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Pension roundup

Thursday, Mar 14, 2013

* I’m not so sure that I agree with Sen. Murphy here. Subscribers know more, but yesterday’s committee votes don’t really signal that any progress is being made on pension reform. Maybe the opposite

A Senate panel endorsed two pension reform proposals Wednesday, but the lack of excitement about the dueling pieces of legislation may signal trouble ahead for the long-sought solutions.

Democrats and Republicans on the Senate Executive Committee said they were voting “yes” on the two fixes only so the proposals could continue to be further debated by the full Senate, perhaps as early as Thursday.

Senators also patted themselves on the back, arguing that they are moving faster on the state’s No. 1 issue than their counterparts in the House.

“There is a willingness to solve this problem,” said state Sen. Matt Murphy, R-Palatine.

* This all started Tuesday, when word went around that top business types had turned against Senate President John Cullerton’s SB1. Subscribers found out Wednesday morning, before the biz groups issued a statement

A coalition that includes many of the state’s leading business groups and some civic organizations is stepping up its opposition to the pension-reform bill being offered by Illinois Senate President John Cullerton.

In a joint letter, organizations including the Illinois and Chicagoland chambers of commerce, Illinois Manufacturers’ Association, Taxpayers Federation of Illinois and Metropolitan Planning Council say that Mr. Cullerton’s bill would not help pare the state’s unfunded pension liability much and “could put the state in an even much more tenuous financial situation.” […]

The core of the group’s argument, which parallels criticism earlier from Civic Committee of the Commercial Club President Tyrone Fahner, is that Mr. Cullerton’s proposal to guarantee retirees access to health care in exchange for some trims in pension benefits won’t do enough to cut the state’s overall liability.

“The exchange has the potential to create a constitutional protection for retiree health care benefits that does not currently exist — thereby tying the state’s hands even further when managing its budget,” the letter said. With retiree health insurance costs potentially “in the tens of billions of dollars,” Mr. Cullerton’s bill would not cut the state’s liability nearly as much as another plan from Sen. Daniel Biss, D-Evanston, which would slash current unfunded state liability by $30 billion, about a third of the current $97 billion figure.

* But, of course, it’s not just the biz groups that are opposed

Although Senate Bill 1 and Senate Bill 35 were both approved by the tightly controlled Senate Executive Committee, several Democrats on the committee made it clear they were not pledging their support if or when the bills come up for final votes in the chamber.

* And this is kind of a stretch

Cullerton has argued that “consideration” must be an element of pension reform, meaning that workers must be given a choice if changing pension benefits is going to be upheld by the courts.

However, Ty Fahner of the Civic Committee of the Commercial Club of Chicago testified that simply giving a guarantee that the state will make its required contribution to the pensions systems “is more than enough consideration.”

* Meanwhile

House Speaker Michael Madigan said Wednesday public employee retirement benefits will have to be less generous if the state is going to get a handle on its pension costs.

Speaking to reporters after addressing a conference of the International Brotherhood of Electrical Workers, Madigan specifically said changes to annual cost of living adjustments to retirement benefits will have to change.

“One place you must go is the COLA adjustment. You cannot evade that,” Madigan said of components that must be part of pension reforms.

The Speaker also attempted to convince IBEW leaders to help him convince AFSCME to make a deal

Madigan singled out the American Federation of State, County and Municipal Employees, led by executive director Henry Bayer, as one of the main opponents in achieving pension reforms.

“I know how it is in unionism. There’s solidarity and there’s brotherhood,” Madigan said. “But I think the time has come where all of us have to call upon Henry Bayer and the AFSCME union to recognize the reality of the facts and these numbers. It’s not just his money. It’s not just the money of the AFSCME members. It’s all of our money.”

- Posted by Rich Miller        

83 Comments
  1. - RNUG - Thursday, Mar 14, 13 @ 2:18 pm:

    Madigan is smarter than that. He knows authors of the diminishment clause meant to protect the COLA; it’s in the 1970 Con-Con transcripts and subsequent court testimony on various pension cases. If he pushes to pass that kind of change, it has to be part of some end game to shift the blame elsewhere for really drastic spending cuts or coming tax increase.


  2. - Mason born - Thursday, Mar 14, 13 @ 2:35 pm:

    RNUG

    I think it is part of an endgame that builds public sentiment to have the language in the State Constitution changed then he can rewrite all the pensions with NO legal recourse .


