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* Another lawsuit has been filed to overturn the state’s new law that strips retirees of their free health insurance premiums…
The retirees’ suit argues that the law “gives the director no intelligible standards” to determine the level of contributions and “as such, is an invalid delegation of legislative authority to an administrative agency or officer.”
The lawsuit says the law violates the pensions clause of the Illinois Constitution, which prohibits the diminishment of pension benefits once they are earned.
The suit also says the new law violates the contracts clause of the Constitution because state law provided for premium-free health insurance after 20 years as a “term and condition of employment” for the five plaintiffs.
One count in the complaint was brought specifically by Kanerva and Hoover, both of whom retired as part of the 2002 early retirement incentive program. The lawsuit says the state promised premium-free health and dental insurance for life to early retirees and that Kanerva and Hoover relied on that promise when they decided to take early retirement.
The lawsuit seeks class-action status on behalf of an estimated 10,000 merit compensation employees who retired with at least 20 years of service. Merit comp employees are not covered by collective bargaining agreements.
Thoughts?
posted by Rich Miller
Wednesday, Jul 11, 12 @ 2:03 pm
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If that was put forth as a part of the early retirement deal…it sounds pretty comelling for the retirees
Comment by titan Wednesday, Jul 11, 12 @ 2:13 pm
Interesting arguments on the early retirement special case.
I would guess, however, that determining the costs to individual employees of an employee program, and their share in paying for it, is better found under executive and not legislative power.
Comment by mark walker Wednesday, Jul 11, 12 @ 2:15 pm
Still going to come down to the contract law issue …
Comment by RNUG Wednesday, Jul 11, 12 @ 2:25 pm
Found this today when Googling a related item: a pension handbook for lawyers at one firm. This pretty much parallels what is in the Madiar report in terms of cases cited, etc., but regulars might find it interesting … 84 pages …
http://www.jenner.com/system/assets/publications/8522/original/2012_IL_PENSION_HANDBOOK.pdf?1327604145
Comment by RNUG Wednesday, Jul 11, 12 @ 2:32 pm
titan,
I hope the ERI claim will hold up (since I’m one of the 2002 people), but I wouldn’t count on it. Don’t think the State ever put it in writing to the 2002 people so it is a stretch. Dental was never part of it; don’t understand why that was included because suing over dental has been a loser all along.
The ‘no standards’ have some validity. As would an unequal treatment claim. That may fly.
The best shot is the contracts claim and the 20 year requirement; there are precedents that seem to support it.
Comment by RNUG Wednesday, Jul 11, 12 @ 2:38 pm
To pull out one section of the publication I referenced above that seems to be applicable:
“Some legislation that has passed since the 1970 Illinois Constitution became effective
has increased employees’ benefits. The Illinois appellate courts for the first, second, third, and fifth districts have held that, if legislation increases an employee’s benefits during her employment, the employee becomes entitled to those benefits once she provides consideration for the contract modification …”
Comment by RNUG Wednesday, Jul 11, 12 @ 2:42 pm
This is the core problem (legal & ethical) with changing the benefits of current retirees. People choose when to retire based on the benefits they are promised at the time of retirement, and this is not only the case for those who retire early. (Unless there is a mandatory retirement age, a potential retiree may chose to wait a few years in order to earn a greater benefit.)
Comment by Pot calling kettle Wednesday, Jul 11, 12 @ 2:42 pm
I recommend reviewing similar lawsuits that have been filed in California; in many of those cases the state court ruled benefits could not be reduced.
Comment by Angry Republican Wednesday, Jul 11, 12 @ 3:51 pm
If memory serves, the SERS website in 2002 had a notice posted that stated insurance was not a guaranteed benefit.
Comment by Bigtwich Wednesday, Jul 11, 12 @ 4:46 pm
There are also applicable AZ and NY cases … especially since all three states use basically the same constitutional pension clause. A number of previous IL cases have referenced NY precedents.
Comment by RNUG Wednesday, Jul 11, 12 @ 5:05 pm
“If that was put forth as a part of the early retirement deal”
If that is genuinely true, for anyone who took early retirement *with that promise made explicit, not implied*, there is no reasonable question.
