general public will also benefit from observing the experiences of other units of government that adopt their own innovative approaches to regulating mobile device-enabling ridesharing. 

A statewide regulatory framework should only be considered when it is clear that it is not possible to address the problem at the local level. At this point, there is not yet enough evidence to make a judgment about the effectiveness of local ordinances in dealing with the challenges of ridesharing technologies.

Governor Quinn also expressed concern that the bill would "stifle innovation," but he's all-in with the local control argument here. And he's right. In an earlier post I contended that there certainly is a need for some regulatory supervision of the emerging ridesharing industry. Some of the regulations contained within HB 4075 make sense. But there's no compelling reason why the state needs to be the regulator. Let the locals regulate the the ridesharing services that operate within their boundaries. The state should be attending to other matters.

The total veto removes this issue from the gubernatorial campaign since both candidates share the same position. Bruce Rauner won't be able to hit Quinn on "stifling competition," and it's unlikely that the taxi industry will throw in with Rauner because he supported a veto. That said, it will be interesting to see what the taxi industry does with its campaign war chest. Does the industry start spending in legislative races to attempt an override? The legislation was approved with veto-proof majorities in each chamber, but the bill has become pretty highly politicized. Some of those votes may peel off. 

Is Illinois' Fire Service Model Economically Viable?

Depending on where you live in Illinois, you may have come across media stories about cities looking to either consolidate or privatize their fire departments. The most high-profile coverage involves the Village of North Riverside.

North Riverside finds itself struggling under the weight of rising annual pension payments and believes that transferring fire protection services to a private company could save taxpayers $750 thousand during the upcoming budget year. The Village has opted to hold-off on the plan while it negotiates with the local bargaining unit in an attempt to achieve equivalent cost savings.

Why all the talk about privatization or consolidation of municipal fire services in Illinois? Put simply, the cost of fire protection is being priced beyond what some communities can reasonably afford. Cities don't exclusively provide fire protection. They do a lot of other stuff, too. And that stuff, things like police protection, economic development, and infrastructure maintenance, costs money. Taxpayer money. Taxpayers want public services, but they also want reasonable property tax rates. Balancing these conflicting desires requires that cities get creative. Particularly those that are under the state's property tax cap law where there's a ceiling on available revenues unless voters approve a referendum. 

So what's driving the expense? Certainly the costs of equipment and salaries plays a role. But so does the "politicization" of the fire profession.

Firefighters are very active politically. They walk precincts for candidates and their unions make sizable political contributions. I'm not suggesting that they should or shouldn't, but their increasing political power ensures that they get things out of Springfield. Much of what they get in the form of legislative enactments costs money or erodes local authority. And these additional costs are pushed onto local property taxpayers. The state doesn't foot the bill for the additional costs that that it creates.

The General Assembly passed at least 28 firefighter union bills from 1993-2014 that were ultimately enacted into law.

Among these were six pension increases, two lump-sum death benefit increases, an expansion of workers’ compensation benefits, three bills that restricted local authority with respect to hiring, promoting, and disciplining firefighters, one bill that entitled disabled firefighters to lifetime taxpayer-funded health insurance benefits, another bill that expanded eligibility for lifetime taxpayer-funded health insurance benefits, a bill awarding firefighters control over local pension boards, a bill granting firefighters an exclusive right to hold municipal office while remaining employed as a firefighter by the same municipality, another bill awarding a special right to solicit charitable contributions outside of the normal regulations of the municipality, legislation allowing arbitrators to decide residency requirements, and two bills that diverted a municipally-imposed tax directly to bodies controlled by firefighters.

In addition to the 28 firefighter bills, the General Assembly met a firefighter union demand by awarding firefighter-controlled pension boards with the power to divert state-shared general purpose revenue to fund firefighter pensions as part of the 2010 pension reform law.

The enactments are listed below by year:

1993

Pension Benefit Increase (P.A. 87-1265)

• Increased minimum retirement pensions for firefighters and surviving spouses from $400-$475 per month.
• Increased general surviving spouse pension from 40% to 54% of the deceased firefighter’s monthly salary.

1995

Creation of Foreign Fire Insurance Boards to Control Spending of Funds (P.A. 89-0063)

• Removed municipal control over revenue collected from locally-imposed foreign fire tax ordinances and mandated that cities annually appropriate the funds to boards consisting of firefighters;
• Provided employee foreign fire insurance boards (and not elected officials) with the power to make decisions concerning the expenditure of fire tax money.

