As state leaders look to cut Illinois’ pension costs, the mayor of the state’s largest city is trying to do the same. Chicago Mayor Rahm Emanuel traveled to the capitol today to introduce his own pension plan. Amanda Vinicky reports:
Emanuel wasn’t just presenting his case to state legislators for the publicity, he needs the General Assembly’s approval to make changes to the city’s retirement system.
Without changes, he says, for Chicago to meet its pension obligations, the city’s property taxes would have to increase 150 percent.
MAYOR RAHM EMANUEL: “Businesses and families would flee, not just from our city, but from our state.”
Elements of his plan echo the cuts Governor Pat Quinn proposed making to current state employees’ pensions. But the Chicago Mayor says the city needs to take a different path.
Emanuel says city employees should work an extra five years , and he wants them to put an extra five percent of their paychecks into their retirement. He wants workers who are already retired to forgo guaranteed annual cost-of-living increases for a decade. He’s also trying to sell a 401k-style package as an “opportunity” for new employees.
House Speaker Mike Madigan says Emanuel’s appearance bolsters the case for changing both the city and the state pension plans:
SPEAKER MIKE MADIGAN: “I think his presence is helpful on pension reform across the board.”
But unions are already slamming the mayor’s package as unconstitutional, and a scare tactic.
It’s too late …………. the City & State are doomed, and the retirees (and actives) are screwed.
Greed, incompetance, self-interest, and stupidity was a recipe for disaster. Well done !
ILLINOIS RETIREMENT SECURITY INITIATIVE PUBLISHES PAPER DEFENDING PENSION RIGHTS: “IN SUM, WELCHING IS NOT A LEGAL OPTION AVAILABLE TO THE STATE.”
The Illinois Retirement Security Initiative has published a very well-crafted and thorough legal analysis of the pension rights of Illinois’s public employees.
The paper, written by Eric M. Madir, notes that the Illinois Supreme Court has invalidated the taking of vested pension benefits from public employees based on both the Pension Clause and the Contracts Clause of the Illinois Constitution. “The court’s principal holding that the Pension Clause (and the Contracts Clause in the public pension context) is an absolute bar to legislative impairments or reductions in pension benefits” cannot be ignored.
The paper addresses the development of pension law in Illinois and other states, focuses on Illinois’s historical underfunding of its pension systems, and summarizes the past campaign for a constitutional pension protection provision in Illinois.
Here is an introduction to the paper by the Illinois Retirement Security Initiative:
http://www.ilretirementsecurity.org/reports?id=0059
Here is a PDF (76 pages) of the paper:
http://www.ilretirementsecurity.org/admin/reports/files/Pension-Clause-Article-Final.pdf
I gave the paper a quick read last night and was struck by the fact that it exclusively addresses the pension rights of current workers. The idea of taking of fully-vested benefits from retirees (Colorado’s pension theft target) is so far beyond the pale that it is not even contemplated.
Below are some excerpts from the paper (in no particular order) that I found interesting:
First a quotation:
“There is no moral exemption for any man or body of men that breaks contracts. Nor is there any hope of public or private respect for a contract breaker. A contract breaker is an utter misfit as a citizen or a business man.”
—Franklin MacVeagh, former President of the Commercial Club of Chicago and U.S. Secretary of Treasury.
Particularly relevant to the current Illinois Governor’s pension reform proposal is the following statement:
“An Illinois Appellate Court has explained that “the [government] cannot whipsaw citizens into ‘voluntarily’ choosing one of two means by which they will be divested of an existing property interest.”
“Public employees have paid their required fair share of pension costs; it is incumbent on the State to meet its end of the bargain.”
“These unfunded liabilities, though, are not the fault of public employees. Public employees have historically paid their fair share of the normal cost of benefits through payroll deductions. Rather, the liabilities principally stem from the State’s decades-long failure to make its required contributions to the five pension systems.”
“Illinois courts have long held that the General Assembly lacks the power to amend or repeal legislation that affects vested rights.”
“The Legislature and various governors chose for decades to use the pension system as a credit card to fund public services and stave off the need for tax increases or service cuts.”
“In sum, welching is not a legal option available to the State.”
From the case Felt v. Judges Retirement System: “The court ‘found that a contract clause violation was not defensible as a reasonable exercise of police power.’”
“These are the ill effects of decades of skipping pension contributions to avoid tax increases and service cuts—a circumstance Illinois Governor John Peter Altgeld described long ago as the “cost of [getting] something for nothing.”
From an Illinois Appellate Court decision in: Sklodowski v. State: “Once rights are created by the constitution or statute, ‘It is within the realm of judicial authority to assure that the action of members of the executive branch do not deprive [individuals] of an institution of rights conferred by statute or by the Constitution.’”
The paper includes a concept from the case Ziebell v. Forest Park Pension Fund that adds clarity to public employee pension rights where employee pension benefits have increased over time. An employee’s right to a pension benefit is protected where the employee made contributions to the pension system after an increase in a pension benefit takes effect (for example, Colorado PERA members have continued their pension contributions after past increases in the COLA benefit took effect, and therefore have a vested right to that statutory benefit.)
The paper cites an Arizona Supreme Court decision in Yeazell v. Capins. In that case, the court held that since pension benefit rights of public employees became “vested” upon accepting employment, the legislature could not later change those rights retroactively without the mutual assent of the employee. The court also held that the fact that the employee continued to work after the statutory change took effect could not be construed as employee acquiescence or a waiver of rights.
The Madir paper notes that even if Illinois’s pension funds were to default, pension recipients would have a cause of action to receive their pension benefits. “Pension recipients will receive their pension payments when due even if a pension fund defaults or is on the verge of default. Any state pension participant placed in such a position would have a cause of action in circuit court to enforce this guarantee and obtain payment directly from the State’s General Fund. A participant need not pursue payment before the Illinois Court of Claims and depend upon the largesse of the General Assembly.” The Illinois Supreme Court has held that “where a constitutional or statutory provision categorically commands the performance of an act, so much money as is necessary to obey the command may be disbursed without any explicit appropriation.”
Can legislatures breach contracts and blame it on a recession?
“Courts, though, “sit to determine questions on stormy as well as calm days,” and the Constitution was upheld during the Great Depression.”
“As the Oregon Supreme Court stated in a similar context, “Once offered and accepted, a pension promise made by the state is not a mirage (something seen in the distance that disappears before the employee reaches retirement).”
What can you do? Go to the saveperacola.com website, click on the “Support” tab, and send them a contribution. Call or e-mail every PERA member and retiree you know and ask them send support. Call your public employee union representatives and ask them how they can stand idly by while the Colorado Legislature attempts to breach its contracts with public employees. Colleagues of our public sector union officials across the country are aggressively defending the pension rights of their union members. What has happened in Colorado is truly bizarre.
To follow developments in the Colorado pension theft lawsuit sign up as a Friend of Save Pera Cola on Facebook, or visit saveperacola.com