  3. - PublicServant - Thursday, Mar 14, 13 @ 2:36 pm:

    Making statements that COLAs will need to be adjusted doesn’t make it any more legal no matter how many times you say it. Reform the tax structure now, or you’ll have to reform it more later.


  4. - PublicServant - Thursday, Mar 14, 13 @ 2:38 pm:

    That’s simply incorrect Mason. Ex Post Facto laws affecting contracts violate the US Constitution.


  5. - Demoralized - Thursday, Mar 14, 13 @ 2:39 pm:

    I understand the need for pension reform. I don’t like it, but I understand it. But I really can’t stand the Civic Committee. Members of the Civic Committee, with their multi-million salaries, bonuses and retirement packages of their own, can’t possibly understand the impact that the retirement changes they want will have on workers. I don’t need a bunch of millionaires telling me my retirement is too generous. Thier hypocrisy makes me sick to my stomach and I wish the General Assembly would tell them what they can go do with themselves.


  6. - titan - Thursday, Mar 14, 13 @ 2:39 pm:

    “However, Ty Fahner of the Civic Committee of the Commercial Club of Chicago testified that simply giving a guarantee that the state will make its required contribution to the pensions systems “is more than enough consideration.” ”

    The employee/pensioners have a right to be paid. how the state funds it is essentialy irrelevant to the employee/pesioners (see e.g. the old IFT case). I don’t think Fahner is on target there.


  7. - Liberty_First - Thursday, Mar 14, 13 @ 2:43 pm:

    Time to means test Fahner’s retirement, social security and medicare.


  8. - Anonymous - Thursday, Mar 14, 13 @ 2:47 pm:

    Time to ignore Fahner.


  9. - RNUG - Thursday, Mar 14, 13 @ 2:51 pm:

    Mason Born,

    As Public Servant noted (thanks), can’t retroactively and/or unilaterally change contracts even if you change the State Constitution. The leaders of the GA know that. That’s why you hear all the talk about “consideration” (contract law) and “police powers”.


  10. - Ryan - Thursday, Mar 14, 13 @ 2:52 pm:

    Why do they still use this 97 Billion dollar figure? That’s completely inaccurate. That’s based on an 8% rate of return without taking on any risk. That’s completely unrealistic. It’s criminal that the state still uses this figure. Its likely 2 to 3 times that!!


  11. - boat captain - Thursday, Mar 14, 13 @ 2:53 pm:

    Any word on the Maag lawsuit?


  12. - Fred's Mustache - Thursday, Mar 14, 13 @ 2:57 pm:

    === Ex Post Facto laws affecting contracts violate the US Constitution. ===

    Not necessarily sure this is the case. Courts have said that Ex Post Facto prohibition only applies to criminal cases or civil cases where “punishment” is involved. In terms of the contracts clause, it is not absolute. The State can alter contracts that are already in place if they have a good enough reason to do so. In contracts where the State is involved (pension systems), the scrutiny is higher, but I think it still can be altered.


  13. - RNUG - Thursday, Mar 14, 13 @ 2:59 pm:

    boat captain,

    From the case schedule, it appears the State filed the requested response on points of controlling law yesterday. Didn’t see a future action scheduled yet.


  14. - Demoralized - Thursday, Mar 14, 13 @ 3:00 pm:

    @Liberty-First:

    That made me laugh. Thanks for that!


  15. - Old and in the Way - Thursday, Mar 14, 13 @ 3:01 pm:

    I believe that the courts will decide whether health insurance is a protected benefit and not the legislature or the Civic Committee for that matter.

    I thought Madigan’s comment that in effect ….”it’s not their money, it’s our money too” to be very revealing. Isn’t that what got us into this? The GA thinking that the pension fund was theirs to do what they want with……..

    As for Ty Fahner……if we were discussing the possibility of the state shorting the payment of contracts to business we would be hearing a different story. I’m sure it would include a moral imperative as to the sanctity of a contract and the letter of contract law. Somehow this is not an issue when screwing the little people……..Ty has a long history of moral and ethical lapses that we should all remember when he starts pontificating. Time wounds all heels!


