Synopsis: If “Kids Need Lobbyists,” In Relation to Illinois and Chicago’s Nutty “Pension” Crisis, So Do Illinois Taxpayers and Businesses, Folks.

Editor’s comment: We were mildly surprised to see our Illinois Workers’ Compensation Commission’s website weigh in on Illinois and Chicago’s impossible-to-fix public employee “pension” crisis. The IWCC’s excellent and newsworthy website athttp://www.iwcc.il.gov/news.htm#mw2 points to two different www.youtube videos on the web they feel are worth watching. We ask our readers to take a look if you have the time and interest to do so. Our problem with Illinois government-employee “pension” programs match the same concerns we have about most things with Illinois government—embedded chaos, disarray and turmoil on numerous levels of state and city government. We have long-time, decades-old leaders like Illinois House Speaker Mike Madigan, a member of the Illinois House since 1971 and City of Chicago Finance Committee Chair Ed Burke, first elected in 1969 who know precisely how we got there and appear to care less about the mess they have supervised. They are clearly not openly accountable for any of it. The last thing we hate about all of this is the answer to any government issue in this state is unlimited borrowing because no one has the guts to raise taxes to pay for government commitments. Simply put, instead of new taxes, the multi-zillion-dollar government borrowing is starting to inexorably bob to the surface, like flipping over a giant iceberg.

Illinois Government Pensions are the Best Investment on the Planet for Government Workers and the Worst Deal in History for Taxpayers and Businesses

If you owned and operated a hot dog stand, a shoe-shine booth or a law firm, would you ever hire a worker who could work for you for twenty years, pay something like 5-6% of their salary into a so-called “pension” fund and then force you to pay their salary and health care benefits for up to fifty more years, long after they had departed from your employ? Would you offer that impossible-to-finance benefit for all your workers over the years and have more folks on “pensions” than on your active payroll? Could any business survive in doing so? As you read this, the State of Illinois and City of Chicago may have as many as a million workers who are receiving or will be certain to receive “pensions” during their lifetimes. Some of them will use the “pensions” to live, thrive and survive; some of them will use the “pension” as a generous second income source from which to make a tidy profit. If you want the poster child for triple-dipped post-government income, former Chicago Mayor Rich Daley gets a City Pension, a State Pension and doesn’t “need” either pension from the way-past-broke government pension funds because he is working at a law firm making solid money as a consultant.

For an example of the above financial model, about ten years ago, some misguided bureaucrat who worked with Finance Chairman Ed Burke agreed to allow Chicago Public School teachers to only contribute 2% of their annual pay into that CPS teacher “pension” fund. Right now, Chicago Public School teachers make about $75,000 on average. If you do the math, 2% of $75,000 is $1,500. After twenty years of contributing, a Chicago teacher would put only $1,500 times 20 years or $30,000 into the kitty for their future lifetime pension rights. When that teacher is fully vested, they would get about $60,000 a year until their passing. To our understanding, they also get 3% COLA increases too. For a career investment of only $30,000, they will go through that career “pension” contribution in half a year and may receive $60,000 each year for twenty, thirty, forty or fifty years! The incredible but certain payout over that time could be more than $3,000,000 based upon career contributions of $30,000!!! We consider that an amazing return for the worker unlike any in the history of the planet and an awful shot to city taxpayers who are truly funding this financially incomprehensible mess. We want to emphasize you can’t blame the teachers who are taking what they are being given—there is enough blame to go around for everyone in Chicago government. Our city fathers are now trying to sell Midway Airport to put a tiny patch on the monster and spiraling problem.

For another example, Circuit Court judges in this state make between $155,000-$180,000 in annual salary. They contribute a little bit more to their judicial pension kitty that Chicago teachers—judges contribute about 8% for single judges to 12% for married judges. The problem with judicial pensions is it only takes six years to be fully vested. Starting at the end of their sixth year, a sitting judge hasn’t contributed one-half of a single year’s salary into the “pension” fund but can sign up for a lifetime payout of about $120,000 a year with COLA increases. Again, they may receive that money for 10-50 years. For their short-career “pension” contributions of as low as $75,000, a retired judge might get $5-10 Million in return plus lifetime health care coverage. We consider that an amazing deal for the jurists involved and an unbelievable bad deal for Illinois taxpayers and businesses who don’t even know it is happening. Again, you can’t blame the judges who work hard and put their lives on the line every day of every year but six year’s “pension” contributions to get millions and millions after you are off the front lines seems unsustainable.

