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* The Senate Democrats’ chief legal counsel Eric Madiar has analyzed state pension law and produced a 76-page legal brief detailing his conclusions. The summary…
This article concludes that legislation enacted to unilaterally reduce the pension benefits of current employees would violate the Pension Clause based on the Clause’s text and origins, constitutional convention debates revealing the framers’ intent, contemporaneous news articles demonstrating voters’ understanding of the Clause, and a host of court decisions construing the Clause.
* Madiar also discovered that, back when the new state Constitution was written in 1970, the state’s pension funds “were no better funded than they are today”…
This circumstance, coupled with the fact that the legislature already had a poor track record of making its actuarially-required pension contributions, caused public employee groups to lobby Convention delegates to include the Pension Clause. These groups reasoned that constitutional protection was necessary because the General Assembly would renege on its pension obligations to public servants during a financial crisis. Convention delegates agreed and included the Clause to foreclose that result.
* Can benefits be unilaterally changed by the General Assembly for current employees? Madiar says no…
The article finds that the Pension Clause not only makes a public employee’s participation in a pension system an enforceable contractual relationship, but also constitutionally protects the pension benefit rights contained in the Illinois Pension Code when an employee joins a pension system, including employee contribution rates. The Clause also safeguards pension benefit enhancements that are later added during employment. Further, the Clause ensures that pensions will be paid even if a pension system defaults or is on the verge of default.
* However, there is a way to change those benefits. And it involves that new national bugaboo word “collective bargaining”…
(W)hile the Clause bars the General Assembly from adversely changing the benefit rights of current employees via unilateral action, these rights are “contractual” in nature and may be modified through contractual principles. In sum, while welching on public pension promises is not an option for Illinois as some legal and civic commentators have suggested, legitimate contract principles provide a solution to mitigate this crisis.
That looks to be the Senate Democrats’ stance for the spring session: It’s up to the governor to negotiate any pension changes with the public worker unions.
The SDems have also posted dissenting and supporting opinions on their site. Go have a look.
posted by Rich Miller
Wednesday, Mar 2, 11 @ 8:46 am
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Won’t the union only be able to negotiate for it’s members. Any deal struck is for union members not everyone. Non-union management positions could only have individual deals with the State.
Comment by frustrated GOP Wednesday, Mar 2, 11 @ 8:59 am
===Won’t the union only be able to negotiate for it’s members===
State employees are over 95 percent unionized.
Comment by Rich Miller Wednesday, Mar 2, 11 @ 9:01 am
What a shock- competing legal opinions with diametrically opposite conclusions- Only one legal opinion can resolve whether the legislature can modify the pension plans for existing employees and that opinion would have to be issued by the Illinois Supreme Court- it is interesting after reading these competing memoranda why those who argue the changes would be unconstitutional- none of them seem to be upset that over the years, there have been increases to what employees themselves contribute- if you can’t increase years of service then why are you allowed to increase the contribution levels? Also not to be cynical- why be surprised when an interested organization obtains an opinion from a respected law firm that the opinion doesn’t reach the desired result- if the opinion was going to be contrary- it wouldn’t be issued!!!
Comment by Sue Wednesday, Mar 2, 11 @ 9:01 am
I’m sure it will just be more crickets from the GOP side.
Comment by just sayin' Wednesday, Mar 2, 11 @ 9:03 am
Rich -
The SJR ran a great piece on the pension system history detailing how lawmakers under-funded it almost from the get-go.
Madiar confirms what many people already knew: The Constitution says what it says.
Frankly, I’ve always thought that it was extremely odd that the business community would argue that contracts can be voided unilaterally. It’s unimaginable that a court would allow the state to break their side of the deal, because at the end of the day the state has taxing authority so they ALWAYS have an alternative to default: raising taxes.
Before the Tea Partiers get all riled up, lets be clear about something else: amending the Constitution to eliminate the Pension clause does not change a thing for folks who are currently in the pension system.
That said, I will continue to advocate for labor and lawmakers to come together and renegotiate the ramp-up legislation enacted in 1995.
It flies in the face of political reality and history to expect that we’ll be increasing pension contributions when state revenues are flat, squeezing funding for human services at a time when the people need it the most.
A more sensible approach would be to amend the pension ramp-up to keep payments flat when revenues are flat and dedicate revenue growth to pension payments when times are good. Republicans and Democrats should be happy with that: Democrats don’t have to cut human services and pension payment requirements will put pressure on the budget against the creation of new programs when revenue grows.