  16. - RNUG - Thursday, Mar 14, 13 @ 3:04 pm:

    Fred’s Mustache

    If you look at previous rulings, specifically Felt, among other comments, the IL SC set a pretty high bar for the State to exercise their ‘police powers’ in pension cases. In that case the amount in question was a few thousand dollars a year and the court found it to be a sufficient diminishment and rejected the State’s ‘police power’ argument (along with all the other arguments).


  17. - Old and in the Way - Thursday, Mar 14, 13 @ 3:10 pm:

    On the Maag suit….look for something as early as next week I am told. However, the final verdict will no doubt be a long way off, maybe six or seven months. No matter the ruling it will be appealed.


  18. - PublicServant - Thursday, Mar 14, 13 @ 3:10 pm:

    Article 1, Section 10 Clause 1 of the US Constitution states:

    No State shall … pass any … Law impairing the Obligation of Contracts…

    Not seeing a lot of wiggle room there Fred, but the state can have at it, if they’d like.


  19. - Blockhead - Thursday, Mar 14, 13 @ 3:11 pm:

    Time can’t wound all the heels in this situation fast enough!


  20. - Fred's Mustache - Thursday, Mar 14, 13 @ 3:14 pm:

    RNUG -

    I agree that the Illinois Courts have consistently ruled against diminishments of benefits in pension cases.

    What I was responding to was a comment that said that an amendment to the State constitution that changed the pensions clause would constitute an “Ex Post Facto law affecting contracts” that violated the US Constitution.

    My point is that if the GA can successfully amend the State Constitution to change the language of the pensions clause, I don’t think this necessarily violates the US Constituion.


  21. - redleg - Thursday, Mar 14, 13 @ 3:14 pm:

    Count me in on ignoring Fahner. That man’s regard for Civil Servants both active and retired borders on hatred. It wouldn’t surprise me to hear that he has the same regard for those he considers beneath him within the private sector. I don’t know how he sleeps at night.


  22. - facts are stubborn things - Thursday, Mar 14, 13 @ 3:14 pm:

    I don’t beleive - in the context of politics - the GA can go from where they are now to where they know deep down they need to be on pensions. They have to first go by way of the courts.


  23. - Ruby - Thursday, Mar 14, 13 @ 3:18 pm:

    HB 1154 passed today by a vote of 101 to 15.

    http://www.ilga.gov/legislation/BillStatus.asp?GAID=12&GA=98&DocNum=1154&DocTypeID=HB&SessionID=85&LegID=71606&SpecSess=&Session=#actions


  24. - Old and in the Way - Thursday, Mar 14, 13 @ 3:21 pm:

    The police power argument is a “hail Mary” at best. Given the history and previous rulings by this court it would be hard to imagine at this point. However, this is not to say that it would never be invoked should the situation get desperate.

    I found it very troubling yesterday to hear comments from GA members, including bill sponsors, to the effect that they neither understood the legal burden they would need to surmount to claim police powers nor the long term implications should they be successful. My regard for Biss and Nekritz and their legal knowledge and understanding could not be lower. If this is indicative of their legislative ability we are in real trouble.


  25. - Cincinnatus - Thursday, Mar 14, 13 @ 3:21 pm:

    RNUG,

    I know that COLA is part of a retiree’s pension, but is there a rate that is guaranteed? What would happen it the COLA was defined as zero? Further, in a simple way, can you explain to me what is guaranteed as far as healthcare is concerned?

    Asking you because you are one of the most knowledgeable commenters, and that you answer the question straight-up.


  26. - RNUG - Thursday, Mar 14, 13 @ 3:22 pm:

    Fred’s Mustache

    I think you missed my point. Even if the constitution is amended, the State still won’t be able to legally change the existing ‘contract’ because it was deemed a contract at the time of ‘agreement’. The State can try to invoke their ‘police powers’ to override a valid contract … and that’s a really high hurdle the State has been unable to achieve in the past.


  27. - Fred's Mustache - Thursday, Mar 14, 13 @ 3:23 pm:

    Public Servant,

    The contracts cluase is not interpreted by the courts to be an absolute prohibition of altering contracts. Pretty much none of the US Constitution is interpreted that way. Courts have allowed impairments of contracts when the government can show “it is reasonable and necessary to achieve an important public purpose.”


