Friday, February 19, 2016

On the Civic Federation’s Proposal to Challenge the Illinois Constitution




  
The Civic Federation, who claims they are a “non-partisan government research organization working to maximize the quality and cost-effectiveness of government services in the Chicago region and State of Illinois,” has recently made a proposal (among many others) in their 55-page manifesto:

Approve [a] Constitutional Amendment Limiting [the] Pension Protection Clause: The Civic Federation urges the General Assembly to draft and approve a proposed amendment to the Illinois Constitution for the November 2016 statewide ballot specifying that the clause in the Illinois Constitution protecting public pension benefits applies only to accrued benefits.”

The past theft of pension assets in Illinois has been quite easy for many governors, legislators and their wealthy abettors from the Civic Federation and their ilk for decades. Today, most Illinois citizens recognize their incessant schemes to blame public employees and retirees for the chronic Illinois budget crisis and their schemes to steal money from the public pension funds; most Illinois citizens also recognize that these relentless liars and thieves who now choose to ignore the Illinois Supreme Court’s ruling against public pension theft on May 8, 2015 are either stupid or intentionally malevolent. 

Public employees and retirees are tired of these callous “pension reform” proposals that ignore the Illinois Constitution. They are tired of the Civic Federation’s, Civic Committee’s, Illinois Policy Institute’s, and the Media’s unrelenting, deceptive dialogues for “pension reform.”

Public employees and retirees understand the significant cause of the $100+ billion unfunded liability to the pension systems: “The state’s decades-long practice of intentionally borrowing revenue from ‘promised’ contributions to the retirement systems in order to subsidize the cost of delivering public services” (The Center for Tax and Budget Accountability), and most citizens of Illinois understand that pension reform should not be the focus in Springfield. It should be tax reform, where fairness, long-term revenue stability, and a progressive tax rate become the State’s priorities and solutions for the state’s chronic budget issues.

As determined by the Institute on Taxation and Economic Policy (as long ago as November 2009), the State of Illinois does not tax equitably, and it is in the top ten of regressive state tax systems where the wealthiest taxpayers do not pay as much of their incomes in taxes as the poorest and middle-income wage earners.

The focus should be on this “fundamental disconnect” and on a long-term economic policy by promoting structural reforms, and not on any unwarranted, unconstitutional modifications and their resultant destruction of the state's public pension plans.

Furthermore, deliberation should be on the current “Pension Ramp” that does not work for the five public pension systems. The “Pension Ramp” entails larger payments today as a result of the 1995 funding law – Public Act 88-0593 – to pay the pensions systems what the state owes. There needs to be a required annual payment from the state to the pension systems. The debt needs to be amortized for a longer frame of time (just like a home loan that is amortized).

According to the Illinois Supreme Court's ruling (nine months ago): “That [1995 funding] plan… contained inherent shortcomings which were aggravated by a phased-in 'ramp period' and decisions by the legislature to lower its contributions in 2006 and 2007. As a result, the plan failed to control the State’s growing pension burden… The SEC [also] recently pointed out:

“‘The Statutory Funding Plan’s contribution schedule increased the unfunded liability, underfunded the State’s pension obligations, and deferred pension funding. The resulting underfunding of the pension systems (Structural Underfunding) enabled the State to shift the burden associated with its pension costs to the future and, as a result, created significant financial stress and risks for the State.’ SEC order, at 3. That the funding plan would operate in this way did not catch the State off guard. In entering a cease-and-desist order against the State in connection with misrepresentations made by the State with respect to bonds sold to help cover pension expenses, the SEC noted that the State understood the adverse implications of its strategy for the State-funded pension systems and for the financial health of the State. Id. at 10.

“‘[Moreover], according to the SEC, the amount of the increase in the State’s unfunded liability over the period between 1996 and 2010 was $57 billion. Id. at 4.5 The SEC order found that ‘[t]he State’s insufficient contributions under the Statutory Funding Plan were the primary driver of this increase, outweighing other causal factors, such as market performance and changes in benefits.’” (Emphasis added.) Id. at 4 (In re PENSION REFORM LITIGATION (Doris Heaton et al., Appellees, v. Pat Quinn, Governor, State of Illinois, et al., Appellants) Opinion filed May 8, 2015, JUSTICE KARMEIER delivered the judgment of the court, with opinion. Chief Justice Garman and Justices Freeman, Thomas, Kilbride, Burke, and Theis concurred in the judgment and opinion). 

Public employees and retirees know they will continue to be the scapegoats for wealthy members of the Civic Federation, Civic Committee, and Illinois Policy Institute, especially by members who lack moral sensibility and legal accountability.

Public employees and retirees know that “pension reform” proposals will not resolve the state’s deficit problems and that these proposals will continue to accommodate and reinforce the enormous inequality of organizational resources of these thriving egotistical profiteers.

Public employees and retirees know they will continue to be potential victims of the corporate vast resources of money and influence that these organizations have committed to the reforming of rules and policies in Illinois.

Public employees and retirees know that the Civic Federation's recent proposal to challenge the Illinois Constitution would adversely affect the lives of middle-class citizens and the disenfranchised.

Public employees and retirees also know there are no equal rights when there is inequity of wealth, and when proposals are made to underpin and to sustain the fortunes of a few at the expense and victimization of the many.

There is a simple synergistic balance to understand here. If the state’s policymakers are able to impair the “Pension Protection Clause” of its public employees, they will not only destroy the public employees’ financial security and their integrity, but they will also damage the communities that these people support, serve and protect, and ultimately the entire state's economy.



