Wednesday, October 23, 2013

“How We Got to the Pension Crisis” via Liars and Thieves

“…Cullerton and other state's leaders have spent many years not fixing the pension debacle they created… In the private sector, this sort of mismanagement gets executives fired. In the public sector, you'd like to think it would provoke humble resignations…” (Chicago Tribune editorial, October 22).

Without a doubt, had Illinois lawmakers funded the public employees' retirement plans throughout the years, there would not be a pension debt “crisis.” However, most of us know Illinois lawmakers have consistently failed to make the annual required contributions to the state’s pension systems because they could pay for essential services and their pet projects without raising taxes by simply pilfering money reserved for the public employees’ pension funds. 

Furthermore, state legislators have refused to correctly amortize the pension systems’ unfunded liabilities; thus, they are willing to sabotage the public employees’ retirement plans and the State of Illinois’ future economic solvency through more calculated mismanagement and fiscal irresponsibility.

Without a doubt, past Illinois lawmakers created the state’s fiscal debacle, and many current policymakers are as devious as their predecessors. They prefer to jeopardize the public employees’ retirement plans through so-called “pension reform,” even though revenue and pension debt reforms are the legal and moral solutions.

Instead of protecting public pension rights and benefits, which have a legal basis under Illinois State Law; instead of restructuring the state’s revenue base to pay for the state’s growth in expenditures and its reckless accumulation of debts and obligations, many current policymakers would rather challenge the Illinois constitutional provision (Pension Clause) and diminish (and predictably destroy) the public employees’ defined-benefit pension plan and their health care benefits. Let’s not forget most public employees will receive no Social Security and, if they do, it will be a pittance.

Indeed, all citizens of the State of Illinois are victims because of a fiscal morass caused by past incompetent, unethical and negligent General Assemblies and today’s scheming Illinois legislators attempting to seize political opportunity via “pension reforms” that violate a constitutional contract. They are also victims of corporate-owned newspapers like the Chicago Tribune.

Like many Illinois legislators, the Chicago Tribune also ignores the fact that Illinois “suffers from structural deficits or from failure of revenues to grow as quickly as the cost of services…, [and that] structural deficits stem largely from out-of-date tax systems, coupled with costs that rise faster than the economy… Fixing these structural problems would help [Illinois] balance [its] operating budgets without resorting to [a reckless and radical “pension reform” instigated and propagandized by the Civic Committee of the Commercial Club of Chicago, the Civic Federation, Illinois Policy Institute, Chicago Tribune and their ilk]” (The Center on Budget and Policy Priorities, January 2011).

Why not listen to the Center on Budget and Policy Priorities, the Center for Taxation and Budget Accountability, the Chicago Metropolitan Agency for Planning, the Institute on Taxation and Economic Policy, the National Council of State Legislatures, United for a Fair Economy, the Economic Policy Institute, the Center for Policy and Economic Research, the National Association of State Retirement Administrators, and the National Institute on Retirement and other organizations that advocate revenue and debt restructuring, rather than scapegoating or breaking a constitutional contract with the state’s public employees and retirees?

1 comment:

  1. Douglas L. Greenfield and Susan G. Lahne (2012) found that “the vast majority of state courts, relying on either state law or the Contract Clause of the U.S. Constitution, treat pensions provided to public employees as enforceable contracts protected from later unilateral reduction, even if imposed through legislative enactments (p. 2) (See E. Madiar, Public Pension Benefits Under Siege: Does State Law Facilitate or Block Recent Efforts to Cut the Pension Benefits of Public Servants?, ABA Journal of Labor & Employment Law, V. 27, no. 2 179, 181-185 (2012) (summarizing and categorizing state courts’ varying treatments of public pensions).

    “It is reasonable to conclude that government employers desire and intend to treat their complex, articulated pension programs in toto [in entirety] as an important aspect of their contractual obligations to each of their employees covered under the program (p. 11-12) (See Madiar, ABA Journal of Labor & Employment Law at 194, n. 111 (citing Lauderdale v. Eugene Water & Elec. Bd., 177 P.3d 13, 19-21 (Or. Ct. App. 2008)).

    “Pension plans, unlike other forms of compensation, are designed as complex systems intended to be funded consistently over time and to produce life-long replacement income to be provided over time to employees after retirement. Stability is an important facet of all pension plans, and this is particularly true of government pension programs, which tend to be larger, more long-term, and more complex in terms and scope than private-sector plans (p. 12)…

    (A footnote referring to the aforementioned states,] “In this regard, the reduction of the governments’ promises, as part of these employment agreements, to maintain these long-term, complex funding and payment programs, to promises of ‘deferred compensation,’ (see Monahan, 97 Iowa L. Rev. at 1043), understates the actual nature of the states’ substantial undertaking. The state courts have obviously understood that more than merely future compensation payments are involved in the commitment that governments took on as enforceable contractual pension obligations (p. 12)…

    “If the courts had initially mistaken the legislative intent underlying these pension programs, and governments had not intended that they create binding contractual rights, governmental entities surely would instead have taken concrete steps, all these many decades, to correct the courts’ errors and to establish that they intended to have the freedom to revise such arrangements at will, as well as to ensure that newly-hired employees understood the precariousness of the current pension arrangements (p. 13)…

    “[However, it is true any] attempt to denigrate the validity of decades of judicial precedents about the binding nature of legislation establishing pension commitments to government employees and to motivate state courts to overturn long-settled premises about these commitments would impose its own, unjustifiable costs. The states and their instrumentalities have promised pension benefits to their employees; those employees have relied on those long-standing promises; and as a result the citizens of the states have benefited from the services provided by those employees.

    “[In short,] there is no sound public policy reason to conclude that these promises – based on the reasonable expectations of the contracting parties – should not be fully protected by the laws prohibiting or limiting the impairment of contracts” (p. 15-16).

    Greenfield, Douglas L., Lahne, Susan G. (2012). How Much Can States Change Existing Retirement Policy? In Defense of State Judicial Decisions Protecting Public Employees’ Pensions. National Council of State Legislatures Legislative Summit, 1-16. Retrieved December 9, 2012 from