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* From the governor’s budget address…
One of Illinois’ most intractable problems is the underfunding of our pension systems.
We must keep our promises to the retirees who earned their pension benefits and forge a realistic path forward to meet those obligations.
The fantasy of a constitutional amendment to cut retirees’ benefits is just that – a fantasy. The idea that all of this can be fixed with a single silver bullet ignores the protracted legal battle that will ultimately run headlong into the Contracts Clause of the U.S. Constitution. You will spend years in that protracted legal battle, and when you’re done, you will have simply kicked the can down the road, made another broken promise to taxpayers, and left them with higher tax bills.
This is not a political football. This is a financial issue that is complex and requires consistency and persistence to manage, with the goal of paying the pensions that are owed.
* David Greising with the BGA responds…
The contracts clause argument has gotten some traction lately, but it’s not as black and white as Pritzker makes it sound. Respected constitutional scholars say a challenge based on the contracts clause could be defeated. There is U.S. Supreme Court precedent stating contract rights can be weighed against other factors, such as the duty of states to exercise police powers, or to protect the health of residents.
Um, David, first you’ll have to find 71 votes in the House and 36 in the Senate to get it on the ballot. Both of those chambers have pro-union Democratic super-majorities. Face it, man, you’re living in a fantasy world. And it’s not even guaranteed to pass at the ballot box even if it somehow makes it that far. The unions would spend every dime they have and then some and deploy tens of thousands of precinct workers to oppose it. You can’t just snap your fingers and make this all happen.
* More Greising…
A pension amendment need not necessarily go to the Supreme Court, either. A negotiated solution with labor unions could lead to needed changes that address Illinois’ pension problems that are fair to all parties. “These benefits are all gained through collective bargaining, so they should be able to be modified through collective bargaining,” said James Spiotto, managing director of Chapman Strategic Advisors, who has written extensively on pension reform.
*facepalm*
Um, public pension benefits cannot be gained or lost as part of the collective bargaining process, David. They must be passed by the Illinois General Assembly and signed into law by a governor. And the Illinois Supreme Court has unanimously ruled that public pension benefits are an individual right, not a collective right. Unions cannot legally negotiate away their members’ pension benefits in this state.
Sheesh. This is just basic 101 stuff, dude.
And how much of a fantasist do you have to be to conjure some alternate version of Illinois where AFSCME Council 31, the IFT, the CTU, the IEA, AFFI, the FOP and SEIU all agree to put a constitutional amendment like this on the ballot and pledge not to sue if it passes? I mean, have you ever met Roberta Lynch or Jesse Sharkey? They ain’t no Arizona-style union leaders. And, in any case, it only takes one person to sue.
This is all a complete, utter fantasy unless the citizenry drastically changes the membership of the General Assembly and elects a governor willing to take up the cause and public union members elect completely different leaders. Or perhaps if a global financial meltdown of a magnitude far greater than 2008-09 (which Illinois survived) totally - and I do mean totally - tanks the budget.
posted by Rich Miller
Friday, Feb 21, 20 @ 12:34 pm
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== They ain’t no Arizona-style union leaders.==
Rich is channeling his inner Jack Woltz.
Comment by don the legend Friday, Feb 21, 20 @ 12:39 pm
No pension reforms anywhere have ever been invalidated by the Contracts Clause. Period.
Prove me wrong.
Comment by JB13 Friday, Feb 21, 20 @ 12:41 pm
OK, so more taxes then. Fine.
Can we at least agree that the GA should stop considering bills to enhance pension benefits?
The first law of holes, or the law of holes, is an adage which states that “if you find yourself in a hole, stop digging”.
Comment by OOO Friday, Feb 21, 20 @ 12:42 pm
===Prove me wrong===
You can’t prove a negative.
Go back to your sophomore dorm room debate and get back to us when you have a real argument.
Comment by Rich Miller Friday, Feb 21, 20 @ 12:42 pm
Dude needs to stay away from the dispensaries for a few days. Whoa.
Comment by Nick Name Friday, Feb 21, 20 @ 12:45 pm
The Governor is absolutely correct on this issue and you have also correctly outlined the political reality. Spiotto is wrong. As you note, these are individual rights. Even ignoring that fact, as has also been noted in prior discussions of this issue, the unions don’t represent union retirees and those retirees who were never union members.
As a retired non-union guy who isn’t RNUG, I can guarantee that there would be a lawsuit, should the fantasy of a “negotiated solution” were to ever come to pass.
