Corporate pension reformers are subverting the very foundations of American democracy... A closer look at Senate Bill 1673... Pension 'reform' proposals are illegal and immoral
Despite efforts by most of Chicago's corporate media (and most of the rest of the corporate media in Illinois), the current struggles over so-called "pension reform" in Illinois are not about biting the bullet, acting tough, or making the hard choices. — the macho rhetoric that has been infused into the debate since its terms were first framed by the state's corporate elites a few years ago. In fact, the debate goes back to the very roots of American and Western democracy and the theories of law and the philosophical bases for the governments established beginning in the late 18th Century.
Senate Bill 1673, which as of this writing has stalled in Springfield, is not a "reform" in the sense that the average person would use the word. It is instead a way of taking money and benefits away from teachers, both active duty and retired, who have planned their lives around these benefits, among other things. SB 1673 basically will force active members of the Teachers’ Retirement System of Illinois, the State University Retirement System, and the State Employees’ Retirement System who do not agree to a reduced COLA (the cost of living allowance) to lose access to the state’s retirement health insurance upon retirement.
Second, the amount of salary on which these public employees’ pension is based will be capped.
Third, the bill will not include a funding guarantee to the pensions’ systems that the “We Are One” Labor Coalition of Illinois had asked for in order to consider pension changes. Funding language depends upon 50 percent of the employees making an election to reduce their COLA. If not, the funding remains status quo.
Fourth, the bill will reduce all retiree’s benefits by offering a choice between either keeping the current COLA benefit — but losing access to health insurance — or agreeing to a reduced COLA while retaining access to the state’s retirement health insurance.
Fifth, pension costs of any salary increase for local teachers will be paid by property taxpayers.
Sixth, school districts would face the uncertainty of whether they will receive a pension bill years later after employing a teacher.
Seventh, the bill will change the balance on the Teachers Retirement System’s board by adding four new seats for members of local school boards.
Finally, it will also bar school districts from bargaining the impact of any changes made by this law (IEA).
Though the General Assembly Retirement System is also part of this bill, the Judges’ Retirement System is excluded. We can expect Governor Quinn will sign this bill into law if it passes through the House and Senate in a special session this summer. We can also expect there will be lawsuits filed immediately afterward.
As of June 1, 2012, SB 1673 is an incomplete bill. What will be considered later, and most likely in the fall veto session after the elections, will be the shifting of the “normal costs” that the state pays into the pension systems to local school districts and universities, an integral part of the original bill that was sponsored by Speaker of the House Michael Madigan. This will increase property taxes. As House Minority Leader Tom Cross stated, they will continue to work on amending the original proposal that also included a Cash Balance Plan option (HB 6149) sponsored by Representative Dan Biss.
The “We Are One” Labor Coalition opposes SB 1673 in its entirety because it breaches a contract and, therefore, is unconstitutional. The “We Are One” Labor Coalition members include the Illinois AFL-CIO, Illinois Education Association, Illinois Federation of Teachers, Associated Fire Fighters of Illinois, AFSCME Council 31, Illinois Police Benevolent and Protective Association, Fraternal Order of Police, Service Employees International Union, Laborers International Union of North America Midwest Region, the Illinois Public Pension Fund Association, Illinois Public Pension Fund Association, National Pension Coalition, United Transportation Union, Laborers International Union of North America - Chicago District Council, AFSCME International Union, National Education Association, Fraternal Order of Police - Lodge 7 Chicago, Fireman's Association of Chicago - Local 2 and Teamsters Local Union #700.
By legal definition, a contract is “an agreement creating obligations enforceable by law..."
Contracts are promises that the law will enforce. The law provides remedies if a promise is breached or recognizes the performance of a promise as a duty. Contracts arise when a duty does or may come into existence because of a promise made by one of the parties. To be legally binding as a contract, a promise must be exchanged for adequate consideration. Adequate consideration is a benefit or detriment which a party receives which reasonably and fairly induces them to make the promise/contract” (Legal Information Institute at Cornell University Law School). Accordingly, the State of Illinois has a long list of antedated court rulings upholding the rights and benefits (contracts) of its public employees.