  28. - Bigtwich - Thursday, Mar 14, 13 @ 3:23 pm:

    No State shall … pass any … Law impairing the Obligation of Contracts…

    Yes, but,

    In Keystone Bituminous Coal Association v. DeBenedictis (1987), Justice John Paul Stevens stated, “It is well‐settled that the prohibition against impairing the obligation of contracts is not to be read literally”.


  29. - PublicServant - Thursday, Mar 14, 13 @ 3:25 pm:

    Not seeing one of the United States of America as a litigant in your referenced case Bigtwich…Care to try again, or rest on that vague statement?


  30. - Ruby - Thursday, Mar 14, 13 @ 3:29 pm:

    HB1166 raises the retirement age to 65 for current employees under the age of 35. The bill passed 76-41.

    HB 1154 and 1166 only affect current teachers and other current public employees.


  31. - RNUG - Thursday, Mar 14, 13 @ 3:29 pm:

    Cincinnatus @ 3:21 pm

    Actually, Old is better qualified at the legal stuff than I am.

    Anyway, my understanding is anything that is a diminishment would be considered unconstitutional. Previous court rulings have held the terms at time of hiring PLUS any enhancement granted by the General Assembly are protected. The 3% Automatic Annual Adjustment (to use it’s offical name) was an enhancement granted by the General Assembly. By those rulings, it should be protected and any reduction of it would be a diminishment. The authors of the ‘pension clause’ have stated under oath they intended such enhancements to be protected. It should not be able to be touched unless voluntarily surrendered in exchange for some other perceived or real consideration (I’m thinking of the forced choice between the COLA and health insurance access).


  32. - Yossarian Lives - Thursday, Mar 14, 13 @ 3:36 pm:

    I think it’s telling that while Ty Fahner testified against SB 1, he was not invited to testify in favor of SB 35. After his comments last fall, he’s toxic and fast becoming irrelevant if he isn’t already.


  33. - Arthur Andersen - Thursday, Mar 14, 13 @ 3:36 pm:

    From what I can see, Tylenol Ty pretty much rendered himself irrelevant with that goofy, over-the-top letter he wrote last fall.


  34. - facts are stubborn things - Thursday, Mar 14, 13 @ 3:37 pm:

    RNUG

    What do you think of this argument some are making that keeping the pensino system solvent is consideration enouch…..seeems like folly to me?


  35. - Blockhead - Thursday, Mar 14, 13 @ 3:39 pm:

    The COLA has been a topic of much discussion in the pension reform discussion. However, isn’t part of the employee contribution to cover the COLA? Also, the 3% sounds fabulous in this economy but since 1970, the average social security COLA comes to 4.1%………which sounds even more extravagant. Let the economy recover a bit more and no one will be talking about 3%.


  36. - RNUG - Thursday, Mar 14, 13 @ 3:45 pm:

    Cincinnatus @ 3:21 pm

    missed the health care question …

    That’s a whole other can of worms and the answer may well depend on which retirement system you belong to. There hasn’t really been any cases on that issue. We won’t know the answers until there is a ruling in the Maag case, and even then we may not know for every possible class, although a lot of combinaitons are represented in the combined case.

    From here on, this is all guesswork right now.

    I think the TRS retirees have a really good case because, when working, they pay to subsidize it in retirement and when retired they actually pay for their insurance. All the TRS retirees get is access to the State Group Health plan.

    The SURS / SERS retirees were generally entitled to (mostly free) health insurance when working and “free” insurance when retired if they met the ‘20 year’ rule. One of the questions Maag will resolve is whether that “20 year” rule constituted a contract. The State claims it is not and the retirees claim it is because it has an offer and a requirement that was fulfilled. I will note that the ‘20 year’ rule was codified (written) and enacted as a State statute.

    The 2002 ERI retirees have an additional argument it was part of the package that induced them to retire early. They can claim they might not have retired if the insurance was not part of the deal.

    I’m going to skip JRS / GARS details because that probably doesn’t apply to most of us, other than to note the lead plaintiff, Maag, is a retired judge.

    I’ve left out a bunch of nuances and details. And the only opinions that are going to matter is the one held by the judge hearing the case and the judges hearing the appeals.


