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Rauner’s federal pension idea allows “some level of bankruptcy”

Monday, Oct 23, 2017

* Tribune

Stymied by a Democrat-controlled General Assembly and still in a contract dispute with the largest state employee union, Republican Gov. Bruce Rauner is looking to Washington for help advancing his agenda to weaken the influence of organized labor in Illinois. […]

Speaking to a gathering of business leaders in late September, Rauner said he was turning to Washington for help with one part of that effort — getting control of Illinois’ massive pension debt, which stands at about $130 billion and ranks among the worst in the nation. […]

The governor thinks Congress can release the state from that restriction by passing a law that would give states permission to come up with cost-saving changes to their pension programs. The option would be available to states only after they had established that spending money on workers’ retirement plans is hampering other essential services.

After conducting hearings, a state would have to propose its changes to a court, which would hear arguments from people who would be affected. Options could include reducing benefits provided under a pension plan, changing the way benefits are calculated or limiting the number of pensions a person can collect.

* But what is he actually trying to do?

Last week, Rauner (along with deputy governor Leslie Munger) made a surprise appearance at a New Trier Republican dinner. He created another surprise by making a couple of declarations, according to people in attendance: one, he singled out National Republican Committeeman Richard Porter for his role in a federal effort to allow the restructuring of public pensions. The state has the worst-in-the-nation pension liability, estimated now at an eye-popping $130 billion. […]

Politically, however, it’s a tall order to advance a federal law to circumvent state constitutions. And any agreement would need 60 votes in the U.S. Senate, which Republicans don’t have. At an event last month before the U.S. Chamber of Commerce, Rauner talked about his efforts.

“We’ve got a bill now, we’re working with Congress. (If) Congress passed a law, we’re lobbying right now, allow states to restructure their pensions, supercede the restrictions that the special interest groups have put on the state,” Rauner said at the Sept. 28 event. (Audio) “And I’m hoping to get it done with the tax overhaul that we’re doing. If we can get this bill passed — transformative for Illinois government and taxpayers.”

Roskam, the Ways & Means Tax Policy chairman, who is taking a lead role in the tax overhaul effort, said there isn’t a separate bill but added: “I’ve heard the concept discussed, I’ve not seen the language. Not pension funds — but there’s some theory about the capacity of federal courts to get the jurisdiction to allow some level of bankruptcy,” Roskam said in an interview. “There is some discussion … there is no language that I’m aware of. I think it’s conceptual.”

- Posted by Rich Miller        

  1. - Macbeth - Monday, Oct 23, 17 @ 9:33 am:

    The idea that the feds can simply abrogate a state constitution is mind-boggling. It makes no sense.

    I read somewhere over the weekend where Rauner claimed this was needed because the situation is “rigged”. Situation, I take it to mean: constitution.

    And these are Republicans?

  2. - Not Rich - Monday, Oct 23, 17 @ 9:36 am:

    Bust up the State and sell the pieces off..just like he did in his private life, with little concern for the people that get hurt. When his lips are moving this guy is fibbing

  3. - VanillaMan - Monday, Oct 23, 17 @ 9:42 am:

    Rauner supports disunion, bankruptsy, taxpayer-funded abortions, higher taxes and federal government overriding state’s rights.

    Rauner failed to do the job right, so is now demanding that he be granted powers to do the job wrong.

    Even if he wins, Rauner clearly showed us that he is an incompetent mess. You don’t give power to incompetent messes like Rauner.

    He is determined to permanently destroy our state, with or without constitutional approval.

    Rauner must go.

  4. - 47th Ward - Monday, Oct 23, 17 @ 9:45 am:

    It is simply breathtaking that a multi-millionaire can suggest negating a contract with pensioners simply because he believes he is over taxed.

    No Mr. Rauner. We aren’t going to wash away our debts in bankruptcy. We are going to pay our bills because that’s what conservative Americans have always done. That’s the only moral way through this crisis.

  5. - Honeybear - Monday, Oct 23, 17 @ 9:47 am:

    The problem that past legislatures and governors
    Didn’t pay the pension credit card bill
    Or paid the minimum
    Now it’s ballooned
    Not my fault
    I pay into it every paycheck
    Now I’m going to be pushed into
    In my old age
    As is my pension amount after 20 years of service
    Will be just above the federal poverty level
    Now republicans are going to take that from me
    I honeybear will retire to poverty
    For 20 years of faithful service to Illinois
    Why do Republicans want to
    Destroy the state workforce?
    Why so cruel?
    My hatred, red eyed rage
    Is so so so strong
    Right now

  6. - Lucky Pierre - Monday, Oct 23, 17 @ 9:48 am:

    The Governor is exploring the options to deal with the # 1 problem in the state- what the Speaker describes as our unsustainable public pension systems.