To possess a right to a promised benefit, 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.
The significant issue of SB 1673 is the relationship between public employees’ rights to constitutionally-guaranteed and earned benefits and the legislators’ obligation to safeguard those promises. An unconscionable constitutional challenge of those rights and 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 have rights that must be protected. They are promised certain retirement benefits. They expect and plan their lives based upon these promises. “The very idea that [the state can] hold [public employees’ lives], or the means of [their] living, or any material right essential to the enjoyment of life, at the mere will of another ‘has been thought’ intolerable in any country where freedom prevails” (John Locke, Two Treatises of Government).
Like all other citizens, public employees’ legal rights are derived from past political constitutions, legislative enactments, and case law. All citizens of Illinois have a fundamental right to oppose a General Assembly that imposes a violation of their constitutional rights and benefits… “Any statute which [is] imposed upon [public employees]… in order to redistribute resources and thus benefit some persons at the expense of others [extends] beyond the implicit boundaries of legislative authority. Such laws… violate natural rights of property and contract, rights lying at the very core of the private domain” (Laurence H. Tribe, American Constitutional Law).
The state “government must respect ‘vested rights’ in property and contract – that certain settled expectations of a focused and crystallized sort should be secure against governmental disruption… “[There is an] undisputed condemnation of any law attempting to ‘take property’ [from anyone]… General principles of law, enforceable in a proper forum, had settled that no form of legislative authority could be employed to serve private ends…” (Tribe). The 5th amendment of the U.S. Constitution bans uncompensated takings of property.
We should be able to assume that most legislators understand the concept of justice and that lawfulness demands that people keep their covenants with one another. No justice is accomplished when subordinating or diminishing public employees’ rights on account of legislators’ negligence, irresponsibility, and corruption.
To understand the issue in a different light, policymakers should act in a way that reflects an impartial consideration that entails passing a law they would also find acceptable and binding on themselves. This is a paraphrasing of the 20th century philosopher John Rawls’ idea that moral principles and covenants should be examined and chosen behind a “veil of ignorance,” where individuals who create laws do so without the influence of self-interest and social prejudice.
“[Moreover], each person possesses an inviolability founded on justice that even the welfare of society as a whole cannot override… It does not allow that the sacrifices imposed on a few are outweighed by the larger sum of advantages enjoyed by the many. Therefore, in a just society the liberties of equal citizenship are taken as settled; the rights secured by justice are not subject to political bargaining or to the calculus of social interests” (John Rawls, A Theory of Justice). According to Dan Montgomery, President of the Illinois Federation of Teachers, Senate Bill 1673 “is a theft of earned benefits used to pay the state's bills.”
All citizens of the State of Illinois have legal justification for their rights and benefits. The foundation of their rights and benefits is the state and U.S. constitutions that directly support any claims against them. State contracts are protected by the federal government. Understandably, the 5th and 14th amendments of the U.S. Constitution protect due process of law. Article 1, Section 10 of the U.S. Constitution protects teachers’ contracts from “improvident majoritarian impairment” (Tribe).
As stated by John Stephens, Legal Consultant for the “We Are One” Labor Coalition, “to take away the Cost-of-Living Adjustment for retirees is not a free and fair choice. It is a coercive choice under duress.” In other words, duress (or coercion) is a vitiating factor. Legislators of the State of Illinois are breaching a contract by forcing public employees to make a choice to diminish their originally-vested guarantee. They are breaking an enforceable promise, one that is bilateral and emphasizes an agreement between the State of Illinois and its public employees as to their future rights and liabilities.
David Hume, an 18th century philosopher, ascertained the idea that 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, in this case 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 that we keep our “covenants” with one another. Keeping an agreement means a concern to promote the well-being of public employees and the need to secure their rights.
Breaking a contract threatens the integrity of all laws that govern and protect the citizenry, for the values of the United States Constitution (for example, Article I, Section 10) and the Illinois State Constitution (for example, 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 strength of the constitution[s] would not be proven by considering each article or amendment in isolation from the others” (Tom Beauchamp, Philosophical Ethics).