Comment by Chris Wednesday, Jul 11, 12 @ 5:33 pm
The quote from the state constitution that Rich has posted frequently uses the plural “benefits” rather than singular. Pension system benefits are more than the annuity.
I think the plaintiffs here have a very strong case. SERS sends us all a written notice every year of the benefits we will receive if we retire after a specific date.
The framers of the 1970 constitution were clear in their intention- the state can’t let occasional budget problems be used as an excuse to stiff employees and retirees counting on the promised pension benefits. Just ask ‘em- lots are still alive.
Comment by DuPage Dave Wednesday, Jul 11, 12 @ 5:45 pm
Depending on the year of SERS publication, the health insurance has sometimes been listed and sometimes not.
As far as I know, the State has always said it could be changed … but the one time the State did change it (8->20), they did not apply it retroactively to existing retirees. From that, you can argue the State set the precedent that retirees already receiving a benefit are grandfathered and, ergo, it was (still is) a protected benefit. Benefits created since the 1970 Con-Con have been ruled protected; there has just never been a case specifically on point about the health insurance in Illinois.
We’re going to find out … and if the retirees win, that just killed the COLA / Health Insurance swap legislation because both will be protected benefits and there will be no consideration in swapping one for the other … you would already be entitled to both!
Comment by RNUG Wednesday, Jul 11, 12 @ 6:11 pm
This second suit is similar to any attempt to go after SURS COLAs since SURS pays more for them.
I still think there are issues with general contract clause to since this above was a specific contract and some other aspectess of health care are too
Comment by western illinois Wednesday, Jul 11, 12 @ 6:27 pm
The Civic Committee’s SB 512 didn’t even envision attempting to include retirees in the “reform” Sidley & Austin thought was constitutional regarding the “reform” of pension benefits going forward, but I notice they jumped on the bandwagon of retiree inclusion pretty quickly when it was proposed. Perhaps that was phase two of their grand plan.
When these unconstitutional attempts to renege on contractually promised benefits are struck down, maybe we can focus on reforming the regressive tax system responsible for the drastic revenue dropoff and concommitant spending increases that are the root of the current crisis.
Comment by PublicServant Wednesday, Jul 11, 12 @ 6:42 pm
Don’t forget - there was also a much smaller ERI in 2004 - but it was still an ERI and this would apply to those who retired in 2004 too.
This pig just ain’t gonna fly. The State is not going to be able to take away benefits from already retired employees - and I think insurance will be ruled part of these benefits. Employees know that too. That’s why there was such a rush of retirees at the end of June 2012. There will be another huge rush retiring whenever the court rules the State can’t stick it to those already retired.
Woe to those still working though. Everyone out there in non-State Employee land may not like it, but that’s the way it’s going to play out. The law is the law; the Illinois Constitution is the Illinois Constitution.
Read Ralph Martire’s article in the State Journal Register published July 3, 2012.
http://www.sj-r.com/opinions/x1762349853/Ralph-Martire-Cutting-benefits-won-t-fix-state-s-pension-crisis
Ralph states “If retirement benefits and salary increases were the only drivers of the unfunded liability, the state’s retirement systems would be about 94 percent funded today. In other words, there’d be no pension crisis.”
The State can try to stick it to the retirees because the State screwed up and used the pension money for their pet projects all they want; the courts won’t let them in the end and the problem will be right back where it belongs - in the Legislature that caused the problem, not on the backs of the retirees who did not cause the problem.
Comment by Jechislo Wednesday, Jul 11, 12 @ 6:45 pm
Boy, I hear a lot of “screw them” remarks on this issue, from both sides. It seems to me as retirees and taxpayers, we are all in this together. I certainly wouldn’t object to paying some reasonable retiree health care premium, including one based on ability to pay, knowing full well that I’ll be father up rather than down that scale.
If it’s going to be significantly burdensome, I would prefer to see it phased in. Some consideration needs to be given to non Medicare eligibles. 50% (or more) of that Quality Care premium is going to be a chunk of money. We need to remember that the early retiree problem is going away after time, as the number of tier-2 employees grows each year.
