The Teacher Retirement System is under attack. It is important to separate fact from fiction, examine possible motives of those seeking radical changes in the system, and consider how best to ensure the stability of the excellent system that already exists. TRS provides a defined benefit plan for members today. Reform efforts are to change to a defined contribution plan.

The Civic Committee of the Commercial Club of Chicago has been leading the charge against teacher pensions. What is the Civic Committee? Who are its members? What might be their interest in public pensions? How might we impact their positions through active engagement and advocacy for public pensions?

Recommendations of the Civic Committee: “State retirees currently receive more generous pension benefits than those available to Illinois taxpayers. (Appendix A [of the Civic Committee Reform Proposal] provides information on private sector retirement plans). In the private sector, employee pensions have in recent years become less generous – and less costly – as a result of competitive pressures on employers. Many companies have shifted away from defined benefit plans to defined contribution plans, and others have retained those plans but trimmed benefits. Still others have adopted two-tier plans – one for existing employees whose rights have vested, and new ones for new employees. Illinois should also make significant pension benefit reforms to reduce its pension liabilities and to bring its pension benefits into line with those of most of the taxpayers who pay the State’s bills. The Civic Committee recommends the State create a two-tier pension program, preferably a defined contribution plan rather than a defined benefit plan, and require increased contributions from both new and current employees.” They recommend increased State funding of the pension plans. They also recommend considering “legal options for applying reforms described...to benefits of current employees.” (p. 12)

In contrast, findings of the State of Illinois Report of the Pension Modernization Task Force, established by the Illinois General Assembly, with bipartisan representation, reveals that Illinois’ state-funded retirement systems were “generally found to be in the statistical median.” The Benefits Subcommittee concluded that the “future cost of TRS (6.63%) to Illinois is clearly not out of line with other states.” The Subcommittee studied the total retirement costs of neighboring states: Indiana (12.85%), Iowa (14.24%), Kentucky (7.25%), Michigan (11.8%), Missouri (8.71%), and Wisconsin (10.6%).” Clearly, Illinois’ cost is lower than every neighboring state.

“Regarding the Public vs. Private Sector Retirement Comparison: The Task Force found that the state’s normal retirement costs are comparable and at times less than the cost of the private sector model [emphasis added]. To that point it must be clearly understood that 78% of those in the state retirement system do not receive Social Security coverage. Every single employer in the private sector must provide Social Security coverage for their employees. This is a cost to private employers amounting to 6.2% of their payroll. Additionally, many employers provide a contribution to a 401k plan.” According to the “51st Annual Survey of Profit Sharing and 401kPlans” report, private company retirement contributions averaged 4.4% of payroll. The 401k plans ranged from a low of 3.2% to a high of 8.6% of payroll. “Adding the average employer contribution of 4.4% to the mandatory 6.2% of payroll payable for Social Security amounts to a total contribution of 10.6% of pay. When you compare this to the state’s normal cost of TRS at 6.63%, the private sector retirement costs are more expensive.” (p. 31-32)

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Pension On PointVol. 2, August 10, 2011

Could it be that the corporate CEO’s just want to maximize their corporate profits and thus their own compensation and retirement benefits at the expense of both their own employees and public employees? Or do you think their primary interest is in the well-being of the average citizen of the State, including public employees? Do we believe it is in the best interest of the average citizen to accept the “corporate business model”? How has it been working lately for our public policy to follow the leadership of corporate America, especially those in the finance industry? Only you can make a judgment from your own experience and perspective. It might be instructive to know a little more about just who the members of the Civic Committee are. Remember, the primary goal of corporate enterprise is profits.

• THE AVERAGE CEO PAY IN ILLINOIS IS $4,687,816. (AFL-CIO)• The median household income of all occupations in Illinois in 2010 was $53,974. (U.S. Census)• The average teacher salary in Illinois is $63,296. (ISBE School Report Card 2010)• The average TRS pension is $42,782. (Teacher Retirement System)

Financial Services and auditing firms make up 40% of the Civic Committee membership.

• Aon Corporation 200 East Randolph Street, Chicago, IL 60601 (312-381-1000) Gregory C. Chase, President and Chief Executive Officer Compensation: $20,783,301 (Salary $1,500,000 + annual cash compensation of $3,502,599 +other

long term compensation $17,333,301) FY2010 compensation source: Bloomberg Business Week Mr. Chase is also a Director of Discover Bank and Independent Director and Chairman of

Compensation Committee of Discover Financial Services for which he receives more pay.