The point we are making isn’t to fix blame or fault upon pensioners; our point is you can’t create a sensible “pension” program where the pensioners don’t contribute at least 3, 5, 10 years’ salary into the program to then receive guaranteed and substantial lifetime income. In our view, the current programs can’t be maintained as they are today—they have to be dramatically revised to make any sense.

Will The Media and Everyone Else Stop/Cease/Desist on Using the Term “Unfunded” When It Comes to Illinois/Chicago Government Pensions? Please!!!?

Another thing about state/city “pensions” that we despise and dislike is the continued use of the blurring accounting term “unfunded” to refer to Illinois “pension” shortfalls. No one other than an accountant or actuary truly knows what it means—for the inside scoop, you have now come to the right place. We assure you right now Illinois state pensions are “funded” at about 40% of the annual payout.

What does “funded” versus “unfunded” mean? It is simple—“pensions” in state governments across the country are “funded” with three apparent sources and one hidden and confusing “unfunded” source.

1. One is employee contributions—as we outline above, the employees are putting in a certain level of money from their paychecks as contributions. That level varies from government pension to pension.

2. The next source of “pension” income is investment income from wherever the State or City of Chicago put the money to obtain a safe investment return. Returns on investments are down across our country since about 2008 when the current recession started.

3. The final source of “pension” income is taxpayer dollars. The problem at both State and City levels came from politicians not putting enough money in to meet the requirements of the pension funds to pay out what is owed to the government workers.

The hidden and confusing “unfunded-funding” source is again from taxpayers—it is billions of dollars being borrowed to pay the shortfall in pension contributions from all sources. Right now, Illinois state pensions are less than 40% “funded” meaning they can’t pay even half of what is owed from the three “funding” sources--employee contributions, investments and government/taxpayer-matching funds. There are about 750,000 workers who are in these pension systems and billions and billions are needed to make up the 60% that isn’t in the kitty. What does government do when they don’t have money? Sadly, no one has even slightly suggested levying a new tax to pay what they have tied us into—instead they borrow it which means we have to eventually pay both principal and interest on billions we admittedly don’t have.

Guess who has to pay back the billions being borrowed—YOU DO!! This is why the Illinois Workers’ Compensation Commission and our Governor are putting out www.youtube.com videos about your kids needing lobbyists. They are letting us know we are all basically smoked; we can’t keep borrowing money to pay the interest and principal on the whopping debt that is building up. We don’t think your kids have to worry about it—in five to ten years, this State and the City of Chicago are going to be so deeply in hock, “pensions” may cause government bankruptcies.

The Final Camel-Back-Breaking Straw in Illinois/Chicago “Pension” Reform That We Hate—Everyone Points to the Illinois Constitution As Requiring Government Bankruptcy!!!

The last thing we heard from the Chicago Tribune® report today on “pension” reform are statements like this:

Few states have enshrined pension protections in their constitutions quite as emphatically as Illinois. The charter's so-called pension clause — which states that pensions cannot "be diminished or impaired" — was written at a time when the financial condition of many retirement systems in Illinois was nearly as bad as now. The difference back then was that courts in Illinois considered pensions a "gratuity" that could be reduced in a financial pinch, and actually had been in other states with similar legal standards. The pension language was added to the constitution to address state workers' fears about benefit cuts, records of the 1970 Constitutional Convention show.

In response to such silliness, we tell our fellow members of the media and everyone in state/city government the simple phrase “Darn the Torpedoes, Full Speed Ahead.” We are facing the mega-crisis of all crises in this state. In our view, we need to start fresh with a new Constitution and new laws on “pensions” that make simple financial sense. The State Constitution was drafted by Illinoisans and can be changed by Illinoisans. If that is a lot of work; well, get started. If we don’t make better sense of what we are doing, we are certainly going to face more giant budget cuts in non-pension government needs and unquestioned bankruptcy that will require others to make those decisions for us.