1997

Pension Benefit Increase (P.A. 90-0032)

• Increased benefits for dependent children of firefighters that receive duty or occupational disability benefits.
• Preserved the benefit for a firefighter’s child who is adopted after the death of the firefighter.

Residency Requirements (P.A. 90-0202)

• Permitted arbitrators to decide on residency requirements in municipalities other than Chicago.

Public Safety Employee Benefits Act (P.A. 90-535)

• PSEBA awards lifetime municipally-funded health insurance premiums for “catastrophically” injured firefighters. In a 2003 decision, the Illinois State Supreme Court defined “catastrophic” to mean when an employee is awarded a duty disability benefit when the injury occurred while responding to an emergency.

1999

Pension Benefit Increase (P.A. 91-0466)

• Reduced the number of years that a firefighter must work from 35 to 30 years to receive their maximum 75% of salary pension.
• Incrementally increased minimum pensions from $475 per month to $1,000 per month.
• Increased duty or occupational disease disability benefits to greater of 65% of salary or the retirement pension earned.
• Added stroke as an occupational disease.
• Increased surviving spouse benefit from 54% of salary to 100% of salary when a firefighter dies in the line of duty.
• Allowed firefighters to earn creditable service toward their pension for up to three years of time spent on disability.

2001

Death Benefit Increase (P.A. 92-0003)

• Increased the one-time lump sum death benefit funded by the state from $100,000 to $118,000 and prospectively authorized the payment to grow 3% each year.

2002

Death Benefit Increase (P.A. 92-0609)

• One year after increasing this state-funded lump-sum benefit, the General Assembly increased it again. This time from $118,000 to $259,038.

2003

Fire Department Promotion Act (P.A. 93-0411)

• Removed firefighter promotions from being a predominantly local matter by creating statutory promotion requirements.

Public Safety Employee Benefits Act Expansion (P.A. 93-0569)

• Expanded eligibility for PSEBA benefits by including EMTs as eligible employees. PSEBA awards lifetime municipally-funded health insurance premiums for firefighters awarded a duty disability benefit for an injury sustained while responding to an emergency.

2004

Pension Benefit Increase (P.A. 93-0689)

• Increased surviving spouse annuity from 54% of final salary to 100% of the pension earned by decedent.
• Incrementally increased the minimum pension for survivors to $1,159.27.
• Retroactively increased children’s annuity by 3% annually.
• Established reciprocity between downstate funds and ability to transfer IMRF service to a downstate fire fund.

2005

Firefighters Allowed to Serve on City Council (P.A. 94-0316)

• Gave firefighters special legal status among local government employees to serve on the city council or village board of the municipality with which they are employed as firefighters.
• Reduction in Permitted Suspension Time (P.A. 94-0188)
• Reduced the amount of time a firefighter could be suspended for disciplinary purposes from 72 hours to 24 duty hours.

Firefighters Awarded Control Over Pension Boards (P.A. 94-0317)

• Reconstituted the firefighter pension boards to give local fire unions a 3-2 controlling share of the vote.

2006

Expansion of Scope for Mandatory Bargaining Under Firefighter Promotion Act (P.A. 94-0809)

• Three years after removing local authority by placing promotion procedures in state statute, the firefighter union expanded the reach of the law by requiring that the rank immediately outside of the bargaining unit be subject to the statewide promotion standards.

Enforcement of Firefighter Health Insurance Continuation (P.A. 94-0858)

• Required the State to enforce the provisions of the law that allows firefighters to remain within the municipal group health insurance program following retirement.

Direct Payment of Fire Pension Levy to Pension Fund (P.A. 94-2859)

• Provided that the annual property tax levied and collected to fund pensions be forwarded by the county directly to the treasurer of the pension board, completely bypassing the municipality that actually has the authority to levy the tax.

2007

Firefighter Workers’ Compensation Benefit Expansion (P.A. 95-0316)

• Provided that conditions related to cancer, heart disease, respiratory disease, hearing loss, or hernia are presumed to be workers’ compensation losses.

