Illinois Supreme Court unanimously supports public worker pensions rights... Major defeat for Rauner's 'turnaround' plans and Pat Quinn's duplicity... Court notes that the problem is a 'manufactured crisis'...
The Illinois Supreme Court on May 8, 2015 unanimously upheld teacher and other public worker pension rights under the Illinois Constitution. The ruling was expected but still widely cheered by public workers and the unions. The Court ruled that the provision of the Illinois Constitution that provided that pensions shall not be "diminished or impaired" meant what it said.
Members of the Illinois Supreme Court.The rule of law was upheld, while the bombastic proclamations of billionaire governor Bruce Rauner about "turnaround" have been defeated. The ruling could also be stated as the final defeat of former Illinois Governor Pat Quinn, whose legislation was the issue before the court. Quinn's position was held to be unconstitutional. The Cour noted in its ruling that the "crisis" that has been in the headlines generated by the Chicago Board of Education and others is in face, as the Chicago Teachers Union charges, a "manufactured crisis." At every point the government, including Chicago Public Schools, could have increased revenues to pay its legal pension obligations. Instead, the Chicago Board of Education and other government bodies chose to let the "crisis" grow over many years.
The decision was immediately portrayed by most media as extending a "crisis" facing Chicago and Illinois budgets. But as the Chicago Teachers Union has said and the Supreme Court agreed, the "crisis" that has occupied headlines is in fact a "manufactured crisis." The issue before the court was a December 2013 state law signed by then-Democratic Gov. Pat Quinn. The law stopped automatic, compounded yearly cost-of-living increases for retirees, increased retirement ages for current state workers and limited the amount of salary used to calculate pension benefits. The court ruled that the Constitution was clear and unambiguous.
The URL for the full decision is: https://www.scribd.com/doc/264643889/Pension-Decision
First page of the 35-page Illinois Supreme Court decision ruling the law trying to break public worker pensions was unconstitutional. The court held that the phrase in the Illinois Constitution saying pensions may not be "diminished or impaired" means what it says. TRIBUNE REPORT:
Illinois Supreme Court rules landmark pension law unconstitutional... Illinois Supreme Court rejects state proposal to aid pension deficit... State pension ruling deals Emanuel triple blow on Chicago's finances, Rick Pearson, Kim Geiger, 6:41 pm, May 8, 2015
The Illinois Supreme Court on Friday unanimously ruled unconstitutional a landmark state pension law that aimed to scale back government worker benefits to erase a massive $105 billion retirement system debt, sending lawmakers and the new governor back to the negotiating table to try to solve the pressing financial issue.
The ruling also reverberated at City Hall, imperiling a similar law Mayor Rahm Emanuel pushed through to shore up two of the four city worker retirement funds and making it more difficult for him to find fixes for police, fire and teacher pension funds that are short billions of dollars.
At issue was a December 2013 state law signed by then-Democratic Gov. Pat Quinn that stopped automatic, compounded yearly cost-of-living increases for retirees, extended retirement ages for current state workers and limited the amount of salary used to calculate pension benefits.
Employee unions sued, arguing that the state constitution holds that pension benefits amount to a contractual agreement and once they're bestowed, they cannot be "diminished or impaired." A circuit court judge in Springfield agreed with that assessment in November. State government appealed that decision to the Illinois Supreme Court, arguing that economic necessity forced curbing retirement benefits.
On Friday the justices rejected that argument, saying the law clearly violated what's known as the pension protection clause in the 1970 Illinois Constitution.
"Our economy is and has always been subject to fluctuations, sometimes very extreme fluctuations," Republican Justice Lloyd Karmeier wrote on behalf of all seven justices. "The law was clear that the promised benefits would therefore have to be paid and that the responsibility for providing the state's share of the necessary funding fell squarely on the legislature's shoulders.
"The General Assembly may find itself in crisis, but it is a crisis which other public pension systems managed to avoid and ... it is a crisis for which the General Assembly itself is largely responsible," Karmeier wrote.
"It is our obligation, however, just as it is theirs, to ensure that the law is followed. That is true at all times. It is especially important in times of crisis when, as this case demonstrates, even clear principles and long-standing precedent are threatened. Crisis is not an excuse to abandon the rule of law. It is a summons to defend it," he wrote.