• Allstate Corporation 2775 Sanders Road Northbrook, IL 60062 847-402-5000 Edward M. Liddy, Retired Chairman and Chief Executive Officer Compensation: $17,790,000 as CEO before retirement ($1,160,000 salary+ $540,000 bonus +

$1,740,000 other + $14,300,000 stock gains) Source: Forbes Thomas J. Wilson, CEO, $9,299,620 (2010) Source: Chicago Tribune, May 22, 2011

• Discover Financial Services 2500 Lake Cook Road, Riverwoods, IL 60015 224-405-0900 David W. Nelms, Chairman and Chief Executive Officer Compensation: $8,522,921 (FY2010: $4,550,000 salary + $1,700,000 bonus + $2,274,995 restricted

stock awards + $10,775 other) Source: Forbes

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Financial institutions could very well make great gains if there were a shift from defined benefit plans to defined contribution plans.

According to the Investment Management Institute, the operating expense ratio for defined benefit plans averages 31cents per $100 of assets; the average for defined contribution

plans is three to six times higher, at 96 cents to $1.75 per $100 of assets. To put that in context for the Illinois pension systems, the administrative costs of a defined contribution system in all likelihood will cost taxpayers anywhere from $275 to $610 million more

annually than the state’s current defined benefit systems.” [emphasis added] Excerpted from Debunking Illinois Pension Myths! by the Illinois Retirement Security Initiative, A

Project of the Center for Tax and Budget Accountability. A separate study by Deloitte accounting firm confirms these administrative fees.

• Northern Trust Corporation 50 South LaSalle, Chicago, IL 60603 (312-630-6000) William A. Osborn, Retired Chairman and Chief Executive Officer Compensation: Source Forbes Director Abbot Laboratories 2008, $188,218 Director 2009 Caterpillar $213,529 Director 2010 General Dynamics $244,318 Presiding Director Tribune Company Frederick H. Waddell, President and CEO (Not a member of the Civic Committee personally) Compensation: $12,760,081 Source AFL-CIO Executive Paywatch (SEC)

• Nuveen Investments, Inc. 333 West Wacker Dr., Chicago, IL 60606 John P. Amboian, Chief Executive Officer Compensation: Not shown in SEC Schedule 14A filed 11/10/2010 (First American Investment

Funds). Last annual compensation found on EDGAR Online: $5,209,000 (not including stock options) 2002 $500,000 salary + $4,709,000 bonsus. Investment teams include HydePark, NWQ, Nuveen Asset Management, Santa Barbara, Symphony, Tradewinds, and Winslow Capital.

• Allstate Corporation 2775 Sanders Road, Northbrook, IL 60062 847-402-5000 Thomas J. Wilson, Chairman, President and CEO Compensation: $2,990,000 (Five year compensation $23 million plus) Source: Forbes

• Bank of America 231 South LaSalle, Chicago, IL 60604 312-828-2345 Timothy P. Maloney, Illinois President Compensation: $1,940,069 Source: AFL-CIO Executive Paywatch (SEC)

• Harris Financial Corp. 111 West Monroe, Chicago, IL 60603 312-461-2121 Ellen Costello, President and Chief Executive Officer Compensation: $1,965,206 (2007 compensation: $375,000 salary+ $650,000 bonus + $695,000

restricted stock + $58,000 security underlying options + $187,206 other compensation ) Source: Forbes

• Health Care Services Corporation (Blue Cross Blue Shield, Dearborn National, etc.) 300 East Randolph, Chicago, IL 60601 312-228-0746 Patricia Hemingway Hall, President and Chief Executive Officer Compensation: $8,700,000 (2010 increase of 62%) Source: Progress Illinois, 3/15/2010

• Jones Lang LaSalle, Inc. 200 East Randolph, Chicago, IL 60601 (312-782-5800) Sheila Penrose, Chairman Compensation: $323,624 (Source Bloomberg Business) Director compensation: $281,981 (FY2009: $41,000 fees + $235,967 stock awards + $5,014 other) Director compensation McDonalds 2008: $215,500 (Sources Forbes)

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• LaSale Bank Corporation Norman R. Bobins, Retired Chairman Compensation: $408,710 ($129,700 AAR Corp. Director Compensation in 2010) + ($279,010 Sims

Metal Management LTD. Director Compensation in 2010) (Forbes.com) PLUS deferred compensation as Independent Director NiCor, Inc. Compensation from NiCor of $128,060 in 2008 and $94,746 in 2007. Mr. Bobins is also Board of Trustees Chair of WTTW (Windows To The World).