Mandatory Bargaining Over Discharge and Removal of Firefighters (P.A. 95-0356)

• Made the process for the removal or discharge of firefighters a mandatory subject of bargaining in all municipalities.
• Prohibition of Substitute Firefighters (P.A. 95-0490)
• Prohibited municipalities from filling shift vacancies with part-time and qualified firefighters from other jurisdictions. A municipality would be required to fill shift vacancies with an off-duty firefighter from that municipality. This would necessitate the payment of overtime wages.

2008

Selection of Promotional Assessors for Firefighter Promotions (P.A. 95-956)

• Another modification to the firefighter promotion law to establish a procedure to select promotional assessors from a roster established by the Office of the State Fire Marshal. The Fire Marshal at the time was the former President of the firefighter union.

Direct Payment of Foreign Fire Insurance Funds (P.A. 95-807)

• Required that payments of foreign fire insurance funds go directly to the treasurer of the foreign fire insurance board rather than to the municipal treasurer despite the fact that the tax is imposed by municipal ordinance. This is similar to the firefighter union legislation that was enacted into law that sent the property tax revenue raised to fund firefighter pensions directly to the treasurer of the firefighter pension fund.

2009

Firefighter Retiree Pension Increase (P.A. 96-0775)

• Awarded 3% compounded pension increases to firefighters that retired prior to 1977.

2010

Interception of State-Shared Revenue for Pension Funding (P.A. 96-1495)

• Vested firefighter-controlled pension boards with authority to order the Comptroller to intercept state-shared revenues intended for municipal general purpose spending and divert the revenue to the firefighter pension funds. This provision was included within a pension reform bill that reduced pension benefits for new hires first employed on or after January 1, 2011. The intercepts could be triggered if a municipality does not make the full actuarial contribution. Intercept authority begins years before municipalities would begin seeing any significant cost-savings from the reduced pension benefits for “Tier 2” employees.

2011

Firefighter Hiring Requirements (P.A. 97-0251)
Removed firefighter hiring from being a predominantly local matter by creating statutory hiring requirements.

• No Candidate Cost for Fire Promotion Act Review Sessions (P.A. 97-0352)
• Provided that review sessions held after an examination must be held at no cost to a firefighter candidate.

2012

Use of Streets for Charitable Solicitations (P.A. 97-0692)

• Created a right for firefighters to collect charitable contributions in municipal roadways outside of standard municipal regulations. The IML raised concerns that the bill would require municipalities to violate the First Amendment by providing certain individuals with a right not afforded to others.

2013

Surviving Child Benefit Increase (P.A. 98-0391)

• Increased benefit from 12% to 20% of a firefighter’s monthly salary for eligible dependent children of a firefighter that dies without leaving an eligible surviving spouse.

2014

Three firefighter union bills were introduced in the General Assembly in 2014. Two bills would reduce the authority of locally-elected officials to decide how fire services are structured. The remaining bill would remove existing municipal authority to determine fire department staffing levels.

Referendum Requirement for Closing Fire Department (P.A. 98-0666)

• Would require referendum approval before a municipality could close its fire department even if the elected officials can provide equal or greater fire protection for the community through intergovernmental cooperation agreement.

Fire Service Consolidation (SB 1681 – Sent to Governor)

• Would create a petition and referendum process as an alternative to existing municipal intergovernmental cooperation authority for fire service consolidations.

Mandatory Bargaining Over Manning (HB 5485 - Passed House)

• Would make manning levels a mandatory subject of collective bargaining and interest arbitration.

Each of these bills was approved in relative isolation from one year to the next, but the costs and operational changes to the fire service add up over time. It should be noted that Illinois hasn't seen the same kind of legislative aggressiveness from police unions. 

So what's the point? It might be time for a top-to-bottom review of the fire service to examine existing cost-drivers and figure out what the endgame will look like at this rate of legislative change. What will the fire service look like in ten to fifteen years? Do we need as many firefighters when the vast majority of emergency calls are for ambulances? What's the most economical way to structure the fire service? If costs continue to rise, where will the revenue come from to pay for it? The state doesn't have anything at all to do with the day-to-day operation and funding of municipal fire departments. Does the state need to get some "skin in the game" if it intends to continue the imposition of cost increases and operational mandates on locally-run and funded fire departments? 

These questions need to be answered if we're going to have a coherent policy toward how we operate and fund fire protection in Illinois.