Schnorf, am I missing something?
Comment by Yellow Dog Democrat Wednesday, Mar 2, 11 @ 9:05 am
@Sue -
Those increases in contribution levels were collectively bargained.
Make no mistake: lawmakers still have plenty of leverage, because they can institute lay-offs.
There WILL be a deal, but it will be negotiated, and unlike Wisconsin, it won’t be crammed down someone’s throat.
I know its vogue to kick unions and their members in the teeth these days. Let’s not forget that it wasn’t the unions that caused the Wall Street crash and brought us to this point.
Comment by Yellow Dog Democrat Wednesday, Mar 2, 11 @ 9:10 am
in response to Steve Scnorf- it would have been great had the legislature and various Governors complied with the 95 law but what he is proposing would be akin to market timing at the worst possible intervals- adding more in good times when the markets are presumeably doing well and less in bad times whn the markets sell off- better to be consistent assuming the contributions are to be paid at all- the pension systems returns reflect the overall economy and putting more money in in good times and less in badtimes would not result in favorable market performance
Comment by Sue Wednesday, Mar 2, 11 @ 9:11 am
Wall Street cannot be blamed for the state of the pension plans- over time the returns have achieved the actuarial requirements- simply stated the underfunding is the result of the people we keep electing failing to comply with the obligation to make recommended contributions- rather then deal with the State’s budget issues head on, every Governor with the exception of Edgar failed to make sufficient contributions into the funds- Thompson was perhaps just as bad as Blago when it came to making the recommended contributions
Comment by Sue Wednesday, Mar 2, 11 @ 9:18 am
That’s why the Supremes get the fancy robes and get to sit on the risers. It will be their call, seemingly sooner rather than later now.
Comment by wordslinger Wednesday, Mar 2, 11 @ 9:18 am
Perhaps we should have a Hall of Shame listing various legislators and state bureaucrats who overpromised and underfunded the state pension systems over the years. We could look at it once in a while and weep. Of course, many of the culprits are probably still in state government.
Making very bad decisions doesn’t disqualify one for elective or state agency office in Illinois-especially in Illinois.
It seems to me that ending the defined benefit pension system here is not in the cards although proposing it allow the Republicans to avoid taking any tough stands. And lots of Republicans benefit from the pensions too. One tough issue— how much state employees should pay for this extraordinary perquisite, which is vanishing out in the real world of the global economy. I doubt there are any defined benefit pensions in China’s private sector. As there are few in ours.
Anyway, with Governor Pat at the collective bargaining table, taxpayers really won’t have a representative, because Governor Pat, as is well known, owes the unions his current job. Governor Pat and the unions will be at the same side of the table scratching each other’s backs. Any increase in pension premiums will be as low as they can get away with. So the funding problem will continue. And so will the “temporary” tax increase.
Comment by cassandra Wednesday, Mar 2, 11 @ 9:28 am
@Sue -
Wall Street CAN and SHOULD be blamed for the current state budget crisis.
But if you read the papers and listen to the politicians, they blame public servants.
Its not until you get to the fine print that you learn that state workers made their contributions to the pension system every month…it was the politicians who skipped out.
Comment by Yellow Dog Democrat Wednesday, Mar 2, 11 @ 9:36 am
BTW, Kudos to Madiar for his use of the word “welching.”
I bet you’d have to search pretty hard to find that term used in another legal opinion.
But if the suit fits, wear it.
Comment by Yellow Dog Democrat Wednesday, Mar 2, 11 @ 9:37 am
AG Madigan gets to argue it before the Supremes if it gets there before 2014… So it wont happen until spring 2014. Quinn signs as a lame duck and Lisa in gov mansion by the time it is argued. That’s my theory.
Comment by Peter Snarker Wednesday, Mar 2, 11 @ 9:38 am
Sorry, typo. “as”, not “a##”
Comment by Peter Snarker Wednesday, Mar 2, 11 @ 9:39 am
YDD, the good folks of Rhosllanerchrugog, Llangammarch Wells, Ystradgynlais and other towns in Wales might not agree, lol.
Comment by wordslinger Wednesday, Mar 2, 11 @ 9:44 am
Oh, and under even the Senate Dems opinion remaining merit comp are naked and hung out to twist in the wind. No union funded legal defense funds to challenge in court either.
Maybe merit comp attorneys with the state could in their furlough days put together the case.
oh, wait, on non-furlough days they are building the state case at AG.
