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* As with House Speaker Madigan’s original SB!, the pension reform conference committee report has a preamble explaining the reasoning behind the bill…
Section 1. Legislative statement.
At the time of passage of this amendatory Act of the 98th General Assembly, Illinois has both atypically large debts and structural budgetary imbalances that will, unless addressed by the General Assembly, lead to even greater and rapidly growing debts and deficits. Already, Illinois has the lowest credit rating of any state, and it faces the prospect of future credit downgrades that will further increase the high cost of borrowing.
The State has taken significant action to address these fiscal troubles, including, but not limited to, increasing the income tax and reducing pension benefits for future employees.
Further, the State has enacted a series of budgets over the last several fiscal years that resulted in deep cuts to important discretionary programs that are essential to the people of Illinois.
At the time of passage of this amendatory Act of the 98th General Assembly, the State’s retirement systems have unfunded actuarially accrued liabilities of approximately $100 billion.
Meanwhile, the State’s annual pension contribution has substantially increased in recent years, and will continue to increase in coming years. The General Assembly recognizes that without significant pension reform, the unfunded liability and the State’s pension contribution will continue to grow, and further burden the fiscal stability of both the State and its retirement systems.
This amendatory Act of the 98th General Assembly is intended to address the fiscal issues facing the State and its retirement systems in a manner that is feasible, consistent with the Illinois Constitution, and advantageous to both the taxpayers and employees impacted by these changes. Having considered other alternatives that would not involve changes to the retirement systems, the General Assembly has determined that the fiscal problems facing the State and its retirement systems cannot be solved without making some changes to the structure of the retirement systems. As a result, this amendatory Act requires more fiscal responsibility of the State, while minimizing the impact on current and retired State employees.
Going forward, the automatic annual increase in retirement annuity will be based on a participant’s years of service to the State and inflation, which more accurately reflects changes in the cost of living. For participants who have yet to receive an annuity, a pensionable salary cap will be imposed; however, it will only impact future salary increases that exceed a cap. Those workers 45 years of age and younger will be required to work an additional 4 months for each year under 46, which results in a minimal increase in retirement age given that the life expectancy for a 45 year old is 87 years of age. Current employees will receive a 1% reduction in required employee contributions.
With these changes, the State can adopt an actuarially sound funding formula that will result in the pension systems achieving 100% funding no later than 2044. The State will also make additional contributions that will considerably aid in reducing the unfunded actuarially accrued liability.
The General Assembly finds that this amendatory Act of the 98th General Assembly will lead to fiscal stability for the State and its pension systems.
Discuss.
posted by Rich Miller
Monday, Dec 2, 13 @ 9:17 am
Sorry, comments are closed at this time.
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The primary difference in this preamble and the SB1 preamble seems to be the lack of a “fiscal emergency” necessitating an overriding action of a constitutional provision, and instead stating that the bill is constitutional without that consideration.
Comment by Six Degrees of Separation Monday, Dec 2, 13 @ 9:26 am
Are Judges included in the new pension deal?
Comment by Anon Monday, Dec 2, 13 @ 9:27 am
This flies in the face of the old adage: “A lack of planning on your part does not constitute an emergency on my part.” That is likely to be the response when this gets to the courts.
The Speaker has been in the driver’s seat for somewhere in the neighborhood of 40 years. His goal has clearly never been to stabilize the pension systems. Why does he suddenly decide it’s an emergency.
Comment by Pot calling kettle Monday, Dec 2, 13 @ 9:28 am
And the fools say blah blah blah.
Comment by pensioner Monday, Dec 2, 13 @ 9:29 am
What Six said. No “police powers.” The GA is telling the courts that the legislation is “consistent with the Constitution.” We’ll see.
Comment by wordslinger Monday, Dec 2, 13 @ 9:36 am
“Having considered other alternatives that would not require changes to the retirement systems…” Really? And what were those exactly? It seems to me that any options that didn’t involve stiffing retirees was never considered. At least it would have been more honest just to say we know we are the ones who created this so-called “crisis”, but have decided that the path of least resistance is to take it out of the hides of both active and retired public employees. Merry Christmas.
Comment by kimocat Monday, Dec 2, 13 @ 9:42 am
I am a retired, receiving a TRS pension. After reading the TRS summary of the changes Rich provided (thank you Rich!) I am actually less critical of this than I was.