Will Twitter Change Politics (Or Just Ruin It!)

Chris Cizzilla wrote an interesting piece in the Washington Post about the impact of Twitter on politics. The Cizzilla piece is itself based on a story written by Republican operative Mark Harris in which he opines that Twitter is ruining young press operatives. Here's the main point made by Harris:

Nothing has done more to ruin young press operatives than Twitter. The basic blocking and tackling of press has been lost to the instantaneous food fight of the social media site famous for its 140-character delivery. 

Snark, substance-less witticisms, and gotcha moments on social media have replaced the hard spade work of pitching stories, developing relationships with reporters, and the basics of an efficient press operation. 

Social media has become the hot commodity for campaigns and like the snake oil salesman of the past, people are saying it will cure every political ill. But in the rush to rightfully develop a strong social media presence, too many young campaign operatives have lost sight of what actually moves persuadable voters.

First of all, it sounds like Mark Harris has had some bad experiences with press staffers. Having said that, I've never heard a single person suggest that social media will cure political ills. If there's ever been an incurable disease, it's politics! 

In writing about the Harris story, Cizzilla offers his take on the influence of Twitter:

Viewed broadly then, I am still on Twitter's side when it comes to its influence on politics. Has it helped supercharge some of the traits -- making mountains out of molehills, insularity in terms of opinion, navel-gazing, egotism -- the political community has always possessed? Absolutely. But, it's also become a remarkable information source for political junkies -- whether you work in the business or not -- and provided insight on and access to politicians (not to mention celebrities and athletes) that was unimaginable even a decade ago.

As a political junkie, I wholly concur with this assessment. For better or worse, Twitter has made it far easier to track what's happening in the world of politics. Especially during down times (like standing in line to order a sandwich!). 

Social media won't replace journalism and well-researched stories. But social media compliments traditional media in two important ways. 

First, it allows for instantaneous reporting of events as they happen. For example, the events playing out in Ferguson, Missouri have been covered heavily on Twitter by multiple sources as the events happened. Not hours later or the next day. There's great value in that. Of course, Twitter users should be cognizant that 140-character tweets don't provide the necessary context to fully understand the totality of an event. That's why professional journalism and long-form stories will always remain essential. 

But sometimes even these stories can be flawed or agenda-driven. That's where the second advantage of social media (and blogs) comes into play. Social media creates opportunities for dialogue and disparate perspectives. You don't have to read a story and wait until you're at a bar or the dinner table to talk about it. You can discuss the story immediately and your opinions can be shared widely. And people can respond in kind. 

In my view, Twitter in particular, and social media in general create tremendous opportunities for outreach and engagement. And this goes beyond the realm of politics. Of course, any communication strategy that doesn't utilize all forms of media is flawed. But there's an entire generation of younger voters that will rely heavily on social media sources like Twitter to stay up on the news. The challenge will be on the education system to emphasize critical thinking skills and discernment in an era where people will be bombarded with information like never before. 

And that's why professional journalism will be more, not less important in a world dominated by social media. The traditional news outlets and political operatives that figure out how to effectively intertwine traditional journalism and social media will be the winners. 

Federal Highway Bill Signed into Law...With Usual Funding Gimmicks

President Obama signed a 10-month transportation funding bill on August 8. The bill makes $10.8 billion available for highway and bridge repairs. Funding for construction projects would have dried up without the short-term extension. A multiple-year funding bill continues to be, forgive the pun, a bridge too far for Congress and the Administration. And Washington is up to its usual tricks with the use of dubious funding mechanisms: 

The short-term measure, approved by lawmakers last month, is paid for using a budgeting maneuver called pension smoothing, which allows corporations to reduce their contributions to employee retirement plans. By allowing companies to do so, the government can boost tax revenues since companies are no longer eligible for tax deductions.

It turns out that "pension smoothing" is used all the time to generate short-term revenues:

Here’s how it works: You let companies set aside less money in their pension plans. When they put less in their pension funds, they report higher profits and pay more in corporate tax. That generates a little extra revenue, which you can put in the highway fund. Over the long run, this policy doesn’t actually generate any added revenue, since in later years, companies will have to increase their pension contributions to make up for what they didn’t set aside today, and their tax payments will go down. But since Congress measures the costs of laws over a 10-year window, the added revenues in the near term count, and revenue losses far in the future don’t.