    This issue is most responsible for driving up the property, income and sales taxes on middle class families.

    The Speaker is continuing to do what he always done about this issue since 2013, ignore it.

    Any leverage that lights a fire under hime to call Senator Cullerton’s pension bill is a good thing.

  7. - ChicagoVinny - Monday, Oct 23, 17 @ 9:49 am:

    Tucked away in the politico article it notes that Rauner is telling GOP donors he’ll get rid of the tax increase, while simultaneously telling bond investors the tax increase is permanent.

  8. - Sonny - Monday, Oct 23, 17 @ 9:55 am:

    Sorry to everyone at that dinner.

  9. - Redraider - Monday, Oct 23, 17 @ 9:56 am:

    Lucky, the number one problem in Illinois has been and continues to be the regressive nature of our tax structure

  10. - RNUG - Monday, Oct 23, 17 @ 9:59 am:

    State’s Rights issue, pure and simple.

    Even if it managed to pass Congress, I suspect SCOTUS would throw it out when the pensioners sued. After all, the 1970 Illinois State Constitution is something the Illinois’ voters chose to approve; you don’t get much more representative government than having the citizens of the State approve it by referendum.

    Rauner’s tossing this out there is a desperate move to regain some popularity and / or just red meat for the wealthy businessmen true believers.

  11. - UIC Guy - Monday, Oct 23, 17 @ 10:03 am:

    @Redraider: YES!

    @OP: note that BVR is not talking about bankruptcy but about ‘restructuring’ [= partially defaulting on]pension obligations. Bankruptcy is not in play because even if legal it carries two big disadvantages from BVR’s point of view. 1) the bond-holders would be hurt at least as much as those owed pensions; 2) a judge is likely to say: ‘you’re not bankrupt, you just need to raise taxes’.

  12. - RNUG - Monday, Oct 23, 17 @ 10:04 am:

    Adding … the people behind this idea realize that if they manage to bust Illinois’ pension protection, no government pension in the country will be safe.

  13. - David - Monday, Oct 23, 17 @ 10:08 am:

    No contract would be safe

  14. - RNUG - Monday, Oct 23, 17 @ 10:08 am:

    == Any leverage that lights a fire under hime to call Senator Cullerton’s pension bill is a good thing. ==

    The current bill is a coerced choice between reduction A or reduction B. Until Cullerton’s bill is revised to be 100% voluntary choice, it won’t be found constitutional.

  15. - wordslinger - Monday, Oct 23, 17 @ 10:09 am:

    The troncs sure do go through some contortions in their story to avoid the word “bankruptcy.” Curious, as they know the grift very well.

    The governor doesn’t want much; just for the federales to invalidate the state constitution (how conservative). Of course, the contract clause in Article 1, Section 10 of the U.S. Constitution would have to be amended as well. That’s an easy process.

    Rauner is, once again, selling snake oil to the gullible, pretending that there’s a way to get out of the unfunded pension liability, and that he’s on it. Some of the people, all of the time.

  16. - Obamas Puppy - Monday, Oct 23, 17 @ 10:09 am:

    “Special interests” did not put “it” on this state, people value public service and don’t think they should be ripped off like you rip people off when you “restructure”(steal pensions to pay off investment managers)companies. Did you go to Wharton school of business like the President from your party did, because you need a civics lesson.

  17. - Skeptic - Monday, Oct 23, 17 @ 10:16 am:

    “The option would be available to states only after they had established that spending money on workers’ retirement plans is hampering other essential services.” That is exactly the “Police Powers” argument Quinn made and the ISC shot down in flames in 2015.

  18. - Grandson of Man - Monday, Oct 23, 17 @ 10:16 am:

    Rauner had a big hand in this pension crisis, directly by managing TRS and profiting from it, and indirectly from paying a low state income tax for decades. Now after he goht his through years of profiting from pensions and low state income taxes for decades, he’s going the extra mile to hurt public employees who have to live paycheck to paycheck.

    It’s time for us to pay our pension debt. Since Rauner uner’s going through all this effort to hurt the state and employees, people should push for a progressive income tax or millionaire surcharge.

    “with the tax overhaul that we’re doing”

    Yes indeed, Rauner wants those huge tax cuts for the super-rich. Time to stand strongly against those, and his support of them.

  19. - David - Monday, Oct 23, 17 @ 10:17 am:

    It has to get 60 in the Senate because it is not budget related. There is no bill even at this point and the current hit mess can’t get 50. Maybe he is just evermore disparate.

  20. - Nick Name - Monday, Oct 23, 17 @ 10:23 am:

    The man. must. go.

