Why Do Newspapers Fear This Woman?
Forget crime, drugs, corruption, and those other themes that newspapers thunder against in their pages. The crusade closest to the owners' hearts is the one against Sally Jackson, a state official who could cost Illinois papers a bundle of money.
She is feared and loathed. "I had this one meeting with her," says the president of the Champaign News-Gazette. "It was like a bad case of booze. I swore off."
Sally Jackson directs the Illinois Department of Employment Security. After DES ordered the News-Gazette to pay up nearly $70,000 in back taxes, president John Hirschfeld tried to reason with her. "She was absolutely intractable," he tells us.
And forget any nice things you may have read in the papers about Governor Thompson. They are as angry with Sally Jackson's boss as they are with her.
The Department of Employment Security maintains the trust fund out of which unemployment compensation is paid. The fund is nourished by unemployment taxes paid by employers.
An employer must pay this tax for each employee. But only for a genuine employee, mind you; not for some independent contractor who's hired to do a job.
But if some dark day that contractor knocks on the state's door asking for unemployment comp, who decides if he deserves it? Jackson's department. And if DES rules for the contractor, next thing you know an auditor could be knocking on that employer's door. Asking to see the books. Wondering how many other spurious "independent contractors" the employer did not ante up for. Before DES is done, that employer could find itself ordered to pay unemployment taxes for dozens of "independent contractors." Ordered to pay back taxes for as much as the last four years. Plus interest. Plus penalties.
By the early 80s, the trust fund had plunged more than $2 billion into the red. Today its surplus exceeds a billion dollars. Sally Jackson insists she did no more than professionalize her department by hiring more auditors and training them better. She flatly denies what her critics swear is true: that at the behest of the governor she changed the rules to raise a lot more money.
"I'm accused of that, but I've never seen any evidence of that," she told us. "I do believe I have 50 years of history to back me up. And cases that have been appealed on their merits have been decided consistently according to current practices of the department."
Yet there's such bitterness, we told her. "It is extraordinary," Jackson said. "It is absolutely extraordinary."
As hostile to DES as the Champaign News-Gazette--and far more powerful--is the Chicago Tribune. In a December '87 letter to the executive director of the Illinois Press Association (IPA), Tribune attorney Joseph Thornton accused Jackson's department of "misconstruing" the law and "unfairly, and without warning or authority" changing the rules "by which newspapers and their independent contractors have conducted their business for fifty years." This, said Thornton, "has wreaked havoc and is bad law and bad government."
Seventeen months ago, the governor's Employment Security Advisory Board, which has no operating authority over DES, heard various witnesses defend or pillory the department. Thornton spoke on behalf of the IPA, which represents 90 percent of the state's 700-some newspapers.
"I feel sorry for the board," declared Thornton, "because it's unwittingly standing here as cannon fodder for a recalcitrant director and a do-nothing governor."
Thornton said Jackson had imposed by fiat "one of the most massive tax increases the state's ever seen . . . retroactively, after the fact, without any due process, without any notice whatsoever. . . . The idea of jumping out of the bushes with hell-bent investigations and essentially no-knock interrogations . . . is the surest way to make people disrespectful . . . of doing business in the state of Illinois."
He went on, "The truckers have talked about how they can pick up and move to other states. I think other businesses will do the same. Unfortunately," he said, referring to newpapers, "we're stuck here."
The Tribune has not been audited; few papers have. But they all smell danger. Look what happened to the News-Gazette back in '86. Jackson's auditor took a long look at the paper's free-lance contributors, at its bundle haulers, at its motor-route drivers and adult carriers--independents all, the newspaper industry has long presumed.
A few months later the News-Gazette was assessed $68,635. "We didn't get any satisfaction at all," says Hirschfeld.
The paper dug in. After the futile meeting with Jackson, Hirschfeld sent a "scathing letter" to Jackson and Thompson. He appealed the assessment, "and it's sort of been in limbo since." Hirschfeld thinks that's only because the state isn't desperate for money at the moment. "If the governor felt he needed $50,000 from papers like my own, he'd be in there pushing."
