Monday, March 21, 2016

Rauner/Republicans and Skipping Payments to the Pension Systems Déjà vu

Senate Bill 2789: 

“Creates the Unbalanced Budget Response Act. Provides authority and procedures for the Governor to establish contingency reserves of previously appropriated funds, and to transfer balances between special funds in the State treasury and the General Revenue Fund. Describes the agencies and programs subject to this authority. Provides that designated agencies may adopt emergency rules to carry out the purposes of the Act. Defines terms. Provides that the Act is repealed on July 1, 2017. Amends the Illinois Administrative Procedure Act to make conforming changes. Amends the Illinois Public Aid Code. Adds actions taken under the Unbalanced Budget Response Act to a Section relating to applicability. Amends the State Mandates Act to require implementation without reimbursement by the State. Effective immediately” (SB 2789). 

From Senator Kimberly Lightford: 

"Last week, during a committee meeting at the Capitol, officials from Gov. Bruce Rauner’s office and Senate Republicans defended their plan to skip pension payments to make the governor’s budget appear balanced. In order to bridge any gap in state spending, the legislation backed by Gov. Rauner and sponsored by Senate Republican Leader Christine Radogno would give the governor unprecedented power to raid local government accounts and skip pension payments –despite decades of evidence detailing the perils of doing so.

"Senate Democrats do not support skipping any payments. It’s been nearly 100 years since we’ve known about this problem, and it seems some people still haven’t learned from past mistakes. Avoiding paying our pension liabilities forces an unfair burden on workers and does nothing to get Illinois back on track. In times of crisis, leaders find solutions to problems. They don’t run from them.

"As early as 1979, Moody’s and Standard and Poor’s warned Illinois that its AAA bond rating would be in jeopardy if it did not tackle its increasing unfunded pension liabilities. The GOP push to skip pension payments comes even as the state’s pension debt tops $100 billion. Studies have shown that more than 40 percent of that debt is due to past lawmakers and governors skipping or shorting pension payments. 'This, to me, would be a big mistake,' Senate President John Cullerton said during committee debate on the Republican proposal.

"Sen. Cullerton’s legal team found reports dating back to 1917 cautioning against the massive debt accumulating for future taxpayers because not enough was being invested in the pension funds. Just like skipping credit card payments, shirking responsibility and skipping pension payments now only makes the situation worse down the road.

"Senate Democratic leadership has advised Rauner’s budget officials and Republican colleagues not to pursue skipping pension payments. The legislation is SB 2789."

Assistant Majority Leader 4th District – Illinois

From the Illinois Supreme Court Decision, May 8, 2015: 

“…The United States Supreme Court has held that particular scrutiny of legislative action is warranted when, as here, a state seeks to impair a contract to which it is itself a party and its interest in avoiding the contract or changing its terms is financial. Committing to a contract does implicate the state’s sovereign power, but:[w]hatever the propriety of a State’s binding itself to a future course of conduct in other contexts, the power to enter into effective financial contracts cannot be questioned. Any financial obligation could be regarded in theory as a relinquishment of the State’s spending power, since money spent to repay debts is not available for other purposes. Similarly, the taxing power may have to be exercised if debts are to be repaid. Notwithstanding these effects, the Court has regularly held that the States are bound by their debt contracts.’ United States Trust Co. of New York v. New Jersey, 431 U.S. 1, 24 (1977)...