Sigh
Comment by Peter Snarker Wednesday, Mar 2, 11 @ 9:45 am
It is not only the the Wall Street wreck that caused the continuing crisis with the pension system. It only accelerated the day of reckoning.
The chronic under-funding, benefit creep, early retirements, increased life expectancy and double dipping are just some of the reasons the funds are billions of dollars underfunded.
Many private corporations have realized that their pension promises were unsustainable. They managed to convert their pension plans to a more sustainable model. Why are there arguments that only the governmental pensions are not subject to similar revisions?
Comment by Plutocrat03 Wednesday, Mar 2, 11 @ 9:47 am
Pluto -
?Seriously?
?Why?
Bc of the constitution.
Comment by Peter Snarker Wednesday, Mar 2, 11 @ 9:53 am
So why can’t Illinois strip collective bargain rights and cancel its current contract with unions. Then there are no contractual agreements and no collective bargaining in Illinois and the change pension laws going forward for current employees?
Comment by Nick Name Wednesday, Mar 2, 11 @ 10:02 am
—”Kudos to Madiar for his use of the word “welching”.@ YDD—
Looks like Madiar may have recently seen Guys and Dolls, too. Or, has been reading CapFax.
Comment by Responsa Wednesday, Mar 2, 11 @ 10:03 am
I think you can, through collective bargaining, change the qualifying criteria– how you earn service credits, eliminating methods that are included in contracts allowing large jumps in salary in close-to-retirment years, and the amount current employees put into the system. Rich….last week you wrote that teachers contribute 9.4%. In the CBA in my district in states that the “board” makes the contribution. I would like to find out the truth. Do you have a source for your statement? Thanks.
Comment by Truth Seeker Wednesday, Mar 2, 11 @ 10:07 am
- So why can’t Illinois strip collective bargain rights and cancel its current contract with unions. -
Are you aware of what a contract is?
On a side note, do you want a job cleaning my apartment and doing my laundry and stuff? I’ll promise to pay you, but when you’ve finished everything I just won’t do it. If that’s the world you want to live in, I’m willing to let you.
Comment by Small Town Liberal Wednesday, Mar 2, 11 @ 10:08 am
When will Tom Cross trot out the GOP pension reform proposal? When will he convene the members for a discussion? When will he follow-up his words with actions?
Comment by Why Is He Hiding Under the Desk ? Wednesday, Mar 2, 11 @ 10:08 am
I guess I’m one of the 5% of state employees that is not in a union then Rich. Whatever bills dealing with state pensions tht get passed, I hope they give current employees time to decide whether or not they want to continue working for the state, so that those who are eligible to retire can do so under the old pension law. I’d like the effective date of any of these laws passed to give employees time to determine what they’d like to do. Also, if the bill is challenged in court, it’s effective date should slip until two months after the ruling if it is judged to be constitutional.
One other thing, if current employees are the target of these pending bills, do you think they should apply to all current employees? Even those close to retirement currently, or only to those with sufficient time to retirement such that they can make financial adjustments as necessary?
Comment by PublicServant Wednesday, Mar 2, 11 @ 10:10 am
Nick Name, this is the US, not Libya.
Comment by Rich Miller Wednesday, Mar 2, 11 @ 10:17 am
Something that has not surfaced here is the fact that union employees have not choice in whether or not to participate in their own retirement plans. This is not common in the private sector where there are often several options for employees to choose from, or decline to choose, for their own retirement. When I started with the state 22 years ago, I was given no alternative: EVERYONE participates. Why can there not be alternatives to the state retirement system for current employees? Especially those with less than 10 years of service? I don’t think that is against the constitution?
Comment by Anonymous Wednesday, Mar 2, 11 @ 10:34 am
–This is not common in the private sector where there are often several options for employees to choose from, or decline to choose, for their own retirement.–
Really? You have to participate in Social Security. Your employer may or may not offer 401K and/or profit-sharing. What else do you have?
Comment by wordslinger Wednesday, Mar 2, 11 @ 10:39 am
—AG Madigan gets to argue it before the Supremes if it gets there before 2014… So it wont happen until spring 2014. Quinn signs as a lame duck and Lisa in gov mansion by the time it is argued. That’s my theory. —
Peter, there is nothing for Quinn to sign here. The FOIA law has already been enacted and it is AG Madigan’s job to interpret new laws and provide counsel to state agencies (e.g. ISP). This legal opinion doesn’t help Madigan at all politically now or down the road in your scenario. This gives downstate dems and voters reason to not help her in a governor’s run and also gun lobbies reason to fund an opponent that much more.
