Steve's Blog

The previous post dealt with a proposal to address the issue of our debt, laying out a “front-loaded” increase in payments to our pension debt so as to avoid ever-increasing payments due in future years. That post was written under the assumption that there’s no way we’ll ever be able to change the level of benefits already accrued and payable.

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This post deals with the major sticking point that prevents us from having a serious discussion about pension reform, that is, the guarantee of benefits contained in Article XIII, Section 5 of the Illinois Constitution:

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“Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”

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This clause isn’t about debt; it’s about benefits and what we’re going to do about them going forward. It’s the clause that every state worker points to when somebody tries to bring up the suggestion that maybe they ought to pitch in and do something about our fiscal mess.

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They’ll say “but I paid my fair share, now you want me to actually give something back?” Actually, they haven’t paid their “fair share”, they’ve paid what their unions negotiated for them, and it’s utterly insufficient to pay them what they’ll receive upon retirement.

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The Supreme Court has consistently ruled that the pension guarantee clause means just what it says, so all of those sweeteners added onto public pensions (i.e.: guaranteed 3% COLA) can’t be taken away once they’re given. So we’re going to have to amend the Constitution if we want to get around the pension guarantee clause.

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Good luck with that. The unions that wield the whip hand here in Illinois would never let the Legislature come close to putting that on the ballot. Arizona recently amended its Constitution to limit pension benefits, but the circumstances that allowed that to happen are vastly different than they are here, so don’t hold your breath. You may ask about calling a convention to rewrite the Illinois Constitution, which was last done in 1970. Since 2008 there have been over 400 resolutions to do just that, but of course they went nowhere.

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But before we move on to the next possible means of fixing this mess, let’s have a moment of honesty, shall we?

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To the extent the Legislature failed to pay its required contribution into the funds over the years, it’s clear that it bears much, if not the lion’s share of the blame. It quietly acquiesced to unrealistic investment return estimates so as to keep the amount it did pay into the plans to an absolute minimum. The Blagojevich pension holiday of 2004 and 2005 didn’t help, and neither did the crash of 2008.

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However, there are other players in our little drama who’ve not been exactly blameless, among them:

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• School Districts: Since 2005, if a school district gave a pay increase in excess of 6% (since reduced to 3%) to an employee within the last several years before retirement, the district was forced to pay a “penalty” to the Teachers’ Retirement System (TRS) to offset the additional pension costs that increase would create. The penalty wasn’t enough to fully deter them from giving out massive pay raises to administrators in the final years leading up to retirement. Two things are notable about this “reform”:
  • Once the employee retired, the entire payroll cost for that employee goes off the district’s books, so why should the district care? The State’s now on the hook for the entire pension cost, calculated on the higher final average earnings.
  • It also created higher property tax bills to pay the additional salary and penalty plus the additional pension cost to the State.

• Union Employees: Every time the subject of pensions is brought up, the first people we hear from are the rank and file, who point out that they’ve paid in every cent they were supposed to, that none of this is their fault. Wrong. Public union employees bear the responsibility for the leadership they elect. The membership sat idly by when those same leaders went to Springfield and told legislators that it was OK to not fund the pension plan if the money would go into the education budget. They knew what was going on and said nothing, figuring that the State would have to come up with the money somewhere. To now say that they’re entitled to collect from the taxpayers that which their own leadership bargained away is hypocrisy. To the extent members of the other unions sat on their hands while their representatives bargained away their pensions, they don’t have any cause to complain now, either.

• An Apathetic Public: Pensions are negotiated between the unions and the people of this state through their representatives, both state and local. Like it or not, the people of Illinois are a party to this transaction, and if they don’t care enough to get rid of those who are supposed to be representing them at that table, they’ve got no more right to complain than the union members.

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So it’s clear that nobody’s coming to the table with clean hands. But try using that as an appeal to reason.