  21. - Blogman - Monday, Oct 23, 17 @ 10:23 am:

    The State can fail to fund its obligations and create a crisis unilaterally. Then run to Federal Court and plead crisis! Where would that end?

  22. - G'Kar - Monday, Oct 23, 17 @ 10:28 am:

    One of the main factors in calling for a Constitutional Convention back in 1786 was the habit of some states changing their laws to keep them from having to pay their debts. Now Rauner wants the Feds to do that for us!

  23. - RIJ - Monday, Oct 23, 17 @ 10:29 am:

    To the politicians of Illinois: Kiss my tush and pay me the pension you owe me. You are bound by my contract with the state and the Illinois Constitution, and you should be bound by ethics and morals. Sad that so many of you are not.

  24. - TinyDancer(FKASue) - Monday, Oct 23, 17 @ 10:31 am:

    The Trip article also cites Rauner’s Lincolnshire “right-to-work” appeal that argues for local government control.
    So, which is it Bruce?
    Federal government dictating law to the sates or local control?
    You can’t have it both ways.

  25. - Oswego Willy - Monday, Oct 23, 17 @ 10:33 am:

    Some really great stuff in comments here from Rich’s post.

    Here’s where I fall;

    The US Constitution has that pesky contract clause.

    States’ rights and the individual state constitutions exist and are framed and modeled to reflect the state and what those framers in those states wanted constitutionally protected.

    Who would’ve thought in 1970 they “saw” a governor willing to usurp the state constitution, try to rewrite the US Constitution to hurt people.

    Rauner is peddling falsehood and social class division, all the while believing that making people earn less and end constitutionally protected guarantees is something that can be “Republican”

  26. - TinyDancer(FKASue) - Monday, Oct 23, 17 @ 10:33 am:

    Heard somewhere that he is trying to get this attached to the tax reform bill.

  27. - TinyDancer(FKASue) - Monday, Oct 23, 17 @ 10:35 am:

    Sorry …… Trib not Trip

  28. - David - Monday, Oct 23, 17 @ 10:40 am:

    If this non existent bill were attached to the tax bill it would violate the buget act and allow the Dems to sink the whole thing.So he is just spewing nonsense again

  29. - Lester Holt’s Mustache - Monday, Oct 23, 17 @ 10:41 am:

    I seriously doubt Rauner and Roskam will be able to find many republicans in D.C. who would be willing to do this. They will be quick to point out that if Bruce Rauner’s Illinois can afford to spend taxpayer money on abortions for Medicaid recipients and state workers, they can darn well afford to pay for its pension obligations. Frankly I’m surprised Roskam hasn’t taken that position as well.

  30. - Norseman - Monday, Oct 23, 17 @ 10:45 am:

    === It has to get 60 in the Senate because it is not budget related. ===

    You’re probably right that such a measure will not pass the test for the use of the reconciliation process, but I see it becoming part of a budget discussion dealing with Puerto Rican disaster relief. Their debt hangs huge over that territory’s ability to recover. If they come up with some measure allowing them to restructure, that could be applied to states as well.

    I wouldn’t bet the house on this happening, but we’ve learned never to say never. Contact your Congressman and Senators.

  31. - Michelle Flaherty - Monday, Oct 23, 17 @ 10:52 am:

    The effort here is to slip it into something like tax reform/disaster relief in much the same way private employer pension relief was slid into the federal transportation bill a few years ago.
    Rauner and Roskam don’t want a public debate on this, they want a provision hid in a bigger bill.

  32. - By the shores of Gitche Gumee - Monday, Oct 23, 17 @ 11:03 am:

    Federal law = supreme law of the land.

    This Constitution, and the Laws of the United States which shall be made in Pursuance thereof . . . shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.

    The contracts clause in the US Constitution applies only to states.

    “No State shall . . . pass any . . . Law impairing the Obligation of Contracts . . . .”

    I think Congress can pass laws impairing the obligations of contracts.

  33. - Jocko - Monday, Oct 23, 17 @ 11:07 am:

    Like WS said, it’s rich that the Tribune has a say in this “re-structuring” after Sam Zell took THEIR pension right out from under them.

  34. - David - Monday, Oct 23, 17 @ 11:21 am:

    Good news Norse the aid bill is our of the house and in the Senate. 36.7 million for PR and some of the other disasters.

  35. - David - Monday, Oct 23, 17 @ 11:22 am:

    Roskums a target so I would suggest any retirees bombard his office anyway.

  36. - Nick - Monday, Oct 23, 17 @ 11:25 am:

    He is desperate and running out of time

  37. - Norseman - Monday, Oct 23, 17 @ 11:26 am:

    Thanks David. I suspect more will be necessary or at least requested and at some point far-right congressmen will raise objections because of debt situation - both the country’s and PR’s. Hopefully, PR will get what it needs.