The News-Gazette is a modest paper with a circulation of 50,000. "I am happy to see the Tribune and all the other papers involved in this," said Hirschfeld. "If [the appeal] does go to litigation it's going to take an ungodly bankroll to fund it. The News-Gazette can't afford that, and I think the state of Illinois damn well knows it."
We asked Hirschfeld, who happens to be a former legislator, what position the governor takes. "The governor is pretty good at being evasive," Hirschfeld told us. "He says, 'Sally runs the department. I don't tell her what to do.'"
The IPA and its business allies want new legislation that makes "independent contractor" mean what they say it used to. Jackson herself says the only way to settle the issue is to change the law. But the law may be unchangeable until 1992.
Illinois' Unemployment Insurance Act is amended by a process that closely resembles union contract negotiations. Business, led by the Illinois State Chamber of Commerce, and labor, led by the Illinois State Federation of Labor, sit down with DES officials and legislative leaders in the governor's mansion and negotiate an unemployment compensation program. Then this "agreed bill" moves to the General Assembly, which automatically passes it.
The act was last renegotiated in 1987 for another five years. Soon after, the IPA became inflamed by the independent-contractor issue and began clamoring for changes. But a deal's a deal. So three bills introduced in 1989 didn't fly and three new bills probably won't fly either--labor won't discuss them. Unless both sides agree to reopen an agreed bill, the General Assembly does nothing.
Also doing nothing is the Illinois State Chamber of Commerce--which having negotiated the '87 bill now acts like it's sacred. The Tribune is so furious with the Chamber for not getting behind the cause that last month it quit the organization. "I find it a little puzzling that there has to be an agreement to even talk about issues," Joseph Thornton told us. "And that's part of what the Chamber seems to be saying."
David Bennett said, "The people who control the agreed-bill process won't let it be discussed. It's like OPEC. It's a closely guarded fiefdom, and the Illinois Chamber is top dog on the totem pole."
John Hirschfeld says that when he asked Mike Madigan to help amend the law, the house speaker told him something interesting: "He said he could not get the agreement of the unions. He specifically said the unions objected because of the problems with the Tribune."
Problems? You may recall the paper's brush-off of its typographers, mailers, and pressmen when they hit the bricks in 1985. The typographers signed a consent decree last May. The mailers and pressmen have never gone back to work.
We asked Richard Walsh about this. Walsh is president of the Illinois State Federation of Labor. "This is not just a Tribune issue or a newspaper issue," he said. "It is an attempt to change the law of the state. Do we love the Tribune? Of course we don't. Is it a factor? I'm not going to say it's not a factor. But this issue is much larger than the Tribune."
What the Tribune Fears
In December of '87, Joseph Thornton accused DES of "changing the rules by which newspapers and their independent contractors have conducted their business for fifty years." But next to the changes the Tribune was about to make, anything DES might have done was laughably paltry.
In early 1988, the Tribune seized control of its circulation system by ousting the independent contractors who'd been distributing the paper for decades. Their routes were given to "agents" to whom the Tribune dictated prices and other terms.
The Tribune knew the risk in this, and now DES has made that risk all too palpable. This surely helps explain the paper's eagerness to change the law. (One of the bills that died last year would have redefined "employment" to exclude "service performed by an individual in the sale of newspapers or magazines under an arrangement under which the newspapers or magazines are to be sold by him at a fixed price. . .")
If the Champaign News-Gazette, circulation 50,000, could be found nearly $70,000 in arrears, then what, we asked John Hirschfeld, might the Tribune's liability be? He worked the numbers in his head. "They could lose a million and a half, not counting penalties and interest," he told us.
Back in '88, the Tribune offered such lowball prices for the routes it was seizing that 45 distributors took the paper into arbitration. Harvey Barnett is an attorney who's represented distributors in several of these cases. He told us recently that arbitrators consistently awarded his clients three to four times the Tribune offer (tops was $1,883,000 after the Tribune offered $268,000), and finally the Tribune agreed to "a global settlement" of 12 remaining cases.
"Justice prevailed," said Barnett.
Unemployment insurance is, as Dave Bennett put it, "an extremely complicated issue." It would be unintellectual to favor one side simply because the Tribune Company's on the other.
Art accompanying story in printed newspaper (not available in this archive): photo/John Sundlof.