“…Because the state’s self-interest is at stake whenever it seeks to modify its own financial obligations, the United States Supreme Court has made clear that it is not appropriate to give the state’s legislature the same deference it would otherwise be afforded with regard to whether the impairment is reasonable and necessary to serve an important public purpose. ‘A governmental entity can always find a use for extra money,’ the Court observed, ‘especially when taxes do not have to be raised. If a State could reduce its financial obligations whenever it wanted to spend the money for what it regarded as an important public purpose, the Contract Clause would provide no protection at all.’ Id. at 25-26.
“In assessing claims by the state that impairment of a contract is ‘necessary’ to advance the public interest, courts consider whether the provisions which the state seeks to change had effects which were unforeseen and unintended by the legislature when initially adopted and whether the state could achieve its purposes through less drastic measures. Id. at 30-32.
“In this case, the State seeks remand to permit it to
develop a more complete evidentiary record on these questions. Such a remand,
however, would serve no purpose. Based on the facts already of record and the
matters of which we can take judicial notice, it is manifest that the State
could not, as a matter of law, clear the threshold imposed under contemporary
contract clause jurisprudence.
“As this opinion has previously observed, our economy is and has always been subject to fluctuations, sometimes very extreme fluctuations. Throughout the past century, market forces have periodically placed significant pressures on public pension systems. The repercussions of underfunding those pension systems in such an environment have been well-documented and were well-known when the General Assembly enacted the provisions of the Pension Code which Public Act 98-599 now seeks to change.
“The General Assembly had available to it all the information it needed to estimate the long-term costs of those provisions, including the costs of annual annuity increases, and the provisions have operated as designed. (While the automatic annual increases have sometimes exceeded changes in the cost of living, these adjustments are not cost of living adjustments, and as indicated earlier in this disposition, the increases have actually lagged the average increases granted by the Social Security Administration, which are tied to the cost of living.).
“The General Assembly understood that the provisions would be subject to the pension protection clause. In addition, the law was clear that the promised benefits would therefore have to be paid, and that the responsibility for providing the State’s share of the necessary funding fell squarely on the legislature’s shoulders. Accordingly, the funding problems which developed were entirely foreseeable.
“The General Assembly may find itself in crisis, but it is a crisis which other public pension systems managed to avoid and, as reflected in the SEC order, it is a crisis for which the General Assembly itself is largely responsible.
“Moreover, no possible claim can be made that no less drastic measures were available when balancing pension obligations with other State expenditures became problematic. One alternative, identified at the hearing on Public Act 98-599, would have been to adopt a new schedule for amortizing the unfunded liabilities. The General Assembly could also have sought additional tax revenue. While it did pass a temporary income tax increase, it allowed the increased rate to lapse to a lower rate even as pension funding was being debated and litigated.
“That the State did not select the least drastic means of addressing its financial difficulties is reinforced by the legislative history. As noted earlier in this opinion, the chief sponsor of the legislation stated candidly that other alternatives were available. Public Act 98-599 was in no sense a last resort. Rather, it was an expedient to break a political stalemate.
“The United States Supreme Court has made clear that the United States Constitution ‘bar[s] Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole [citations].’ (Internal quotation marks omitted.) United States v. Winstar Corp., 518 U.S. 839, 883 (1996).
“Through Public Act 98-599, however, the General Assembly addressed the financial challenges facing our State by doing just that. It made no effort to distribute the burdens evenly among Illinoisans. It did not even attempt to distribute the burdens evenly among those with whom it has contractual relationships.
“Although it is undisputed that many vendors face delays in payment, the terms of their contracts are unchanged, and under the State Prompt Payment Act, vendors are actually entitled to additional compensation in the form of statutory interest if their bills are not paid within specified periods. 30 ILCS 540/3-2 (West 2012).
“In no sense is this comparable to the situation confronted by members of public retirement systems under Public Act 98-599, which, if allowed to take effect, would actually negate substantive terms of their contractual relationships and reduce the benefits due and payable to them in a real and absolute way. Under all of these circumstances, it is clear that the State could prove no set of circumstances that would satisfy the contracts clause. Its resort to the contracts clause to support its police powers argument must therefore be rejected as a matter of law…”
“As this opinion has previously observed, our economy is and has always been subject to fluctuations, sometimes very extreme fluctuations. Throughout the past century, market forces have periodically placed significant pressures on public pension systems. The repercussions of underfunding those pension systems in such an environment have been well-documented and were well-known when the General Assembly enacted the provisions of the Pension Code which Public Act 98-599 now seeks to change.
“The General Assembly had available to it all the information it needed to estimate the long-term costs of those provisions, including the costs of annual annuity increases, and the provisions have operated as designed. (While the automatic annual increases have sometimes exceeded changes in the cost of living, these adjustments are not cost of living adjustments, and as indicated earlier in this disposition, the increases have actually lagged the average increases granted by the Social Security Administration, which are tied to the cost of living.).
“The General Assembly understood that the provisions would be subject to the pension protection clause. In addition, the law was clear that the promised benefits would therefore have to be paid, and that the responsibility for providing the State’s share of the necessary funding fell squarely on the legislature’s shoulders. Accordingly, the funding problems which developed were entirely foreseeable.