As citizens, we are advocates of a unification of the Bill of Rights in the Constitution of the United States, which protects all of us from any violations of human rights and contracts, as much as we would wish others to be motivated by a way of life that is also govern by a complete moral system of thinking.
There are no good reasons for legislators’ attack on public employees’ rights and benefits and their attempt to equate their lives to an exchange rate in dollar amounts, even if it is all about the state’s Bond Ratings. The General Assembly cannot justify pension reform in accordance with fundamental, constitutional principles of reason and morality. As said by Henry Bayer, Executive Director of AFSCME, Council 31, “it’s unfair for public employees to pay for mistakes committed by the State. Who is sacrificing besides state employees? People that are not responsible are making the sacrifices.”
Indeed, what we call rights of individuals is bound up with the theory and precepts of social and political justice we adopt (John Stuart Mill, On Liberty). All citizens of the State of Illinois have legal justification for their rights and benefits. When legislators swear an oath to uphold the state and federal constitutions, 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 Illinois, 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.
If policymakers do not take individual rights and contracts seriously but prefer to challenge them in a court of law, as Speaker of the House Michael Madigan once said, then we can assume the legislators of the Illinois General Assembly will not take any of their other laws seriously either.
It is true rights and obligations are logically correlative. A citizen’s rights imply or complement the legislators’ obligation to guarantee them. The keeping of promises is the General Assembly’s legal duty. It is something the U.S. Constitution requires them to do whether they want to or not. Unfortunately, many legislators act without moral principles, even though “claims of rights [are] prima facie or presumptively valid-standing claims” (Beauchamp).
Acting ethically and morally is best described by Immanuel Kant, another 18th century philosopher, who said we should act toward others in accordance with principles that we all can sanction; from an unbiased perspective, we should treat others as “ends instead of means.”
What is at stake is not a potential adjudication of conflicting claims that public employees will have against policymakers who want changes to public employees’ benefits and rights, 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 acts of cheating any person’s guaranteed rights and benefits will violate interests in morality and ethics and the basic principles of both the state and U.S. constitutions that protect every one of us.
It’s imperative that policymakers and stakeholders examine their own ethical and moral principles and their conduct 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 fund the public pension systems should not be eschewed.
It is the state’s moral duty and legal concern to increase the state’s revenue and to tax the wealthy among us more fairly, so they can fund all the public pension systems of Illinois instead of continuously incriminating public employees and, thus, forcing them to defend the state and U.S. constitutions.
In light of the benefits granted to the wealthy and the imposition of burdens upon public employees by Illinois policymakers, there is no equality in granting tax breaks to wealthy corporations and, at the same time, legislating cuts to public employees’ constitutionally-promised benefits. It is ethically wrong to perpetuate unfair distributions of wealth in Illinois, especially when Illinois legislators give “undeserved weight to highly-organized wealthy interest groups, [those groups] tending to ‘drain politics of its moral and intellectual content’” (Tribe). Madigan’s “let the courts decide” is a travesty of justice, a costly effrontery and negligence of a legislator’s oath of office. Though of course, Ty Fahner of the Civic Committee of the Commercial Club of Chicago will do it "pro bono," and most of us know why.
Comments:
By: Rod Estvan
Cost shifting for non-Chicago pensions
One part of the debate on pensions in the General Assembly, which on the face of it appears not to be unconstitutional, was the so-called cost shifting provisions that were contained in SB 1673 House Floor Amendment 3 introduced by Speaker Madigan. Ultimately several other amendments were put forward by the Republicans that took out those cost shifting provisions, that would have required the tax payers of local school districts outside of Chicago ultimately to pick up the bill for teachers pensions that teachers themselves did not fund.
As Glen Brown may be aware the CTU, CPS, and the City of Chicago attempted to get another bill through the Assembly that would have required ultimately for the State to pick up CPS’s costs for the Chicago Teacher’s pensions. This bill HB4246 from my understanding was not supported by the IEA and I am unclear if the IFT took a position on that bill. I do not know if the “We Are One” Labor Coalition supported HB 4246, but I am assuming it took no position on that bill. While Glen Brown’s discussion of David Hume, the 18th century philosopher, was interesting, for Chicago teachers this issue is rather important.