Simple Financial Solutions That No One Will Consider to Fix State/City “Pensions?”

· Limit the post-employment “Pension” payout to a fixed period, say 5, 10 or 20 years?

· Match “Pension” contributions/investments to what the pensioner receives? We understand this is how the State of Wisconsin offers their pensions.

· Make “Pensions” only for folks who are not working at all after leaving government service—if a pensioner has a post-government job, have the State/City money be set off by that amount until they stop the other job and actually retire?

· Right now today; move everyone to a 401K style retirement system, like the rest of the U.S. in the private sector.

· Hold a symposium or three and listen to all sides including kids, pension experts, rabid union members, local governments, businesses and everyone interested.

We salute IWCC Chairman Weisz and our Governor for their work to bring these issues to the forefront. We hope everyone who cares about our State and its biggest City start to get involved and find a fix for this looming financial disaster. We appreciate your thoughts and comments. Please post them on our award-winning blog.

----------------------------------------

Synopsis: Twelve Years of Litigation and Back to Square One—thoughts by James F. Egan, J.D. on New and Unprecedented IL WC Appellate Ruling.

Editor’s comment: The Illinois Appellate Court, Workers’ Compensation Division in a relatively rare situation involving claimed injuries stemming from a 1999 date of loss, ruled as two commissioners who found claimant was entitled to receive WC benefits did not agree as to a specific permanency award, a majority of the commissioners did not approve the PPD award, and the Commission's decision was therefore not final as it did not dispose of claimant's request for permanent disability benefits per Section 19(e). In absence of a final determination by the Commission, the Circuit Court lacked requisite subject-matter jurisdiction to enter an order confirming the Commission's decision.

We note Section 19(e) of the Workers' Compensation Act provides, in relevant part, that "a decision of the Commission shall be approved by a majority of a panel of 3 members of the Commission.” In University of Illinois Hospital v. Illinois Workers' Compensation Commission, 2012 IL App (1st) 113130WC (December 21, 2012) Claimant presented evidence regarding her 10-year employment with University of IL Hospital and her condition of carpal tunnel syndrome. She also presented opinion evidence to support her claim that she was permanently and totally disabled under the supposed “odd-lot” category. We remind our readers the term “odd-lot” doesn’t appear in our Rules or Act.

The government employer presented evidence and indicating Claimant's injury and current condition of ill-being were caused by a systemic disease not related to her employment, Claimant was not permanently and totally disabled and was capable of performing the necessary functions of a clerical-assistant, a position that had been offered to Claimant in December 2005, but which she had rejected.

The Arbitrator found Claimant sustained a work-related injury which aggravated a pre-existing condition, and the current condition of ill-being in the claimant's wrists and hands was causally connected to the employment onset. The arbitrator determined Claimant was entitled to temporary total disability (TTD) benefits for 179 4/7 weeks from February 14, 2000, through July 29, 2003 and also found Claimant sustained a permanent partial disability (PPD) to the extent of 25% loss of use of the right hand and 22.5% loss of use of the left hand.

Both parties sought review of the Arbitrator's decision before the Commission. In a sense the IWCC panel proceeded to muddy the waters with their decision. The panel, with one Commissioner dissenting and one Commissioner concurring in part and dissenting in part, corrected and clarified certain portions of the Arbitrator's decision, but affirmed and adopted the Arbitrator's decision as to causation, TTD, and medical expenses. The Commission's decision also sought to award Claimant 90 1/7 weeks of PPD benefits, based, in part, on the determination Claimant was not permanently and totally disabled under the odd-lot category and, therefore, was not entitled to PTD benefits. However, only one Commissioner expressed the view Claimant was entitled to PPD benefits and was not entitled to PTD benefits under the odd-lot theory. A second Commissioner dissented in part concluding Claimant had proven she was permanently and totally disabled under the odd-lot category and was entitled to PTD benefits. The third Commissioner dissented from the entire decision determining Claimant had failed to prove that her injury and current condition of ill-being were causally related to her employment.

The Circuit Court of course did nothing at all to clarify the confusion and merely rubber-stamped the Commission decision, which then wound its way to the Appellate Court.