“The General Assembly may find itself in crisis, but it is a crisis which other public pension systems managed to avoid and, as reflected in the SEC order, it is a crisis for which the General Assembly itself is largely responsible.
“Moreover, no possible claim can be made that no less drastic measures were available when balancing pension obligations with other State expenditures became problematic. One alternative, identified at the hearing on Public Act 98-599, would have been to adopt a new schedule for amortizing the unfunded liabilities. The General Assembly could also have sought additional tax revenue. While it did pass a temporary income tax increase, it allowed the increased rate to lapse to a lower rate even as pension funding was being debated and litigated.
“That the State did not select the least drastic means of addressing its financial difficulties is reinforced by the legislative history. As noted earlier in this opinion, the chief sponsor of the legislation stated candidly that other alternatives were available. Public Act 98-599 was in no sense a last resort. Rather, it was an expedient to break a political stalemate.
“The United States Supreme Court has made clear that the United States Constitution ‘bar[s] Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole [citations].’ (Internal quotation marks omitted.) United States v. Winstar Corp., 518 U.S. 839, 883 (1996).
“Through Public Act 98-599, however, the General Assembly addressed the financial challenges facing our State by doing just that. It made no effort to distribute the burdens evenly among Illinoisans. It did not even attempt to distribute the burdens evenly among those with whom it has contractual relationships.
“Although it is undisputed that many vendors face delays in payment, the terms of their contracts are unchanged, and under the State Prompt Payment Act, vendors are actually entitled to additional compensation in the form of statutory interest if their bills are not paid within specified periods. 30 ILCS 540/3-2 (West 2012).
“In no sense is this comparable to the situation confronted by members of public retirement systems under Public Act 98-599, which, if allowed to take effect, would actually negate substantive terms of their contractual relationships and reduce the benefits due and payable to them in a real and absolute way. Under all of these circumstances, it is clear that the State could prove no set of circumstances that would satisfy the contracts clause. Its resort to the contracts clause to support its police powers argument must therefore be rejected as a matter of law…”
Commentary (from May 29, 2012):
…Like all other citizens, public employees’ legal rights are derived from past political constitutions, legislative enactments, and case law. All citizens of Illinois have a fundamental right to oppose a General Assembly that imposes a violation of their constitutional rights and earned benefits. “Any statute which [is] imposed upon [public employees]… in order to redistribute resources and thus benefit some persons at the expense of others [extends] beyond the implicit boundaries of legislative authority. Such laws…violate natural rights of property and contract, rights lying at the very core of the private domain” (Laurence H. Tribe, American Constitutional Law). So-called pension reform is without legal and moral justification; furthermore, to call it pension reform when it is breaking a contract is a fabrication.
The significant issue of pension reform is its attack on public employees’ rights to constitutionally-guaranteed, earned compensation and the legislators’ obligation to safeguard those promises. An unconscionable constitutional challenge of those rights and earned benefits generates a serious threat to their secure sense of worth as citizens and creates the unfair possibility for an economic disadvantage for a particular group of people and their families. This can never be legally or morally justified.
Public employees are promised certain retirement compensation. It is earned; it is not a gratuity. They expect and plan their lives based upon these promises. “The very idea that [the state can] hold [public employees’ lives], or the means of [their] living, or any material right essential to the enjoyment of life, at the mere will of another ‘has been thought’ intolerable in any country where freedom prevails” (John Locke, Two Treatises of Government).
“Each person possesses an inviolability founded on justice that even the welfare of society as a whole cannot override… It does not allow that the sacrifices imposed on a few are outweighed by the larger sum of advantages enjoyed by the many. Therefore, in a just society the liberties of equal citizenship are taken as settled; the rights secured by justice are not subject to political bargaining or to the calculus of social interests” (John Rawls, A Theory of Justice).
“The notion that, whenever a privilege or benefit might be withheld altogether, it may be withheld on whatever conditions government chooses to impose, has been repeatedly repudiated since the mid-20th century... Unconstitutional conditions – those that make enjoyment of a benefit contingent on sacrifice of an independent constitutional right – are invalid..." (Tribe).
“Wherever there is a right, the case is one of justice and not of the virtue of beneficence… When we call anything a person’s right, we mean that he [or she] has a valid claim on society to protect him [or her] in the possession of it, either by the force of law or by that of education and opinion” (John Stuart Mill, Utilitarianism).
Breaking a contract threatens the integrity of all laws that govern and protect the citizenry, for the values of the United States Constitution (Article I, Section 10) and the Illinois State Constitution (Article I, Section 16 and Article XIII, Section 5) are dependent upon the understanding and integration of all of the articles and amendments in totality; “the strength of the constitution[s] would not be proven by considering each article or amendment in isolation from the others” (Tom Beauchamp, Philosophical Ethics).
As citizens, we are advocates of a unification of the Bill of Rights in the United States Constitution, which protects all of us from any violations of human rights and contracts, as much as we would wish others to be motivated by a way of life that is also governed by a complete moral system of thinking. There are no good reasons for legislators’ attack on public employees’ rights and benefits and their attempt to equate public employees' lives to an exchange rate in dollar amounts. The General Assembly cannot justify pension reform in accordance with fundamental, constitutional principles of reason and morality…
-Glen Brown
from Illinois Pension Reform Is Without Legal and Moral Justification
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