And both parties are guilty of the practice:

Over the last few years, pension smoothing has been one of Congress’ favorite fiscal tricks, with members proposing it as a way to pay for all sorts of things: Cutting tax rates. Repealing the tax on medical devices in the Affordable Care Act. Shoring up benefits for coal miners. Undoing a set of cuts to military pensions that Congress had passed just weeks earlier. And pension smoothing actually did get used once, in the two-year highway bill that passed in 2012. If the House gets its way in the current fight, we’ll just be extending the underfunding that already happened in the 2012 bill for a few more years. 

There’s no real opposition in Congress to pension smoothing, just disagreement about how to spend the money it “generates.” It’s hard to avoid concluding that members of Congress aren’t trying to find ways to spend money without increasing the deficit; instead, they’re trying to find ways to spend money while being able to say they are not increasing the deficit. And that means there is a lot of demand for gimmicks like pension smoothing that appear to generate tax revenue without imposing a real tax increase.

Oy. 

Investing in our transportation infrastructure is critical to our economic future. Congress needs to work out a long-term highway funding plan that doesn't rely on accounting tricks and gimmickry. We've certainly paid the price for similar practices in Illinois. But hey, why change when you can keep getting away with it. 

An Über Battle

As Jerry Seinfield might ask, "So what's the deal with Uber?"

One of the more interesting issues that played out last spring was the emergence in late March of an amendment to regulate commercial ridesharing services. 

I have to admit that, having not lived in a metropolitan area for awhile, I was wholly unfamiliar with companies like Uber and Lyft until the amendment to HB 4075 was introduced. After learning more about how ride-sharing worked, I remember thinking that the ridesharing model seemed like an innovative idea. I intend to try it out. 

But the taxi industry didn't agree with this assessment and put forward the amendment to impose substantial regulations on ridesharing companies.

The taxi industry contends that the regulations are intended to ensure that ridesharing companies offer the same consumer protections as the taxi industry (i.e., commercial liability insurance, criminal background checks, special licenses, special registrations plates, vehicle inspections, etc.).

Detractors believe that the taxi industry's arguments are mostly a canard and view the bill as a gambit to protect the monopoly held by the industry. 

I'm going to split the difference and say that there's some truth to both arguments, although I'm more sympathetic to the arguments made by the ridesharing companies. 

Ridesharing services should be required to adhere to a few basic consumer protections. I would suggest commercial liability insurance and criminal background checks. Even so, I don't believe for a second that the taxi industry has consumer safety as its foremost concern. In this they're being complete and total posers. 

The reality is that the industry views the less expensive ridesharing service as a threat to their business model and want to mitigate the threat as soon as possible (and before the more streamlined ridesharing services have a chance to really take-off with large swaths of consumers). Think about how much easier it would have been to impose Internet taxes before everyone was online.

Making the issue about consumer safety provides a more effective public relations argument than making it about the bottom line of the taxi industry. And this consumer safety argument is being used by the taxi industry to thwart ridesharing companies in several states.

The politics created by the emergence of ridesharing services bear watching. The magnitude of the threat has caused the Illinois taxi industry to gird for battle by raising significant cash. Cash that they will throw at legislators and gubernatorial candidates to encourage loyalty to the industry:

The Chicago-based Illinois Transportation Trade Association, a trade group representing the taxicab industry, formed its political action committee at the end of May with a planned annual budget of $1 million to help defend itself politically against the onslaught by rideshare companies, such as Uber.



In May, the taxi PAC put $200,000 in the bank. 

 Now they're ready to spend.

 "We're giving now," a PAC insider said. "The plan is to be a significant player in the November elections and in the 2015 municipal elections."

It doesn't get much more direct than that. And the spending by "Big Taxi" isn't limited to Illinois:

The next time you’re stuck at the airport, stranded by the side of the road or trying to catch a ride home on a Saturday night, consider the following fact: the taxi cab industry has donated at least $3,500 to the political war-chests of state legislators for every $1 that Uber, Lyft and Sidecar gave.

This massive discrepancy in political giving may also explain why, since the start of 2014, at least 12 states and the District of Columbia have introduced new regulations aimed to limit these popular ride-sharing applications, according to a review of legislation from the Sunlight Foundation’s Open States project.