For the Chicago delegation to the Assembly the number one reason for not supporting SB 1673 as finally amended by Rep Cross was not the constitutional issue, but rather the cost shifting issue from my discussions with several Chicago Representatives. I agree with Glen and the Coalition that much of SB 1673 might have been unconstitutional, but the members I had contact with were largely willing to leave that issue up to the Illinois Supreme Court to decide. Moreover, as an advocate for students with disabilities in Chicago I am very worried about Senator Christine Radogno’s threat to go after state funding for disabled children in CPS if cost shifting were included in SB 1673. Interestingly, several African American south suburban Democrats appeared to support Radogno on the CPS special education funding issue, possibly in hope of getting some of this money for their own school districts that are in really bad shape.
I would like to hear Glen’s thoughts on these issues that were also part of the debate around SB 1673.
Rod Estvan
By: Jean R Schwab
WTTW blacklists CTU leaders from pension coverage?
I tried to watch every program concerning the pension vote (especially Channel 11). WTTW seemed to agree with passing the bill, but also brought up the concerns of the teachers.
My problem is that they did not have anyone from the CTU on the program to state these issues. Everyone involved should be included on these programs about the pensions. This issue is very important to teachers and other public workers.
(Jean Schwab, retired Chicago teacher and CTU retiree delegate)
By: Glen Brown
Impact of SB 1673
Hello Rod,
Cost shifting of the state’s “normal costs” would be considered constitutional; however, if Illinois policymakers pass a bill to shift its responsibility of paying “normal costs” to the local school districts in the Veto session (after the elections) which will be attempted, the effects of such a bill would be ruinous. In cash-strapped school districts, teachers would not receive increases in their salaries for years; many teachers would lose their jobs; student programs would be reduced or eliminated; class sizes would increase; it would be more difficult to recruit, as well as retain and attract, the best teaching candidates in Illinois (Education Sector Policy Briefs).
“[Moreover] a shift [of the state's ‘normal costs' to the pension systems] would create a new and large financial requirement for school districts, which would be difficult for many to meet. [Since] Illinois ranks last in terms of state spending on K-12 education and school districts are already relying heavily on local property taxes, shifting the state’s normal cost obligation onto school districts would only mean that an even higher proportion of school districts’ revenue would come from property taxes” (the Center for Tax and Budget Accountability March 2012).
HB 4246 appears to be written as “shell” bill for now, though it has traveled through the House and most recently was “re-referred to the Rules Committee" on May 31st. What is available online is this synopsis: “Amends the Illinois Pension Code. Makes a technical change in a Section concerning downstate police.”
Indeed, the reason for the impasse on SB 1673 was cost shifting to school districts and its ramifications. Though Madigan removed this amendment, I believe SB 1673 still remains unconstitutional. If the unions agree to modify contractual principles, however, then the bill will circumvent the question of constitutionality. If there is no agreement between the unions and the General Assembly, the courts will decide on this issue for all of us.
By: Rod Estvan
Misreading of current state of HB 4246
Glen I think you did not read 4246 correctly, the bill was amended and is no longer a shell bill. If you go to
http://www.ctunet.com/blog/support-hb-4246-strengthens-pensions
the CTU gives a good overview of the bill. Which reads as follows:
“Information on HB 4246 Amendment 1:
A recent amendment to House Bill 4246, sponsored by Rep. Barbara Flynn Currie, would require the State of Illinois to pay for the normal costs of CTPF benefits earned from 2013-2059. The normal cost is the annual amount required to fund future benefits. This would include a state appropriation of $191M to CTPF in 2013.
The amendment also requires the primary employer, CPS, to make an annual contribution to ensure that our unfunded liability, currently $6.8 billion, is brought down to $0 by 2059.