• Chicago Board Options Exchange 400 South LaSalle Street, Chicago, IL 60605 William J. Brodsky, Chairman and Chief Executive Officer Compensation: NA

• Madison Dearborn Partners, LLC Three First National Plaza, Chicago, IL 60602 312-895-1000 info@mdcp.com John A. Canning, Jr., Chairman Compensation: NA

• JP Morgan Chase & Co. Chase Tower, 10 South Dearborn, Chicago, IL 60603 William M. Daley, Vice Chairman Compensation: NA Daley is also a Director U.S. Chamber of Commerce Peter R. Chase, Chairman and CEO of Chase Corp: $2,660,740

• Henry Crown and Company 222 N. La Salle, Chicago, IL 60601 312-236-6300 James Crown, President Compensation: NA Director Compensation Sara Lee Corp. $230,011 (2010); Director Compensation General Dynamics

$286,985 (2010); Director Compensation, JP Morgan Chase $260,000 (2009); Lead Director, General; Trustee, Univ. of Chicago Medical Center; Trustee Museum of Science and Industry

• CC Industries, Inc. 222 N. La Salle, Chicago, IL 60601 312-885-4000 A private equity firm controlled by Henry Crown and Company. Lester Crown, Chairman Compensation: NA

• William Blair & Co. 222 West Adams, Chicago, IL 312-236-1600 info@williamblair.com John R. Ettelson, President and Chief Executive Officer Compensation: NA

• Federal Reserve Bank of Chicago 230 South La Salle, Chicago, 60604 312-322-5322 Charles L. Evans, President and Chief Executive Officer Compensation: NA

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• Zurich North American Commercial Corporate headquarters Zurich, Switzerland Zurich Towers, 1400 American Lane, Schaumburg, IL 847-605-6000 Michael T. Foley, Chief Executive Officer Compensation: NA• Ernst and Young LLP 155 North Wacker Dr., Chicago, IL 60606 333 West Wacker Dr., Chicago, IL 60606 (Same bldg. as Nuveen Investments, Inc.) Anthony K. Anderson, Vice Chair and Midwest Managing Partner Compensation: NA

• UBS Investment Bank 1 North Wacker Drive, Chicago, IL 60606 312-525-4500 James T. Glerum, Jr., Managing Director, Co-Head Midwest Region Compensation: NA

• Pricewaterhouse Coopers LLP Corporate headquarters NY, NY 411 Hamilton Boulevard, Suite 110 One North Wacker, Chicago, IL 60606 Peoria, IL 6602 312-298-2000 309-676-8945 Jay L. Henderson, Vice Chairman Client Services Compensation: NA Trustee Rush University Medical Center; Trustee Museum of Science and Industry Trustee Chicago Symphony Orchestra

• Roundtable Healthcare Partners 272 East Deerpath Road, Suite 350, Lake Forest, IL 60045 847-739-3200 Lester B. Knight III Compensation: NA

• Washington, Pittman & McKeever, LLC (Management consulting and accounting) 819 South Wabash Avenue, Suite 600, Chicago, IL 60605 (312-786-0330) info@wpmck.com Lester H. McKeever, Jr., Managing Principal Compensation: NA

• TransUnion, LLC 555 West Adams, Chicago, IL 60661 (312-258-1717) Penny Pritzker, Chairman Compensation: NA

• GTCR Golder Rauner, LLC 300 N. LaSalle, Chicago, IL 60654 (312-382.2200) info@gtcr.com Bruce V. Rauner, Chairman Compensation: NA Chairman Chicago Convention and Tourism Bureau; Renaissance Schools board member

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• Ariel Investments, LLC 200 East Randolph, Suite 2900, Chicago, IL 60601 312-726-0140 John W. Rogers, Jr., Chairman and Chief Executive Officer Compensation: NA $217,000 Director McDonalds Corp. 2009; $238,616 Independent Director Aon 2008; $192,000 Independent Director Exelon 2008 (Source Forbes)

• KPMG LLP 303 East Wacker Drive, Chicago, IL 60601 312-665-1000 Philmer H. Rohrbaugh, Vice Chair and Office Managing Partner (Chicago) Compensation: NA

• Ryan Specialty Group 200 East Randolph St., Chicago, IL 60601 312-784-6001 Media Contact: Chelsey Krull (ckrull@ryansg.com 312-784-6043) Patrick G. Ryan, Chairman Compensation: NA Director After School Matters; Founder Aon Corp.; Former Director First National Bank of Chicago