Comment by Facts Matter Friday, Feb 21, 20 @ 12:46 pm
==Respected constitutional scholars say a challenge based on the contracts clause could be defeated.==
If that’s the case, I’m looking forward to his reasoned argument allowing us to default on our bond obligations. Just think of the savings (exclamation point)./S
Comment by Jocko Friday, Feb 21, 20 @ 12:46 pm
=== Sheesh. This is just basic 101 stuff, dude.===
It’s tiring. You can type or say lots of words, think the premise is sound and obvious, but missing that this GA, and previous GAs, even when the GOP controlled both chambers, that there’s no 71 and 36 to be found, or worse, ignoring that there is a 71 and 36 required, it’s tiring.
The rest is, sorry, gibberish, without 71 and 36.
Comment by Oswego Willy Friday, Feb 21, 20 @ 12:48 pm
==Respected constitutional scholars say a challenge based on the contracts clause could be defeated.==
The fantasy of his arguments makes me want to replace “respected constitutional scholars” with “ancient alien theorists.”
Comment by Montrose Friday, Feb 21, 20 @ 12:51 pm
I do believe the police power of the state was used as argument at Illinois Supreme Court and went down in flames quickly
Comment by DuPage Saint Friday, Feb 21, 20 @ 12:51 pm
The words of Illinois Supreme Court Judge Lloyd Karmeier need to be carved in stone somewhere in the Statehouse:
“The General Assembly may find itself in crisis, but it is a crisis which other public pension systems managed to avoid and … it is a crisis for which the General Assembly itself is largely responsible…It is our obligation, however, just as it is theirs, to ensure that the law is followed. That is true at all times. It is especially important in times of crisis when, as this case demonstrates, even clear principles and long-standing precedent are threatened. Crisis is not an excuse to abandon the rule of law. It is a summons to defend it.”
Comment by IllinoisBoi Friday, Feb 21, 20 @ 12:59 pm
I do believe the police power of the state was used as argument at Illinois Supreme Court and went down in flames quickly
You are correct, citizen.
Gino Divito is not a Mr. Spiotto.
Comment by miso Friday, Feb 21, 20 @ 1:00 pm
==It only takes one person to sue==
So how come no one has sued in Arizona? JB says Contracts Clause is a slam dunk reform-killer.
Comment by Tawk Friday, Feb 21, 20 @ 1:01 pm
==So how come no one has sued in Arizona? ==
I don’t know. Why don’t you go ask someone in Arizona. You’re a dolt if you don’t beleive a lawsuite would come withing a half a second of anything like that ever passing.
Comment by Demoralized Friday, Feb 21, 20 @ 1:07 pm
Then we eventually go insolvent and default. The only real variable is the associated timeline. Once our bond ratings begin the decent into the various stages of “junk” it will be the beginning of the end. This will come after the state throws ever tax ever conceived by humanity at it, but all this will do is delay the inevitable. From a purely academic and macroeconomic standpoint, this state is fascinating. A state default and the economic predictive models which exist in the peer reviewed literature that deal with these type of events are all purely theoretical and highly speculative. We will actually get to see what happens when it plays out in a real world scenario, which is again, fascinating. It will also be interesting to see how the federal government responds, if at all. If they attempt a bailout, could that then spook the markets and trigger doubt in the fiat currency system? Would a Puerto Rico type response be taken by congress? Could a Chapter 9 styled code be extended to states? The events which follow will be be studied by public finance folks for decades after the fact.
Comment by Jacob Friday, Feb 21, 20 @ 1:08 pm
States can’t go bankrupt.
Puerto Rico is not a state.
Comment by Oswego Willy Friday, Feb 21, 20 @ 1:11 pm
Let’s not forget David was another Tribbie cut lose.
Also can someone give us some background on Chapman Strategic blah blah…who bankrolls them? Just askin’ Mr. Koch
Comment by Annonin' Friday, Feb 21, 20 @ 1:11 pm
I wonder if he spends all his waking hours on public pensions like he did in the past. /s
A partner at Chicago’s Chapman & Cutler, James Spiotto, charged clients for more than 5,471 hours in a single year – about 15 hours a day, every day. Called “possibly the hardest-working lawyer in America” by his colleagues, Spiotto claimed to have pulled 52 all-nighters in a row in 1993, working on bankruptcy matters.
Spiotto is still a partner in good standing at Chapman & Cutler. Firm managing partner John M. Dixon would not explain how Spiotto could have spent virtually every waking hour of his life doing billable work, adding that “No clients were hurt and no clients complained.”
