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The Tribune looks back

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Illinois

* We’ve discussed this several times before, but it’s still good to see the Tribune take a look at the history of how Constitutional Convention delegates devised the pension benefits protection clause…

“If a police officer accepted employment under a provision where he was entitled to retire at two-thirds of his salary after 20 years of service, that could not subsequently be changed to say he was entitled to only one-third of his salary after 30 years of service, or perhaps entitled to nothing,” said Helen Kinney, of Hinsdale, a Republican delegate to the convention drafting the new charter and one of four lead sponsors of the pension clause.

The debate was whether to define pension benefits as “an enforceable contractual relationship” that “shall not be diminished or impaired.” After hours, the convention voted 57-36 in favor of adding the language to the broader constitutional draft.

Why they did it…

Believe it or not, the state’s key pension funds were in almost as bad financial shape back then as they are now, and for the same reason: a chronic failure by lawmakers to pay enough money into the funds to cover projected pensions costs and keep them financially sound.

Go read the whole thing.

* Zorn’s take…

I’ve earlier made the point that this vital article underscores, which is that those crafting the constitution ere not making airy, gauzy feel-good promises, but attempting to prevent future lawmakers from succumbing to the inevitable, powerful temptation to balance the state’s books by reneging on promises they’d already made in their labor agreements.

The idea some are floating that we must now go back on these promises because the state’s in a real financial bind miss the point that we’re in exactly the sort of pickle that the framers envisioned.

* And despite what someone is quoted as saying in the Trib’s story, it wasn’t just the Con-Con debate that can be relied on here. The explanation of that passage to voters who approved the new Constitution was also crucial…

The Convention stated in its official text and explanation of the proposed Constitution that under the Pension Clause “provisions of state and local governmental pension and retirement systems shall not have their benefits reduced.” And, “membership in such systems shall be a valid contractual relationship.”

The Convention’s official explanation also stated that the Clause was a new section “and self-explanatory.” The Convention’s official text and explanation was mailed to each registered voter in Illinois and published in newspapers throughout the State prior to the special referendum election held in December 1970 to approve the proposed Constitution

posted by Rich Miller
Monday, Sep 23, 13 @ 11:20 am

Comments

One of the key facts in the current pension debate the Trib got correct:

“the state’s key pension funds were in almost as bad financial shape back then as they are now”

It is why some believe that with the leveling off of the pension ramp that the annual payments are now more doable which makes the fiscal crisis hysteria seem overblown.

Comment by Cassiopeia Monday, Sep 23, 13 @ 11:29 am
And that history and debate is exactly why any impartial judge will have to toss out most of the proposed pension ‘reforms’.

Comment by RNUG Monday, Sep 23, 13 @ 11:29 am
Here’s some of the original 1970 discussion:

http://illinoisissues.uis.edu/archives/2013/02/Concon.html

Comment by RNUG Monday, Sep 23, 13 @ 11:36 am
Hence: not only will the income tax not expire, but it will probably have to be bumped up a bit.

Comment by Mmmmmmm Monday, Sep 23, 13 @ 11:55 am
Heresy, heresy, how could the Ivory Tower let such heretical views be printed in the paper.

Comment by Norseman Monday, Sep 23, 13 @ 11:55 am
It seems the level of underfunding of the pension funds are similar to the 70’s, but what about the overall financial condition of the state now compared to the 70’s?

I will allow someone older who was alive back then comment on this as I am curious.

For example, if the state has plenty of money floating around, the level of underfunding is less relevant than when a state is absolutely cash strapped and has the same level of underfunding.

Comment by skeptical spectacle Monday, Sep 23, 13 @ 11:58 am
“Those who cannot remember the past are doomed to repeat it.” — George Santayana

“Oye Como Va.” — Carlos Santana

Comment by 47th Ward Monday, Sep 23, 13 @ 12:07 pm
The rule of law vs. the political system. Unless the courts bye the “police powers” argument (seems very unlikely) or create some contorted ruling out of thin air, pensions will not be diminished. The best chance the GA has is to construct something where they gamble on future inflation and reduce the fixed COLA for a COLA that is driven by the CPI. They could argue that consideration was given (protect against higher rates of inflation) in exchange for reducing the fixed 3% COLA. I don’t see how you change the compounding. What I would like RNUG and other legal minds better then mind to way in on is this…..can you change a contract without giving choice? Is forcing a change with “consideration” a legal option in contracts.

