30 Comments - Ghost of John Brown - Wednesday, Apr 14, 10 @ 12:02 pm: I am very glad that at least the topic seems to finally be hitting lawmakers between the eyes (figuratively). Pension reform has largely been ignored (except for borrowing from it) for decades. We need adults in the room during the discussion. I agree with the Civic Committee that reducing benefits needs to be examined and examined in a thoughtful way. Eventually, the courts will ultimately decide what can and can’t happen. A huge tax increase will be unpalatable for the majority of the public. Aside from new reforms (which may lead to lawsuits and a protracted court battle in which only the lawyers win) and big tax increases (which the public won’t support), perhaps a negotiated settlement in the middle can be achieved. - wordslinger - Wednesday, Apr 14, 10 @ 12:03 pm: I doubt a study that says the funds will be bust in 10 years is going to light a fire under the GA. If anything, it will be a rationalization to do nothing. - cassandra - Wednesday, Apr 14, 10 @ 12:14 pm: I think we would have to hear from an expert who disagrees with the conclusions of the Zorn article to make an even remotely informed decision. But why does freezing current benefits or raising income taxes have to be the choice. The economy is going to improve eventually and so will the value of pension fund assets. If we are raising taxes to fix a problem that could disappear in a few years, that’s hardly fair to taxpayers. What will they do with any extra monies then? I think we can guess, based on Illinois political history. I don’t believe the constitution prohibits requiring employees to pay more for their defined benefit plans. Why not take a combo of that route and waiting for the market to improve. And after all, unionized state of Illinois employees, in the middle of a massive recession, have gotten steady pay increases, protection from layoffs until mid-2011, and 100 percent protection from mandatory furloughs. They can afford to take a seat at the sacrifice table. One thing seems clear…in a US economy where only a small fraction of workers have defined benefit pensions backed by some government law, there will be scant sympathy for tax increases to fund these plans, especially given Illinois’ bipartisan history of plundering them to enrich politicians and their cronies and supporters. And I think that folks are beginning to catch on. Monies can be shifted around. Just because our Pat says the money will go to fund education–and he’s not necessarily lying–tax revenues from a tax increase targeted at education can be used to free up other monies previously designated for same. A tax increase will be used to pay for a lot of things, including state pensions. Remember the Lottery for education? In the hands of pols and their pals, government money–our money–is well and truly fungible. And increasingly, in an information age internet world, folks are getting more curious about what they are really paying for. - Brennan - Wednesday, Apr 14, 10 @ 12:14 pm: If constitutional issues didn’t stand in the way towards passing health care reform in DC, why would they stand in the way in Springfield on pension reform? Heck, there is always bankruptcy. - jonbtuba - Wednesday, Apr 14, 10 @ 12:14 pm: I read Eric Zorn’s article and…WOW. Among the most comprehensive reviews of state policy I’ve ever read. Few things scream “must-read” like that does. I wasn’t even aware until now that the courts have already struck down multiple attempts to revise current pensions. Many thanks to CapFax for cluing me in on this. The best line: The Governor and the General Assembly have been careful to comply with the Illinois Constitution’s Pension Protection Clause, as well they should. The alternative would be a short-lived pension reform that is invalidated by court order after protracted litigation, which would be a disservice to the taxpayers. - wizard - Wednesday, Apr 14, 10 @ 12:14 pm: as noted by earlier esteemed bloggers, the ga has ignored this for years. the new legislation is reputed to save 100 million in the “coming decades”. pq wants to use 300 million of that now thus borrowing from it before the savings are even realized. unbelievable. - girllawyer - Wednesday, Apr 14, 10 @ 12:18 pm: While I would agree that with most issues a warning that disaster is just ten years away would do little to motivate action by the Illinois legislature; I’m thinking that a lot of these guys are looking forward to collecting that pension ten years from now (and for many years after). So maybe that will motivate some action. I’m pretty sure they couldn’t get away with saving just legislators’ pensions. Not to say they wouldn’t do just that if they could! - Secret Square - Wednesday, Apr 14, 10 @ 12:22 pm: If the pension funds do go broke in 10 years, or 20 years, or whenever, then what good are the constitutional promises that benefits can’t be diminished? If the money ain’t