Perhaps the early retiree Quality Care issue could be addressed by some sort of higher deductible alternative for the early retirees who are not willing (in the case of out-of-staters, able) to move to one of the managed care options. One way or another, if we can put a man on the moon, we can figure that out.
Some over-all goal of maybe 33% of premiums being paid by retirees, perhaps ranging from 15% to 50% based on size of pension, and phased in over 3 or 4 years, could work for most of us. I think just saying, “hey, we were promised” may be penny-wise and pound-foolish.
Comment by steve schnorf Wednesday, Jul 11, 12 @ 7:02 pm
While paying a little for our health insurance premiums sounds reasonable what worries me is the old camel’s nose in the tent scenario. If we don’t fight to stop it completely now based on the constitution next year who knows what the new “reasonable” will be defined as. It is either constitutional or not, one or the other
Comment by Road Dog Wednesday, Jul 11, 12 @ 7:24 pm
Steve,
In my opinion, the state might have gotten the retirees to swallow it and not sue IF it required the same payments as current employees, even if those payments were up from the current levels … but the State (apparently at the urging of the Chicago groups) went for the whole enchilada … and the rumors I’m hearing are 50% - 65% for people like myself (lot of service years but young non-Medicare 2002 ERI & better than average pension) and, I’m assuming given your various positions, yourself. Plus we have to pay that amount again for our dependents.
Based on action to date, I have to conclude the State (or at least the GA) has an agenda to stick it the retiree and try to make the retiree pay as much as they can if they manage to cook the numbers enough since there is no independent audit, just JCAR, to restrain them.
Personally, I would have gone for a reasonable amount, but the State isn’t being forthcoming with the numbers and they are open to manipulation. Then the State immediately followed it up with the pending COLA / insurance trade-off legislation … which to myself and, I think, a lot of the MC retirees, is perceived as just another in a long line of one finger salutes.
You mention a lot of people on both sides have a “screw you” attitude; there may be a reason the retirees feel that way.
/rant on … I don’t dwell / harp on it and haven’t mentioned it the past two years until now, but I’ll still bitter I never got back the 4% pay raise I gave up for consideration and then had to pay when the MC people were forced to again pick up the retirement contribution w/o recomp and the union people got raises to cover it … to me, the proposed COLA / insurance trade-off is the last straw, so I have no inclination to compromise … /rant off
As a taxpayer, I bemoan the money the State will waste and the lawyers will make. As a retiree, good luck and godspeed to the plantiff’s lawyers.
Comment by RNUG Wednesday, Jul 11, 12 @ 7:48 pm
RNUG, Am I eligible for Medicare @ 65, if I have over 40 quarters into Social Security?
Comment by PublicServant Wednesday, Jul 11, 12 @ 7:59 pm
I think it should be illegal to pass such a law for any state employee that is hired now but if they wanta pass that law and make it effective at a future date, then that is fine but those of us who have been promised this and working towards it and planned on it and less than a year from retiring and then to pull it, I think it is illegal to take it away from those of us who was promised that benefit. No where does it say that we would loose that benefit if the state elected leaders passed a law prohibiting it, its part of our benefit. I don’t care what the public has to say about it or anyone, it was part of our benefit then we are entitled to it, I don’t care how bad the state is financially. If they would have paid the pension payments on time, they wouldn’t be broke and if they would stop giving “pork belly, political grants” out, they would have the money. All they wanta do is close prisons, so they can spend the money somewhere else, now they wanta take benefits away that were promised to the state workers, not to even mention, that we are one of the lowest states in the nation who pay the poorest retirement percentage to the state employees and the one benefit that we do have, they wanta take away, cuz they spent to much money, to bad1!! I am sick of ppl attacking the state worker who has dedicated there lives to public service. Much of our lives, many of us have worked over and behind what we are hired to do and now the elected leaders wanta crap on us, cuz they think “they can”. I would also like to be included in a lawsuit, because it is illegal and they shouldn’t be allowed to break the law.
Comment by thunder Wednesday, Jul 11, 12 @ 8:00 pm
I tend to agree with RNUG on this. Employees have been under attack for a long time and there is no reason to believe that making any concessions will satisfy. Especially since it won’t solve the debt situation. One problem for the plaintiffs is that the in recent past the 4th District Appellate court has granted defacto sovereign immunity when the state has ripped-off employees citing “the state’s dire financial situation”. The court has done this out of the blue with nothing presented in the case record to support it.