“The State’s police powers defense is fatally flawed for other reasons as well. Just as the legislature is presumed to act with full knowledge of all prior legislation, the drafters of a constitutional provision are presumed to know about existing laws and constitutional provisions and to have drafted their provision accordingly. Kanerva v. Weems, 2014 IL 115811, ¶ 41. The contracts clause had antecedents in the very first Illinois Constitution and in the Constitution of the United States. When the time came to address the protection for public pensions, the drafters of the 1970 Constitution therefore presumably knew of the substantial body of case law involving that clause, including the case law holding that, when warranted, the protections afforded contracts could be modified through the exercise of the State’s police powers. That, however, is not the standard they chose with respect to the benefits of membership in public pension systems… 

“Given the history of article XIII, section 5, and the language that was ultimately adopted, we therefore have no possible basis for interpreting the provision to mean that its protections can be overridden if the General Assembly deems it appropriate (see id.), as it sometimes can be under the contracts clause. To confer such authority on the legislature through judicial fiat would require that we ignore the plain language of the constitution and rewrite it to include ‘restrictions and limitations that the drafters did not express and the citizens of Illinois did not approve.’ Kanerva v. Weems, 2014 IL 115811, ¶ 41. Indeed, accepting the State’s position that reducing retirement benefits is justified by economic circumstances would require that we allow the legislature to do the very thing the pension protection clause was designed to prevent it from doing. Article XIII, section 5, would be rendered a nullity.

“The State protests that this conclusion is tantamount to holding that the State has surrendered its sovereign authority, something it may not do. The State is incorrect. Article XIII, section 5, is in no sense a surrender of any attribute of sovereignty. Rather, it is a statement by the people of Illinois, made in the clearest possible terms, that the authority of the legislature does not include the power to diminish or impair the benefits of membership in a public retirement system. This is a restriction the people of Illinois had every right to impose… 

“The people of Illinois give voice to their sovereign authority through the Illinois Constitution. It is through the Illinois Constitution that the people have decreed how their sovereign power may be exercised, by whom and under what conditions or restrictions. Where rights have been conferred and limits on governmental action have been defined by the people through the constitution, the legislature cannot enact legislation in contravention of those rights and restrictions.

“Our court made this clear in an opinion published 186 years ago in the very first volume of our official reports. As we explained then, the constitution ‘is the form of government instituted by the people in their sovereign capacity, in which first principles and fundamental law are established. [It] is the supreme, permanent and fixed will of the people in their original, unlimited and sovereign capacity, and in it are determined the condition, rights and duties of every individual of the community.’ Phoebe v. Jay, 1 Ill. 268, 271 (1828). ‘From the decrees of the constitution there can be no appeal, for it emanates from the highest source of power, the sovereign people. Whatever condition is assigned to any portion of the people by the constitution, is irrevocably fixed ***.’ Id

“Article XIII, section 5, of the Illinois Constitution (Ill. Const. 1970, art. XIII, § 5) expressly provides that the benefits of membership in a public retirement system ‘shall not be diminished or impaired.’ Through this provision, the people of Illinois yielded none of their sovereign authority. They simply withheld an important part of it from the legislature because they believed, based on historical experience, that when it came to retirement benefits for public employees, the legislature could not be trusted with more. 

“As we discussed in Kanerva v. Weems, 2014 IL 115811, ¶ 45, and noted earlier in this opinion, delegates to the constitutional convention were ‘mindful that in the past, appropriations to cover state pension obligations had been made a political football and the party in power would just use the amount of the state contribution to help balance budgets, jeopardizing the resources available to meet the State’s obligations to participants in its pension systems in the future.’

“They understood that steps were necessary ‘in order to protect public employees who are beginning to lose faith in the ability of the state and its political subdivisions to meet these benefit payments and to address the insecurity on the part of the public employees [which] is really defeating the very purpose for which the retirement system was established ***.’  Id. ¶ 46 (quoting 4 Record of Proceedings 2925 (statements of Delegate Green)). And they wanted to make certain ‘that irrespective of the financial condition of a municipality or even the state government, that those persons who have worked for often substandard wages over a long period of time could at least expect to live in some kind of dignity during their golden years ***.’ (Internal quotation marks omitted.) Id. 

“…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).

On Bruce Rauner, et al.

"He knows nothing; he thinks he knows everything--that clearly points to a political career" -George Bernard Shaw

"In politics, as in high finance, duplicity is regarded as a virtue" -Mikhail A. Bakunin

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