there, it ain’t there. I suppose the entire state government could be shut down and current employees laid off to make current pension payments if it came to that — but would even the most rabid public employee unions want that to happen? That would be a cure worse than the disease. - John Bambenek - Wednesday, Apr 14, 10 @ 12:34 pm: If we are talking strictly legal arguments, pension benefits legally CAN be modified. To be more specific, you can’t touch benefits already earned by currently employees, you CAN modify benefits not yet earned by current employees. The easiest and cleanest way to do this is terminate the employee then re-hire them a day later under a new benefit regime. That’s about the only LEGAL way to do it. Now, the Contact Clause of the Federal Constitution and likely, the pension guarantee COULD be trimmed even for benefits already earned if you could show a court there is an overwhelming public interest. If the state was “bankrupt” you might be able to make that case. Likely you’d run into trouble saying there is an overwhelming public interest in trimming pension benefits caused by the state making promises it never funded. Now, is it politically possible to fire all state employees and rehire them a day later with a leaner retirement benefit package? I think we all know how likely that is. As far as the Constitutional Guarantee, likely the courts would order payment from the state to pay for benefits. Ultimately the state is possible and it would likely just order the GRF to make the pension payments. There is a theory that the courts could order a tax increase, but I doubt that’s possible or likely. - Anonymouse - Wednesday, Apr 14, 10 @ 12:44 pm: John Bambenek – Does this passage point out the impossibility of your solition: — The Sidley Austin memorandum also overlooks the fact that civil service laws and collective bargaining agreements may prohibit the State from terminating certain State employees except for cause. The continued employment of such individuals would not constitute valid consideration for a unilateral diminishment of those individuals’ pension benefits, since the State is already obligated to continue their employment absent cause for termination. —- Nevermind the collective bargaining contracts — isn’t termining and then rehiring for simply saving money (no fault of the employee, BTW) a violation of civil service contracts? (Not to mention pretty morally repugnant — but I digress …) - Anonymouse - Wednesday, Apr 14, 10 @ 12:45 pm: “solution” I mean — not “solition” Yikes! - Anonymouse - Wednesday, Apr 14, 10 @ 12:48 pm: BTW — what? — you’re going to force the employee to quit by threatening not to rehire? What if the employee doesn’t sign? Then what? You’re just going terminate the employee? Fuggedaboutit. That sounds like a threat by the state. Can states (or any employer) threaten employees with their jobs for no reason? - dupage dan - Wednesday, Apr 14, 10 @ 12:49 pm: Brennan, Perhaps you don’t read this blog, although I have seen your name much recently. For the umpteenth time - the State of Illinois CAN NOT declare bankrupcy. - Small Town Liberal - Wednesday, Apr 14, 10 @ 12:58 pm: Thanks John B for impressing everyone with your expert knowledge of the potential loopholes in the Illinois Constitution that you’re so deeply committed to upholding. - VanillaMan - Wednesday, Apr 14, 10 @ 1:01 pm: The easiest and cleanest way to do this is terminate the employee then re-hire them a day later under a new benefit regime. That isn’t realistic, because now you are tampering with federal laws as recognized under the US Supreme Court. We’ve had one hundred years of civil service reform across the US intended to prevent what you are calling the “easiest” way. You cannot merely fire civil servants. As an American you have constitutional rights to work within this government. Try for a moment to stop thinking about this situation as a union one, or a governmental one, or a political one, and recognize it as a contractual business one - because that is what this is. When two parties enter into a contract, contractural laws and precedents have effect. When a unionized civil servant is included into the employment contract made with the state, they are held to that contract, as is the state. There are contractural agreements regarding pay, benefits, the right to strike, and their wage levels. If the contract favors the government, the government wins. This happens when the economy booms and private employees enjoy salaries and benefits within their industries, unavailable to civil servants bound by contract to lower wages and benefits. But when the economy sours, as it has been souring in Illinois since 1990, the civil workers benefit, because even though the economy sours for many private employees, the civil workers are protected, thanks to their contract. So, we are in a downturn. The last union contract holds. The next union contract negociations