Tuesday, June 5, 2012

“HJRCA 49: A Constitutional Amendment Regarding the Rules Governing Pension Benefit Increases”

“...[According to the Center for Tax and Budget Accountability June 5, 2012], House-Joint Resolution Constitutional Amendment (HJRCA) 49 is a key example of [a] misguided approach to dealing with the state’s unfunded liability. This legislation would add Section 5.1 to Article XIII of the Illinois Constitution, which covers all public employee retirement systems (state and local) in Illinois.

“HJRCA 49 would create a constitutional requirement that any pension benefit increases would require three-fifths (3/5) approval by both houses of the General Assembly. This would make it far more difficult for the legislature to enhance retirement benefits for public workers in Illinois. HJRCA 49—itself a Constitutional amendment also requiring a 3/5 vote— passed the House by the required majority on April 18, 2012, and the Senate on May 3, 2012. That means HJRCA 49 will go to the public in November 2012 as a separate ballot initiative.

“Advocates justify their support for HJRCA 49 by claiming the proposed amendment represents a positive step towards ensuring the fiscal health of Illinois’ public retirement systems. However, this rationale is misguided for two key reasons. First and foremost, while the amendment may prevent future legislatures from passing benefit enhancements without the accompanying and necessary funding, HJRCA 49 does not reduce the state systems’ current $83 billion unfunded liability by even one cent.

“HJRCA 49 fails to address the real fiscal issue caused by the state’s outsized pension debt—how to amortize the $83 billion debt owed to the five state-sponsored retirement systems in a feasible way. Second, implementing a Constitutional amendment that hinders the ability of legislators to institute benefit increases would make it nearly impossible to rectify the problems associated with the reduced benefit tier that lawmakers created in 2010—Section IV details deficiencies of the second benefit tier…

“…Ensuring the stability of Illinois’ public retirement systems is certainly a laudable goal. That said, the means of ensuring stability should be designed to both redress the true causes of the fiscal problem and constitute sound public policy. HJRCA 49 fails on both counts. Since HJRCA 49 only deals with restricting the ability to institute benefit increases, the legislation does nothing to guarantee that public pension systems are adequately funded, thereby entirely missing the core problem that created the state systems’ aggregate unfunded liability. It would also interfere with the legislature’s ability to remedy the flaws with Tier II, making it poor public policy. Adequate funding of the state retirement systems is a pressing issue in Illinois.

“Rather than passing symbolic Constitutional amendments that fail to address the actual cause of the retirement systems’ underfunding, lawmakers should concentrate their efforts on redesigning the currently back loaded and unattainable repayment schedule for the debt owed to the five state-sponsored retirement systems.”

 For the complete Issue Brief from the Center for Tax and Budget Accountability, please read

1 comment:

  1. Glen, I wonder whether you've read or heard anything disputing the position I've copied and pasted below, along with a link to the page where I found it. If it's so, it's frightening.

    From: "Bruce C. Appleby"
    Subject: Fwd: HJRCA49 Explanation
    Date: May 10, 2012 12:37:29 PM CDT
    Reply-To: SIUC-EMERITUS-L List

    To SIUC AA Members:
    If you need a better understanding of why the constitutional amendment that will be on the November ballot is of such great danger to us, here's a concise description of the problem(s).
    Bruce C. Appleby
    borrowed from
    Linda Guinn and Lou Anderson @ Kankakee Community College

    According to our lobbyist Dick Lockhart at the last meeting of the State SUAA Executive Committee, HJRCA49 is a Constitutional Amendment which could eventually replace the pension protection language ("shall not be diminished or impaired") in the current Illinois Constitution. The way it works in the court system is that when later language conflicts with earlier language in the Constitution, the later language takes precedence. Paragraph d is the deadly one.

    d) Nothing in this Section shall prevent the passage or adoption of any law,
    ordinance, resolution, rule, policy, or practice that further restricts the
    ability to provide a "benefit increase", "emolument increase", or "beneficial
    determination" as those terms are used under this Section.

    The highlighted words have the potential to allow future "restrictions" on or reductions in pension benefits that the existing Constitutional language would be taken to forbid. Consequently, the above language would replace the "shall not be diminished or impaired" section in actual practice. If this amendment passes in a constitutional referendum in the Fall, then future legislation could cut pensions dramatically; and we would not be able to win a lawsuit to stop the cuts based on the Illinois Constitution.
    Cuts could occur for everyone: Tier I and Tier 2 and Tier 3 (if Tier 3 is put into place) for both current employees and retirees. Self Managed Plan could also be affected for current employees.