Comment by Anon Wednesday, Mar 2, 11 @ 10:41 am
If Quinn is our negotiator, game over. The unions
win! Regardless of what he says he will, without a doubt cave.
Comment by mokenavince Wednesday, Mar 2, 11 @ 10:44 am
Please disregard my post @10:41, I got my threads mixed up.
Comment by Anon Wednesday, Mar 2, 11 @ 10:59 am
Anon -
I wasnt talking about FOIA and FOID, I was referring to AG Madigan arguing in front of Supreme Court a state law that stripped current employees pension benefits.
Comment by Peter Snarker Wednesday, Mar 2, 11 @ 11:00 am
Ok, so we know you can strip collective bargain rights through legislation (see Wisconsin). And I presume contracts expire right? So what happens if the state and unoins do not have a contract? Can’t future benefits then be reduced?
Comment by Nick Name Wednesday, Mar 2, 11 @ 11:05 am
What a great country when a middle school teacher in Springfield with 32 years teaching and a Masters degree can earn over $142,000 annually. Upon retirement this teacher will earn a pension of over $102,000 annually. When 80 years old they will have received over $2.5 million from the TRS. This is why what is happening in Wisconsin is so important. We have got to protect working people so they can earn their fair share. Go Wisconsion Unions.
Comment by Flaming Liberal Wednesday, Mar 2, 11 @ 11:07 am
Wordslinger - I participate in social security, too. Apparently, you missed my point. I will try again. State employees are not currently given any choice in whether or not they participate. Why can’t there be choices for them to pick from? And, I disagree with your statement that it isn’t common in the private sector. If you examine corporations with 50,000 or more employees (comparable to the state workforce) I believe you will see quite a few options.
Comment by Anonymous Wednesday, Mar 2, 11 @ 11:14 am
- If you examine corporations with 50,000 or more employees (comparable to the state workforce) I believe you will see quite a few options. -
Nope. I work for just such a company, there aren’t quite a few choices. We have 401k with a company match, you can choose not to put any money in it if you want to, but it’s pretty ignorant not to. There are a few different funds in the 401k, but that’s not the same as a different retirement plan. I believe the state has this through deferred compensation, but not being a state employee, I’m not sure. We also have a company paid pension plan, though it doesn’t work quite like the state’s defined benefit plan. Are you really griping about not having the choice to opt out of the state’s pension plan?
Comment by Small Town Liberal Wednesday, Mar 2, 11 @ 11:18 am
Oh, one more thing, I just started my current job a few months ago. The one I just left was also a very large company and had the exact same setup as this one.
Comment by Small Town Liberal Wednesday, Mar 2, 11 @ 11:20 am
Flaming @ 11:07
Please provide a way for us to validate your claim of a teacher in Springfield making $142,000.
Comment by Go Wisconsin Dems Wednesday, Mar 2, 11 @ 11:34 am
Teacher Salaries…
http://isbe.net/research/htmls/teacher_service_record.htm
Comment by Anonymous Wednesday, Mar 2, 11 @ 12:52 pm
Didn’t think so.
In less than 5 minutes I was able to find the April 2010 study of Illinois teacher’s salaries for 2009-2010. This is a large document with figures for all school districts at different school enrollment levels.
Springfield School District
Master’s degree, 34 years, maximum salary $59,458.
Master’s degree plus 48 semester hours, maximum salary $73,664.
Comment by Go Wisconsin Dems Wednesday, Mar 2, 11 @ 12:54 pm
There is indeed a listing for a Springfield middle school teacher making $142,000. It does however far exceed the actual salary for that position and is not mirrored by other Springfield District teachers.
It should have been obvious to anonymous that it was either 1) a mistake in the data or 2) due to some other additional compensation (lawsuit payment).
Comment by Gish Wednesday, Mar 2, 11 @ 2:10 pm
First let’s change the elected officials pension to what the avg state worker gets at 20 years, 32% instead of the elected officials 85% then we can talk and make the changes for theirs the exact same - of course I’ll wait to see pigs fly first
Comment by Let's Go Wednesday, Mar 2, 11 @ 2:49 pm
Since the salary listing is a big Excel spreadsheet, I was able to do some sorting and this is what I found (not counting individuals with less than $100 in earnings): Average salary for teachers with Bacalaureates Degree $50,742, Masters Degree $70,248, C.A.S. Specailist 6 Year Certificate $80,616, and Doctorate Degree $83,748. It is interesting to note that there are alot of high paid Physical Education and Drivers Education teachers, which I would guess are the football or basketball coaches.