  38. - Retired SURS Employee - Monday, Oct 23, 17 @ 11:31 am:

    - By the shores of Gitche Gumee - You might want to also take a look at the 10th Amendment to the US Constitution.

  39. - Earnest - Monday, Oct 23, 17 @ 11:33 am:

    >The option would be available to states only after they had established that spending money on workers’ retirement plans is hampering other essential services.

    This would be my fear in a Rauner second-term: stepped up squeeze-the-beast in order to show that higher education and social services are very very “hampered.”

  40. - Anonymous - Monday, Oct 23, 17 @ 11:39 am:

    pensions are truly safe if they are funded. That is the true problem.

  41. - Anonymous - Monday, Oct 23, 17 @ 11:47 am:

    While morality is important in this discussion, math is always going to win out. I strongly suggest that future pensioners that are currently working push their union leadership to work down a path that will make reasonable changes to current pensioners’ benefits. If it doesn’t happen, the benefits that future pensioners have been promised will be mathematically impossible to provide.

  42. - Gruntled University Employee - Monday, Oct 23, 17 @ 11:49 am:

    Rauner floating this crazy idea is almost as silly as Trump and the R’s trying to con people into thinking that a tax cut at the federal level is somehow going to pay for the last two unfunded wars.

  43. - By the shores of Gitche Gumee - Monday, Oct 23, 17 @ 11:59 am:

    Retired SURS Employee

    I could be wrong, but I don’t think I see anything in 10th amendment jurisprudence that is relevant, and the current Supreme Court would certainly not go out of its was to protect pensions of unionized public employees.

    A great resource =

  44. - Blogman - Monday, Oct 23, 17 @ 11:59 am:

    Will the Federal Court tell the State to stop unnecessary spending in other areas? Will it take over the budgeting process or just impair pension duties?

  45. - Lefty Louie - Monday, Oct 23, 17 @ 12:00 pm:

    I don’t see this having any chance of advancing. The Republicans can’t get agreement on things they want to do, much less something that would benefit a state like Illinois, which they could care less about.

    No, the state of Illinois will continue to decline over time, and will ultimately be a state that few will want to live in due to an increasingly burdensome tax system. There’s no other way out for a state that has been fiscally mismanaged for the last 30 years.

    And those happy public pensioners will retire out of state as well. All of this brought to you by a state legislature run by MM.

  46. - Anon221 - Monday, Oct 23, 17 @ 12:08 pm:

    RNUG, as usual, nails it: “Adding … the people behind this idea realize that if they manage to bust Illinois’ pension protection, no government pension in the country will be safe.”

    This is an “assignment” Rauner must do in order to keep getting invited back to those Koch Brother retreats. If any re-structuring is done for Puerto Rico, then it needs to be very specific in nature, and not an opening for ALEC and that ilk.

  47. - Anonymous - Monday, Oct 23, 17 @ 12:17 pm:

    - By the shores of Gitche Gumee -
    The problem is that there is no basis under the US Constitution for the federal government to oversee public pensions. Indeed, the fact that governmental pensions were specifically excluded from ERISA acknowledges that fact. Furthermore, not all public employees are unionized, but all public employee pensions are protected under Article 13, Section 5 of the state constitution. Reliance upon a 1 person majority in today’s US Supreme Court is somewhat presumptuous, given that any proposed legislation will need 60 votes in Senate.

  48. - Retired SURS Employee - Monday, Oct 23, 17 @ 12:18 pm:

    Anonymous at 12:17 is me.

  49. - The Old Professor - Monday, Oct 23, 17 @ 12:19 pm:

    People like the governor and the president think that a contract with a worker is like a promise to a child: you try to keep it, but there’s no real harm if you break it.

    This holds from before they were in office, look at the way Rauner looted the pension funds of companies he bought and bankrupted and look at the contractors Trump stiffed, daring them to sue.

  50. - Honeybear - Monday, Oct 23, 17 @ 12:24 pm:

    Anonymous 11:47- just this weekend I attended a workshop with Ralph Martire presenting. His group has the plan to avoid the unsustainable math. In a nutshell we have to put a lot of funding into the pension funds but it stays even and does not go through the roof. Go to for the details
    Until this weekend I thought there was no way out but there is.

  51. - illinois manufacturer - Monday, Oct 23, 17 @ 12:27 pm:

    If we can offer 2.5 billion to one of the biggest corporations on Earth it would be hard to argue we are broke.. this in big trouble and flailing.