will open in the future. At that time, negociations to reduce civil servant salaries and benefits may be discussed. Contracts previously agreed upon hold sway. This is just basic contract law. The last AFSCME contract did not see the same level of salary increases as earlier contracts, reflecting market realities. The next AFSCME contract will most like reflect similarly. The failure of Illinois government to meet it’s fiscal responsibilities regarding their contractural agreements with AFSCME, doesn’t negate contractural laws. You don’t merely forget not paying off contractural obligations because you spent every dime unwisely. The State of Illinois even passed laws under the Edgar Administration to address what everyone foresaw as fiscal failure by Illinois government to meet it’s contractural responsibilities. The fact that for the past decade, instead of meeting this contractural duty, Illinois has spent the monies, (during good economic times, at that!), is a case of governmental mismanagement and irresponsibilities, not justification for screwing contract laws. - Secret Square - Wednesday, Apr 14, 10 @ 1:03 pm: “Can states (or any employer) threaten employees with their jobs for no reason?” Well, isn’t “the state/company can’t afford to keep you” reason enough? - Truth Seeker - Wednesday, Apr 14, 10 @ 1:12 pm: Could you require future pensioners to make up some of the short-fall with larger pension directed payroll deductions? - Anonymouse - Wednesday, Apr 14, 10 @ 1:15 pm: — Well, isn’t “the state/company can’t afford to keep you” reason enough? — That’s a layoff, I assume. But if several thousand layoffs ran in to difficulty this year — imagine the impossibility of 50,000+ layoffs (which seems to echo back to civil service rules for most employees. The state can afford to keep the employees — just not pay those employees pensions. That seems a bit weird to me — but I’m no lawyer.) It’s a bizarre argument — made even more bizarre by the assertion that it’s the only LEGAL way to go about pension reform. How much money would state spend in legal fees? Millions, no? Surely, that millions could be better spent elsewhere like, say, making sure teachers aren’t let go? *shrug* - VanillaMan - Wednesday, Apr 14, 10 @ 1:23 pm: What I don’t get is how many critics claim they want government to run like a business, then say in the same breath that we should just ignor contract laws. You can’t have both. - Obamas' Puppy - Wednesday, Apr 14, 10 @ 1:27 pm: Isn’t it clear by now that unless the business community gets a 401(k) style pension plan so their simplistic ideological minds can say that now public employees get the same raw deal as Wal-Mart employees they will not be satisfied. The state should start paying Social Security and realize once and for all that they are currently paying less than that for current employees. This riduculous idea of firing everyone and hiring them back as being “LEGAL” is yet another example of what that end of the political spectrum thinks of working families. Consider the source of that comment before taking it seriously. I guess if you are a teacher or public employee you are not worthy of protections that should be extended to all Americans. Eric Zorns article today should put any serious debate about this issue to rest. When Eden writes another self serving legal opinion and Trib editorial they can spend all the money in the world trying to tell people how they have it all figured out. See you in court and good luck with that. - John Bambenek - Wednesday, Apr 14, 10 @ 1:34 pm: Anonymouse - I wasn’t arguing we SHOULD do that, but contracts are usually for a defined period. You could play hardball and say you won’t renew the contract without pension benefit revisions. Legally it’s possible. Politically and practically, it isn’t a small minefield… Small Town Liberal - Interestingly enough, since I’ve never taken an oath to defend the state constitution, I’m not precisely bond to do so. And I’m not exactly an elected official either so it isn’t like I have some kind of power to violate it either. More importantly, I believe the state constitution was written with the underriding philosophy to protect government from the people. Again and again, the political class’ obligations under the constitution are “voluntary”, while everyday citizens are bound. In practice, I call the state constitution the Mala Carta. - Brennan - Wednesday, Apr 14, 10 @ 1:39 pm: =Can states (or any employer) threaten employees with their jobs for no reason?