Saturday, October 5, 2013

On Breaking a Contract or So-called Illinois “Pension Reform” and Giving the Money to Corporations

"The power of changing the relative situation of debtor and creditor, of interfering with contracts, a power which comes home to every man, touches the interest of all, and controls the conduct of every individual in those things which he supposes to be proper for his own exclusive management, had been used to such an excess by the state legislatures, as to break in upon the ordinary intercourse of society, and destroy all confidence between man and man. This mischief had become so great, so alarming, as not only to impair commercial intercourse and threaten the existence of credit, but to sap the morals of the people and destroy the sanctity of private faith. To guard against the continuance of the evil was an object of deep interest with all the truly wise, as well as the virtuous, of this great community, and was one of the important benefits expected from a reform of the government" (Chief Justice Marshall). 

"It is competent for the States to change the form of the remedy, or to modify it otherwise, as they may see fit, provided no substantial right secured by the contract is thereby impaired. No attempt has been made to fix definitely the line between alterations of the remedy, which are to be deemed legitimate, and those which, under the form of modifying the remedy, impair substantial rights. Every case must be determined upon its own circumstances" (Von Hoffman v. City of Quincy, supra, pp. 71 U. S. 553).

Of course, every case “must be determined upon its own circumstances” and here are some significant “circumstances” to consider” in Illinois:

·         Illinois State legislators have not fully funded the state’s public pension systems for years so they can gain favor from their constituency and from their wealthy supporters. It has been said that approximately 30 billion dollars have been "diverted" from the five public pension systems; 15 billion dollars of that amount was stolen from the Teachers' Retirement System. (Total Employer Contributions to the Illinois Teachers' Retirement System Since 1970).

·         “For decades, states have treated pension systems as a credit card to pay for government services and to avoid tax increases or service cuts…” (Eric M. Madiar, Chief Legal Counsel to Illinois Senate President John J. Cullerton and Parliamentarian of the Illinois Senate (2012), Public Pension Benefits under Siege: Does State Law Facilitate or Block Recent Efforts to Cut the Pension Benefits of Public Servants?).

·         In 1995, policymakers created a flawed re-funding schedule, and they have refused to correctly amortize the pension systems’ unfunded liabilities since then.

·         Instead, policymakers have favored corporate interests (by providing them with unwarranted tax breaks) rather than the interests of their citizenry and; thus, they have seriously sabotaged the public employees’ retirement plans and the State of Illinois’ future economic solvency through mismanagement and fiscal irresponsibility.

·         Instead of protecting public pension rights and benefits, which have a legal basis under Illinois State and U.S. Laws; instead of restructuring the state’s revenue base to pay for the state’s growth in expenditures and its recklessly-accumulated debts and obligations, some current policymakers want to diminish the public employees’ constitutional rights and their benefits, even though revenue restructuring and pension debt re-amortization are the best legal and moral solutions. 

How can it be deemed fair that so-called “pension reform” is a legitimate remediation of the state’s incurred pension debt and its revenue problems, especially when pension reform will inevitably create a severe economic disadvantage for most public employees and their families in retirement while creating an economic advantage for the wealthy among us and corporations that subsidize unethical policymakers? This is not protection of the vital interests of the citizens of the State of Illinois. It is, however, a violation of public employees’ guaranteed constitutional rights and benefits.

Now consider the absurd conflict and irony of Governor Quinn v. the Illinois General Assembly recently: Quinn wants to steal money from public employees’ pensions just like some members of the General Assembly, via breaking a constitutional contract, and then give the money to Archer Daniels Midland Co. and other kindred, extortionate corporations (like he did with Motorola Mobility, Chrysler, Navistar International, U.S. Cellular, Mitsubishi Motors, Sears and Roebuck...).

“…Gov. Pat Quinn said today that a request by Decatur-based Archer Daniels Midland for millions of dollars in tax incentives to stay in Illinois should not be considered until lawmakers first reform the state's highly indebted public employee pension system. The company has asked lawmakers for as much as $24 million in incentives over the next two decades to continue to operate in Illinois. The company, which has been based in Decatur for more than four decades, wants to move its headquarters to Chicago. Quinn said the agricultural giant should ‘hold back’ from seeking special tax breaks and instead put pressure on lawmakers to implement pension reforms” (Quinn: No ADM tax breaks until pension deal). 

Just when you forgot Quinn "was put on earth" to solve the pension mess that legislators and their cohorts had created, now he wants corporate extortionists to coerce the unethical members of the Illinois General Assembly! Isn't that Ty Fahner's modus operandi? 

Something to look forward to in January, now that Illinois legislators have stolen more money from their favorite scapegoats: retirees and public employees.


  1. Glenn if you have not read the article in Salon I am including the URL below. It reinforces what you have indicated in your post but on a broader scale.

  2. A Commentary about the Archer Daniels Midland Corporation and EDGE credits by Al Popowits

    Would it surprise you to know that you pay more in state income tax than does Archer Daniels Midland Corporation? This is true despite the fact that (1) according to the State Constitution, the corporate income tax rate is 9.5%, and (2) ADM had sales last year of about $90B.

    How is it possible that a world-wide conglomerate can pay less state income tax than you? It is really quite simple. ADM accountants have for years used perfectly legal accounting methods to give the corporation a zero tax liability. Therefore, if you have paid any Illinois State income tax, you have paid more than ADM.

    This situation, however, has created a problem for ADM which has applied for an EDGE credit. EDGE is the acronym for “Economic Development for a Growing Economy.” It is a state program created to attract and retain businesses which make an investment in jobs and capital.

    However, ADM does not qualify for an EDGE credit because without any taxes owed ADM has no way to access the credit which would be worth about $1.2M a year for 20 years.

    How can ADM extract itself from this dilemma? It seems that the only thing it can do is follow the lead of Sears Holding, Motorola Mobile, Ford and other large corporations, and take a tax credit against the income taxes paid not by the corporations, but rather by their employees. In other words moneys that were destined to pay for state pensions, roads, schools, state police, etc. would go to ADM’s bottom line. This will only be possible if the state legislature passes special legislation.

    Why would the Illinois state legislature even contemplate making such a deal? ADM is moving its corporate headquarters from Decatur, Illinois to somewhere else. That somewhere else could be Chicago or an out-of-state location. Corporate executives aren’t saying where they will relocate, but they have applied for an EDGE credit.

    The implication is that the legislature will either give ADM the EDGE or else! Some impolite readers might call this corporate black mail, but those folks just don’t understand these things. After all, they are only taxpayers.