STUMP » Articles » Sunday Dumpery: Cook County Soda Tax, Chicago Pension Funding, and More » 6 August 2017, 19:22

Where Stu & MP spout off about everything.

Sunday Dumpery: Cook County Soda Tax, Chicago Pension Funding, and More  


6 August 2017, 19:22

During my asset-focused week, I pushed Illinois and Chicago out of my mind.

Well, here’s what’s accumulated since last I posted on this mess.


The last time I did a dump, I mentioned the Cook County Soda Tax had a stay put on it by a judge, but that stay has been lifted.

So let’s see what that tax looks like:

$2.88 on a $5.99 24-pack. YOWZA is right.

And they’ve got a 10.25% sales tax?! I thought the 8.25% sales tax we had around here was high.

And from the Illinois Policy Institute:

That’s for a 12-pack, not a 24-pack, but the numbers match up. The sugary drink tax is huge — given these prices, it’s a ~36% tax.

But hey, let’s get the fatties off of sugary drinks…


A Chicago Soda Party:

Okay, let’s compare these soda taxes to beer taxes. The soda taxes are a penny per ounce, which makes for $1.28 per gallon Keep the number $1.28 in mind when looking at this map:

The highest beer tax is in Tennessee, at $1.29 per gallon. That’s on a par with the Cook County soda tax.

Illinois’s beer tax is $0.23 per gallon, according to that map. More recent and detailed info here shows the beer tax to be $0.29/gallon in Chicago and $0.06/gallon in Cook County on top of the state tax. Even adding those, it’s still less than the soda tax.

Hey fatties, switch from soda to beer! I’m so sure that’s what Cook County wanted you to hear.

There is still litigation going on over the tax.

News stories and other links:

From that last one — there is operational fuckery all over the place:

First, confusion reigns. Retailers and restaurants weren’t prepared to apply the tax correctly, or didn’t know how. The receipts we collected from Walgreens, for example, didn’t reflect the new tax at all. Our purchases included a two-liter bottle of Coke, a 20-ounce bottle of Diet Coke and an 18-ounce bottle of Narino sweetened iced tea.

A district manager collared by a Tribune employee said the chain’s computer system was in chaos. Customers at one store were being charged the tax on La Croix sparkling water, which isn’t supposed to be taxed at all, he confirmed.

Second, this tax isn’t about reducing obesity or preventing diabetes. But you knew that. The 13-ounce bottle of Dunkin’ Donuts French vanilla iced coffee purchased by one colleague (13 cents tax) has 290 calories, which is 290 more than that whole gallon of iced tea ($1.28 tax). Another colleague’s grande Starbucks Coconutmilk Mocha Macchiato weighs in at 210 calories. It wasn’t taxed at all.

Yeah, tell me something I didn’t know.

Also, I’m a fatty myself, and I don’t drink any soda other than seltzer. I got fat on Stu’s great cooking. Man, can he make a butter/miso sauce to die for. And to get fat by.

Anyway, Preckwinkle, if the tax is not supposed to be so confusing, why are the retailers getting screwed up all over the place over it?

And Preckwinkle says: Shut up and pay up:

Cook County Board President Toni Preckwinkle is sending a strong message to anyone who wants to mess with her pop tax: Don’t.

In an action a judge said could have “a chilling effect” on government and citizens’ rights, county attorneys are seeking $17 million in damages from the Illinois Retail Merchants Association, the group that, with a couple of co-plaintiffs, won a temporary restraining order delaying the levy by about a month.

Preckwinkle spokesman Frank Shuftan says seeking damages is appropriate: “Actions have consequences.”

He added in an email: “The financial damage to the county as a result of this delay is projected at more than $20 million. . . .The county has every right to be made whole as a result of the judge’s ruling upholding the ordinance and removing the TRO.”

Oh, actions have consequences all right.

I hope Preckwinkle gets those consequences, good and hard.

Mark Glennon’s commentary on Preckwinkle’s threats: Cook County’s Outrageous Attempt To Charge Plaintiffs $17 Million In Beverage Tax Case – WP Original

The legal defense of Cook County’s new beverage tax took an astonishing turn this week — a dangerous one.