• CME Group 335 LaSalle, Chicago, IL 312-356-9850 John F. Sandner, Retired Chairman of the Board Compensation: NA Director CME Group $335,014 (2008) Director Compensation Echo Global Logistics, Inc., $492,100 (2009)

• Financial Investments Corporation 50 East Washington St., Suite 400, Chicago, IL 60602 312-494-4513 Harrison I. Steans, Chairman of the Executive Committee Compensation: NA Formerly chairman of LaSalle National Bank; Trustee of DePaul University; Trustee Ravinia Festival

• First Chicago NBD Corp. (Acquired by Bank One Corp. 1998, a part of JP Morgan Chase) Richard L. Thomas, Retired Chairman Compensation: NA Trustee Chicago Symphony Orchestra; Director Commonwealth Edison Trustee Chicago Botanic Garden

• Judd Enterprises, Inc. 21 S. Clark, Suite 3140, Chicago, IL 60603 312-236-3836 David B. Weinberg, Chairman and Chief Executive Officer Compensation: NA

• Deloitte LLP 111 S. Wacker Dr., Chicago, IL 60606 (312-486-1000) Deborah L. Dehaas, Vice Chairman and Regional Manager Compensation: NA Trustee Northwestern Univeristy; Trustee Museum of Science and Industry; Director After School Matters, Inc.

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Technology firms with representation on the Civic Committee include:

• CDW Corporation 200 N. Milwaukee Avenue, Vernon Hills, IL John A. Edwardson, Chairman and Chief Executive Officer Compensation: $3.35 million (5 year compensation $14.43 million) Source: Forbes CDW is a leading provider of technology products and services for education, business,

government . CDW is now privately owned. Edwardson is a 1971 graduate of Purdue University, where he earned a B.S. in industrial engineering, and a 1972 graduate of the University of Chicago Booth School of Business, where he earned an M.B.A. He currently serves on the Board of Directors of FedEx Corporation and Northwestern Memorial Hospital and the Board of Trustees for The Chicago Symphony Orchestra, the Art Institute of Chicago and the Ravinia Festival. Edwardson also serves as the Chairman of the Advisory Council of the University of Chicago Booth School of Business.

• U.S. Cellular 8410 W. Bryn Mawr, Suite 700, Chicago, IL 60631 (773-399-8900) Mary N. Dillon, President and CEO Compensation: $5,956,854 Source: Chicago Tribune, May 22, 2011 Director Target Corp. $245,024 (2010) Source: Forbes

• Molex Inc. 2222 Wellington Court, Lisle, IL 60532 (630-969-4550) (amerinfo@molex.com) Fred A. Krehbiel, Co-Chairman Compensation: $932,135 (2006) Source: Forbes Martin P. Slark, Vice-Chairman and CEO Molex: $9,076,402 (Not Civic Committee member) Source: Chicago Tribune, May 22,2011

• AT&T Illinois Corporate Headquarters: 208 S. Akard St., Dallas, TX 75202 Paul V. LaSchiazza, President Compensation: NA Director After School Matters; Director Chicago Urban League; Director United Way Metro. Chicago Stephenson, CEO, 2010 “target compensation” $19,350,000. Source: AT&T Annual Report Note: Ernst & Young are AT&T auditors.

• Motorola Solutions 1303 East Algonquin Road, Schaumburg, IL 60196 (847-576-5372) Greg Q. Brown, Chief Executive Officer Compensation: $13,738,910 Source: Chicago Tribune May 22, 2011 Director River Soft, Inc.; President Ameritech New Media Note: Motorola Mobility, a different division than Motorola Solutions, received $100 million in

incentives from Illinois taxpayers as a way to keep the smartphone company’s corporate headquarters in Libertyville. Sanjay K. Jha, CEO, received $12,312,126 compensation in 2010.

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Higher education institutions with representation on the Civic Committee include:

• University of Illinois 364 Henry Administration Bldg., Urbana, IL 61801 (217-333-3070) (uipres@uillinois.edu) mjhogan@illinois.edu Michael J. Hogan, President Compensation: Approximately $620,000 annually Formerly president of the University of Connecticut, executive vice president and provost at the

University of Iowa, and academic and administrative positions at Ohio State University. Note: Tuition at U of I (May 2010) went up 9.5% with incoming President Hogan’s compensation,

$170,000 more than previous president. (www.huffingtonpost.com/2010/05/21/u-of-illinois-trustees-ok_n_584376.html)