Comment by facts are stubborn things Monday, Sep 23, 13 @ 12:08 pm
skeptical spectacle @ 11:58 am:

Maybe not to exactly the same degree, but the State was somewhat revenue restricted back then also. That is why there was a new income tax being proposed in the 1970 Con Con to replace various other revenue sources, including the hated personal property tax. Prior to 1970, there was no individual state income tax of any kind.

The new income tax brought in additional revenue (as it was designed to) compared to the previous sources. But when the GA ran through all the ‘extra’ money by 1974, they again started shorting the pension funds. That led to the landmark IFT v Lindberg case ruling the GA could fund the pensions in whatever manner the GA chose to … which, to gloss over 40 years, got us to where we are today.

Comment by RNUG Monday, Sep 23, 13 @ 12:11 pm
facts are stubborn things @ 12:08 pm:

I’m not a lawyer, so I’m not going to answer that one.

Comment by RNUG Monday, Sep 23, 13 @ 12:16 pm
@RNUG - Monday, Sep 23, 13 @ 12:16 pm:

Fair enough. Seems like if the Pension committee goes down the road of trying to reduce the fixed COLA for something more tied to inflation this question of wether or not choice must be a part of “consideration” may be important.

Comment by facts are stubborn things Monday, Sep 23, 13 @ 12:27 pm
Thank you RNUG for your link to the Convention discussion that is part of the protection that some lawmakers seek to ignore. I’m glad that Madigan voted “Aye” in 1970. What has happened? I can’t believe that so many of our legislators can’t understand what the intent and plain language of pension protections are in Illinois’ Constitution!

From the convention …
MRS. KINNEY: No, I am just commenting, Mr. President, thank you. I might say that Mr. Green and I in proposing this amendment consulted with the counsel to Mr. Whalen’s committee, and the issue of proprietary rights perhaps being more advantageous was not raised at that time or not at all until it was commented upon upon the floor.

But I would say that the New York Constitution adopted such a provision in 1938, and this amendment is substantially the same language as the New York Constitution presently has. The thrust of it is that people who do accept employment will not find at a future time that they are not entitled to the benefits they thought they were when they accepted the employment.

Comment by My Thoughts For Whatever Monday, Sep 23, 13 @ 12:30 pm
==Prior to 1970, there was no individual state income tax of any kind.==

The income tax was enacted in 1969, and was upheld against challenges brought under the 1870 constitution.

Comment by Anon. Monday, Sep 23, 13 @ 12:31 pm
I can’t seem to find the text of the constitution where it says that pension benefits shall not be diminished or impaired unless the State has made a mess of itself.

Comment by Old Timer Monday, Sep 23, 13 @ 12:34 pm
@My Thoughts For Whatever - Monday, Sep 23, 13 @ 12:30 pm:

I bleive in private they actually do understand. What we are seeing play out is a political solution wich is going to take may twists and turns and perhaps even a bill passed someday that will be found unconstitutional by the ISC. I bleive for the many legislatures that is fine with them…they are seeking political cover and trying to avoide accountability for the sins of the past.

I apprecited what you and RNUG have share on the con con minutes.

Comment by facts are stubborn things Monday, Sep 23, 13 @ 12:37 pm
The Tribune reports on the history of the pension clause, which seems bad for the editorial board’s position, so what will the Tribune’s editorial board excuse be for continued whining and hacking away at pensions? A) We don’t read our paper so we don’t about this article B) The liberal media is at it again C) We demand a massive expansion of government powers to break contracts and constitutions

Comment by Precinct Captain Monday, Sep 23, 13 @ 12:56 pm
Q: What did Republicans get at ConCon for giving the pension clause?
A: Flat income tax, corporate tax a fixed ratio of personal income tax, abolishment of personal property tax.

Comment by Kwark Monday, Sep 23, 13 @ 1:08 pm
@RNUG,

Thanks for reminding me of the IFT vs. Lindberg case!

Of course, this and other similar decision may or may not mean anything to the ISC.

Again, I wish I knew their ideological views or any personal gains that might be involved. I really have no clue.

We shall perhaps know relatively soon in the health insurance issue. If they rule that health insurance is not a retirement ‘benefit’ when the words retirement and benefits are clearly stated in the IC, then that tells me all I need to know

Comment by Federalist Monday, Sep 23, 13 @ 1:09 pm
===What did Republicans get at ConCon for giving the pension clause?===

I doubt anything. If you read the story, the provision was sponsored by several Republicans.

Comment by Rich Miller Monday, Sep 23, 13 @ 1:13 pm
You can thank Tito Puente, not Santana, for writing Oye Como Va. Maybe the Trib realizes the plan won’t fly in court so is switching to an amend the constitution strategy. Of course, that might open up the progressive income tax so be careful what you ask for.