Washington Post 3/22/98
Comment by G'Kar Friday, Feb 21, 20 @ 1:13 pm
And yet Greising will still be popping up in weekly roundup panels on various news outlets spouting his nonsense.
Comment by Precinct Captain Friday, Feb 21, 20 @ 1:17 pm
BGA may be in fantasyland - but the clock is ticking on statutorily required 90% funding level in 2045
Comment by Donnie Elgin Friday, Feb 21, 20 @ 1:17 pm
=== utter fantasy unless the citizenry drastically changes the membership of the General Assembly ===
I just want to note that not only did every Republican on the Illinois Supreme Court vote against the last attempt to diminish pension benefits for current members, but half of the Republicans in the Illinois House voted against it as well.
Downstate Republicans represent a lot of prison guards, highway workers, and state police officers who are state pension systems members and vote for them regularly. The represent a lot of communities that depend on the spendings of prison and university employees for their livelihood. And they represent a lot of county, local fire and police employees who understand that as the state workers pension benefits go, they will follow.
Show me the GOP’s Constitutional amendment and tell me how many Republicans are co-sponsors.
This is not a “Because…Madigan” problem as much as the Tribune would want you to believe that’s true.
Comment by Thomas Paine Friday, Feb 21, 20 @ 1:17 pm
It’s over. The fat lady has sung. All there is to do now is watch as those in charge wrestle with the best way to resolve the issue.
Comment by SSL Friday, Feb 21, 20 @ 1:19 pm
==No pension reforms anywhere have ever been invalidated by the Contracts Clause. Period.==
Perhaps true. But beside the point. Here in Illinois — unlike other states to the best of my knowledge — we have enshrined pension benefits as a contractural right and not a mere public benefit. The sovereign State of Illinois did that. Not anyone else. Having done that, the US Constitution’s Contract clause will prevent the State of Illinois from reneging on its commitments. Period.
Comment by DougChicago Friday, Feb 21, 20 @ 1:22 pm
Saying you think there’s a chance SCOTUS might agree IK is facing an emergency and thus let the state unilaterally rip up a contract is a mighty small peg to hang your hat on
Comment by Perrid Friday, Feb 21, 20 @ 1:27 pm
Right, states have no current legal mechanism for bankruptcy, but it’s not as if a lack of federal policy on the matter will prevent a default. It won’t. However, at some point the federal government may feel compelled to involve themselves as you have to figure that pensioners, state vendors, bond holders, etc. will start filing lawsuits when they don’t get their money. That is when DC will have little choice but to respond in some way. Don’t get me wrong, involving the feds will likely be a disaster, but by that point the state will already be a disaster.
Comment by Jacob Friday, Feb 21, 20 @ 1:31 pm
“It is difficult to get a man to understand something, when his salary depends upon his not understanding it.” - Upton Sinclair
Greising’s just doing the bidding of his paymasters.
Can we forward a copy of this takedown to the Crain’s ed board? They are fantasists, too, when it comes to this issue.
Comment by Moe Berg Friday, Feb 21, 20 @ 1:31 pm
=== but===
No but. States can’t declare bankruptcy.
=== may feel===
No.
We had a Great Depression and countless recessions.
No. It’s not happening.
=== That is when DC will have little choice but to respond in some way===
No. Stop. No.
See: Depression, Great.
Comment by Oswego Willy Friday, Feb 21, 20 @ 1:35 pm
Just pay the bill. Governor is correct.
Comment by Washingtonian Friday, Feb 21, 20 @ 1:38 pm
I’ll just note the State Legislature tried arguing “police piers” on both the Kanerva and SB-1 cars. It didn’t fly with the Illinois Supreme Court.
Comment by RNUG Friday, Feb 21, 20 @ 1:39 pm
== So how come no one has sued in Arizona? ==
The Arizona pension clause is not phrased or parsed exactly the same as the Illinois clause. It gave a bit of wiggle room by not being all one sentence.
Plus the record of intent, which judges do look to, is different in the two states. The 1970 IL Con-Con records are pretty crystal clear the authors intended to leave no exceptions.
Comment by RNUG Friday, Feb 21, 20 @ 1:44 pm
Rich people paying people to say what rich people want to hear does not mean rich people are right.
Comment by DIstant watcher Friday, Feb 21, 20 @ 1:48 pm
In an era of rampant age discrimination, Obamacare under attack, tanking Medicare / Social Security, and an aging population, the last thing we need are more technocrats and “good government” (?) types pushing cuts to existing old-age benefits and pensions, so the State has more $$$ to give in tax incentives to Amazon and out-of-state companies.