= Is “we’re out of money” a reason? I wouldn’t want to see a judge that rules the State must raise taxes to solve this. - Small Town Liberal - Wednesday, Apr 14, 10 @ 3:22 pm: - More importantly, I believe the state constitution was written with the underriding philosophy to protect government from the people. - Awful funny that just yesterday you were declaring war on Kwame Rauol for his unconstitutional proposal. Is it just when its convenient to your causes that you want the constitution upheld, loopholes or no loopholes? - lincolnlover - Wednesday, Apr 14, 10 @ 3:36 pm: Has anyone done a study to see how much taxes would need to be raised to support a 401K - matching funds - instead of a direct benefit plan? And does anyone really believe that the state would put its “matching” money in when they haven’t put their share in for the past 2 decades? - steve schnorf - Wednesday, Apr 14, 10 @ 8:20 pm: I’m very worried about this, but I’m also very worried about Illinois Tool Works. m I’ve done exhaustive research and the results are that I am absolutely convinced that in less than 12 months the checks they write are going to start bouncing if they stop making deposits into their checking accounts. I’ve also just described the problem with the pensions. Not the benefits, not the normal costs of the benefits (not the bills that Illinois Tool Works pays out of it’s checking accounts), you just have to make the God____d deposits!! I would think business wizards would understand that part. - foster brooks - Wednesday, Apr 14, 10 @ 9:42 pm: well put Obamas puppy, it’s the race to the bottom, i dont have mine so you cant have yours. - Pot calling kettle - Wednesday, Apr 14, 10 @ 11:05 pm: John B., I believe your firing and rehiring plan is wrong on two accounts. The collective bargaining agreements are not necessarily the same as employment contracts. Employees are hired by the state (or by a school district) and are then covered under the collective bargaining agreement which describes some working conditions and wages and benefits. The working conditions described may or may not include conditions for hiring and firing, and the lack of an agreement does not necessarily result in termination of the employees. Teachers, for example, are covered under the tenure law and, should they choose to continue to come to work without a collective bargaining agreement, would remain employed. Lack of a contract would not equal lack of employment. In Illinois, you are covered by the pension system as it was when you were hired. Firing and rehiring would bring people right back into their original system. This is, I believe, derived from the constitutional requirements described above. - truthteller - Thursday, Apr 15, 10 @ 5:45 am: Perhaps James Farrell who chairs the State Finance Task Force of the Commercial Club will tell us how much a fair pension benefit is. His is $1.4 million anually supplemented by part-time gigs on corporate boards which yielded him over $600 grand in 2008. And perhaps Madigan, Quinn, Cullerton, Radogno, Brady and all the other folks who think cutting pensions is wise, tho theirs can’t be cut, will voluntarily return to the state treasury the difference between what they willl collect and what the new benefit will yield. But don’t hold your breath waiting. - PalosParkBob - Thursday, Apr 15, 10 @ 9:48 am: Interesting read by the appellate court judge. It is also interesting to note that while “benefits may not be diminished or impaired”, there seems to be no prohibition from increasing contributions from plan participants or for limiting “early” retirements, increasing the costs for the early retirements to fully fund benefits, limiting (or prohibiting) “end of career sweeteners” that boost pension costs by about 20%, or requiring full reimbursement for large pension recipients ($50K plus) for health care costs by retirees. As far as “fairness” in contributions from public plan participants, how’s this for an idea for fair contribution; costs should be benchmarked to Social Security retirement contributions and benefits. In other words, if paying 7.5% to SS yields a $1,700 per month benefit at age 62, the 9.3% contributions by public employees should yield about $2,100 per month at the same retirement age. If by current benefit calculation a public employee gets a $4,200 per month benefit, they should be paying about double the current rate of contribution. Public employees should be able to choose a contribution amount that they can afford, and if there was a “level playing field” between social security and public pension plan recipients considering Return on Investment, the cost to public participants would be staggering. Public employees should be able to VOLUNTARILY reduce pension benefits to accommodate amounts for which they’re willing to contribute. They should also be allowed to contribute to 401Ks as an alternative to an equivalent social security retirement contribution plan. This kind of reform should be able to solve the pension crisis, make public employee benefits and costs comparable to the rest of us in the social security system, and be fair to ALL the citizens of Illinois. Arguements as to why you think this is UNFAIR are welcome! - Pension Southampton - Monday, Apr 26, 10 @ 9:59 am: One has to love the democrat machine. Keep voting them in. Sorry, comments for this post are now closed.