By: Mark Glennon*
The Illinois Supreme Court on Thursday invalidated reforms that would have restricted inclusion of union salaries as pensionable salaries when employees take time off to work for their union. If the union pays more than their government job, that higher salary is pensionable, too, ruled the court.
This particular chapter of pension madness started in 1991. Then, according to the Chicago Tribune,
All it took to give nearly two dozen labor leaders from Chicago a windfall worth millions was a few tweaks to a handful of sentences in the state’s lengthy pension code. The changes became law with no public debate among state legislators and, more importantly, no cost analysis.
Take time off to work for your union, no problem. Taxpayers are still on the hook for pension accruals during that work. That was already the law, but the 1991 changes made the deal much more attractive by making higher union salaries pensionable as well.
“Pension experts from around the country say they’ve never heard of such a perk for union leaders,” reported the Tribune in 2011, so the state passed reforms. Those reforms would have terminated the union work benefit for 2012 and years thereafter, and limited pensionable salary to a formula based on the worker’s public salary.
That the Illinois Supreme Court has now invalidated those reforms should come as no surprise. The court had already made their sweeping interpretation of the pension protection clause clear, most conspicuously in the outrageous Kanerva decision in 2014 on which the new ruling is heavily based. There, the court said any benefit associated with participation in a pension plan is constitutionally protected. Once a worker starts, he’s entitled to take advantage of all perks in the system existing at that time, forever. Our criticism of the Kanerva ruling at the time is linked here.
This new ruling is just another whack on the head about why the Illinois constitutional pension protection clause must go, along with all the Illinois court’s rulings based thereon. We’ve long called for that constitutional amendment here. We called for it in our Crain’s article earlier this month. A Tribune editorial this week does, too.
From that Tribune article, here are some of the pensioners the now invalid reform was intended to address:
•Liberato “Al” Naimoli, president of the Cement Workers Union Local 76. He retired last year from a $15,000-a-year city job that he last held a quarter-century ago. Today, Naimoli receives more than $13,000 a month from the city laborers’ pension fund even as he continues to earn nearly $300,000 annually as president of Local 76. His city laborers’ pension will pay him about $4 million during his lifetime, according to a Tribune/WGN-TV analysis based on the funds’ actuarial assumptions.
•James McNally, vice president of the International Union of Operating Engineers Local 150. He receives nearly $115,000 a year even though at the time he retired, in 2008, he had not worked for the city in more than 13 years. He was only 51 when he started collecting a city pension. By the time he turns 78, he will have received roughly $4 million from the city laborers’ fund.
•Dennis Gannon, former president of the Chicago Federation of Labor. In 2004, he began receiving more than $150,000 a year after retiring at age 50 from a $56,000-a-year city job that he had left nearly 13 years earlier. He received his city pension while collecting a salary of about $200,000 from the federation. During his lifetime, the city municipal pension fund will pay him approximately $5 million. Gannon told the Tribune that he was only following the law in filing for a city pension.
A new Tribune article on Thursday’s ruling is linked here.
By the way, here’s a little warning. That Kanerva decision in 2014 is the one that made lifetime healthcare a constitutional right along with pension benefits. My colleagues Ted and John will be writing shortly about what that will cost. Please be seated before you read it.
*Mark Glennon is founder and executive editor of Wirepoints.