• University of Chicago 5801 South Ellis Ave., Suite 501, Chicago, IL 60637 (773-702-8001) (rzimmer@uchicago.edu) Robert J. Zimmer, President Compensation: $1,162,213 (2008-2009 compensation represents a 25% increase)

• Northwestern University 2-130 Rebecca Crown Center, 633 Clark Street, Evanston, IL 60208 847-491-7456 (nu-president@northwestern.edu) Morton O. Schapiro, President Compensation: $1,742,560 (2008) Director of Compensation Marsh & McLennan Co., Inc. 2009: $192,500. Source: Forbes As a member of Marsh’s compensation committee, Schapiro set the CEO’s compensation at over

$14 million, and paid the top five executives over $38 million.

Food service companies with representatives on the Civic Committee include:

• McDonald’s Corp. 2111 McDonald’s Drive, Oak Brook, IL 60523 (800-244-6227) James A. Skinner, Vice Chairman and Chief Executive Officer Compensation: $9,732,618 Source: Chicago Tribune May 22, 2011 Director Compensation Fossil, Inc. (2009) $71,558 Andrew J. McKenna, Chairman

• Corn Products 5 Westbrook Corporate Center, Westchester, Il 60154 (708-551-2600) Ilene S. Gordon, Chairman, President and CEO Compensation: $5,842,602 Source: Chicago Tribune, May 22, 2011 Director Compensation United Stationers $27,088 (2009), $156,615 (2008); Director Compensation Arthur J. Gallagher & Co., $156,638 (2008) Source: Forbes

• Jewel Companies, Inc. 150 Pierce, Itasca, IL 60143 (Jewel-Osco) (630-948-6000) Donald S. Perkins, Retired Chairman Compensation: NA Chairman of the Board Nanophase Technologies Corp.in Romeoville, IL; Director Compensation Nanophase $26,714 (2009) Director Compensation LaSalle Hotel Properities $115,535 (2010) Formerly served on boards or trustee of AT&T, Aon, Lucent, Brookings Institution, Northwestern

university, Cummings Engine, Putnam Funds, Ford Foundation, Firestone, Inland Steel.

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• Schwarz Supply Source 8338 Austin Avenue, Morton Grove, IL (800-323-4903) (info@schwarz.com) Andrew J. McKenna, Chairman (also McDonald’s Corp. Chairman) Compensation: NA Director of Compensation McDonald’s $990,151 (2009) Director of Compensation Skyline Corp. $44,000 (2010) Director of Compensation Aon Corp., $291,759 (2008)

• Reyes Holdings LLC 6250 North River Road, Suite 9000, Rosemont, IL 6008 (847-227-6500) J. Christopher Reyes, Chairman Compensation: NA but listed as “The Forbes 400 Richest Americans 2009” Trustee Museum of Science and Industry; Director After School Matters, Inc;Director Merrick

Ventures; Vice Chairman of Corp. board Boys and Girls Clubs of Chicago Former Director Tribune Company; Former Director Allstate; Compensation Committee General

Dynamics• Kraft Foods Three Lakes Drive, Northfield, IL 60093 (847-646-2000) Irene B. Rosenfeld, Chairman and CEO Compensation: $19, 287,983 Source: Chicago Tribune, May 22, 2011

Attorneys, consulting firms, health care companies, and retail companies are also represented on the Civic Committee. Many of these firms are inter-related in many ways. They may supply each other with various goods and services. They may have CEO’s sitting on the compensation boards of other companies within the group. Clearly there is a high degree of mutual interest and economic dependency within the Civic Committee. One might think of it as the “good old boys club” with the exception of one or two females included.

Without question the financial community stands to profit dramatically with the changes in the pension system that they are proposing. Therefore, the attorneys, consulting groups, and related companies also stand to benefit.

Do you suppose any of these business interests might have contributed to Illinois’ elected officials? You might want to look at the following web site to see where your local legislator’s campaign funds came from.

http://www.followthemoney.org/database/StateGlance/candidate.phtml?c=98645

For example, this site shows that:

Representative Tom Cross received $759,699 from the finance, insurance, and real estate industries in 2010. He received an additional $672,752 from general business contributions and another $165,943 from lawyers and lobbyists. And $136,550 from labor. Total campaign contributions in 2010 = $3,743,578.

Representative Michel Madigan received $523,850 from the finance, insurance, and real estate industries in 2010. He received an additional $424,336 from general business contributions, and another $367,218 from lawyers and lobbyists. And $1,552,011 from labor. Total campaign contributions in 2010 = $4,894,078

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