Comment by Crime Fighter Wednesday, Jul 11, 12 @ 8:03 pm
===It seems to me as retirees and taxpayers, we are all in this together.===
Yes Steve, we are. When the proposed solutions are balanced, I’ll cooperate. Since the current proposals place the entire burden on state employees and retirees, I won’t.
Comment by PublicServant Wednesday, Jul 11, 12 @ 8:25 pm
RNUG, yeah, I know, my wife is not yet Medicare eligible, and we have a young dependent also, so it’s going to cost us a lot. On the other hand, better us than people with $20,000 pensions.
I made the 4% trade-off deal, and I hated the way the Blago people handled it, but they were absolutely screwed by their boss’s no new taxes pledge, and the people elected him, and lots of state employees voted for him, especially the first time.
I don’t feel like we’re “under attack”. and I agree this could be being handled better, but I believe strongly that things have to continue to be cut, as they already have been, and I don’t feel a hell of a lot more worthy than the parents of those medically fragile children. There but for the grace of God go you or I.
I wish this could be done calmly, thoughtfully, and cooperatively, but I also wish for world peace and a cure for cancer, so…
Comment by steve schnorf Wednesday, Jul 11, 12 @ 8:32 pm
No, PS, they don’t put the burden entirely on us. Everyone’s taxes have already been raised, though we don’t pay on our pensions and or social security. Under the proposals I’ve seen, the taxpayers will continue to pay $500 or 600 million per year for our health insurance. Programs serving people much needier than me (and I’m guessing you, and most of the people who post hear) have already been cut back or even eliminated Were you eligible for the Rx program that was just eliminated? If not, I’ll bet those, was it 200,000 people, don’t feel like the burden is entirely on you and me.
This isn’t fun. I wish it wasn’t happening. But we’re paying now for years of sin you and I and millions of others benefited from over the years, of wages and benefits and programs that weren’t truly affordable at the time they were happening. Hindsight is 20-20, I know, but this has to be fixed and we should not expect to be exempt.
Comment by steve schnorf Wednesday, Jul 11, 12 @ 8:42 pm
===I agree this could be being handled better, but I believe strongly that things have to continue to be cut, as they already have been, and I don’t feel a hell of a lot more worthy than the parents of those medically fragile children.===
Nor do I Steve, but why do you posit the argument as a choice between state employee benefits and medically fragile children, while leaving the civic committee and their ilk out of the equation?
Comment by PublicServant Wednesday, Jul 11, 12 @ 8:43 pm
you seem to be forgetting that state employees earned these benefits, many times, at the expense, their personal expense, of raises while continuing to provide services to the state. Earned compensation vs. unearned entitlements. That is a false choice. Raise taxes on all taxpayers, spreading the burden progressively on those taxpayers most able to afford it. That’s the only way “we’re all in this together”, and it’s the most equitabl way too. Our representatives got us, all of us taxpayers, into this mess, and paying for the contractual agreements that were made, is the only fair way to get us out of this.
Comment by PublicServant Wednesday, Jul 11, 12 @ 8:55 pm
PS, I’m for a graduated income tax, I’m for taxing retirement income, and I’ve said it time and again. I’ll gladly take a chunk of the Civic Committee’s member’s wealth for state government, but the argument was the burden is being placed entirely on us, and it isn’t.
Comment by steve schnorf Wednesday, Jul 11, 12 @ 8:57 pm
Between Ralph Martire’s study and Iris J. Lav/Elizabeth McNichol’s “From the Center on Budget and Policy Priorities” study, it should be clear that all the cuts and cost shifting to those in state pension plans isn’t going to fix this mess! No one is talking tax increase on those that can’t afford to pay more…ala middle class woking families. There are ways to generate increased revenue, ways that just about every state other than Illinois employs. Why do you think we’re at the bottom of the list? Why that’s such a non-topic indicates to me that state/public employees are in fact, under attack. Intelligent people who understand basic math would figure out that we have a revenue problem…….and because we always HAVE, the pension funds were raided to pay for things that should have been paid for with tax dollars. Come on……….it’s nothing more than a plan to keep focus OFF those who might be eyeballed to pay more and direct the anger and resentment onto workers who don’t have resources to fight back. We have a revenue problem in Illinois……..always have and will continue to have that revenue problem no matter how much more retirees or future retirees have to pay.