The cash starts to pour into political coffers when special interests or competing companies go to battle over rules, exemptions, and advantages conferred by government. It's all chronicled in the book, "Government's End: Why Washington Stopped Working." 

If the issue is really about consumer protection, then why hasn't Governor Quinn, a noted consumer rights advocate, signed the bill into law yet and taken a victory lap?

The Governor and his staff are most likely trying to figure out the politics of the emerging fight between the taxi industry and the upstart ridesharing companies. On the one hand, "Big Taxi" has gobs of money that it can spread around to political candidates. On the other hand, supporting the additional regulations risks alienating younger urban voters that like the cheaper rides that are available using a smartphone app. I can imagine an entire generation of young people asking "what's a taxi?"

The GOP is already working to use efforts to regulate the emerging ridesharing companies as a wedge issue to curry favor with younger voters. And Bruce Rauner is just waiting to whack the Governor for being "anti-business" if he signs the bill: 

In a statement and a campaign appearance, GOP gubernatorial nominee Bruce Rauner urged Gov. Pat Quinn to veto a pending bill that conventional taxicab firms say would even the regulatory playing field, but which Uber and other ride-sharing firms say is antithetical to their business model.   

"I love Uber," said Mr. Rauner, who, in a Tribune account, then proceeded to get in an Uber car: a Toyota with 200,000 miles on it. "And we need a state that supports job creation — not runs it off. Tweet Pat Quinn — tell him to veto the anti-Uber bill."  

Mr. Rauner went on to describe Uber as "an innovative, growing company . . . that wants to create 425 more (headquarters) jobs right here in Illinois. Yet Gov. Pat Quinn may sign a bill that will hamper this fast-growing company with burdensome regulations."   

The Governor is quite obviously taking his time to carefully assess the political environment before acting. 

My own view is that a better solution might be found by imposing minimal regulations on ride sharing companies (commercial liability insurance and criminal background checks would be essential) and narrowing the regulatory gap by easing the requirements on the taxi industry. For example, why should a taxi driver need a chauffeur's license and a special registration? They're driving a car, not flying a Cessna. 

Ridesharing companies and consumers shouldn't be punished because the taxi industry finds itself operating under an expensive business model. Rather than overly burden the ridesharing companies, why don't we encourage policies that lessen the burden on the taxi industry and then encourage the industry to rethink its business model? This is how consumers win. 

My suspicion is that the rules and regulations in HB 4075 have more to do with obstructing competition within the taxi industry and the desire for ever-expanding control by state regulators. And any regulations should be completely in the hands of the local governments where the ridesharing companies and taxis operate. There's no compelling justification for the General Assembly and Governor to make the rules here. They've got more pressing problems to solve.

What Passage of the 1957 Civil Rights Act Teaches About the Legislative Process

Anyone wanting to learn more about how legislative bodies work should read "Master of the Senate" by Robert Caro. The book is the third volume in a series about the career of Lyndon Johnson. As a lobbyist, I read the book for the insights contained therein. It didn't disappoint. 

I wrote the following freelance book summary (I know...kind of sick!) after reading the book a couple of years ago. And there's a tie-in to the Illinois General Assembly. I thought I would post the summary here for anyone with an interest. It's a lot shorter than the 1,232 page book!

The year was 1957 and Senator Majority Leader Lyndon Johnson was caught between the horns of a dilemma. The time had come to pass civil rights legislation through the United States Senate, but the hurdles appeared absolutely insurmountable.   

Several years earlier, Lyndon Johnson had gained notoriety for assuming the position of Senate Majority Leader and, for the first time in the annals of Senate history, turning that position into a meaningful platform for power and influence. For the first time, the Senate Majority Leader exercised some degree of influence over a committee structure run by independent and powerful chairmen accountable to only their own parochial ideologies and political interests. What Lyndon Johnson achieved through a combination of shrewdness, persuasiveness, and in some cases downright trickery was a measure of control over which Senators received key appointments and which bills were permitted to advance. This power allowed Johnson to create order within the senate calendar and efficiently move previously stalled legislation through the chamber. More importantly, it positioned him to reward or punish senators for their obedience or recalcitrance to his ambition of using his accomplishments in the Senate to achieve the presidency. This power to reward and punish bestowed even greater power into the hands of the politically skillful Majority Leader. 