Here is why:
1. The bill changes to EAN payments - putting the bulk of the savings at the back of the 30 years.
2. Almost 1/2 of the State “savings” in cost is not related to benefit cuts. The payment changes make a big difference.
That said - it is still unconstitutional. It diminishes already earned benefits (my annual increase will decrease from 3% to 0.8%). A better argument could have been made if it only diminished future benefits for current employees - but that would have really cut into the savings. Even that is likely unconstitutional.
The preamble still contains language that would rationalize the State use of police power to diminish the contract. “Having considered other alternatives” and “cannot be solved without making some structural change to the retirement system” all seem to be justifying this as reasonable and necessary for an important public purpose.
Comment by archimedes Monday, Dec 2, 13 @ 9:43 am
Just to start the comments ball rolling, here’s my situation.
State non-management employee in my 70s, was hoping to retire in a few years. Based on what’s been released on the COLA changes, my expected lifetime pension payments will decrease between $213,900 and $226,400 depending on what the CPI is in future years.
Of course, if the legislators get away with this theft, I expect they’ll be back again for more in five or ten years.
Comment by Curmudgeon Monday, Dec 2, 13 @ 9:45 am
No more talk is necessary. I’ve called my legislators and asked them to vote against this immoral and unconstitutional theft of my earned pension. The preamble is meaningless. Other options exist that are constitutional. Some require true “heavy lifting” on the part of legislators, and passing an unconstitutional bill is nothing approaching heavy lifting, it is, in affect, the current legislature joining the ranks of those past legislatures that have abdicated their responsibilities to pay their bills like I and hopefully the rest of you do, and declaring that “we’ve tried and this is what we came up with” will hopefully be met with a “Nope. Unconstitutional. Try harder.” by the courts, IF it passes.
Also, the 100% funding goal is totally unnecessary for public pensions since the state exists in perpetuity and cannot declare bankruptcy. And why 30 years since it took us 60+ years of “borrowing” state employee funds to get us into this mess in the first place?
My legislators know how I feel, and the reasons behind those feelings. Call yours and let them know that you pay your debts and that you expect the state to pay theirs too. Tell them to vote no on this pension theft bill.
Comment by PublicServant Monday, Dec 2, 13 @ 9:49 am
To the Post,
Saying something is Constitutional in intent does not manke it absolutely so. All the detractors or nay sayers or even those in “100%” in favor of everything in this, and since its a compromise, that group is razor thin at best, everyone will be waiting for the next step, and the courts will see if it is constitutional.
To the Weekend,
Thanks to Rich for “keeping the lights on” and the updates. You posts and analysis of what was being said, nor not, made all the updates even more compelling. The “story behind the story” makes all the posts more than just links “just because”. Appreciate the work on a “holiday weekend”.
To “RNUG”, well done. Another set of “eyes” on things is always good, and you did yourself and the analysis a solid. “RNUG”, you and quite a few others keep me reading and learning, and not posting and looking foolish about Pensions. Thanks for your “Take” and cool move on Rich’s part to include you.
Thanks to you both.
Comment by Oswego Willy Monday, Dec 2, 13 @ 9:50 am
“Meanwhile, the State’s annual pension contribution has substantially increased in recent years, and will continue to increase in coming years.”
That’s what happens when skip out on payments for many years and have to play catch up now!
Comment by Rusty618 Monday, Dec 2, 13 @ 9:50 am
Thanks, Pot (9:28 a.m.). I didn’t know that adage and it does seem to fit the current situation completely.
Comment by UIC Guy Monday, Dec 2, 13 @ 9:53 am
Like Willy, I appreciated the updates over a busy holiday weekend.
Thanks.
Comment by Wensicia Monday, Dec 2, 13 @ 9:54 am
So now TRS will punish for Social Security as Social Security punishes for TRS with WEP and GPO.
Really? How many ways can you beat someone?
Comment by Griz Monday, Dec 2, 13 @ 9:55 am
==With these changes, the State can adopt an actuarially sound funding formula that will result in the pension systems achieving 100% funding no later than 2044.==
Oh, really? Wasn’t that the plan with all of the previous “fixes”? This flies in the face of both reason and history.
Comment by Pot calling kettle Monday, Dec 2, 13 @ 9:56 am
“We’re broke, broke I say!
Meanwhile, we are busy finding revenue streams to pay for a new, multi-billion dollar capital bill.