  52. - Ghost - Monday, Oct 23, 17 @ 12:31 pm:

    So as the election nears Rauner wants to make sure no conservative Republican state union worker, or their friends or family, votes for him.

  53. - Roman - Monday, Oct 23, 17 @ 12:36 pm:

    I don’t get it.

    I suppose Congress could amend the bankruptcy code and allow municipalities, the state itself, or even the pension funds themselves seek the restructuring of debts in the federal courts. But that’s problematic in a bunch of other ways. Any other path would raise serious Tenth Amendment questions.

  54. - City Zen - Monday, Oct 23, 17 @ 12:47 pm:

    ==Who would’ve thought in 1970…==

    The pension problem summed up succinctly.

  55. - Oswego Willy - Monday, Oct 23, 17 @ 12:51 pm:

    ===The pension problem summed up succinctly.===


    One is the idea of usurping the rights that needed Constitutional protection from someone who swore to uphold the constitutions, including the US Constitution.

    The other is the “Edgar Ramp” and policy issues… and they still recognized the need to pay and fulfill the promise of the Constitutionally protected pensions.

    Your driveby missed all that. I’m sure on accident.

  56. - wordslinger - Monday, Oct 23, 17 @ 1:06 pm:

    – offer $2.5B to one of the biggest corporations on Earth.–

    While he’s pushing for state bankruptcy, Rauner is also advocating tax cuts.

    And making sure those IT pinstripe patronage types get paid first over social service providers.

    And that old Manila folders are safe and protected inside Cellini-connected-leased buildings.

    And that his personal staff is hidden away as ghosts on different agency payrolls.

    Rauner aint a mystery. Grifters gonna grift.

  57. - Anon - Monday, Oct 23, 17 @ 1:08 pm:

    The Trib ran an oped some time ago that seemed to make a pretty bullet proof argument that congress could amend federal bankruptcy law to include public pension systems. As a potential pensioner, it scared the heck out of me.

  58. - Hamlet's Ghost - Monday, Oct 23, 17 @ 1:24 pm:

    Even if the US Congress authorized a state level bankruptcy filing, it seems to me that state action to take advantage of that option would violate the state constitution.

    For example, a resolution by the IL General Assembly to direct the filing of a bankruptcy petition allowed under an amended Chapter 9 would itself violate the IL Constitution and be void.

    Whether the US Congress can give Illinois that option is problematic. Whether the state government could voluntarily elect to use that option is an unrelated hurdle.

  59. - Hamlet's Ghost - Monday, Oct 23, 17 @ 1:29 pm:

    More succinctly, the federal government cannot give Illinois authority to violate the Illinois constitution.

  60. - Joe M - Monday, Oct 23, 17 @ 1:30 pm:

    “some level of bankruptcy”

    Let me guess - stiffing pensions of the middle class will be allowed in this “some level of bankruptcy” - but stiffing wealthy holders of Illinois bonds will not?

  61. - Justdoingtime - Monday, Oct 23, 17 @ 1:34 pm:

    But tier 2 was supposed to fix all of this. Hmmmm….

  62. - RNUG - Monday, Oct 23, 17 @ 1:40 pm:

    == But tier 2 was supposed to fix all of this. Hmmmm…. ==

    Actually, Tier 2 and paying the (Blago revised) Edgar ramp does fix it. It just takes another 30 - 40 years to do so … but the politicians want the savings now so they can spend it.

  63. - RNUG - Monday, Oct 23, 17 @ 1:53 pm:

    == The Trib ran an oped some time ago that seemed to make a pretty bullet proof argument that congress could amend federal bankruptcy law to include public pension systems. As a potential pensioner, it scared the heck out of me. ==

    IF Feds allowed State’s to take bankruptcy (a pretty high hurdle given historical context and past rulings), I don’t see how you could void just pensions while keeping bondholders whole.

    And that is the crux of the matter. In the few municipal examples we have seen in other states in modern times, the pensions have generally received a high level of protection while the bondholders have taken significant cuts. Same thing (so far) for a US territory (Puerto Rico).

    /s on

    If Rauner was really looking out for all the citizens of Illinois (and not the wealthy 1% / bondholders), he should be bonding out the entire $130B or so pension debt, stash away the cash in the pension funds, and then just default on the bonds. Let the wealthy banks take the hit. That’s more his method of operation anyway … a bust-out of all the cash.

  64. - Judgement Day - Monday, Oct 23, 17 @ 2:08 pm:

    “One of the main factors in calling for a Constitutional Convention back in 1786 was the habit of some states changing their laws to keep them from having to pay their debts. Now Rauner wants the Feds to do that for us!”

    Folks, doesn’t appear to matter what any of us think. It’s all about Puerto Rico, and SCOTUS. This is a MONEY game.