Comment by anon Monday, Sep 23, 13 @ 1:25 pm
@Precinct Captain -

You, I and others may not agree with the Tribune ed board position, but give them a bit more credit. They are journalists.

i am much more interested in hearing what biz leaders beside Ty Fahner have to say. He seems interested in scuttling any solution besides his own, but it seems to me there are those with the sense to realize that 90 percent of a loaf is better than none, or even half.

Comment by Juvenal Monday, Sep 23, 13 @ 1:27 pm
@ facts are stubborn things

There are numerous ways a contract can be set aside when dealing in a commercial context. Impossibility of performance, fraud in the formation, mutual mistake of contracting parties, inadequate consideration, bankruptcy and the list goes on and on.
Which, if any, of the long recognized doctrines to set aside contracts may apply in the government pension arena is anyone’s guess, especially with the constitutional overlay and the unavoidable conflict of elected state judges, themselves entitled to government pensions, deciding the issue.
In my view, the major problem to resolving the issue is that the taxpayors left on the hook do not have an unbiased advocate in the process. Even if the issue would somehow escape to federal courts, the jurists there also are pensioned and may be inclined to avoid the issue or be colored in their decision in order to avoid prejudice when the pension beast inevitably reaches the federal arena.
The pervasiveness of the issue throughout government at all levels and the entrenched bias agianst meaningful change has led some commentators to label our government as a “pensionocracy.”

Comment by Cook County Commoner Monday, Sep 23, 13 @ 1:30 pm
Anon. @ 12:31 pm:

Thanks for the correction.

Comment by RNUG Monday, Sep 23, 13 @ 1:30 pm
How does the Tribune editorial board address this article since they would seem to discount the facts of that time?

I have to say that the article came as quite a shock to me. I’ve got a true case of the vapors and am currently lying down.

Comment by dupage dan Monday, Sep 23, 13 @ 1:32 pm
“I’m glad that Madigan voted ‘Aye’ in 1970.”

Madigan also voted in the Athenian assembly to oppose Philip II of Macedon. God that guy has been around a long time.

Comment by Grandson of Man Monday, Sep 23, 13 @ 1:53 pm
oops, I was always bad at math, make that 40 plus years…

Comment by Loop Lady Monday, Sep 23, 13 @ 2:02 pm
From my memory of reading the 1970 Con Con transcripts, the delegates broke out what they considered vital issues for individual approval by the voters. I wanted to check my memory since I got a couple of years off on the income tax.

I just went and looked at the sample ballot included in the offical transcript record (175 MB if you want to download and read it all yourself) to refresh my memory. I’ve read it before so I could find what I wanted fairly easily.

The flat rate and individual / corporate ratio of th eincome tax were part of the revision. It was not separately submitted to the voters.

Pension protection was also just part of the overall revised constitution, and not a separate item submitted to the voters. I do remember reading there was a discussion on whether it should be, and that was voted down.

The choice to the voter was:

Approval / rejection of the revised Constitution

The individual choices submitted to the voters:

1 - whether representatives would be from single member districts or multi-member districts with culmulative voting

2 - whether judges would be elected or appointed

3 - abolishing the death penalty

4 - lowering voting age to 18

Comment by RNUG Monday, Sep 23, 13 @ 2:13 pm
==Impossibility of performance, fraud in the formation, mutual mistake of contracting parties, inadequate consideration, bankruptcy and the list goes on and on.==

None of the things listed remotely applies to pensions. The performance is not impossible or even difficult in itself. What is difficult is maintaining current levels of discretionary spending in other areas, without increasing taxes, while paying the pensions. The State has many other choices that do not involve breach of contract.

Comment by Anon. Monday, Sep 23, 13 @ 2:29 pm
Just stumbled across an e-book published by the Tribune called “Pension Games: Bad Decisions and Back Room Deals.” Apparently a lengthy dose of Civic Committee fodder hasn’t sold well as Barnes and Noble has cut the price from $4.99 to $2.99. I think I will save that $2.99 for a donation to a pension protection litigation fund.

Comment by anon Monday, Sep 23, 13 @ 2:37 pm
@Cook County Commoner - Monday, Sep 23, 13 @ 1:30 pm:

Thank you for the info and your thoughts. I would offer that the legislature is an advocate for the taxpayer. The legislature is persuing (yet to see any results) a bill that would reduce/diminish promised pension benifits. This would seem to be on behalf of the taxpayer/citizen through our republic form of government. As I know you are aware, those of us on state pensions and those who work for the state are taxpayers also. Not sure how you would create any other party that could represent the “taxpayer” which is anything but a likeminded entity.

