STUMP » Articles » Illinois Pensions: How Did We Get Here? The 1970 Constitution » 11 May 2015, 21:12

Where Stu & MP spout off about everything.

Illinois Pensions: How Did We Get Here? The 1970 Constitution  

by

11 May 2015, 21:12

Yeah, there’s more reactions going on. I captured some in the prior post and in my first post after the ruling.

Mark Glennon at Wirepoints has rounded up what he considers some of the dumbest reactions.

I will talk about the Chicago situation in a different post. Right now, I want to concentrate on Illinois as a state, as a whole.

The ruling is based on a specific clause in the Illinois state constitution. The current constitution was put together and ratified in 1970.

Let’s take a look at the specific clause in question: Article XIII, section 5 of the Illinois state constitution.

I tried to find out what was written at the time. The following is an informational brochure on the constitution, I assume for those voting on it.

The bit we want is on page 16. I took a screenshot:

For convenience, this is what the text says:

SECTION 5. PENSION AND RETIREMENT RIGHTS

Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.

That was the language that went into the Illinois state constitution and was passed.

Within the brochure is this explanation of the text:

This section is new and self-explanatory.

Indeed.

I am not interested in semantic deconstruction in this matter, and the Illinois Supreme Court has already interpreted this clause to mean a few things:

  • you cannot change the percentage of cost-sharing on retiree health benefits, even if the specific procedures covered keep changing and health costs rise
  • it doesn’t matter if you haven’t worked those years yet, not only are COLA benefits locked in for your past services, but also your future services

(at least, this is my reading of the rulings. I am not a lawyer, much less an Illinois constitutional lawyer.)

But let us consider what the people at the time said about this new clause, eh? Maybe we’re reading into it that which was never considered as a possibility.

Or maybe they knew just what they were doing:

And the transcript of the debate on that July day makes it clear that even the delegates who argued against the pension clause did so because they saw it as something that could handcuff state and local officials as they sought to prioritize spending in tough times.

“This innocuous little amendment sounds a lot like motherhood and strawberry shortcake,” complained delegate John C. Parkhurst, of Peoria, who went on to deride it as “terribly, terribly mischievous.”

Another critic wondered if the state might be locking its employees into a retirement anachronism if better and more lucrative funding mechanisms were developed. “To freeze this in the constitution might hurt the very, very people that we are trying to help at this time,” said Southwest Side delegate Ted Borek. Eight years later, the federal tax code was changed to allow the first 401(k)-type retirement plans.

Ann Lousin, then a young lawyer on the convention staff, recalled in a recent interview that the intent of the clause was quite clear. “Both proponents and opponents were saying that this would be a very strong protection for public employees, even though some felt in the future it might be regretted,” said Lousin, who now teaches Illinois constitutional law at Chicago’s John Marshall Law School.

……
Believe it or not, the state’s key pension funds were in almost as bad financial shape back then as they are now, and for the same reason: a chronic failure by lawmakers to pay enough money into the funds to cover projected pensions costs and keep them financially sound.

Prevailing case law in Illinois and several other states had defined pensions as essentially bounties offered up to public workers that government bodies were free to reduce or eliminate at will. Fearing that just might someday happen, employees at state universities began agitating for including a safeguard in the new constitution.

At the same time, police, fire and other local workers grew nervous about new home rule powers the convention appeared set to bestow on local governments. They feared municipal leaders, flexing newfound fiscal independence from state rules, would see that as a green light to back away from retirement promises and spend resources on other things.

…..
Green said the wording of the pension clause was modeled after that added to the New York Constitution in 1938 to prevent that state’s Depression-era lawmakers from cutting money owed pension programs. He said in New York it had led to full funding of pension programs.

But then, in a perhaps fateful declaration foreshadowing the present crisis, Kinney went on to stress that sponsors intended to protect benefits but did not consider their proposal a full-funding mandate. “It was not intended to require 100 percent funding or 50 percent or 30 percent funding or get into any of those problems,” she said.

In short, state and local governments would be required to keep their pension promises but not be required to sock away enough money to cover payments years into the future. When it came to funding, officials of both parties in Illinois took significant advantage of the escape clause, helping them skate by for decades without having to make politically difficult decisions on raising revenues or cutting services to meet pension obligations.

In May 1971, just weeks before the new constitution would go in effect, an official state pension oversight panel of lawmakers and laymen issued a report warning that the new pension safeguards were a mistake.

Didn’t matter. They did it anyway.

Since then, there have been two votes on amending the Illinois state constitution. It’s not been amended (to be fair, I don’t know if any proposals to amend Article XIII, Section 5 were in either of those votes.) Wonder what the result would be if they tried again. (The last vote was in 2008.)

Anyway, yes, this problem was known (before I was born) and they went ahead anyway. As it was, the population of taxpayers was still growing — who cared if future generations had to pay for past service?

Of course, if that taxpayer base didn’t grow fast enough…. oopsie.

This is not a “mistake”.

They knew what they were getting to in 1970.

They just assumed they’d all be dead before the bill came due.

Some were correct. Others…. not so much.

oopsie

Compilation of Illinois posts


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