That new bill may or may not include bronzed doors for the governor’s mansion, to match those on the capitol building.”
Comment by Formerly Known As... Monday, Dec 2, 13 @ 10:05 am
Kudos and thank you to RNUG for his quick analysis this weekend.
Take it to the court house. It’s not as black and white as many wish it were.
Comment by walkinfool Monday, Dec 2, 13 @ 10:08 am
The City of San Jose, California passed an ordinance containing pension reform similar to the proposed Illinois legislation. Lawsuits were filed in State and Federal Courts claiming, among other things, that the ordinance is a violation of Due Process and the California Constitutional Contracts Clause as well as Federal Law. Though there are differences between California and Illinois, the San Jose litigation will be of guidance for both sides in Illinois pension reform litigation. There was an article discussing San Jose pension reform in a Wall Street Journal article several days ago. The California court is expected to rule in several weeks.
For those who enjoy reading legal documents, all Pleadings, Motions and Briefs are available at the San Jose City Attorney website, including filings by AFSCME.
http://www.sanjoseca.gov/index.aspx?NID=3182
AFSCME Local 101 Post Trial Brief:
http://www.sanjoseca.gov/DocumentCenter/View/21247
City’s Post Trial Brief:
http://www.sanjoseca.gov/DocumentCenter/View/21250
Comment by Samurai Monday, Dec 2, 13 @ 10:09 am
Really ??? In fact the income tax increase is currently set to expire. If the “state” (actually the legislators who are more worried about their political futures than solving problems) was actually doing what was necessary to resolve the issue, revenue would be part of the discussion. The “pension reform” is now, and has always been, not focused on a fair solution but on winning the next election. Everyone wants to blame the unions and lazy mooching stae employees. But the pension mess has existed long before the state ever had unionized employees. The problem was so serious that the 1970 con-con committee, who wrote the current Illinois Constitution, foresaw the current dilema and wrote constitutional protections into the law. MJM was part of that process. State employees and retirees are protesting loudly, except for a sudden supicious late deal with Cullerton, the voices of those affected have been excluded from the process. The law to be voted on is clearly unconstitutional, and the arguments that are in the preamble to this bill were why the constitutional provision to protect pensions in there in the first place. The legislators cannot with any credibility skip the pension payments needed to adequately fund the pension then plead poverty when it blows up in their faces. They need to uses revenue solutions and further cuts to meet the constitutional protection. The citizens of Illinois have benefited from programs paid for with money that should have gone into the pension system. Maybe when they have to pay more taxes to fix the problem they’ll finally take a look at some of these so called leaders and remove them from office.
“The State has taken significant action to address these fiscal troubles, including, but not limited to, increasing the income tax and reducing pension benefits for future employees.”
Comment by AFSCME Steward Monday, Dec 2, 13 @ 10:09 am
The bottom line: in order to get the level of savings desired, the proposal diminishes/impairs pensions. The more savings, the more diminishment.
Even the most ardent conspiracy theorist has to wonder how the Supremes can can get around the diminishment language, however much they might want to help out Madigan and Quinn. So all this talk about “consideration” is just silly. Where in the constitution does it talk about consideration with respect to pensions.
Comment by Cassandra Monday, Dec 2, 13 @ 10:12 am
Yeah, Rich invested as much time and effort in pensions over the long weekend as I did in eating, movies and football (Saturday football was epic, with the Hawks to boot).
I especially enjoyed the Tribbies giving up their editorial page to Ken Griffin without identifying him as Rauner’s boy. I imagine some of the Tribbies felt the need for a shower after that.
Of course, at this point in their history, the Tribbies aren’t going to honk off any hedgies in the billionaire boys club. They are for sale,and Griffin is a potential buyer.
“Why, yes, Mr. Griffin, you can have our editorial pages. In fact, you can have the whole rag for the low, low price of….”
Comment by wordslinger Monday, Dec 2, 13 @ 10:15 am
I am not a lawyer, but I do know this about contracts, one party cannot set the terms of the contract for both sides, and then sign it for them. In order for there to be consideration there needs to be negotiation and agreement on the part of both parties. This so called consideration is a farce.
“So all this talk about “consideration” is just silly. Where in the constitution does it talk about consideration with respect to pensions.”