Make Amazon and other subsidized companies pay taxes into Illinois (and USA) coffers, make our President and his companies pay Federal tax for the first time - then - come back to us.
Comment by Ares Friday, Feb 21, 20 @ 1:52 pm
At the risk of sounding unfair, Greising isn’t writing this for people who know (or want to know) the facts. It’s not quite as bad as IPI, but it’s on that path.
Comment by Father Ted Friday, Feb 21, 20 @ 1:53 pm
=== ==Respected constitutional scholars say a challenge based on the contracts clause could be defeated.==
The fantasy of his arguments makes me want to replace “respected constitutional scholars” with “ancient alien theorists.”===
Reminds me of that guy at the end of Raiders of the Lost Ark: “Top. Men.”
Comment by Nick Name Friday, Feb 21, 20 @ 2:01 pm
Let’s revisit the Kanerva case since it is relevant here.
It was as much or more so about contract law as the pension clause. To refresh memories, the State offered employees premium free health insurance upon retirement if they had 20 years of service. Straight contract language of offer acceptance fulfillment.
Comment by RNUG Friday, Feb 21, 20 @ 2:02 pm
After considering all other options (there are none), one is reduced to paying the bill via a graduated income tax. This crisis was artificially created by ill advised political decisions, so we need another ill advised decision to fix it. Great to be an Illinois taxpayer.
Comment by Donnie Elgin Friday, Feb 21, 20 @ 2:04 pm
For the weak minded out there-
Pension funding as a percentage of obligations in 1970- 40%
Pension funding as a percentage of obligations in 2020- 40%
If you think ‘we’ are on the brink of insolvency I suggest you stop huffing industrial solvents.
=OK, so more taxes then. Fine.=
If need be yes, that is how we pay for public services and obligations. The ’state’ is a perpetual organization (even if the eastern bloc doesn’t think so) so the obligations of one era are upheld by those that follow. Different than a corporation.
Nobody cries too much about most of the others, just pay that is owed for public workers.
Comment by JS Mill Friday, Feb 21, 20 @ 2:10 pm
“Then we eventually go insolvent and default.” If all the Tier I retirees die off first, then maybe not.
Comment by Skeptic Friday, Feb 21, 20 @ 2:16 pm
DougChicago
“But beside the point. Here in Illinois — unlike other states to the best of my knowledge — we have enshrined pension benefits as a contractural right and not a mere public benefit. The sovereign State of Illinois did that. Not anyone else.”
Incorrect. Illinois’ pension protection was inspired by New York State’s. And New York, unlike Illinois, requires full funding. And currently they are one of the few states to do so.
Comment by Anyone Remember Friday, Feb 21, 20 @ 2:20 pm
I’ve believe I may have posted this before, but always a good reminder.
“The peculiar circumstances of the moment may render a measure more or
less wise, but cannot render a measure more or less constitutional”
John Marshall (Chief Justice U S Supreme Court)
Comment by Retired ISP Friday, Feb 21, 20 @ 2:23 pm
== A state default and the economic predictive models which exist in the peer reviewed literature that deal with these type of events are all purely theoretical and highly speculative. ==
One somewhat relevant example does exist: Arkansas during the Great Depression did default on some bonds. Eventually, a decade or so later, Arkansas eventually paid off the bonds with a bit of indirect Federal aid.
Comment by RNUG Friday, Feb 21, 20 @ 2:25 pm
== Illinois — unlike other states ==
Actually, 3 states have a pension protection clause in their State Constitution. New York was first. Illinois via the 1970 Con-Con and voter approval was second and, mostly, copied the NY clause but, in my opinion, cleaned it up and improved upon it. Arizona pretty much copied both NY and IL, but also changed it as they saw fit and, in my opinion and the opinion of the Arizona Supreme Court, make it a bit weaker than the NY and IL clauses.
Comment by RNUG Friday, Feb 21, 20 @ 2:33 pm
Please note that our constitutional experts are 2 for 2 in Supreme Court decisions compared to your experts at 0 and 2.
Comment by Norseman Friday, Feb 21, 20 @ 2:35 pm
==No pension reforms anywhere have ever been invalidated by the Contracts Clause. Period.
Prove me wrong. ==
Gladly. Here are three from the Illinois Supreme Court to get things started: In re Pension Reform Litigation, 2015IL118585 (2015); Felt v. Board of Trustees of the Judges Retirement System, 107 Ill. 2d 158 (1985); Bardens v. Board of Trustees of the Judges Retirement System, 22 Ill. 2d 56 (1961).