  37. - Blockhead - Thursday, Mar 14, 13 @ 3:47 pm:

    Cincinnatus re healthcare:

    Depends on which pension system you are talking about. For TRS, part of the paycheck contribution when employed goes to funding TRIP, Teachers Retirement Insurance Program, and you have access to TRIP as a retiree for a monthly premium. Other systems have different arrangements, some covering retirees’ health premiums. That’s the problem with pension reform. Differences amongst them. I can’t believe how many people think that teachers get free health coverage in retirement. Never happened.


  38. - Cook County Commoner - Thursday, Mar 14, 13 @ 4:04 pm:

    The COLA seems to be as much a part of the pension as the monthly payment. This is an extremely valuable adjunct to the annuity because it takes into account increased longevity and recognizes that federal inflation numbers are hoakum, especially for older retirees. “The Rule of 72″ indicates that a 3% COLA results in a doubling of the pension in 24 years.
    I’d like like to see the total dollar pool of current retirees with this COLA. And augment it daily with new retirees. The Dept of Insurance says 1 million state and local government workers are either collecting or vested into a government pension. I bet the annual ramp up based on the COLA is breath-taking.
    Speaker Madigan probably has seen the precise estimates, which prompted his recent comment that COLAs have to be part of reform.
    Considering what I’m hearing about the cost of health care going forward, and the possibility that government employee retirement healthcare cuts may avoid the constitution’s pension anti-impairment clause, the government retirees and vested workers will probably fight to keep the COLA just to cover health care costs. It might not be enough.
    Of course the rest of us are toast.


  39. - RNUG - Thursday, Mar 14, 13 @ 4:06 pm:

    facts are stubborn things

    in a word: BS

    The State is already obligated to fund the pensions at some level. There is already continuing authorization in place the same as bonds. The State is already obligated to actually pay the pensions when due.

    The last time the State seriously changed things (the ramp), the GA gave pensions equality with bonds and a continuing appropriation. So what are they going to give us this time? A triple dog dare promise with a cross your heart?

    About the only thing I could see as possibly valid ‘consideration’ in terms of payment guarentee would be to move the pension funding to be ahead of the bond funding and clearly say the State would default on bond payments before defaulting on the pensions. That will NEVER happen; the State wouldn’t be able to sell another bond. And if you actually did that, we would no longer have a pension problem; it would be a bond problem.


  40. - Sgt Schultz - Thursday, Mar 14, 13 @ 4:08 pm:

    CMS started charging retirees premium for dental insurance several years ago. Why would charging health insurance premium be so very different?


  41. - Leave a Light on George - Thursday, Mar 14, 13 @ 4:12 pm:

    Make the income temp income tax permanent. Subject pensions to same.

    Then go on to something else please. This is making my head hurt.


  42. - Leave a Light on George - Thursday, Mar 14, 13 @ 4:13 pm:

    and affecting my typing skills


  43. - RNUG - Thursday, Mar 14, 13 @ 4:17 pm:

    Sgt Schultz

    Short answer - dental had no pre-conditions, other than state employment / retirement, attached to it. No ‘20 year’ statute.


  44. - Arthur Andersen - Thursday, Mar 14, 13 @ 4:23 pm:

    RNUG, I have to agree with your last post. I have been skeptical about this entire “ironclad guarantee” stuff, and the unions’ quick embrace of the concept, from the outset.
    Now to claim a funding “promise” equals the “consideration” is well, to be polite, nervy.


  45. - Sgt Schultz - Thursday, Mar 14, 13 @ 4:25 pm:

    Oh, I see; thank you for the clarification!


  46. - Old and in the Way - Thursday, Mar 14, 13 @ 4:26 pm:

    Leave the Light On George

    The changes you suggest would be a drop in the bucket compared to the amount owed. Remember the amount shorted is a little over $42 billion including interest and that is only about half of the obligated amount. As Ev Dirksen so eloquently said, “…a few billion here and a few billion there and pretty soon you are talking real money.”


  47. - nobody - Thursday, Mar 14, 13 @ 4:35 pm:

    Ralph Martire has a proposal that would not be easy but would work. It would pay off the pension debt but would take longer than 30 years to do so and would end the structural deficit. Do we want solutions or just more of the same can kicking. Somebody has to have the courage to say that this is what is, so this is what has to be done.


  48. - RNUG - Thursday, Mar 14, 13 @ 4:38 pm:

    One minor correciton to my post @ 3:29 pm:

    I should have said “Increase” instead of “Adjustment” … mixed up the AAI ending with the COLA ending.


