* Center Square…
A state Supreme Court decision in Rhode Island could possibly remove a hurdle to reforming Illinois’ pension debt load, but an expert said lawmakers here would first have to change course.
Rhode Island’s highest court ruled earlier this month in Cranston Police Retirees Action Committee v the City of Cranston that the city could freeze a cost of living adjustment for its police and firefighter retirees and not break the U.S. Constitution’s Contract Clause protection.
Mike Stenhouse, CEO of the Rhode Island Center for Freedom and Prosperity, said the city of Cranston’s budget was so upside down that the benefit freeze was deemed reasonable and necessary, a designed exception in interpretations of the clause.
“Cranston was in such financial distress that you couldn’t reasonably tax anymore,” he said. […]
Ralph Martire, with the Chicago-based Center for Tax and Budget Accountability, said Illinois wouldn’t make it that far because the state’s constitution protects any pension from being diminished. […]
Democrats in control of the General Assembly have shown little appetite for changing that protection, even though the state has more than $137 billion in unfunded pension liability, billions more in unfunded healthcare costs. Municipalities in Illinois have billions more at the local level for police and fire pensions.
Mark Glennon, founder of Wirepoints, said the important aspect of the Rhode Island opinion is that it refutes a common talking point that changing Illinois’ constitution to allow for changing established pension contracts is a fool’s errand because the Contracts Clause would kill the effort.
“We’re applying the same law that would be applied in Illinois if we ever follow the same route and the same challenge was there,” he said.
* Cranston was an extreme case…
The high court observed that the city faced “dire” financial straits when [Mayor Allan W. Fung] assumed office in 2009. Unemployment soared and property values plummeted by $1 billion. Those factors were compounded by dramatic cuts to state aid and “devastating” flooding in 2010. As a result, the city cut jobs, eliminated city vehicles and increased health-care costs for its employees.
State lawmakers in 2011 passed the Rhode Island Retirement Security Act, aimed at helping cities and towns manage their pension liabilities and remain stable. That law enabled municipalities to submit improvement plans if an actuary determined that a pension plan was in “critical” status, meaning that it was less than 60-percent funded.
In June 2011, the unfunded liability in Cranston had risen to $256 million. A year later, it was funded at only 16.9 percent.
Emphasis added because we have only a handful of smallish first responder pension funds in Illinois that are in worse shape than that (for a total of about $100 million in unfunded liabilites in nine funds as of 2016).
The General Assembly Retirement Fund, however, was only 14.8 percent funded at last report.
Even so, the General Assembly would first have to vote to change the constitution (not gonna happen in the foreseeable if ever future) and then voters would have to approve it (risky proposition since the unions would be dead set against it) and then and only then could a federal case be made if any local governments actually started cutting benefits to retired cops and firefighters (very difficult to do).