First, the background. On June 30 a Cook County judge issued a temporary restraining order against enforcement of Cook County’s new beverage tax. The plaintiffs — the Illinois Retail Merchants Association and some grocers — argued that the tax is unconstitutional. An appellate court upheld that order on July 10, and the lower court extended its order for an additional week on July 21. But on July 28 the court determined on the merits that the tax was constitutional, denying a request for a permanent injunction and letting the tax go into effect.

Well, now Cook County has gone back to court and demanded plaintiffs pay it $17 million as compensation for taxes that weren’t collected while the tax was on hold.

The danger inherent in penalizing — or even trying to penalize — those who bring plausible constitutional claims in good faith should be obvious. If Cook County sets a precedent, claimants will be frightened by the prospect of being liable for damages even though though the damages result from legal due process. Just the cost of litigating the damage claim would chill the assertion of constitutional rights for those with limited means.

Cook County’s claim is apparently unprecedented. As reported by Crain’s yesterday, the judge is allowing Cook County to brief its case for the $17 million but said, “I’m willing to do that only because everyone is entitled to that. But let me just make sure that everybody understands my perspective. I could find no such case of a governmental body suing a taxpayer who had challenged a tax.”

And, I would be extremely skeptical of the $17 million amount. Especially given the screw-ups in collecting the tax in the few days it has been in effect.


So… this is a mess.

As with the budget that was passed after years of no real budget, and over Gov. Rauner’s veto, there’s a lot on Senate Bill 1 that people are trying to figure out.

For example, thanks to Mark Glennon’s post Education Funding Bill is a Monstrosity of Unknown Proportions – Wirepoints Original, I saw there was a spreadsheet that had a workout of the FY 2017 state contributions (at least the base) under SB1.

I’m still trying to figure out the spreadsheet, but I have made a few graphs.

Here is the non-stupid graph first:

That’s the per-pupil state contribution from the Base Calc tab, by district count. The orange bar is where Chicago Public Schools falls.

It is, shall we say, a little higher than the average… by district count.

This next graph is a bit stupid, but now you can see looking at the per-pupil spending by district count isn’t necessarily helpful:

Yeah, Chicago Public Schools is far-and-away much larger than the other districts. It has over 9 times the number of students compared to the next largest district (School District 46 in Kane County).

So they’re getting a higher-than-average state contribution on a per pupil basis… and they’ve got a lot more students.

Yeah, that’s expensive.

Here’s the main story from 2 August 2017 – Gov. Rauner Issues Amendatory Veto to Illinois’ Senate Bill 1:

Continuing to push for his vision of pension reform, Gov. Bruce Rauner issued an amendatory veto against Illinois school funding bill Senate Bill 1 on Tuesday, sending it back to the Illinois General Assembly, where if lawmakers uphold his changes, the state’s education funding will achieve a “historic” reform, Rauner said.

In mid-July, the Chicago Public Schools (CPS) issued a statement, claiming Rauner couldn’t legally veto SB 1, citing that his amendatory veto “exceeds the power of the Governor under the State Constitution.”

Compared to the current bill, Rauner’s version would cause CPS to lose $203 million, according to calculations from his office.

“As written, Senate Bill 1 places the burden of the Chicago Public Schools’ broken teacher pension system on our rural and suburban school districts through three major provisions: pick-up of CPS’ normal pension costs, retention of the so-called Chicago block grant, and a deduction for the CPS unfunded pension liability,” Rauner said in his veto letter. “Taken together, these three provisions put Chicago in line for millions more in funding that are diverted from other, needier districts, thus going against the Commission recommendation that any additional money be distributed first to districts farthest from adequacy. This is not about taking resources away from Chicago. This is about making historic changes to help poor children in Chicago and throughout the state of Illinois.”

In his amendatory veto, the Governor asks the General Assembly to make the following changes to the bill:

Maintain a per-district hold harmless until the 2020-2021 school year, and then move to a per-pupil hold harmless based on a three-year rolling average of enrollment.