    Much of Puerto Rico’s current bonded indebtedness is ‘toast’. Trump just spoke the plain hard truth (that NOBODY wanted to hear) regarding Puerto Rico’s bonded indebtedness. Those bondholders are going to experience a big-time ‘Cram Down’ regarding their PR bond holdings. Deservedly so, IMO.

    And it’s still not going to be enough (we’re currently taking bonds getting paid off somewhere in the .333 cents on the dollar range over many years). Nowhere near enough.

    After those types of haircuts happen, what’s the likelihood that any investors out there are going to put more money down into these risky bonded indebtedness environments? Not high, maybe virtually non-existent.

    What’s left to cut? - public sector pensions.

    And it’s going to happen in the federal courts, blessed by SCOTUS.

    Now, will the Court give States & units of local government options to avoid the fate of Puerto Rico (and other potential locations, like Illinois) - Sure.

    But, the Courts are not likely to welcome a ’smoke and mirrors’ approach to resolving pension funding issues. And you better intend to ’stick to your financing plan’.

    Just my betting. We’ll see.

    “When They Say It’s Not About The Money, It’s ALWAYS About The Money”

  65. - Norseman - Monday, Oct 23, 17 @ 2:09 pm:

    RNUG sums it up nicely. In the Detroit case, the Michigan constitutional protection for pensions was overruled by the Fed judge, but the bondholders took a much bigger hit.

  66. - ejpp - Monday, Oct 23, 17 @ 2:16 pm:

    - Ghost - Monday, Oct 23, 17 @ 12:31 pm:

    So as the election nears Rauner wants to make sure no conservative Republican state union worker, or their friends or family, votes for him.

    Your correct. Bruce Rauner only won by 142K votes. Plus 3rd party and those not voting at all (didn’t want either). I believe this is one of the biggest reasons why Pat Quinn lost, because he turned on state works and signed/supported the unlawful bill SB1.

    How is it the stock market has added over 5 Trillion dollars in value and we are still at the 130 billion number?

  67. - Retired SURS Employee - Monday, Oct 23, 17 @ 2:19 pm:

    - Hamlet’s Ghost -
    You are absolutely correct, assuming the state could seek bankruptcy protection in order to abrogate its pension obligations, it couldn’t violate its own constitution in order to do so.

    -RNUG- I love reading your comments on pensions. Always right on the money! That said, Tier 2 probably “solves” the current problem around 2045, so it’s really less than 30 years.

  68. - wordslinger - Monday, Oct 23, 17 @ 2:26 pm:

    Pensions are contracted deferred compensation for labor already provided. You can’t clawback the labor.

    No one has to buy any muni bonds; those with bonds can sell at any time. Caveat emptor.

    Courts have recognized the distinction in muni bankruptcy proceedings.

    A couple of weeks ago, Rauner was sweet-talking Wall Street prior to the bond sale that the tax increase had shored up state finances and that Illinois’ continuing, irrevocable appropriation on bonds was solid.

    Now Rauner’s talking about repealing the tax increase and declaring bankruptcy.

    I’d be fascinated to know who in the world takes this dude at his word, given his track record.

    If Rauner told me the sun came up in the morning, I’d look out the window to make sure.

  69. - California Guy - Monday, Oct 23, 17 @ 2:51 pm:

    I don’t think the Contracts Clause applies here because the STATE is not passing a law - only the Federal government would be.

    Furthermore, Puerto Rico is not in BK. They are under a looser (relative to BK judge) supervision by an oversight board.

    To RNUG’s comment and others, municipal BK’s have only allowed the disproportionate protection of pension assets to bond assets because bond holders did not object to the plan that was laid out. Bond holders maintain the right to object to a plan that pays them proportionally less than pensioners - it just hasn’t happened yet. In the California example with Stockton, it was easier for the City to cut costs through retiree health care benefits (retirees received health insurance practically for life) than pension benefits. The pension benefits would have been defended by CalPERS, who is a strong advocate with deep pockets for legal fees. Cutting retiree health insurance is different. Retirees as a group have way less money than CalPERS to fight the City and blow up the BK plan. BK judge in Stockton (and other cases) validated the legal argument that State protections are not applicable in Federal BK court.

    Also, simply bonding out the entire pension debt and than defaulting would not solve the financial problem long term. This would be the Rauner plan in reverse - applying only to bonds. If Illinois defaulted on all bonds tomorrow, the interest rates it would get for all bond proceeding would be ridiculously high. In aggregate, the bond industry would probably still recoup all of the money that Illinois declared BK on over the long term through higher interest rates. It’s the magic of compound interest over long periods of time. Illinois already pays over 5% interest on bonds as of this summer. That’s a ridiculously high.

