Tuesday, January 14, 2014

Illinois Pension "Reform"

Forwarded from the Illlinois Policy Institute. Merle

In December 2013, Gov. Pat Quinn signed a pension “reform” bill with many serious flaws. For example, it: barely makes a dent in the state’s unfunded pension liability; guarantees pension funding at the expense of taxpayers and all other government services; creates a fake 401(k) plan; doesn’t means test cost-of-living adjustments, or COLAs; still allows state workers to retire much earlier than private sector workers; and lets state workers contribute even less toward their own pensions than they do now.
One problem the new law does not have, however, is conflict with the Illinois Constitution’s Pension Clause – despite claims made in three new lawsuits challenging it.
Those lawsuits include Heaton v. Quinn, filed by current and retired participants in the Teachers’ Retirement System in the Cook County Circuit Court; Illinois State Employees Association Retirees v. Board of Trustees of the State Employees’ Retirement System, filed by members of various state pension plans in the Sangamon County Circuit Court; and Retired State Employees Association v. Quinn, filed by members of the State Employees’ Retirement System, also in Sangamon County.
All three suits allege that the law violates the Pension Clause because it makes modest reductions to annual increases in retiree benefits, commonly referred to as COLAs. The Cook County suit also alleges that the law’s increases in retirement age for some workers and its (generous) cap on pensionable salaries violate the Pension Clause.
The lawsuits’ claims don’t have merit. The COLA reduction doesn’t touch the benefits workers have already earned, but only limits increases going forward. COLAs are a way for the Illinois General Assembly to help retirees keep up with changes in the cost of living, which may fluctuate over time; by their nature, they’re not written in stone.
As for the higher retirement age, the Illinois Supreme Court has already held that the Pension Clause allows a change in workers’ retirement age even if it indirectly affects the benefits they will receive. And the pensionable salary cap – which, at more than $110,000 for participants in the Teachers’ Retirement System in 2014, is unlikely to leave anyone destitute – doesn’t violate the Pension Clause because it only affects benefits workers will earn for work done in the future, not benefits they’ve already earned.
Even those who didn’t support the pension “reform” bill should hope the lawsuits challenging it fail. The law Quinn just signed is not meaningful pension reform. If not even this tiny token gesture in the direction of reform can stand, it’s not clear how genuine reform could be upheld later. And if the state can’t enact true pension reform, it will be locked on its current collision course with insolvency and economic disaster, which definitely would not be good for state workers or retirees.
Fortunately, the Illinois Constitution is not on the challengers’ side, and the Illinois Supreme Court – which lately seems to know an unconstitutional law when it sees one – is likely to recognize that.

Jacob Huebert
Senior Attorney
Liberty Justice Center
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