Remove the minimum funding requirement. While the governor is committed to ensuring that the legislature satisfies its duty to fund schools, the proposed trigger of 1% of the overall adequacy target plus $93 million artificially inflates the minimum funding number and jeopardizes Tier II funding.

Remove the Chicago block grant from the funding formula.

Remove both CPS pension considerations from the formula: the normal cost pick-up and the unfunded liability deduction.

Reintegrate the normal cost pick-up for CPS into the Pension Code, and treat Chicago like all other districts with regards to the state’s relationship with its teachers’ pensions.

Eliminate the PTELL and TIF equalized assessed value subsidies that allow districts to continue underreporting property wealth.

Remove the escalators throughout the bill that automatically increase costs.

Retain the floor for the regionalization factor, for the purposes of equity, and adds a cap, for the purposes of adequacy.

The amendatory veto also removes the accounting for future pension cost shifts to districts in the Adequacy Target, preventing districts from taking full responsibility for the normal costs of their teachers’ pensions.

I highlighted some key bits.

We’ll see what happens.

News dump:

I have no idea if they’ll actually resolve this issue this week, but Madigan and Cullerton have already shown they can override a veto.


One can count on them blaming everything on Rauner, but one wonders what good those two fellows have been doing in their decades in the Illinois legislature.


Chicago pension contributions to double by 2022

CHICAGO – Chicago’s rising pension costs and other budgetary pressures cast a wide shadow over big gains the city has made in whittling down its structural budget.

The city projects a $114 million structural deficit heading into the 2018 budget season, Mayor Rahm Emanuel’s administration said this week as it released its annual review of the city’s fiscal health. That’s down 82% from the more than $600 million gap Emanuel inherited in 2011.

“We are more financially secure today than we were six years ago,” Emanuel said in a statement.
The administration has chipped away deficit by cutting expenses, raising taxes and fees, and through natural revenue growth – and it’s made strides in putting the city’s four pension funds on a more stable funding path. Emanuel’s overhaul staved off looming insolvency for two of the city’s funds and prompted two rating agencies to shift the city’s outlook to stable.

But on both the budget and pension fronts, challenges persist and are growing.

The deficit projection doesn’t take into account $70 million in costs to pay for new police hiring and other expected contract or police reform expenses, because the city considers them new initiatives or one-time expenses and not part of structural spending. Red ink also is projected to rise.

Pension payments make a big leap in 2020 and again in 2022 as the funds fully shift to actuarially based payments under legislative changes.

The city is facing a leap of about $300 million in 2020 in payments for its public safety funds and a $330 million increase in muni and laborers fund payments in 2022. Total payments will rise from $1 billion this year to nearly $2.2 billion in 2022.

They have to increase that much if they don’t want the cash to run out.

MEABF is one of the worst of the funds, which required about a 11% per year increase in contributions to prevent the fund of running out of cash (forget about being fully-funded).

An 11% per year increase ends up with contributions about twice what was given before in 7 years. I was basing my calculations off of 2015, so it would mean a doubling of contributions by 2022.

So yes, doubling the contributions by 2020 sounds about right to me.

But here’s the big question: will they actually be paying those contributions? As has been seen in New Jersey, it’s easy to say you’ll make required payments.

So yeah, I’ll believe the contributions are doubled when they actually pay doubled contributions.


And here’s what’s left:

You gotta read that last one for sheer artistry in ass-kissing.

I’m sure that the various Chicago and Illinois pensioners, not to mention the taxpayers, will really appreciate:

“As you may recall, Madigan brokered the 2013 pension reform deal, approved by the legislature and signed by Pat Quinn, that sought to save taxpayers $160 billion in pension costs over 30 years, mixing benefit reductions and new funding. As you know, the Supreme Court struck down the law, but Madigan led the negotiations with the other leaders to strike the deal.

I’m sure that will make them all feel cozier when taxes are hiked even more, and still pension benefits will get cut.

At least he tried, right? Trying has to count for something, right?

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