Comment by A Voter Wednesday, Mar 2, 11 @ 2:49 pm
One huge positive Step the Governor (Jello man) could take with support of the legislature which would drive up their poll numbers is to take a page out of Governor Cuomo’s plan to limit administrative salaries- Illinois has literally thousands of administrators making anywhere from 150 to 350K all of whom drive up the pension costs- Cuomo proposes limiting salaries to no more then 175 for large school districts and less for smaller ones- Salary caps wouldn’t violate the pension code since it would limit salaries not the percentage of salaries creditable for pension service- Quinn would be a hero overnight if he limited what all of those school districts, municipalities and governmental Boards pay their leaders- think Metra
Comment by Sue Wednesday, Mar 2, 11 @ 4:44 pm
Sue, general governmental bodies and municipalities don’t pay thousands of their employees salaries of $150-$350k. Universities and some public schools may, though I don’t know if it’s “thousands”. Don’t mix apples and oranges.
BTW, the GA has already addressed the pension results of those sorts of salaries with the reform package already law.
Comment by steve schnorf Wednesday, Mar 2, 11 @ 4:52 pm
–Illinois has literally thousands of administrators making anywhere from 150 to 350K all of whom drive up the pension costs–
Can you give us a harder number on the “thousands” of “administrators” making that coin?
Comment by wordslinger Wednesday, Mar 2, 11 @ 5:06 pm
I guess if they do away with collective bargining that means state employees can STRIKE? Hmmm. There are not many employees left, most are working 3 jobs and getting paid for one. The do more with less thing they got going on now. And the power tripping of the upper managers is unbelievable. Threatening in hard economic times always brings out the best in management I guess. I miss the late 90s and early 2000s when times were not so bad.
Comment by Ain't No Justice Wednesday, Mar 2, 11 @ 6:08 pm
Study I saw showed 1/10 of 1% of illinois municipal retirement fund annuitants receive a pension of $100,000 and over. The vast majority, 66%, receive less than $20,000 per year. At the current contribution rate, it would take an employee making $50,000 year, about 30 years of service to reach that level.
Comment by Fosduck G. Wednesday, Mar 2, 11 @ 6:27 pm
However, elected officials under the elected county officials system, earning $50,000/ year, can get a $20,000 per year pension after only 12 years. The elected officials, not the employees, need to be held accountable.
Comment by Fosduck G. Wednesday, Mar 2, 11 @ 6:33 pm
Simple solution. Treat elected officials the same as real workers.
Comment by Plutocrat03 Wednesday, Mar 2, 11 @ 8:11 pm
I guess as long as the employees have to run for their jobs every 2 or 4 years that might be fair
Comment by steve schnorf Wednesday, Mar 2, 11 @ 8:32 pm
===Treat elected officials the same as real workers.===
Sounds good until you think they would have civil service protection and could join a union and then nobody would ever leave. [/snark]
Comment by Rich Miller Wednesday, Mar 2, 11 @ 10:47 pm
Teachers need to negotiate away receiving credit for the unconscionable salaries paid some in the suburbs. Some classroom teachers are making $180,000 or more, are qualified for a $145,000 taxpayer supported pension starting at age 55 is ridiculous, and gives cause for every taxpayer to be outraged. Negotiate away the excess, and and make the “trade off” reducing the new retirement age back to 62–in other words the old 55 (retirement) becomes 62, and the old 60 (3% cost of living) becomes 67. The outrageous excesses are putting all our pensions in danger! Any teacher already qualified for a pension in excess of $120,000 should agree to have their entitlement frozen at their current level, and instructed to provide for their own 401 or IRA with their high salaries from this point forward. If you do your homework you learn that retirees use all of their contributions and interest earned by the end of their 5th year retired, and the system cannot sustain the ridiculous pensions that were never envisioned when TRS was established. The above numbers would generate a pension of over $3,000,000 in a normal lifespan–does anyone really think that is deserved or justified? The IEA has totally failed its membership in not pro-actively addressing this obvious flaw, and now when they are confronted with the numbers they are acting like the kid who got caught with their hand in the cookie jar!
Comment by Dragonfly Friday, Mar 4, 11 @ 10:34 am