Governor Rauner’s (and the Civic Federation’s) “Hard Freeze” of Pension Benefits Would Give Current Teachers and State Employees Frostbite

“Governor Bruce Rauner’s recommended budget for fiscal year 2016 includes a new plan for reducing the State of Illinois’ massive pension costs. As discussed here, the plan could cut the State’s unfunded pension liability by approximately $25 billion and save $2.2 billion on pension contributions from general operating funds in FY2016, according to the budget proposal.



“Proposed legislation on the plan has not yet been filed and the actuarial analysis that was used to generate the savings estimates was not released with other budget material. However, the plan’s main features are described in the recommended budget.

“The key component of the proposal is a freeze on the State’s more generous level of benefits, which are available to employees hired before 2011. Under the new plan, these Tier 1 benefits would only be paid on service before July 1, 2015. For work after that date, benefits would be paid at the lower Tier 2 level.

“In pension terminology, this is known as a ‘hard freeze.’ A hard freeze is when an employer ends benefit accruals for existing employees in a pension plan. As a result, benefits paid under that plan do not increase with additional years on the job or salary increases. In contrast, a ‘soft freeze,’ such as the one that created Illinois’ Tier 2, only closes a plan to newly hired workers.

“A hard freeze immediately reduces an employer’s projected accrued pension liability. This liability consists of benefits earned by retired employees; benefits earned by existing employees based on their current salaries and years of service; and the effect of future salary increases on existing employees’ past service. (Many public retirement systems, but not the State’s under current law, also take into account a portion of future service in computing accrued liability.) A hard freeze does not affect benefits already earned by retirees and existing employees. It does eliminate future salary increases from the accrued liability calculation…”

For the entire article, click here.


Commentary (for the umpteenth time)

“[A] plain language reading of the Pension Clause’s text makes clear that governmental entities may not reduce or eliminate a public employee’s pension payments and other membership entitlements once the employee becomes a pension system member… Further, the Clause’s prohibitory language against the diminishment or impairment of pension benefits is cast in absolute terms and lacks any exceptions…” (Is Welching on Public Pension Promises an Option for Illinois?).  

To challenge the “Pension Clause” is to defy common understanding of its legal and moral principles and to believe that every word in the State and U.S. Constitutions might also be interpreted in an infinite, fabricated regression. 

We have before us “the validity of decades of judicial precedents” that provide “the binding nature of legislation establishing pension commitments to government employees” (Defending and Protecting Public Employees’ Pensions against the Legislative Siege).  

If there is anything else we might examine regarding the “Pension Clause” and its relationship to a reality that reveals repeated attempts by the wealthy elite, their politicians and the media to steal constitutionally-guaranteed pension benefit rights, perhaps we should also dispute the relentless attacks on the very intelligibility of the English language by these liars and thieves. We know the “Pension Clause” is valid because it is understood to be a contractual right and guarantee that public employees have earned. 

Though incompetent, corrupt politicians and their wealthy benefactors continue to ignore legal and moral terminologies and court precedents, logical and ethical people understand the essential history and necessity of the “Pension Clause” and know what it also means to uphold the State and U.S. Constitutions. 

The promise to honor commitments and pay for the public employees’ pension is of “sufficient importance” to all citizens of Illinois. To pass any pension reform is “an unequivocal manifestation of intention not to perform… legal duties…under a contract… When there is a duty of immediate performance of a promise, failure to perform in full is a breach” (Professor of Law, Emeritus, Claude D. Rohwer and Professor of Law, Emeritus, Anthony M. Skrocki, Contracts in a Nutshell).

Though many legislators would rather dispute one of the Bill of Rights contained in both the Illinois and U.S. Constitutions instead of addressing the “real causes” of the state's budget deficits (the flawed pension ramp, the pension debt, and the state’s insufficient revenue), legislators should reexamine the concept of justice and what lawfulness demands: that people must keep their covenants with one another. In particular, no justice is accomplished when diminishing public employees' earned benefits and rights because of decades of legislators' irresponsibility, corruption and incompetence.  

“[T]he Illinois Supreme Court instructed, that ‘general language in a [judicial] opinion must not be ripped from its context to make a rule far broader than the factual circumstances which called forth the language.’ …In 1982, the Appellate Court in Kuhlmann v. Board of Trustees of the Police Fund of Maywood, again relied on Kraus [v. Board of Trustees of the Police Pension Fund of the Village of Niles, 1979] as well as Ziebell [v. Board of Trustees of the Police Pension Fund of the Village of Forest Park, 1979] to fashion the following rule regarding the Clause’s scope: [A]ny alteration of the pension system amounts to a modification of the existing contract between the State (or one of its agencies) and all members of the pension system, whether employees or retirees. A member is contractually protected against a reduction in benefits…” (IS WELCHING ON PUBLIC PENSION PROMISES AN OPTION FOR ILLINOIS? AN ANALYSIS OF ARTICLE XIII, SECTION 5 OF THE ILLINOIS CONSTITUTION by Eric M. Madiar, former Chief Legal Counsel to Illinois Senate President John J. Cullerton and Parliamentarian of the Illinois Senate).