The taxpayer has been receiving the benifits of billions of pension dollars that were deverted from the pension system and went to services and programs. I think the fact that the pensions system is so underfunded speaks to the fact that we are anything but a “pensionocracy”. We are blue state that wants to be taxed as a red state. To avoid that issue our GA and Gov. spent pension dollars to avoid dealing with a structual deficit. Now they do not want held accountable so they need to turn the pension system into the villian and citizens against citizens. The issue is simple - do the things that are legal to fix the pension system and then if people don’t like it vote the bums out. That way we remain a land of laws and a decent state that honers it’s comitments. I can not beleive we are even discusing changing retirment benfits for those who have alrady retired…crossed the finish line and have no way to reverse their decision.

Comment by facts are stubborn things Monday, Sep 23, 13 @ 2:47 pm
Can anyone explain how an Attorney General could argue to the Ill. Supreme Ct., in good conscience, that there is nothing in the law that creates a contractual right to health care benefits for retirees.

Comment by Martin Monday, Sep 23, 13 @ 2:58 pm
My Thoughts For Whatever @ 12:30 pm
said “… What has happened? …

Two answers that are pretty much the same thing:

Politics and Self-Preservation

Comment by RNUG Monday, Sep 23, 13 @ 3:25 pm
==Can anyone explain how an Attorney General could argue to the Ill. Supreme Ct., in good conscience, that there is nothing in the law that creates a contractual right to health care benefits for retirees.==

The old law didn’t say “contract” and didn’t say “this means you.” Or, if you believe Judge Narduli, because the Constitution only protects “pension benefits,” and health insurance isn’t a pension. Since the Constitution doesn’t say “pension benefits,” I can see a problem with making that argument with a straight face, much less a good conscience.

Comment by Anon. Monday, Sep 23, 13 @ 3:38 pm
Someone on here not long ago stated that over the next 15 or 20 years, our state, if nothing “meaningful” is done, will become not much more than gigantic pension system, as pension costs become a larger percentage of the annual budget.

Regardless of how one feels about pension reform, this is difficult to dispute, and creates a great deal of uneasiness and nausea about the role of the state in the lives of its citizens.

Comment by skeptical spectacle Monday, Sep 23, 13 @ 4:12 pm
===What did Republicans get at ConCon for giving the pension clause?===

–I doubt anything. If you read the story, the provision was sponsored by several Republicans.–

I guess you could ask Whalen, Wolff & other participants in the negotiaions. That is the way Taylor Pensoneau tells it in his bio of Ogilvie. And it certainly explains why voters were not given the choice and these items were presented as a package.

As for who introduced the provision, I am reminded of the conversation between Ogilvie and GOP leader Russ Arrington on the measure authorizing the state income tax: Arrington: “What fool do you think you’re going to get to sponsor the bill?” Ogilvie: “You, Russ.” And that did help get it passed.

Comment by Kwark Monday, Sep 23, 13 @ 4:24 pm
===this is difficult to dispute===

Actually, it is. We’ve climbed the steepest part of the ramp.

Comment by Rich Miller Monday, Sep 23, 13 @ 4:44 pm
skeptical spectacle @ 4:12 pm:

If you re-fi’d the current obligation to be level payments, it would be more than today but not all that bad, about the same amount as where the 1995 ramp will have us in a couple of years. Of course, it would require the State to raise taxes to pay for all the other things the State wants to pay for that the State has been using the pension money for.

The Martire plan is probably the best proposal out there right now to raise revenue. Here’s Martire’s proposal:

http://www.chicagobusiness.com/article/20130116/OPINION/130119858/heres-an-actual-honest-to-goodness-pension-fix

You can read more of Ralph Martire’s thoughts and budget analysis here:

http://www.ctbaonline.org/

Comment by RNUG Monday, Sep 23, 13 @ 4:45 pm
== over the next 15 or 20 years, our state, if nothing “meaningful” is done, will become not much more than gigantic pension system ==

There are two tiers to state pensions now. By 2030, those in the second tier will be a majority of the workers. Their deal is much less costly for the state, so state obligations will actually decline over time.

Comment by Anonymous Monday, Sep 23, 13 @ 5:53 pm
The answer is: back then, there were many Republicans who actually were moderate and had sense. Think Susan Catania - although she wasn’t at the convention, she is the type if Republican I’m referring to.

Comment by low level Monday, Sep 23, 13 @ 6:00 pm