  70. - Back to the Mountains - Monday, Oct 23, 17 @ 2:59 pm:

    Art I, § 10 applies to the states. Individual states cannot pass laws impairing contracts. The Supreme Court has held that Art. I, § 10 does not apply to Congress.

    Even if it did, Art. I, § 10 is not read as being absolute. There are instances in which a contract can be impaired based upon an action which is later judged to be constitutional. The test is whether impairment was the primary focus of the legislation.

  71. - Arthur Andersen - Monday, Oct 23, 17 @ 3:06 pm:

    Appreciate the good comments here. Old AA is slow today, so I can’t really even fathom how this scheme would even work in practice. Is Rauner really saying that he wants to create a process that bypasses all three branches of State Government, most notably the Executive, and hands off Legislative powers to a “Federal Court?”

    We have 28 years left to run on the 1995 “Edgar ramp” pension funding program. The litigation attendant to this swell idea (which had to come from the IPI big brains) may stretch out that long.

  72. - Groundhog Day - Monday, Oct 23, 17 @ 3:10 pm:

    Isn’t “some level of bankruptcy” like being “a little bit pregnant”?

  73. - RNUG - Monday, Oct 23, 17 @ 3:13 pm:

    == because bond holders did not object to the plan that was laid out. ==

    Actually, they did object in Detroit … specifically to the federal judge’s plan to sell off the city art museum and all of it’s assets to fund the pension system. The “powers” there in Detroit didn’t want the museum gone, do they came up with the bondholders taking an even bigger haircut AND a bunch of cash. The judge (who wanted the pensions mostly protected) went along with the deal that the wealthy special interests concocted to protect the museum and, indirectly, the pensioners.

    I have other issues with the way the Detroit bankruptcy was handled. And I will note that, unlike Illinois, Michigan’s pension protection is much weaker and Michigan did allow for municipal bankruptcy.

  74. - California Guy - Monday, Oct 23, 17 @ 3:27 pm:

    == because bond holders did not object to the plan that was laid out. ==

    ==Actually, they did object in Detroit==

    I’m not as familiar with the Detroit situation, so I’d defer to you there. Who objected to the sale of the museum? Was it City officials? Or, was it the bondholders themselves?

    I assume the situation in Illinois would play out like that as well. Pensioners taking a smaller haircut, relative to bondholders. Bondholders making up their lost “hair” through higher interest rates moving forward. I think that’s the overlooked piece of muni-BK that people outside the financial industry don’t understand. Higher interest rates going forward gives bondholders a chance to recoup losses. It’s almost like a natural/market safeguard against the politics of muni-BK.

  75. - Generic Drone - Monday, Oct 23, 17 @ 3:54 pm:

    Whatever it takes to destroy the nations workforce and their rights. Right Rauner?

  76. - Anonymous - Monday, Oct 23, 17 @ 4:36 pm:

    And in the meantime, after much whining and hand-wringing, the debt grows. Tier 2 is created, TIer 3 is created. Supreme Court hands down a ruling that the pensioners must be paid, however that happens.

    And the debt continues to grow. More whining and hand-wringing.

    I guess you can create a much bigger problem every single day by doing absolutely nothing to address it.

    Apparently the goal here.

  77. - CEA - Monday, Oct 23, 17 @ 4:43 pm:

    The state breached its contract with pensioners the day it began shorting pension contributions, which was before a fair number of the people reading this were born. The question at hand is not whether the state has the right to breach the pension contract, but what remedy should be applied now that it has been breached beyond the state’s likely ability to correct, and whether a higher authority exists that can compel the state to apply said remedy against the wishes of the Governor and/or the General Assembly. If a rogue legislature in one of the several states decided to zero out its tax rate and provide no services, or to set its tax rate at 50% and pave the streets with gold, no federal intervention would be required–voters would throw the bums out because the Somalian service delivery model or the confiscatory taxation would hit their constituents in the present day. The insidious aspect of the pension system is that for decades legislators were able to avoid consequences (and even to benefit from giving voters an unsustainable ratio of spending to taxing) while obligating the state to future payments which they had no intention of giving it the ability to make. Rauner’s prime directive may well be to ease the pain of billionaires, but even if you put Bernie Sanders or Jerry Brown in the Governor’s mansion it is unlikely they could practically or politically impose tax rates high enough to allow the state to clean up the result of a half century of Springfield looting the pension funds by way of undercontribution. At this point I concur with “Judgement Day” that the creation of a federal power to allow states and municipalities to unilaterally restructure pensions is probably inevitable, and is likely to be blessed by SCOTUS despite having at best a dubious constitutional foundation.