Comment by Monadnock Pigeon Friday, Feb 21, 20 @ 2:36 pm
== “Then we eventually go insolvent and default.” ==
The IL SC already addressed this issue back in the 1975 IFT pension funding case. Ruling by the court said the pensions MUST be paid when due; no wiggle room given.
To bottom line it as most people have interpreted the ruling, there are only 2 things that the State absolutely must pay: bonds and pensions. And if the State has to, those funds will come from GRF before paying for anything else.
If there is a default, it will be to local governelments, including schools, service suppliers, and vendors … kind of like the Rauner no budget years but without the preferred vendor contracts being paid out of revolving funds.
Comment by RNUG Friday, Feb 21, 20 @ 2:45 pm
RNUG, as usual, is correct.
Comment by Rich Miller Friday, Feb 21, 20 @ 2:46 pm
Illinois will increase the income tax rate(s) to whatever level is necessary to pay the pensions and benefits owed. It’s not that complicated. If the base tax rate has to be 7%, or higher, so be it. If the top rate goes to 10%, oh well.
That really needs to be the thinking. If that doesn’t work for you, do what you have to do.
Comment by SSL Friday, Feb 21, 20 @ 2:49 pm
“Rich people paying people to say what rich people want to hear does not mean rich people are right.”
Brilliant.
Comment by IllinoisBoi Friday, Feb 21, 20 @ 3:07 pm
Of course RNUG is right. And if Greising or his experts actually read the US Supreme Court cases on the police powers argument, they would come across the US Trust case and might notice that the Court’s analysis reads a lot like the Illinois Supreme Court’s analysis of the last pension reform. Then they would realize that the Illinois Supreme Court cut right to the chase to see if there was any contracts clause jurisprudence analysis that would allow the reform to be constitutional and rejected all the arguments. So if the pension clause is ever repealed and a new pension “reform” is enacted and challenged, the court will just say “we heard this before, go away.”
Comment by Whatever Friday, Feb 21, 20 @ 3:09 pm
=This is all a complete, utter fantasy unless the citizenry drastically changes the membership of the General Assembly and elects a governor willing to take up the cause==
Or if Pat Quinn actually decides to run for governor–and win–again in 2026. And claim yet again that he was “put on this earth” to seek pension reform.
Comment by Leatherneck Friday, Feb 21, 20 @ 3:15 pm
Where in the world is Squeezy? Asking for a friend.
Comment by PublicServant Friday, Feb 21, 20 @ 3:22 pm
BGA is trending towards IPI. Most of their decent policy people left a while ago. Once Andy Shaw made it a “gotcha” news outlet that’s how they have continued to move.
When was the last time the BGA had people down in Springfield writing legislation and lobbying officials?
Now, instead they go to committee’s, throw tantrums and then write articles complaining? At the same time getting a residual for their article that others print, sounds very IPI to me.
Comment by Frank talks Friday, Feb 21, 20 @ 3:26 pm
Almost too many fantasists here to respond to.
“contract rights can be weighed against other factors”…like the ability to pay, for example. Currently, our pension payments make up about 2% of your income tax rate. Painful but doable. They will go up to about 4% when the ramp hits its high point. Again, painful, but do you think a judge will see that as such an emergency that he/she will stiff pensioners? Especially when they will go back to normal in 25 years? Fantasy world.
Comment by JIbba Friday, Feb 21, 20 @ 3:28 pm
== Where in the world is Squeezy? Asking for a friend. ==
He retired to Florida …
Comment by RNUG Friday, Feb 21, 20 @ 3:29 pm
== state can’t declare bankruptcy ==
Yep, and the “contracts cause” is why.
One of the primary reasons why the founding fathers ditched the Articles of Confederation was because after the revolution, it became somewhat routine for the new state legislatures to pass laws relieving their state government of accrued debt. Don’t want to pay off the loan your state took out to buy equipment for the Continental Army regiments you mustered? Just pass a law saying you don’t have to.
State legislatures also had a habit of passing laws to forgive the debts of politically connect private citizens.
So, in Article 1, Section 10 of the new U.S. Constitution, they wrote that no state shall pass any law impairing the obligation of contracts.
Hence, Greising and company have a much bigger job facing them than they think: after they amend the Illinois constitution, they have to amend the federal constitution, too.
Fantasists indeed.
Comment by History Lesson Friday, Feb 21, 20 @ 3:42 pm
Apparently there seems to be a cash cow in campaign contributions. Perhaps we should tax that and earmark it for pensions.
Comment by Generic Drone Friday, Feb 21, 20 @ 4:23 pm