  49. - Joe M - Thursday, Mar 14, 13 @ 4:41 pm:

    ==giving a guarantee that the state will make its required contribution to the pensions systems “is more than enough consideration.”==

    Calling the State actually making its required payment a contract consideration — that is like giving someone a good citizenship award because they didn’t rob a bank


  50. - TiredofMike - Thursday, Mar 14, 13 @ 4:50 pm:

    What does Mike say about his 3% inservice annual retirement increase?


  51. - Old and in the Way - Thursday, Mar 14, 13 @ 4:51 pm:

    The Martire solution is just that, a straight forward solution but it has one flaw. It doesn’t allow the GA to continue to use the pension funds as a pork funding source. It essentially requires some fiscal discipline and pain on a GA that wants more giveaways for constituents. It’s also based on reality and real numbers so that’s a problem too! We won’t even broach the issue of ethics and responsibility.

    There are solutions to this problem. However, there are no easy ones. Martire’s is just too painful for the GA to accept at this point. Good for citizens, bad for GA.


  52. - Norseman - Thursday, Mar 14, 13 @ 4:58 pm:

    AA, your being polite when you say you’re skeptical of the “ironclad guarantee.” Those of us who worked in government know that you can’t legislate an “ironclad guarantee” of some future action by the state. The GA always has the ability to amend the law to avoid the action.

    Something I stepped in when I was a kid at my uncle’s farm is the way I would describe the claim that the funding is the “consideration.” Then again, there’s not a lot that Fahner says that I don’t believe falls into that category.


  53. - Bigtwich - Thursday, Mar 14, 13 @ 4:58 pm:

    PublicServant

    That was my point. The impairment of contracts clause is vague. Was not saying a case would be decided one way or another.


  54. - retired and fed up - Thursday, Mar 14, 13 @ 5:41 pm:

    The impairment of contracts clause is not vague. It says you can’t enact a law to impair a contractural obligation. You work for me for 20 years and I will pay your health insurance premium. I accept and put in my 20 or 30 years in my case. You made an offer, I accepted and now it’s time for you to do your part. Taking that away impairs your oontractual obligation to me. It’s really pretty simple. Further leaving the judges out probably violates the equal protection provision.


  55. - retired and fed up - Thursday, Mar 14, 13 @ 5:42 pm:

    I should have added upon retirement and that I also performed my part.


  56. - Former Merit Comp Slave - Thursday, Mar 14, 13 @ 5:43 pm:

    Prediction: Maag case will be “settled” very shortly, very “conveniently” after the AFSCME contract agreement. Retirees will pay for health care. THEN final pension bills will be voted on.


  57. - Mugwump - Thursday, Mar 14, 13 @ 5:48 pm:

    The “police power argument makes no sense to me.

    “In United States constitutional law, police power is the capacity of the states to regulate behavior and enforce order within their territory for the betterment of the health, safety, morals, and general welfare of their inhabitants.”

    http://www.britannica.com/EBchecked/topic/467323/police-power

    So there will be rioting in the streets if they don’t cut pension benefits? There was a case upholding a Minnesota law from the 1930’s that altered the terms of existing mortgages based on the state’s police power. It could be argued that foreclosing all mortgages at the same time and evicting thousands of people would result in social chaos. I don’t see how this would apply to our current pension situation.


  58. - retired and fed up - Thursday, Mar 14, 13 @ 5:58 pm:

    Former Merit Comp Slave.

    Are you saying that someone can waive my constitutional rights for me. I don’t think so.


  59. - PublicServant - Thursday, Mar 14, 13 @ 6:35 pm:

    So then Fred’s Mustache, please cite an example or two that we might look at that will make me feel that the US Constitution’s Contract Clause would fail to protect my pension contract from being diminished or impaired. That would be important to me. As it stands now, I’m thinking I don’t have much to worry about regarding the state’s bluster re pensions. If you have some examples that would support the FUD and fear of God that you seem to be trying to instill, please place that evidence before the court of public opinion represented by Rich’s blog. And thanks in advance.


  60. - Joe M - Thursday, Mar 14, 13 @ 6:41 pm:

    == Pretty much none of the US Constitution is interpreted that way. Courts have allowed impairments of contracts when the government can show “it is reasonable and necessary to achieve an important public purpose.” ==

    I beg to differ.

