Print Friendly, PDF & Email

Getting on the same page about the facts on Illinois pensions is a necessary first step. Unfortunately, we have a way to go, thanks in part to errors in news and opinion articles.

The latest example is from an author we usually agree with in an article we otherwise like. It’s Jim Nowlan’s guest piece in Crain’s this week, “Police and fire unions must lead on pension reform.” He’s certainly right that it would be in their own interests for police and firefighter pensions to come to the bargaining table to fix an unsustainable pension system.

However, he claims that’s the only way to fix our pensions. Why? Because a state constitutional amendment to our pension protection clause won’t work under the United States Constitution, he wrote.  “The state high court has said that benefits already granted are contractual, and a state constitution cannot override the U.S. constitutional right of contract.”

That’s dead wrong. We’ve often spelled out why that’s wrong, and we have plenty of company. While the issue might be litigated, it has become increasingly clear that federal constitutional objections would lose and a constitutional amendment would work, and that’s almost certainly true for the particularly distressed towns and cities Nowlan wrote about.

Just this June, the Rhode Island Supreme Court rejected what Nowlan called the “constitutional right of contract” as well as other federal constitutional objections to pension reform. They were applying the same federal law that would be applied if Illinois were to amend its constitution. See our article on that. Last week, James Spiotto, a nationally recognized legal expert on insolvency, wrote to the same effect. A growing number of newspapers, including Crain’s and the Chicago Tribune, have also endorsed an amendment, as has The Civic Federation.

Nowlan’s error undermines his own point about union cooperation. They won’t negotiate if they remain under the mistaken impression, propagated by their leadership, that the federal constitution guarantees their full pension. In contrast, Arizona unions have twice negotiated and agreed to amendments to their state constitution, which had a pension protection clause identical to ours. While some individuals dissented, nobody bothered to sue. More importantly, the world didn’t end.

-Mark Glennon

For further information on the legal issues pertinent to amending our constitution to allow for needed pension reform, see the following:

newest oldest most voted
Notify of
Gary MacDougal

Mark: Terrific article – 100% persuasive! Gary MacDougal

Rick

Bailout, bankruptcy or some group getting a serious financial haircut is the only cure. Adjusting the clause is not a solution, pain is. Which of these three will happen first? Bailout is no solution if the same jamokes are in charge, that’s like giving a bum your wallet. Bankruptcy, same situation, same jamokes same results. Now pain is a different story, that might work. But who gets the pain? Well it’s either the bondholders, pension recipients or the taxpayers. So far the lawyers have crafted every law to protect the bondholders and recipients. We are toast.

Andrew Szakmary

My understanding is that the Illinois state constitution also has a contracts clause, separate from the pension protection clause, that similarly prohibits the passage of ex-post facto laws and the abrogation of contracts. Even if you delete the pension protection clause (a big if, given the many hurdles you need to jump through), and then tried to cut pensions, beneficiaries could sue in state court and it would likely wind up – you guessed it – before the Illinois Supreme Court. The same court that in its 7-0 ruling against the 2013 pension cut legislation strongly hinted that it would… Read more »

Cass Andra

The pension “contract” that the Illinois courts have interpreted is similar to the Michigan clause that the bankruptcy court in Detroit was prepared to invalidate in the city’s bankruptcy. So municipal bankruptcy (if permitted in Illinois) could extinguish or modify pension rights accrued in those municipalities. That’s one of the reasons for the push to have the State consolidate all municipal pensions under state sponsorship … i.e. the State can’t go bankrupt under current law. A federal court in Maryland, interpreting Maryland teachers’ pension rights under the U.S. constitution, declined to find future expectations protected by the federal anti-impairment clause.… Read more »

John Nokes

Mark
Both Rhode Island and Arizona unions brought these cases to the state and was contractural agreement. In Rhode Island there was dissenting individuals who sued and that decision was made by the Supreme Court.

Wise Wally

State employees gave 98% of their donations to legislators who returned the favor by giving them divine rights of employee pensions which are several times higher than social security. What’s wrong with this picture?

Bonnie

As a current INFORMED state employee, not far from retirement, I, too am sick of it. I ABSOLUTELY want something done, so I WILL KNOW WHERE I STAND. Until then, I don’t DARE retire…I will just HANG ONTO MY JOB since that seems to be the most stable thing going for me right now.

DantheMan

My brother is in the private sector and his pension fund is going broke. The uncertainty of if/when he can retire is always on his mind. His pension fund tried to implement a plan that would bring some sanity to the situation, but the politicians in Washington said ‘no’, offering no alternative or solution. Like you, he will keep working under a cloud of uncertainty.

Adam

It sounds like you need to write an op-ed for Crain’s exposing this Mark. You also need to bluntly state that the pensions will collapse completely without something being done – it would seem hardly anyone wants to say that in a major publication, but it is true. They are doomed with no fix.

DantheMan

As specified in this article, Wirepoints has stated before that an amendment to the Illinois constitution would survive a legal challenge. I agree with Wirepoints, so let’s call that ‘plan A’ for saving Illinois. I have to wonder what happens if ‘plan A’ doesn’t survive a legal challenge. Is there a ‘plan B’ or is it game over?

Adam

I agree with Dan. It seems this site and IPI also has put all their eggs into the amendment basket, however, what if that fails? I assume total pension collapse and some sort of federal action in time. Either way the gig is about up. The next recession is game over for the pensions. Math will win. This can’t go on much longer at all. Dan and I would appreciate an answer. An entire state won’t be allowed to collapse, so something has to happen.

danni smith

and why won’t an entire state be allowed to collapse? Detroit did. New york is folding. chiraq is. pritzker already told lighthead ‘no bailout for cps”. baltimore has-san francisco is the noose around the neck of califormia and los angeles is the anchor around her ankles. those governments are majorly concerned for the health and wealth of illegals and criminals-pelosi’s, “there is a spark of humanity in ms-13 gang members”. Anarchy will prevail when the fedgub makes Aunt Tillie in Idaho pay for the $600,000 annual pension for richie daley.

Adam

The federal reserve will just end up bailing states out if nothing else. Once the fed cannot do that then the entire global economy crashes and we all cease to be quickly anyway. Illinois, while the US still functions as a country, will not be allowed to fail, because it would bring down the entire system in time. Detroit did not fail; it went bankrupt. Detroit is also not a state.

Adam

P.S. How long until Peoria admits they are bankrupt? 100% of their high property taxes are going towards pensions now. Peoria is out of options and bankrupt.

Platinum Goose

I’m not an attorney but I’ve been involved with enough bankruptcies to know that nobody is ever made whole in a bankruptcy. If the unions think the bond holders will take a gigantic haircut and they’ll be made whole they are in for a big surprise.

Adam

They both will have to take big cuts, and those cuts get bigger every year nothing is done. There is a recession looming, and it is about game over time.

Platinum Goose

I think the unions know it which is why they’re making these ridiculous demands for wage increases. They figure if they have to take a haircut they better take what they can now before it falls apart.

DantheMan

Isn’t that kind of what they have been doing all along? Just sayin…

Ditmar Redfern

The commute from Indiana isn’t that bad.Don’t dare stay,lest they drain you of your own resources.