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SEIFFE:  The Porcine Pension

Monday, May 26, 2008 

By Ralf Seiffe

According to a Sun Times News Group story, Carol Ronen is a retired state senator due an annual pension of $64,005 each year which represents 85% of her final legislative salary.  That’s more than  $5,300 per month for life which, in itself, is an excellent deal as she only served 14 years in the General Assembly.  Recently, she worked for the Governor for two months and raised her pension to $8,500 per month, a spectacular 59% increase.  I’m no lawyer but the news of former Democrat state senator’s pension grab and the circumstances surrounding it makes  me wonder if this transaction might fall under the honest services'  duty of the mail frauds statute. 

Senator Ronen is an evidently talented political machinist.  Here’s just one example: In 2007, Senator Ronen engineered a political maneuver of the sort that preserves the machine but which gives Chicago politicians a bad name the world over.  She delayed announcing she would resign until no reformer had the time to mount a campaign for her open seat.  Ronen’s neat trick ensured that the Democrat Party, not the voters, would choose her successor. 

Soon thereafter, on March 1, 2008, Governor Blagojevich hired Ronen to work in his office.  Two months later, on April 30, 2008, the former senator quit.  At the annual salary the newspaper reported,  Ronen earned approximately $20,000 for 39 actual work days.   But what those few days of work really did for the Senator was to make her eligible for a pension that is $37,995 higher than her legislative salary would qualify.  And, because the General Assembly doesn’t want any of its members to slide into poverty, there’s an automatic 3% escalator we taxpayers will have to pay as long as former Senator Ronen lives. 

Assuming the Senator actually worked all of those 312 hours, she made a stunning deal that can only be imagined by a regular taxpayer.  The annual increase of $37,995 increases her yearly pension to $102,000.  Assuming she lives to the average age a 63-year old woman can expect, Senator Ronen will collect for another 25 years or so.  A few punches on a calculator shows just the increase in the pension over that period obligates the taxpayers to pay Ronen nearly $1,500,000 more because she served the governor faithfully for all of 39 days.  Calculated as an hourly rate, the former senator earned about $4,800 per hour.   

Even if one recognizes the time value of money, this is still an incredible windfall for Ronen.  A search of annuities on the Internet shows that the best rate for a guaranteed contract is in the 4.75% range.  But this is for level payments not for payments that grow by 3% per year like a General Assembly pension does.  To fund just the increase in Senator Ronen’s pension an honest mathematician would subtract the required growth from the yield and find that to create a stream of income that  produces $37,995 each year, one would have to invest more than $2 million.  A trough-to-trough comparison would require a quote from an insurance broker but even if an annuity costs a huge 40% less, the windfall for the Senator is still $1.2 million. 

I’m certain that the Senator’s windfall pension meets every test of legal eligibility but it stinks like a pig pen.  That’s because Senator Ronen left the Governor’s service to become a “volunteer” for the Obama campaign.  For eight weeks’ work, this talented political operative has just received a increase that would represent a lifetime’s work for the average taxpayer.  Now, she turns up working in the Obama campaign for no pay because, after all, she can afford it on that extra $37,995 every year. 

That’s why I wonder if this porcine behavior might not fall under the purview of 18 U.S.C. §1346, which makes it a crime to use "scheme or artifice to deprive another of the intangible right of honest services."  This statute makes it possible indict public officials for unethical and criminal activities that may not be recognized as crimes in the ways we normally perceive them.  In this case, the scheme relates to the State’s accounting practices.  Because they use a cash basis system, they don’t report the full accrual of the deal Ronen got.  They merely report this year’s expenses, effectively burying this huge payment from the public’s scrutiny.  In this case, they will report only the two months’ increase left in this fiscal year--just $6,333 for the benefit of the former Senator--not the million dollars obligation a private business would have to record on their books. 

Here, the taxpayers of Illinois are not receiving the honest services--or any services at all--from the former Senator that would justify her million dollar windfall.  Instead, Senator Obama is not paying for the services of a talented operative from Chicago’s Democrat machine.  The Chicago machine--and the “Combine” too---have a huge interest in an Obama victory because that would result in a new U.S. Attorney in Chicago.  Do you detect a scheme, a quid pro quo and a victim or is it just me? 

Ralf Seiffe advises business start-ups and product launches from Chicago, Illinois and is a political analyst and columnist for the Illinois Leader and Illinois Review.

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