The ruling means Republican Gov. Bruce Rauner and the Democrat-controlled General Assembly will have to come up with a new solution after justices appeared to offer little in the way of wiggle room beyond paying what's owed, which likely would require a tax increase. Coming up with a way to bridge a budget gap of more than $6 billion already was going to be difficult with little more than three weeks before a scheduled May 31 adjournment, and now the pension mess has been added to the mix.
Rauner, who argued during last year's campaign that the law was unconstitutional and didn't go far enough to reduce the pension debt, said the court ruling only reinforces his approach of getting voters to approve a constitutional amendment that "would allow the state to move forward on common-sense pension reforms."
The governor has proposed allowing veteran state workers to keep the current benefits they've earned through a certain date, then move them into a lower-paying benefit plan created for newer state workers. To try to make that approach pass legal muster, he wants lawmakers to put on the ballot a proposed constitutional amendment to clarify that future retirement benefits could be changed.
In its ruling, the court restated that state worker retirement benefits that are promised on the first day of work cannot be later reduced during their term of employment, only increased. But it is unclear whether a change in the constitution could be applied to existing state workers. Even if reluctant lawmakers were to put a measure on the ballot and voters approved it, such a change would spur years of litigation that could involve both state and federal courts.
A coalition of unions that represent government workers and retirees applauded the ruling as protecting "the hard-earned life savings of teachers, police, firefighters, nurses, caregivers and other public service workers and retirees."
"Public service workers are helpers and problem solvers by trade. With the Supreme Court's unanimous ruling, we urge lawmakers to join us in developing a fair and constitutional solution to pension funding, and we remain ready to work with anyone of good faith to do so," Illinois AFL-CIO President Michael Carrigan said in a statement.
Democratic Senate President John Cullerton issued a statement noting concerns he raised at the time the bill was passed.
"Today, the Illinois Supreme Court declared that regardless of political considerations or fiscal circumstances, state leaders cannot renege on pension obligations," the statement read. "This ruling is a victory for retirees, public employees and everyone who respects the plain language of our constitution."
The court decision affects not only state government but also taxpayers in Chicago and municipalities throughout Illinois struggling to cope with growing pension debts that are straining government budgets.
At City Hall, the ruling stands to loom large in lawsuits that unions and retirees filed against Emanuel's changes to pension systems for city workers and laborers. Like the state law, the city measure reduced annual cost-of-living increases. The ruling also could hurt Emanuel's leverage as he negotiates a pension fix for the retirement systems covering Chicago police and firefighters.
At the state level, for decades governors and lawmakers failed to put enough money into the pension systems covering most state workers and university employees, as well as suburban and downstate teachers. In playing catch-up, spending on pensions now amounts to almost a quarter of every tax dollar that goes into the state's general bank account.
The justices went so far as to fault lawmakers for failing to keep in place a 2011 temporary income tax hike that boosted the personal tax rate to 5 percent. At the start of the year, the tax increase automatically phased down to 3.75 percent for individuals, costing the state $4 billion in annual revenue. Much of the tax increase was used to make the state's share of pension payments during those four years.
"The General Assembly could also have sought additional tax revenue. While it did pass a temporary income tax increase, it allowed the increased rate to lapse to a lower rate even as pension funding was being debated and litigated," Karmeier wrote.
Now Rauner and lawmakers must figure out a pension solution.
"Our path forward from here is now much more difficult, and every direction will be more painful than the balance we struck (in the pension law that was thrown out)," Rep. Elaine Nekritz, a Northbrook Democrat who helped negotiate the pension law, said in a statement Friday.
CHICAGO SUN TIMES REPORT, May 8, 2015 came from the Assoiciated Press, as has happened of late since the Sun Times owners' decision to reduce its staff of photo journalists and reporters:
EDITOR�S NOTE: Read the entire Illinois Supreme Court decision at the bottom of this article.
SPRINGFIELD � The Illinois Supreme Court on Friday struck down a 2013 law that sought to fix the nation�s worst government-employee pension crisis, a ruling that forces the state to find another way to overcome a massive budget deficit.
In a unanimous decision, the seven justices declared the law passed 18 months ago violates the state constitution because it would leave pension promises �diminished or impaired.�
�In enacting the provisions, the General Assembly overstepped the scope of its legislative power. This court is therefore obligated to declare those provisions invalid,� Justice Lloyd Karmeier said in writing the court�s opinion.