Why We Need This Legislation
The State currently picks up a large portion of the normal cost and unfunded liability for all non-Chicago public school teachers (TRS), but provides minimal funding for CTPF. Last year the State of Illinois allocated $2.4 billion for TRS and $10.4 million to CTPF and only $10.4 million to CTPF.
Chicago's teachers receive less than a penny for every dollar the State spends on downstate and suburban teachers' pensions. This amendment works toward a more equitable distribution of State pension funding for teachers and holds CPS responsible for paying for CTPF's unfunded liability.”
Glen, it is my understanding that the IEA opposed this bill because it threatened funding for out-of-Chicago pensions. By way of disclosure I am a registered lobbyist for a not-for-profit so I have been in Springfield this session. But I am not clear about the full dynamics in relation to the cost shifting proposal. But from your response and quote it appears you too are opposed to the cost shifting concept that was in SB 1673.
I think the issue is simple either downstate and suburban school districts pay for their teachers pensions in manner similar to Chicago, or they agree to support HB 4246 Amendment 1. Chicago teachers should be calling their members of the General Assembly on this issue. I would prefer to see the solution as full funding for the Chicago Teachers Pension Fund, but I think that is unlikely given the fiscal problems of the state. Given that reality I am totally opposed to having CPS parents, teachers, and Chicago property tax payers state income tax dollars go to pay downstate and suburban teachers pensions if the state does provide equitable distribution of State pension funding for CPS teachers.
Rod Estvan
By: Bob Busch
Pension
Chicago should have a tax levy for pension obligations if you consider that state and federal sources pay 51.5% of its budget. While it might be true that Chicago only gets back a penny on the dollar for pensions they get over half their total budget from outside sources.
Take District 230 Palos and Orland townships. They get 14.9% of their income from the same places Chicago gets 51.1%.That percentage leaves a difference of over 36% in Chicago"s favor.
It might be easier to swallow all this if the taxes collected by Chicago"s levy were actually paid into the pension fund, but for the last 15 out of 17 years they were not. Shifting the pensions to the local districts was just a ruse anyhow, with predictable results.
The compromise will be in the middle but rest assured the screwing of old people will be extreme.
By: Rod Estvan
re: Bob Busch's comment
As Bob is no doubt aware there are far poorer school districts in Illinois than CPS that get even a greater portion of their total budget paid for by state and federal funds than Chicago does. East St. Louis is one among many. In terms of total dollars coming from outside of property taxes, CPS is of course at the top of the heap.
There is no question that there are many not truly poor districts that are also not property tax wealthy. But I am sorry I personally as a Chicago tax payer do not want to help pick up the tab for their teachers' pensions if my income tax dollars are not providing an equitable distribution of State pension funding for CPS teachers' pensions.
Rod Estvan
By: glen brown
HB 4246
Rod,
This is what I read on the Illinois General Assembly's website. Here's the link:
http://ilga.gov/legislation/fulltext.asp?DocName=&SessionId=84&GA=97&DocTypeId=HB&DocNum=4246&GAID=11&LegID=63586&SpecSess=&Session=
By: Rod Estvan
House Amendment 1
Glen, you need to click at the top of the page House Amendment 1. It was what is called a gut and replace amendment. By the way, the legislative process and how bills appear is designed to be confusing.
It also keeps myself and over 3,000 other registered lobbyists employed.
Rod Estvan
By: Bob Busch
Taxes
Rod, your argument reversed is precisely why there will be no shift.That is why, in my opinion, that was and is, a ruse. Taxpayers outside Chicago see this as a money grab. Their argument is that they did not make the rules. Chicago gets 40.9% of school money from local property tax, while district 230 gets 80.1%. The state average is 58.9% The discrepancy is obvious.
Voting for a shift would be political suicide and officials know that. So in my opinion this ruse is a way for Chicago to get the state to include CTPF as one of the state supported funds. That is what I predict will happen
By: Rod Estvan
Its not just my argument
I can point to south suburban districts that get an equally high percentage of state and federal funds because of their poverty numbers, these districts have high property taxes but low values. As you can see from the CTU statement the union and the pension fund would be happy to have state support for the pension fund. I simply do not want to see my income tax dollars being sent to district 230 or for that matter even East St. Louis if the state is not going to provide equal funding for our teachers pensions.