Comment by AFSCME Steward Monday, Dec 2, 13 @ 10:17 am
Apologize if everyone thinks this is off-topic. Setting aside the questions about what the courts will do — I’m curious what impact readers think this would have on future contract negotiations — not just union contracts. What would a contract with the State of Illinois mean if the Legislature can simply rewrite the provisions anytime in the future?
Comment by Out Here In The Middle Monday, Dec 2, 13 @ 10:19 am
Seems like a lot of work went into the preamble (and the new bill too), but to me it doesn’t change the fundamental issues and it’s still unconstitutional. A rational judge will say: “OK, you screwed up for 30-40 years; you have fixed the system going forward with new hires; in the meantime you need to either raise taxes temporarily until the retirees die off or just hope the money is there to pay them.”
Comment by Soccertease Monday, Dec 2, 13 @ 10:23 am
Cassandra, the pensions are a contract, and as such can be modified through consideration AND AGREEMENT by both parties to the contract. The problem here is that you can’t call something consideration, when the other party to the contract hasn’t been given the opportunity to consider it, and possibly say no.
Comment by PublicServant Monday, Dec 2, 13 @ 10:27 am
It seems clear to me that if the ISC decides based on the rule of law and precedent, this is unconstitutional. No question. Only if they decide based instead on politics could they even consider any other outcome.
Comment by Bobbysox Monday, Dec 2, 13 @ 10:27 am
==The problem here is that you can’t call something consideration, when the other party to the contract hasn’t been given the opportunity to consider it, and possibly say no. ==
They will get that opportunity by lobbying the GA to vote no and also in court. You can’t negotiate with somebody who doesn’t want to negotiate. Why waste your time?
Comment by Demoralized Monday, Dec 2, 13 @ 10:36 am
Pub Servant
But the constitution also says that the benefit cannot be diminished or impaired. It doesn’t say
that it can be changed for adequate consideration, but that’s irrelevant because there is no question but that this proposal is a diminishment for all affected. As I argued above, by their lights, that’s the only way Quinn, Madigan et al can get the “savings” (ha-that’s another topic) they want. By diminishment.
Comment by Cassandra Monday, Dec 2, 13 @ 10:46 am
OW, Walkinfool, etc.
Thank you.
And a big Thank You to Rich for the opportunity to comment over the weekend.
Comment by RNUG Monday, Dec 2, 13 @ 11:00 am
I hope the judges that decide the constitutionality of this bill remember the millions Madigan promised to build the new school in his district, the millions, maybe billions that have been promised to build the Illiana expressway(the new “bridge to nowhere”), the millions for the extension of the Elgin O’hare expressway, the possible millions worth of tax breaks to ADM, etc. etc..
Maybe the leaders can’t say “fiscal emergency” with a straight face. No…..that can’t be it.
Comment by Irish Monday, Dec 2, 13 @ 11:14 am
If this plan is constitutional then words have no meaning. Basically, this is the state’s political elite telling teachers and public servants: it’s constitutional because we say so. This whole process makes a mockery of the rule of law. And then passing another corporate giveaway on the same day - words fail me.
Comment by Eugene Monday, Dec 2, 13 @ 12:06 pm
And remember, the idea for the CC originated right here on your site, Rich. And many didn’t think it was going to help resolve anything.
It did, in that it gave time for the leaders to take a step back and work on the problem without it being in the papers all summer
Comment by low level Monday, Dec 2, 13 @ 12:24 pm
Those assuming an ISC overturn better be sitting when the opinion comes down.
Comment by Outsider Monday, Dec 2, 13 @ 12:25 pm
Governor Quinn is the Grinch that stole Christmas to State employees and retirees. He is heartless. He lied in his last campaign when he said that he had a heart. He has an ice cold heart like all Chicago machine democrats.
Comment by Quinn is the Grinch Monday, Dec 2, 13 @ 10:00 pm
Isn’t it amazing that the GA can embrace a progressive diminishment of the COLA (the wealthier get hit harder) but reject a progressive income tax!
The preamble is doggerel! We had no choice but to negate our contractual pensions after we shorted your pension payments for 40 years! We had no choice…….
If this passes judicial review then there is NO contract of any kind that the GA cannot duck or invalidate. Let’s buy some Caterpillar tractors that we can’t pay for and see how that one plays! Hey how about some capital bonds……due in twenty years? No, this is too brazen even for Illinois…..
Comment by Old and in the Way Monday, Dec 2, 13 @ 11:43 pm