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Sunday, February 23, 2020
The Bottom Line: Illinois’ Public Pension Debt Is a Moral Issue by Elizabeth Bower (Forbes February 23, 2020)
Earlier this week, President Donald Trump granted clemency to former Illinois Gov. Rod Blagojevich, who was eight years into a 14-year federal sentence for corruption charges. As Wikipedia notes, “he was the fourth Illinois governor to serve time in federal prison, after Otto Kerner Jr., Dan Walker, and George Ryan.” Of note, although Illinoisans appear now to be either mystified or outraged at this turn of events, he won re-election in 2006 even though he and his associates were already under investigation at the time of the election. Earlier in February, a report by the University of Illinois at Chicago ranked Chicago as the most corrupt U.S. city.
That same report ranked Illinois as the third-most-corrupt state. And the math behind those rankings pulls from such examples as Ald. Edward Burke, who was re-elected to his 13th term back a year ago after having been charged of attempted extortion. The charge was plastered all over the newspapers, but voters still returned him to office — and not even because he had opponents who split the opposition between them, as the Chicago elections function on a run-off basis, and Burke won an absolute majority.
The state’s target of 90% funding in 2045 is so dependent on the reduced benefits for Tier 2 employees staying in place (which is itself unlikely) and on the optimistic assumptions for asset returns, that a boost in those Tier 2 benefits (widely expected to occur) or a drop in the valuation interest rate/long-term asset return, will cause the state to fall far short, or contribute far more, than scheduled.
That doesn’t include debt due to retiree healthcare promises, or state and local debt, or pension obligation bonds needing repayment…
It should be plain to see that debt has skyrocketed, and far beyond what can be adjusted away by looking at inflation or other factors during this time frame — and blame can hardly be placed on the “Edgar ramp” of 1996 when there have been ample years since then in which the problem has only gotten dramatically worse. That dip in 2004? That’s the result of Blagojevich’s Pension Obligation Bonds shifting liabilities out of the pension funds themselves to elsewhere on the state’s balance sheet.
Elizabeth Bauer has also written about amending the Illinois Pension Protection Clause.
Indeed, “Illinois public pension debt is a moral issue”; however, this is the significant moral and justice issue columnists ignore:
To possess a right to a promised deferred compensation, such as a pension, is to assert a legitimate claim with all Illinois legislators to protect that right. There are no rights without obligations. They are mutually dependent. Fulfilling a contract is a legal and moral obligation justified by trust among elected officials and their constituents.
According to philosopher David Hume, the idea of keeping a promise depends upon creating rules of justice; that rules of contracts, for instance, have to be considered morally desirable as well. In other words, a “contract” or promise between the State of Illinois and its public employees must be viewed as a moral commitment and requirement of justice. Justice demands we keep our “covenants” with one another. In regard to public pensions, keeping an agreement means a concern to promote the well-being of public employees and the need to secure their rights.
All citizens have rights that must be protected. When legislators swear an oath to uphold the state and federal constitutions (Article XIII, Section 3 of the Constitution of the State of Illinois), then citizens of Illinois and the United States have also acquired the right to expect that they will uphold that pledge. This is also a matter of important moral concern for all citizens of a state, for all legal claims will be validated by a moral framework since the concept of justice is grounded in ethics. If citizens’ legal rights are abused, then their dignity and humanity will also be violated. As stated by Alicia H. Munnell, Director of the Center for Retirement Research at Boston College, Illinois is one of seven states where accruals are protected, and the legal basis for protection of public pension rights is under state law (State and Local Pensions). This was also validated on the May 8, 2015 by the Illinois Supreme Court.
Without a doubt, the significant issue of past and now future pension reform by today's pundits has been its attack on public employees’ rights to constitutionally-guaranteed, earned compensation and the legislators’ obligation to safeguard those promises. An 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.
What has continuously been at stake is not an adjudication of claims that public employees will have against policymakers who want changes to public employees’ benefits and rights or an amendment to the Pension Protection Clause, but to respect the public employees’ contractual and constitutional promises because they are legitimate rights and moral concerns not only for public employees, but for every citizen in Illinois: for any unwarranted act of stealing a person’s guaranteed rights and compensation will violate interests in morality and ethics and the basic principles of both the State and United States Constitutions that protect every one of us.
For these reasons, it is imperative that policymakers, stakeholders and columnists examine their own ethical and moral principles in view of the fact that they will have to justify their decisions to the citizens of Illinois. Certainly, moral responsibility and legal obligation to fully fund the public pension systems should not be ignored "so the time of passing costs on to our children and grandchildren is over."
It is a moral concern and legal duty to reform the state’s sources of revenue and to address the incurred pension debt through restructuring so the state can provide services for its citizens and fund the public pension systems instead of incessantly incriminating public employees and retirees, and thereby forcing them to defend the State and United States Constitutions nearly every day of their lives.