By the way downstate and suburban districts have been getting their pensions largely funded out of state dollars for a long time. The Chicago fund has always been self supported through local property taxes, so who has been grabbing the money for many years? Either approve HB 4246 or shift the burden for these other districts. Shifting the burden would free millions of dollars over time for k-12 education along with human services. Having the state over time pick up the tab for the Chicago pensions would free up money for teachers pay in the city or for increased educational expenditures.
It goes without saying one reason Chicago finds itself pitted against other school districts is because of Illinois's funding system for education. But that is not going to change any time soon, nor is the flat income tax. So in the current context the Chicago delegation is not going to approve anything in relation to SB 1673, which is actually good for suburban and downstate teachers, unless there is a deal on funding for CPS teachers pensions or a cost shift.
The reality is the shift in funding for pensions to school districts is a bigger deal than the constitutionality of most of SB 1673 to the majority of members of the Assembly. It is really the only reason the bill failed.
I urge CPS teachers, parents, and other Chicago tax payers to contact their members of the Assembly to support equitable distribution of State pension funding for CPS teachers or have the other schools districts pick up their own tab and free up those dollars over time.
Rod Estvan
By: Bob Busch
Taxes and Chicago pension obligations
Chicago has been grabbing the money to the tune of over 50% of their total budget paid for by State and Federal taxes. If you can find out when the state started to pay for the pensions of everyone else let us know.
Do you honestly believe shifting the pension to the local districts will solve the pension crisis in Chicago? If we want to play the blame game what is worst — a pension levy that is hijacked or one that is not paid?
By: Kent Joseph
Brother Against Brother
Bob Busch vs. Rod Estvan
IFT vs. CTU
Downstate vs. Chicago.
Why does IL political leaders keep putting us at odds with one another?
I always thought that Chicago was part of Illinois, but if you look at the legislation that has been passed it would appear otherwise. Did you know that CTU cannot argue class size as part of their contract (although other teacher unions in the state can)?
Did you know that SB7 is chockfull of Chicago-only provisions?
And now we have a legislator who suggests taking money from one group of unfortunate children to give to another?
Hmmmm...I wonder....why does Illinois use a divide-and-conquer strategy when dealing with IT'S OWN PEOPLE?
By: George N. Schmidt
Free your mind and you ass will follow...
Those of us who edit Substance try not to jump into the comments, which are expanding by the day. And — and this is very important — everyone commenting here today (and now) is giving our readers their full name, so that we can serve as a living witness to the BS of blogs. The anonymous and pseudonymous trolls who potshoot around places like "District 299..." and some other blog sites make most of the discussion dishonest and in some ways useless.
All Rahm's million dollar Propaganda ministries (the two main ones being the Mayor's Press Office and City Hall and the CPS "Office of Communications" down the street at 125 S. Clark st.) have to do is send out a couple of dozen talking points (usually with some anti-union — even personal — stuff about the CTU) and "anonymous..." and "Chicago teacher..." and "Another parent..." etc etc can clog the pages of the blogs like sludge in someone's arteries. The other day, my print out of comments from just one of those blogs (easily the most self-important among them) came to more than 40 pages in less than two days. And almost all of those "comments" were dishonestly anonymous. (They could have all come from the same person; most obviously reflected the same ideology).
I am hoping that we not only stop using the boss's deceits, but also the boss's terms.
There is no "pension crisis" in Chicago; only a pension ripoff that grew when the ruling class (led by America's number one tax dodging plutocratic family, the Pritzkers) basically got away with lowering their taxes to zero and sticking the rest of us with all the bills for public services and public goods.
We have to free our minds from the boss's verbiage ("pension crisis," "entitlements," "government schools" etc.) in order to free ourselves from the straight jackets of the boss's thinkings.
Or, as the character says in "Platoon." Free your mind and your ass will follow.
By: Theresa D. Daniels
What George said
I agree: Stop letting our enemies frame the debate.
By: Victoria Foxwater
SB 1673
Did ALEC write this?