Jurisdiction was not raised on appeal, however; the Appellate Court considered subject matter jurisdiction sua sponte and ultimately held, correctly we feel, that as the IWCC review record affirmatively demonstrated there was no approval by a majority of the 3-member panel of commissioners with regard to Claimant's entitlement to a permanent disability award and in the absence of a final determination by the Commission, the Circuit Court lacked the requisite subject-matter jurisdiction to entertain this matter and enter its order confirming the Commission's decision. Therefore the Circuit Court decision was vacated and the matter punted back to the Commission for a determination on permanency.

Clearly upon receipt of the Commission decision, the parties should have motioned the matter immediately to stay further appeal timelines and bring the matter back before the Commission panel for a majority decision. This article was researched and written by James F. Egan, J.D.,please feel free to contact him about it at jegan@keefe-law.com.

--------------------------------------

Synopsis: Denial of Unemployment Benefits Affirmed Following HIPAA Misconduct by Health Care Worker; Analysis by Joseph B. Moore III, J.D.

Editor’s comment: In Pesoli v. The Department of Employment Security, 2012 IL App (1st) 111835 (December 19, 2012), Plaintiff Pesoli was denied unemployment benefits by the Illinois Department Employment Security (IDES) following her termination for misconduct after improperly accessing patient records. Appeals to the Compensation Board, Circuit Court, and finally the Appellate Court, all affirmed the denial of benefits.

Plaintiff-Appellant Pesoli worked as a secretary in the radiology department at Advocate Lutheran General Hospital for more than a decade. She was terminated after accessing secure patient files on the hospital computer network. The IDES adjuster initially found her eligible for unemployment benefits. Advocate Hospital appealed, assert Pesoli was discharged for “misconduct,” and ineligible under the Illinois Unemployment Insurance Act. The appeal referee agreed with Advocate Hospital and Pesoli appealed but the Board affirmed denial of benefits. A further administrative review action was filed in the Circuit Court of Cook County, who again affirmed the Board's denial.

In the Illinois Appellate Court, Pesoli argued the facts in her favor were not properly introduced and her actions did not constitute “misconduct” under the Act. The Appellate Court disagreed with Pelosi and affirmed the denial of benefits was not contrary to the weight of the evidence. Furthermore, Pelosi failed to request testimony from her co-worker or any additional evidence regarding unauthorized access of records in violation of HIPAA. During her administrative hearing, these issues were procedurally defaulted and therefore waived. Pelosi also argued unsuccessfully hospital human resources testimony was hearsay and should not have been admitted. Lastly, Pesoli's termination for “misconduct” was found to be proper, meeting three basic elements: (a.) deliberate and willful violation (b.) of a reasonable rule (c.) causing harm to the employer.

On its face, this Appellate opinion confirms an employee terminated for misconduct shall appropriately be denied benefits. However, the opinion touches on a few other key issues, especially for health care employers.

First, the court rejects efforts to make new factual arguments at the Appellate level. A failure to make appropriate objections to factual issues at the administrative review level shall deem them “procedurally defaulted.” Hospital rules and procedures to comply with HIPAA, a federal health care law, were found to be reasonable. Lastly, while Plaintiff's actions did not specifically harm the patient whose records were accessed, the court held that breaking HIPAA laws could expose the hospital to potential lawsuits or loss of business.

An employee may break rules or laws without causing “actual harm.” Keep in mind the “potential harm” demonstrated in this case. When evaluating the actions of a terminated employee, answer these questions. Was the violation deliberate or intentional? Was the employee properly trained and aware of the reasonable law, rule, or regulation? Did the violation expose the business to actual or potential harm? Employers should keep these issues in mind when dealing with instances of employee misconduct.

This article was written by attorney Joseph B. Moore III, J.D. He is licensed and representing defense clients in both IL and IN. If you have thoughts and comments, please send a reply to jmoore@keefe-law.com or post them on our blog at www.keefe-law.com/blog.

KCBA Blog

1-1-13; Can Someone Find a Lobbyist for IL Taxpayers?; Jim Egan, J.D. Reviews 12-year-old IL WC Claim Going Backward; Joseph B. Moore, J.D. on Unemployment Denial and much more