4 comments:

  1. On the Civic Federation’s Proposal to also “Establish Comprehensive Teachers’ Pension Funding Reform: There is no good public policy reason for Illinois to maintain two separate funds for public school teachers’ pensions. The Chicago Teachers’ Pension Fund and Teachers’ Retirement System should consolidate, providing more equitable pension funding for all teachers and helping to stabilize Chicago Public Schools’ finances”:

    “‘Combining the retirement systems will destabilize TRS and put pensions of every retired teacher outside Chicago in even greater jeopardy,’ Jim Bachman, Executive Director of the Illinois Retired Teachers Association said. ‘Consolidation is a great benefit to Chicago Teachers, but there is little, if no, value to TRS beneficiaries. Combining these systems would inflict too much of a strain on the pension system, causing a complete failure and leaving no one with the benefits they have earned.’

    “‘Consolidation of the Chicago and Downstate Teachers' Pension Funds would be detrimental to both CTPF and TRS because both systems are vastly underfunded. The cause is not the result of people retiring with excessive pensions or teachers not paying into the funds, but instead due to pension holidays taken by both the City and the State’” (Illinois Retired Teacher Association).

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  2. Give the Civic Fed some credit for its latest proposals. Yes, they did call for the Constitutional amendment that we disapprove of (that courts may rule will apply only to new employees anyway), but they also called for over 8 billion dollars a year in revenue increases that would go a long way towards stabilizing Illinois' long term fiscal balance. Probably mostly out of self-interest (Detroit and other municipal bankruptcies recently have been far less kind to bondholders than pensioners, and the top 1% hold virtually all the muni bonds), it seems to me the Civic Fed actually wants to avoid a potential bankruptcy situation, which is not currently possible (at least for the state) but could be in the future under a Republican President and Congress. With the Illinois Supreme Court ruling making clear that pensions cannot be reduced outside of bankruptcy, going forward, the top 1% may prove to be our allies rather than our enemies, because we both have a strong desire to have governments avoid bankruptcy so that our contractual obligations are paid. I know, it sounds preposterous, but stranger things have happened in history. Did we not ally ourselves with Stalin's Soviet Union to win WW2?

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    1. Dear Andrew,

      Kraus v. Board of Trustees… Police Pension Fund, Niles, 1979: The law existing at the time of “vesting” is incorporated into employee’s agreement… Pension benefits commence at the time employee contributions begin… General Assembly cannot modify benefits. “The Pension Protection Clause protects pension benefit rights as an enforceable contractual relationship that is subject to modification [only] through contract principles.” Moreover, this case also “clarified that pension benefit rights were 'contractual' in nature under the Clause... [T]he court [also] rejected the notion that the General Assembly somehow retained a 'reserved power' to modify and reduce pension benefits because neither the Clause's text nor drafting history supported that view” (Eric M. Madiar, the previous parliamentarian for the Illinois Senate).

      The significant issue of pension reform (or attempting to break a constitutional contract) is its attack on public employees’ rights to constitutionally-guaranteed, earned compensation and the legislators’ obligation to safeguard those promises. Any unconscionable constitutional challenge of those rights and earned benefits generates a serious threat to their secure sense of worth as citizens and creates the unfair possibility for an economic disadvantage for a particular group of people and their families. This can never be legally or morally justified.

      Public employees are promised certain retirement compensation. It is earned; it is not a gratuity. They expect and plan their lives based upon these promises. Breaking a contract threatens the integrity of all laws that govern and protect the citizenry, for the values of the United States Constitution (Article I, Section 10) and the Illinois State Constitution (Article I, Section 16 and Article XIII, Section 5) are dependent upon the understanding and integration of all of the articles and amendments in totality.

      The Teachers’ Retirement System, for instance, depends upon three incomes: the State’s contributions (which legislators and governors have not fully paid for decades), TRS investments (which have fluctuated based upon the market), and teachers’ contributions (which have been the only consistency at 9.5%). Surely, if we were currently teaching, we would not want to contribute to a system that will not compensate us fully in our retirement.

      “The concerns of the delegates who drafted article XIII, section 5, and the citizens who ratified it have proven to be well founded. Even with the protections of that provision, the General Assembly has repeatedly attempted to find ways to circumvent its clear and unambiguous prohibition against the diminishment or impairment of the benefits of membership in public retirement systems. Public Act 98-599 is merely the latest assault in this ongoing political battle against public pension rights. As we noted earlier, through that legislation the General Assembly is attempting to do once again exactly what the people of Illinois, through article XIII, section 5, said it has no authority to do and must not do…” (In re PENSION REFORM LITIGATION (Doris Heaton et al., Appellees, v. Pat Quinn, Governor, State of Illinois, et al., Appellants) Opinion filed May 8, 2015, JUSTICE KARMEIER delivered the judgment of the court, with opinion. Chief Justice Garman and Justices Freeman, Thomas, Kilbride, Burke, and Theis concurred in the judgment and opinion).

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  3. Dear Andrew,

    You wrote four months ago in a discussion regarding upholding the Chicago pension deal: "...[T]he unanimous (7-0), bipartisan (4 Democratic, 3 Republican justices) Ilinois Supreme Court decision, you will see that the court addressed this issue at length and correctly concluded that the pension crisis is largely due to continual, deliberate underfunding by the state over many decades." We agree. We should not victimize public employees again.

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