Despite being at the pinnacle of his power in the Senate, it appeared inevitable that Johnson was headed toward a catastrophic failure in maneuvering the Senate to conform to the growing drumbeat for civil rights legislation. Failure to act threatened the emergent reputation of the Senate as a body finally freed from prior decades of calcification and gridlock. It would also prove catastrophic to the presidential ambitions of Lyndon Johnson as he sought to transcend perceptions that he was a regional politician beholden to southern interests. As 1957 wore on, the politics involved in moving a civil rights bill through the Senate appeared bigger than Lyndon Johnson and his Texas-sized yearning for recognition as a national leader. 

A growing national awareness of civil rights abuses in the southern states had brought the issue to a head during the Eisenhower presidency.  Much of the nation was demanding federal action to guarantee basic legal rights for African Americans living in the south. The chief impediment was the deft tactical use of the filibuster by southern Senate Democrats. The immediate dilemma for Lyndon Johnson was how to move a civil rights bill through the Senate while avoiding a southern filibuster. It seemed an impossible task. 

Johnson worked to win over southern Senate Democrats by urging them to recognize that passage of a civil rights bill would actually preserve the cause of states’ rights as well as the electoral future of the Democratic Party. He advanced these arguments by pointing out that the power of the southern bloc was waning. Southern Democrats were losing northern allies and might no longer be capable of successfully maintaining a filibuster in the face of a cloture vote. Johnson also warned that the Republicans were on the verge of co-opting the cause of civil rights and would use the issue to gain and solidify national power. Using these arguments, Johnson was able to prevail upon his southern colleagues to compromise by agreeing to allow a weak, watered-down civil rights bill to be debated in the Senate without a filibuster. They would still remain free to vote against the bill. 

While seemingly a breakthrough, the pacification of the southern Senate Democrats created another vexing problem that threatened to undermine the entire endeavor. The large coalition consisting of civil rights leaders along with northern Republicans and Democrats would not accept a weak civil rights bill. After years of being flummoxed by southern filibusters, a frustrated and vocal civil rights coalition would accept nothing less than sweeping civil rights legislation. And Majority Leader Lyndon Johnson was caught in the middle with the knowledge that he simply had to move a civil rights bill through the Senate. Doing so was in the interest of his country, his party, and his personal political ambition. 

After several advances and setbacks, the Senate eventually passed legislation that gutted a raft of proposed federal protections favored by the civil rights movement while ensuring only that the federal government would guarantee voting rights. Much to the consternation of civil rights supporters, a trial by jury amendment was added to avoid a filibuster by making the bill more palatable to southern Senators. Lyndon Johnson was able to convince his northern Senate colleagues and civil rights leaders that passing a watered-down bill was preferable to passing nothing at all. The details and complex political maneuvering that achieved the eventual solution are fascinating in their own right. Interested readers can learn more by reading “Master of the Senate,” which is the third volume in Robert Caro’s series covering the life of Lyndon Johnson. 

The story about the passage of the nation’s first significant civil rights legislation is a classic story about how legislative bodies function in the face of outside pressure and expectations. Except for rare occasions, accomplishing legislative change is difficult and more often then not disappointing. Disappointment and anger are magnified when the expectations of those on the outside are incompatible with what actually happens on the inside. Those on the outside often have idealistic expectations. With respect to the Illinois General Assembly, they ask, “Why doesn’t the General Assembly just recognize what is necessary and do the right thing?” Those on the inside are compelled to abandon idealism in favor of cold, hard numerical pragmatism. Leaders in the General Assembly ask, “How can we get 60 votes in the House and 30 votes in the Senate on a controversial bill?” Doing so often entails amending a bill to make it acceptable to enough legislators to move it forward, yet dissatisfying to many of their constituents. 

The moral of the story is that, when pursuing legislative solutions, it is often a mistake to allow the perfect to become the enemy of the good. Incremental progress is preferable to principled stands that yield nothing in return. Lyndon Johnson knew that the 1957 Civil Rights Act was far weaker than what was demanded by civil rights leaders and a majority of his Senate colleagues. He also knew that a crack in the damn would eventually lead to a flood. The flood arrived with the passage of the Civil Rights Act of 1965. This notable achievement of comprehensive civil rights legislation was pushed through Congress and signed into law by none other than President Lyndon Johnson.