    In U.S. Trust Co. of New York v. New Jersey, 97 S.Ct. 1505, the U.S. Supreme Court stated:

    “Contract Clause of [U.S.] Constitution limits otherwise legitimate exercise of state legislative authority, and existence of important public interest is not always sufficient to overcome that limitation; moreover, scope of state’s reserved power depends on nature of contractual relationship with which challenged law conflicts.”


  61. - Arthur Andersen - Thursday, Mar 14, 13 @ 6:58 pm:

    Norseman, just trying to stay within the guidelines. I agree with you completely. Remember the teachers’ benefit increase was fully funded until Blago/Filan rewrote the law to take the State’s share out of the deal.

    AA was raised in a family of horsemen and learned at an early age that the gentlemanly term for that stuff was “road apples.”
    Still makes the kids laugh.


  62. - Liberty_First - Thursday, Mar 14, 13 @ 8:04 pm:

    (not sure of the source but it is all over the web) In 1977, the U.S. Supreme Court (in U.S. Trust Co, 431 U.S.) clarified that state attempts to impair their own contracts, ESPECIALLY FINANCIAL OBLIGATIONS, were subject to greater scrutiny and very little deference because the STATE’S SELF-INTEREST IS AT STAKE. As the court bluntly stated:

    “A governmental entity can always find a use for extra money, especially when taxes do not have to be raised. If a state could reduce its financial obligations whenever it wanted to spend the money for what it regarded as an important public purpose, the Contract Clause would provide no protection at all… Thus, a state cannot refuse to meet its legitimate financial obligations simply because it would prefer to spend the money to promote the public good rather than the private welfare of its creditors.”


  63. - Jack - Thursday, Mar 14, 13 @ 8:07 pm:

    So Madigan wants the IBEW to convince AFSCME to play along. Long before I became a state employee, I took the test to join IBEW. But they said I was too intelligent for that type of work.

    Since then I have avoided hiring any IBEW workers to do any work on my house. And I certainly wouldn’t put any weight in anything they have to say about my pension.


  64. - Old and in the Way - Thursday, Mar 14, 13 @ 8:14 pm:

    Joe M

    You are right on target. A quick check of Westlaw confirms that the courts rarely and then only narrowly uphold such state action. The keys are proportional and appropriate actions as opposed to over reaction.


  65. - foster brooks - Thursday, Mar 14, 13 @ 8:14 pm:

    RE: However, Ty Fahner of the Civic Committee of the Commercial Club of Chicago testified that simply giving a guarantee that the state will make its required contribution to the pensions systems “is more than enough consideration.”

    i want what he’s drinking!


  66. - wordslinger - Thursday, Mar 14, 13 @ 8:17 pm:

    –From what I can see, Tylenol Ty pretty much rendered himself irrelevant with that goofy, over-the-top letter he wrote last fall.–

    Ugh, are he and his crew vampires or what?

    If you look at the lineup of the Civic Committee, none of them pay oogats in Illinois corporate income tax to begin with.

    That’s for the small business people.

    The Civic Committee has no skin in the game.\

    Ty, go find that Tylenol Killer — I hear he confessed about 20 years ago on “60 Minutes.”

    The game’s afoot!


  67. - county chairman - Thursday, Mar 14, 13 @ 8:22 pm:

    the civic committee has a stake in this if they can help break unions it means more money in thier pocket


  68. - Old and in the Way - Thursday, Mar 14, 13 @ 8:27 pm:

    Ty’s relationship with Sidley-Austin was showing in that testimony…….


  69. - Protect the constitution - Thursday, Mar 14, 13 @ 9:27 pm:

    If “…shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.” can be twisted by legislative “interpretive revisionists”, than who would ever believe that new proposed bills including “mandatory” state contributions over 30 years to fully fund pension plans would be honored. This would just be another broken promise!!!!


  70. - Joe M - Thursday, Mar 14, 13 @ 9:51 pm:

    Liberty First and I are citing from the majority opinions from the same case:
    U.S. Trust Co. of New York v. New Jersey 431 U.S. 1, 97 S.Ct. 1505 It is by far, the most-cited case concerning States and the Contract clause of the U.S. Constitution.

    There were also minority dissenting opinions in that case. I’m not sure how the current makeup of the U.S. Supreme Court would look at the issues.