NOW WHAT??Rauner budget depended on pension reform
The decree puts new Republican Gov. Bruce Rauner and Democrats who control the General Assembly back at the starting line in trying to figure out how to wrestle down a $111 billion deficit in what�s necessary to cover its state employee retirement obligations. The hole is so deep the state has in recent years had to reserve up to $7 billion � or one-fifth of its operating funds � to keep pace.
In fact the court, in its opinion, took to task the General Assembly for its role in leading to the pension precipice.
�The General Assembly may find itself in crisis, but it is a crisis which other public pension systems managed to avoid and . . . it is a crisis for which the General Assembly itself is largely responsible,� the unanimous opinion states.
Most states faced the same public employee pension crisis, exacerbated by the Great Recession, and took steps to remedy the problem. But Illinois balked for years at addressing the crisis until former Democratic Gov. Pat Quinn and fellow Democrats who control the General Assembly overcame opposition from union allies and struck the deal, amid warnings that it might not pass constitutional muster.
After the changes were adopted in December 2013, retired employees, state-worker labor unions and others filed a lawsuit seeking to invalidate the law on constitutional grounds. The high court opinion means the state must keep its pledge on pensions.
�Our goal from the beginning of our work on pension reform has been to strike a very careful, very important balance between protecting the hard-earned investments of state workers and retirees and the equally important investments of all taxpayers in education, human and social services, health care and other vital state priorities. In its ruling today, the Supreme Court struck down not only the law but the core of that balance,� state Rep. Elaine Nekritz, D-Northbrook. �Now our already dire pension problem will get that much worse and our options in striking that balance are limited. Our path forward from here is now much more difficult, and every direction will be more painful than the balance we struck in Senate Bill 1.�
The law dealt with four of the state�s five pension programs � the Legislature did not include the judges� account because of the conflict posed by expected legal action. The shortfall in the amount of money necessary to meet all pension obligations has reached stifling depths largely because of years of skimping on � or skipping � on annual pension contributions by past governors and General Assemblies.
�CATASTROPHIC OUTCOME�?Chicago lawyers predict doom from ruling
It would have crimped pensions perks in several ways in an effort to erase the shortfall by 2044. Perhaps most significantly, it would have erased the 3 percent compounded cost-of-living adjustment added in 1989, replacing it with a formula that gave the increases on a portion of benefits, depending on years of service. Some would have had the option of freezing their pensions and contributing to a 401(k)-style plan.
It also would have delayed the retirement age for workers aged 45 and younger, on a sliding scale. Workers would have had to contribute 1 percent less to their retirements and the pension agencies would have been allowed to sue the state if it didn�t contribute its full annual portion to the funds. Those were additions to help the matter survive a court challenge.
At the March argument before the high court, the opponents to the law argued that the constitution�s language was clear � promised pensions could not be reduced.
State lawyers contended the government had the right to exercise �police powers� in time of crisis, and that the 2008 recession, which decimated retirement fund investment portfolios, provided the crisis. But under close questioning from the bench, the state�s lawyer acknowledged that past governors and legislatures shorted pension payments to save money in the short term.
Ty Fahner, president of the Commercial Club of Chicago�s Civic Committee, said the decision leaves the state�s leaders with much work to be done.
�There are no winners today,� Fahner said in a written statement. �If there�s any good news, it�s that Chicago and Illinois are resilient, and we�ve responded to great challenges before. The Civic Committee stands ready to work with Governor Rauner and the General Assembly to craft a bipartisan solution to rescue the state from financial collapse and restore Illinois as a compassionate and competitive state.�
STATEMENT FROM THE CHICAGO TEACHERS PENSION FUND...
JUST IN: SB1 Struck Down by Illinois Supreme Court legislation
Statement from Charles A. Burbridge, executive director of the Chicago Teachers' Pension Fund, regarding Illinois Supreme Court decision on Senate Bill 1:
"While CTPF members were not directly impacted by the ruling on Senate Bill 1, the Illinois Supreme Court's landmark decision to strike down this legislation is a welcome development for our members. This ruling clearly establishes that pensions are a promise to be kept, which is important to our members since they do not receive Social Security benefits and depend on CTPF pensions for their retirement security. "Unfortunately, our Fund has been devastated by decades of underfunding by our employer. As a result, CPS faces significant challenges as it makes up for the impact of its past decisions. We hope that this ruling helps move forward the conversation about fully funding pensions for CTPF members."
