Tuesday, November 25, 2014

Should we worry about the unions’ “commitment… to develop a fair and constitutional solution to fund the state’s retirement systems” after the Illinois Supreme Court’s ruling?

Going forward, our union coalition repeats our longstanding commitment to work with anyone of good faith to develop a fair and constitutional solution to fund the state’s retirement systems” (The Illinois Education Association, November 25, 2014).  


To the We Are One Leadership:

“[B]y joining a pension system, public employees obtain absolute ‘vested’ rights in the pension plan, including later benefit increases added during their service. These rights cannot be unilaterally changed by the legislature under any circumstances, but the rights may be modified via legitimate contract principles…” (Eric M. Madiar (2012). 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, 179-194).

Though “rights may be modified via legitimate contract principles” (or by what is commonly called consideration), we hope the leadership of the We Are One Coalition intrepidly believes from now on that “a fair and constitutional solution” should never be an exchange for reductions of originally-vested benefits assured by the Illinois Constitution!

In Illinois, the Supreme Court “has consistently invalidated amendments to the Pension Code where the result is to diminish benefits” (McNamee v. State, 173 Ill. 2d 433, 445 (1996)). There are over a dozen antedated court rulings to confirm this fact.

“Any alteration of the pension system amounts to a modification of an existing contract between the State and all members of the pension system, whether employees or retirees. A member is contractually protected against a reduction in benefits” (Kuhlmann v. Board of Trustees of the Police Pension Fund of Maywood, 106 Ill. App. 3d 603, 608 (1st Dist. 1982)).

Thousands of union members (that the union leadership did not acknowledged at the time of Senate Bill 2404) did not support a decision to cut benefits and rights already guaranteed by the State and U.S. Constitutions that some Illinois politicians and union leaders chose to negotiate nearly two years ago. (Quinn’s loss confirms this conclusion).

Senate Bill 2404 “attempt[ed] to extract a pretense of agreement from individual public employees and retirees to the reduction of their vested pension rights...; [SB 2404] force[d] a retiree to choose between pension rights and health care coverage. [This] rested upon an assumption that the State ha[d] an unlimited right to exclude a public employee or retiree from participation in a health insurance program…

The We Are One Illinois Labor Coalition’s acquiescence to modify retirees’ and public employees’ rights and benefits was an inexcusable abdication of a constitutional guarantee. According to Tabet, DiVito & Rothstein LLC, it was a unilateral reduction of pension rights… even if coupled with equally unilateral benefits that the [Labor Coalition] imagine[d] retired and active public employees might theoretically find desirable…” (Gino L. DiVito, John M. Fitzgerald, and Katherine M. O’Brien of Tabet, DiVito & Rothstein LLC, Constitutional Issues Concerning Legislative Pension Reform Proposals, February 2013).

“…Illinois Courts have consistently held over time that the Illinois Pension Clause's protection against the diminishment or impairment of pension benefits is absolute and without exception. The Illinois Supreme Court has ‘consistently invalidated amendment to the Pension Code where the result is to diminish benefits’ (McNamee v. State, 173 Ill. 2d 433, 445 (1996)). In their affirmative matter, the defendants assert that the Act is nonetheless justified as an exercise of the State's reserved sovereign powers or police powers. The Court finds as a matter of law that the defendants' affirmative matter provides no legally valid defense. The Court ‘may not rewrite the pension protection clause to include restrictions and limitations that the drafters did not express and the citizens of Illinois did not approve’ (Kanerva, 2014 Ill. 115811, ¶ 41). The Pension Protection Clause contains no exception, restriction or limitation for an exercise of the State's police powers or reserved sovereign powers. Illinois courts, therefore, have rejected the argument that the State retains an implied or reserved power to diminish or impair pension benefits (See Fell v. Board of Trustees of Judges Retirement System, 107 Ill.2d 158, 167-68 (1985) (holding that, to recognize such a power, ‘we would have to ignore the plain language of the Constitution of Illinois’); Kraus v. Board of Trustees of Police Pension Fund of Village of Niles, 72 Ill. App. 3d. 833, 851 (1979)).

“Because the Act diminishes and impairs pension benefits and there is no legally cognizable affirmative defense, the Court must conclude that the Act violates the Pension Protection Clause of the Illinois Constitution. The Court holds that Public Act 98-0599 is unconstitutional” (Ruling by the Honorable Judge Belz). 


We presume that the IEA pronouncement, Going forward, our union coalition repeats our longstanding commitment to work with anyone of good faith to develop a fair and constitutional solution to fund the state’s retirement systems,” means unequivocally a re-amortization of the pension debt and reform and modernization of the state’s regressive single-rate tax structure to sufficiently address the funding of the state’s retirement systems. “To work with anyone of good faith” on the State of Illinois’ revenue and debt problems is what the union membership expects, not a capitulation of their constitutional rights and benefits that have been lawfully earned.

5 comments:

  1. How can the unions come up with a constitutional solution? Anything that diminishes the pension is unconstitutional?

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  2. Dear James,
    “In Illinois, New York and Arizona… by joining a pension system, public employees obtain absolute ‘vested’ rights in the pension plan, including later benefit increases added during their service. These rights cannot be unilaterally changed by the legislature under any circumstances, but the rights may be modified via legitimate contract principles [an offer, new consideration, and voluntary union negotiated acceptance]" (Eric M. Madiar (2012). 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, 179-194. Retrieved December 7, 2012 from http://www.americanbar.org/content/dam/aba/publishing/aba_journal_labor_employment_law/jlel_v27n2.authcheckdam.pdf).

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  3. Additionally, one might regard the decrease in pension benefits as the inverse of the accumulation of allowances like ERO, COLA's, access to healthcare, etc. These were moderations given in exchange for increases in payments by employees. SB2404 was a "take back," operating in the guise of "consideration" for the COLA or access to healthcare.

    While the IEA's stance is "to develop a fair ...solution to the problem," such a laurel will be seriously affected by the ultimate finding of the ISC - one would think.

    In fact, even Lawrence Msall on WTTW the other evening acknowledged that such an attempt once again (if the pension theft law is struck down by ISC) will bring a multitude of lawsuits and lawyers representing the retired, those about to be, etc.

    The answers have always been found on the revenue side of the issue, but thus far legislators and business leaders have remained wedded to the status quo of flat taxes and punishing payback schemes.

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  4. The Union Leadership must realize that if they decide that they will work with Illinois elected officials and diminish employees' constitutionally protected benefits by contract negotiations this will result in a mass exodus of union members.
    Also, for those retired state employees(both union and non-union members) it is my understanding that unions do not represent them at any negotiating table. It is my understanding that unions legally can only represent current employees. Please let me know if I am wrong in my understanding

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    Replies
    1. We Are One Illinois Coalition (Unions)
      Filed: January 28, 2014
      Location: Sangamon County

      Plaintiffs:

      5 TRS active teachers
      3 TRS annuitant teachers
      3 SURS active members
      3 SURS annuitant members
      9 SERS active members
      2 SERS annuitant members

      —Seek to represent class of actives and annuitants from TRS.

      Delete