    Hopefully appeals won’t have to go as far as the U.S. Supreme Court, and can be dealt with appropriately in the State level courts, based on the Illinois Constitution. However, its certainly looking like one way or another the Courts will be deciding on any pension changes the General Assembly will be passing.


  71. - Ryan - Thursday, Mar 14, 13 @ 10:10 pm:

    I’ll ask again. Actually why aren;t any of you outraged?

    Why do they still use this 97 Billion dollar figure? That’s completely inaccurate. That’s based on an 8% rate of return without taking on any risk. That’s completely unrealistic. It’s criminal that the state still uses this figure. Its likely 2 to 3 times that!!


  72. - Cincinnatus - Thursday, Mar 14, 13 @ 10:28 pm:

    Thanks, RNUG.


  73. - cod - Thursday, Mar 14, 13 @ 10:32 pm:

    It seems the extremely powerful big business interest Civic Committee is driving the campaign to default on pension obligations instead of raising revenue to honor them. They see this as a first step in weakening the influence of organized labor in Illinois, just as was achieved after the air traffic controllers battle in the 80’s. The profits for big business executives will be enormous if they succeed. Madigan is under a great deal of very intense pressure from the Club, so passing an unconstitutional bill will allow him to put the blame onto the courts


  74. - Former Merit Comp Slave - Thursday, Mar 14, 13 @ 10:45 pm:

    retired and fed up…..I’m not saying it will pass judicial muster. I’m suspicious that ASFCME made a deal with the gov and the Maag suit could suddenly get dropped/settled/etc. I could be way off base, but that magical contract that appeared overnight with raises has to come at a price.


  75. - Arthur Andersen - Thursday, Mar 14, 13 @ 10:52 pm:

    Ryan, huh?


  76. - Patrick Henry - Thursday, Mar 14, 13 @ 11:06 pm:

    If the retirement age is raised and the pension is capped for state workers, does this apply to those attempting to pass the legislation?
    Do they need to work 27 years, 30 years, 35 years to collect a pension ? AND, at what percentage are they collecting ? Nowhere in any discussion have I EVER seen the answer. It has been brought up, but no one seems to know the answer. What is the end game ?
    To use distraction,smoke and mirrors to make all the woes of the state the fault of the public workers. Once they have shown how “evil” the state workers are, then the public will rally behind the politicians who have saved Illinois !


  77. - RNUG - Thursday, Mar 14, 13 @ 11:48 pm:

    Former Merit Comp Slave @ 10:45pm

    Anything can happen, but I don’t think Maag will be settled out of court. Like Old, but possibly for a different reason or two, I also believe it will be appealed all the way to the IL SC. The State will go all the way because the cost of losing is too high. The retirees, I think, are just mad enough to take it all the way also … if they need to do so.


  78. - PublicServant - Friday, Mar 15, 13 @ 7:37 am:

    Rich

    Heads up. Looks like CPS has contacted at least Lane Tech HS and instructed the principal that the Chief of Schools is sending out someone to make sure that “Persopolis”, a graphic novel from a child’s perspective that is very critical of the Iranian Revolution, is collected from all classrooms, has not been checked out from the library by any teacher or student. He says no explanation given. You’ve got to look into this man.


  79. - PublicServant - Friday, Mar 15, 13 @ 7:38 am:

    http://preaprez.wordpress.com/2013/03/14/cps-book-banning/


  80. - PublicServant - Friday, Mar 15, 13 @ 7:40 am:

    Lane Tech Students gearing up for a free speech protest today.


  81. - anon - Friday, Mar 15, 13 @ 9:13 am:

    @former merit comp slave –a friend of mine says that even paranoid peolpe get followed sometimes…but, in this case, there is no deal, no settlement on the Maag lawsuit.


  82. - facts are stubborn things - Friday, Mar 15, 13 @ 10:47 am:

    RNUG/OLD MAN

    At what point in the Maag legal process is it possible for the judge to place an order preventing the health care premiums from being introduced, untill at such time a verdict is rendered?


  83. - RNUG - Friday, Mar 15, 13 @ 11:31 am:

    facts are stubborn things

    Another can of worms.

    Probably too early in the process right now. Also, might only be against SB-1313 and not the union contract …


Sorry, comments for this post are now closed.


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