“It is the politician’s task to pass legislation, not to sit around saying principled things.”

-- Senate Majority Leader Lyndon Baines Johnson --

Michigan Teachers Finding it Hard to Leave Union

You should read this disturbing Watchdog.org story about unsavory tactics employed by the Michigan Education Association to prevent their members from leaving the ranks of the union now that Michigan is a right-to-work state.

Bottom line - the union will only allow members to provide notice of their desire to opt-out during the month of August. Teachers can choose to leave during any other month at a price - the union will sick a collection agency on them and ruin their credit rating: 

“People who thought they could exercise their right-to-work rights have unfortunately gotten a rude awakening that (the MEA is) now sending collection notices home,” said Vincent Vernuccio, director of labor policy for the Mackinac Center for Public Policy. “If they have not opted out during the narrow window during August, they’re sending a collection agency after them.”

And the union was in no hurry to inform it's members about the limited annual opt-out window:

“Early September, we got an e-bill statement from the union treasurer, the dues statement for the year,” Jelenek said. “We said, ‘What? We’re not joining.’ We found it very convenient that we got it right at the beginning of September, when all the powers that be knew we had to do something in August.”

Some members want to leave the MEA to seek continued representation elsewhere. Here's an example of one teacher who made this choice:

Other than that, not a lot has changed, he said. He has since joined the Association of American Educators, through which he receives better benefits at a fifth to a sixth of the cost, he said. 

“If MEA were to offer better than AAE, for a lower price, I’d probably jump back with them,” he said. “I teach economics. It’s really dollars and cents.”

Everyone should have a basic right to freely associated (or dissociate) with any organization they choose. I get the "fair share" arguments advanced by unions, but people shouldn't be compelled (or in this case bamboozled) into an affiliation that they don't want. 

I can support the notion that an employee can choose to accept certain benefits (wage increases, health care) negotiated by a union and be required to retain membership. They should also be provided with a right to opt-out of both to seek representation elsewhere or negotiate on their own behalf. 

Border Crisis Politics: Show vs. Go

I know that the blog is really about Illinois politics, but I'm going to write about politics in general (or whatever strikes a chord with me!). 

I've been tweeting about House Republican efforts to pass a bill addressing the crisis on the U.S-Mexican border. Speaker Boehner wisely opted to delay the five-week August recess by a day to ensure that his caucus didn't go home empty-handed. Nobody wants to face angry town halls. An even bigger issue would have been handing the President and Congressional Democrats a cudgel with which to beat Republicans over the head for failure to act (even though the Democrat-controlled Senate left town without passing a bill). 

It would have looked pretty bad if Speaker Boehner and Company went wheels up without passing legislation to address the border crisis after recently passing a bill authorizing litigation against the President for acting on policies without Congress!

So House Republicans stayed behind to get the job done and this could benefit them in the run-up to the November election. Vox has a good analysis of the politics involved in the passage of not one, but two bills aimed at addressing the border crisis. Keep in mind that politics is part "show" and part "go." 

Neither of these bills is going to pass. Not only have Senate Majority Leader Harry Reid and President Obama both declared their opposition to them, but the Senate isn't even in Washington anymore — it adjourned Thursday night after failing to get its own border bill through a procedural vote.

But House Republican leadership didn't put these bills up in the hopes they would pass into law. It put them up so that Republican members of Congress can have an easy answer when they go back to their districts during the August recess and constituents ask them what they're doing about the border crisis. It's very important to these members that they have a good, and simple, response — especially one that implies that they showed leadership and took action, and their opponents weren't willing to rise to the challenge. 

In fairness, this is what Senate Democrats would have done, had they managed to pass their own border-funding bill last night. The Democratic bill would have put more money toward judges and long-term care for unaccompanied children, and avoided changes to the law. But it failed on a procedural point of order when no Republicans were willing to join Democrats to pass it. So instead of Democrats having the easy talking point on immigration action, Republicans have it.

That's a pretty dead-on analysis. The passage of these bills was more "show" than "go," but House Republicans may have achieved what they needed in order to politically insulate themselves back home.  

It's about jockeying for position. It's frustrating when problems aren't solved, but this sort of thing happens with increasing frequency when partisan gridlock is prevalent. And, unfortunately, this is how politics works in Washington...and Illinois.