Comment by Inactive Wednesday, Jul 11, 12 @ 9:03 pm
OK Steve, I agree. I was wrong when I said the burden was being placed “entirely” on state employees, so let me rephrase it: When I see discussions leading to bills that propose as a component, any or all of the concepts you mention above in your 8:57 post, then I’ll agree to talk health insurance premiums and COLAs.
Comment by PublicServant Wednesday, Jul 11, 12 @ 9:12 pm
Inactive, the state has a structural budget imbalance. The people we elected raised taxes substantially as one part of a solution to the imbalance, and now they are cutting spending, the other part of the equation.
Ralph is incorrect in part of what he says in his article, though his moral compass is correct and strong, as it usually is. What he needed to say was that reducing benefits is not the correct way to address the problem because they didn’t cause the problem, but like it or not, it WILL help solve the problem of $80+ billion in unfunded liabilities. Future COLAs are a significant part of that unfunded liability and reducing them will lower it. You don’t like it, i don’t like it, plenty of legislators are going to have to vote for it that don’t like it.
Comment by steve schnorf Wednesday, Jul 11, 12 @ 9:19 pm
Retirees and taxpayers all in it together?
I guess that depends on which taxpayers you’re referring to, Schnorf.
CME and Sears appear to be in a different boat. And you can say the same for about half the corporations in Illinois.
Hey, did you here that as a result of the state’s budget crisis, the General Assembly and Governor Quinn only want to pay Com-Ed fifty cents on the dollar for the electric services they provided, even though we promised them more?
No, you didnt hear that. But its essentially what we’re doing to our retired neighbors.
Comment by Yellow Dog Democrat Wednesday, Jul 11, 12 @ 10:06 pm
Steve,
For what it’s worth, I don’t and never have blamed you personally for the 4% mess … that was clearly an executive decision. And the only reason I mentioned it today was to illustrate one example of why a lot of us are PO’ed. In fact, to be honest, I had forgot you were one of the players at the time …
Comment by RNUG Wednesday, Jul 11, 12 @ 10:08 pm
If we ARE all in the same boat, let’s take a balanced approach and put corporate tax loopholes, a graduated income tax, and sales tax reform on the table.
Comment by Yellow Dog Democrat Wednesday, Jul 11, 12 @ 10:09 pm
Retirees and taxpayers…..in it together….are these 2 separate/different groups? I’m a taxpayer AND a retiree………..paying more taxes and soon looking at being less of a retiree! Hey, can I have my job back at the salary I was making when promised the benefits I thought I would have? But I AM a taxpayer…..
Comment by Inactive Wednesday, Jul 11, 12 @ 10:14 pm
The weakness of your “balanced approach” comparison Steve is that the tax increase is temporary, while the pension changes are perpetual.
I do not believe, given the current and likely future political climate, that the tax increase will be extended.
Comment by Yellow Dog Democrat Wednesday, Jul 11, 12 @ 10:17 pm
PublicServant,
Normally, with 40 quarters, Part A (hospitalization / major medical) is free … but there can be some offset rules for certain government workers like non-coordinated SERS or TRS who didn’t pay in as part of their ‘primary’ job. Note to others; regardless of quarters, you can always buy part A, it just isn’t cheap. And part of the retroactive change State retiree issue is if you relied on the State plan and didn’t sign up for Medicare at age 65, it gets more expensive the longer you wait.
You will still pay for Part B (routine doctor visits & medical care), everyone does. And then there is either the current State policy to serve as your Medigap or a seperate Medigap policy or Part D policy for things like prescriptions. Your existing State policy issues a ‘credible coverage cewrtificate’ that it subs for Part D.
I’m not at that age yet but parents have been dealing with it for a long time. Once you start dealing with it on a regular basis, you learn the whole alphabet soup breakdown. The best people to answer any questions are the Social Security staff, especially when you start getting into the various offset rules.