  78. - Sue - Monday, Oct 23, 17 @ 5:05 pm:

    In what Universe does Rauner believe his proposal would garner 60 votes in the Senate. Governor you have a better chance of changing the composition of the Illinois Supreme Court. Do the words slim and none mean anything to you

  79. - Sue - Monday, Oct 23, 17 @ 5:09 pm:

    Hamlet- don’t worry because if ain’t happening but the Feds can override the Illinois Constitution. It’s called supremacy. They teach that in law school

  80. - 37B - Monday, Oct 23, 17 @ 5:18 pm:

    Unless I have missed something, I haven’t seen any details which suggest this is anything like a true bankruptcy provision. Instead it seems geared toward selecting one class of creditors (pensioners) and allowing the state to abrogate its contracts with them, and them alone. There is nothing which suggests other creditors would be denied payment plus prompt payment interest on their past due bills. Isn’t there an equal protection problem with that?

  81. - Anonymous - Monday, Oct 23, 17 @ 5:47 pm:

    RE: Overriding the Illinois Constitution

    Remember the court said this was a created crisis. It didn’t accidentally happen. If it can be orchestrated to happen, it can be orchestrated to be fixed. Not their words, mine.

  82. - Anonymous - Monday, Oct 23, 17 @ 8:37 pm:

    Illinois needs debt relief. This is a good idea.

  83. - Generic Drone - Monday, Oct 23, 17 @ 8:48 pm:

    Anomynous=== “Illinois needs debt relief. This is a good idea.”

    By your logic, the nation needs debt relief. Perhaps they should just stop paying Social Security too.

  84. - Beat grunt - Monday, Oct 23, 17 @ 9:18 pm:

    Rauner has made himself toxic to his base on the abortion veto. The feds can’t pass or agree on anything. He is living in his own world and will be voted out in the near future.

  85. - Anonymous - Monday, Oct 23, 17 @ 10:18 pm:

    ==Honeybear - Monday, Oct 23, 17 @ 9:47 am: ==

    Honeybear, please hang in there. Remember it isn’t over until the fat lady sings. We need to keep ‘hope’ alive.

  86. - Robert the 1st - Monday, Oct 23, 17 @ 10:46 pm:

    =Perhaps they should just stop paying Social Security too.=

    Let’s cap pensions at $42k a year. That’s the max SS adjusted for 8.5% vs 6.2%. Of course government workers would have to stay on the job an additional 1.5 decades to make things “fair.”

  87. - Anonymous - Tuesday, Oct 24, 17 @ 7:57 am:

    Government workers, in order to make things fair, would also have to be paid what comparable workers in the private market are paid, Robert. If SSI=Pension, then employer would also have to offer a 401K and match. Then, things would be more comparable. Pensioners have ONE retirement income and a subpar salary along the way. Private workers have 401ks, SSI and whatever they can or choose to save on their own with their more generous benefits.

  88. - Late to the Party - Tuesday, Oct 24, 17 @ 8:27 am:

    I point to the IL Supreme Court opinion when it rejected Illinois’ contention the need to reduce retirees’ pensions (
    (Docket No. 118585)
    In re PENSION REFORM LITIGATION (Doris Heaton et al., Appellees,
    v. Pat Quinn, Governor, State of Illinois, et al., Appellants).
    In paragraph 85, the opinion identifies why the State of Illinois was denied its desires:
    (”it” is the Illinois Legislature)
    ” …it could create the very
    emergency conditions used to justify its suspension of the rights…”

  89. - City Zen - Tuesday, Oct 24, 17 @ 8:45 am:

    ==If SSI=Pension, then employer would also have to offer a 401K and match.==

    SSI most certainly does not equal Pension.

    ==Private workers have 401ks, SSI…==

    If my SSI contributions were all mine and not redistributed to others AND invested in the stock market earning pension-like returns, you might have a comparison. But you don’t, which is why comparing SSI to pensions is a futile exercise.

  90. - Rabid - Tuesday, Oct 24, 17 @ 8:58 am:

    rooting for bankruptcy before the budget, now this munger work

  91. - Over Taxed - Tuesday, Oct 24, 17 @ 11:39 am:

    Rauner would rather layoff younger employees and pay their unemployment compensation, then allow older workers to buyout. That’s why government is in the mess their in, because he’s not thinking about what’s the right way to cut the budget. He just wants to stick it to ordinary working people.and eliminate unions. Just give older employees an opportunity to buyout and save millions for the working class.

  92. - ecommerce platforms free - Wednesday, Oct 25, 17 @ 10:28 pm:

    An internet site to record the services or products.

Sorry, comments for this post are now closed.

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