Comment by RNUG Wednesday, Jul 11, 12 @ 10:18 pm
Steve, you’re talking about a scenario that is unrealistic in the current environment. At one point in time, I would have agreed with you. As a former MC employee, I’ve been through furlough days and years of no salary increases. We have all seen the vilification of government workers by so-called pension reform groups. We’ve also seen the state enter into a contract of only to renege on it.
Reality is that there is no one who represents my interests. No one who will help ensure that my contribution level is reasonable rather than a punitive level geared towards making me accept additional financial penalties. Even if there was some organization representing MC employees, it’s hard to negotiate when there’s no trust that the state will honor its commitment.
At this point in time, I have to rest my hopes on the success of lawsuits filed by the MC5 and a retired judge.
Comment by Norseman Wednesday, Jul 11, 12 @ 10:28 pm
Norseman,
RSEA is doing what they can to represent the interest of retired MC people. Check out http://rsea4u.org/
Comment by RNUG Wednesday, Jul 11, 12 @ 10:30 pm
YDD,
I’d be willing to bet there’s a tax railroad job coming in mid-November by a lame duck GA
Comment by RNUG Wednesday, Jul 11, 12 @ 10:33 pm
Since the retirees now paying insurance premiums is touted as “pension reform”, how many of you think all of the new insurance premium dollars should go directly into the pension fund to help reduce the unfunded liability? I do. If it does not, then it’s not pension reform. It’s just one more way to get State retirees to give the legislature additional money each FY to spend on the same type of programs that caused the problems in the first place. That is - using “pension funds” from State employees/retirees to support programs that Illinois can not afford.
Comment by Jechislo Wednesday, Jul 11, 12 @ 10:41 pm
RNUG, I have a save the date note for the 25th.
I was speaking in terms of a formal negotiation. I know Randy and the RSEA are doing their best to advocate on our behalf.
Comment by Norseman Wednesday, Jul 11, 12 @ 11:02 pm
Norseman,
I have it on my calender too … if nothing comes along to conflict.
Comment by RNUG Wednesday, Jul 11, 12 @ 11:20 pm
Any chance we can get the union to strike a deal where current employees (me) contribute more toward retirement? Why do we have to wait for the courts to rule all these pension reforms unconstitional? The longer we wait, the bigger the hole we have to dig out of.
And here’s another reality: The Civic Federation and all their CEO members will never pay their “fair share” as long as the tea partiers
Comment by Sox fan Thursday, Jul 12, 12 @ 12:06 am
…continue to do their bidding. I don’t see that changing until we (state employees) provide a giveback. Do I think it’s fair that I have to do that, especially when I could have made a lot more in the private sector? I made the choice to earn less, banking on my public pension being there. It won’t be there if we keep kicking the can down the road.
Comment by Sox fan Thursday, Jul 12, 12 @ 12:12 am
All state residents share some of the repercussions from reduced spending on basic state services.
Almost state residents pay higher taxes, on non-pension income.
But state retirees are being required to also lose benefits they were contractually promised and therefore counted on when deciding when to retire.
That’s a double whammy on one group.
No one proposes solving the financial challenges with Social Security and Medicare by taking away benefits from current retirees. Why is it different with state retirees?
Comment by reformer Thursday, Jul 12, 12 @ 8:42 am
@RNUG -
There will be no lame duck tax plan going into midterm elections, when Democrats are most vulnerable.
Moreover, history shows that the votes for new revenue are unlikely to appear until the old revenue is going, going, gone.
I expect the 2014 elections to be the most partisan we’ve ever seen, in part because the map is likely to even further polarize Illinois Republicans. I’ve seen some signs of fiscal leadership from Radogno, Rutherford and of course Topinka, but Rutherford will be running for Governor, screaming anti-tax rhetoric at the top of his lungs. I don’t expect Radogno to break completely from Cross and support tax reform, even though its in her political interest and in her heart, I believe she knows its necessary.
There are only two scenarios where a tax hike happens in 2014-15: a Democratic supermajority in both chambers or a Republican governor. I think both are extremely unlikely.
Comment by Yellow Dog Democrat Thursday, Jul 12, 12 @ 9:22 am