PRESS RELEASE: Illinois pension reforms would survive federal constitutional challenges

Gov. Pritzker’s declaration of comprehensive pension reform as a “fantasy” is wrong. Case law and other states’ experiences show reforms would survive federal constitutional challenges.

Properly-crafted comprehensive pension reforms would survive state and U.S. Constitutional challenges, according to a new report by Wirepoints.

“Success in states such as Rhode Island and Arizona show Illinois can craft reforms that are in compliance with the U.S. Constitution,” says Wirepoints Executive Editor and Founder Mark Glennon.

Pension reform opponents claim that the pursuit of a state amendment would be futile because any subsequent reform would be struck down due to the U.S. Constitution’s Contract Clause. Gov. Pritzker has even made that argument, calling the pursuit of reform “a fantasy.”

Federal case law shows that simply isn’t true. The United States Supreme Court and lower federal courts have long made clear that the Contract Clause is not an absolute. Contracts can be adjusted if it serves an important public purpose. Accordingly, modifications to Illinois pension benefits could be made as long as they are narrow, reasonable and meet the threshold of achieving an important public purpose. The fiscal impact of the pandemic and recession seal the case that pension reform is permissible.

Those are the key points in “Why Pension Reform is Legal,” part three of Wirepoints’ new Special Report: “Solving Illinois’ Pension Problem: Why It’s Legal, Why It’s Necessary, and What it Looks Like.

The following are some of the facts included in Wirepoints’ report:

  • Various U.S. Supreme Court cases, including Home Building & Loan Association v. Blaisdell, show the court does not consider the Contract Clause to be absolute. Contracts can be impaired if the impairment serves an important public purpose.
  • Cranston, Rhode Island’s successful defense of pension reforms is a clear example of courts making exceptions to the federal Contract Clause for a higher public purpose. The city’s reduction of benefits was upheld by Rhode Island Supreme Court, which found that the clause and other U.S. constitutional matters are not blanket rules against reforming contracts.
  • The state of Arizona has twice amended a pension protection clause similar to Illinois’ and successfully passed reform. Though reductions were mostly agreed through negotiation, dissenting pensioners, to this day, could go to court if they thought they could win. None of them has.

The only two paths to override the state’s pension clause are state bankruptcy or a state constitutional amendment. State bankruptcy would require federal legislation, which leaves a state constitutional amendment as the only option at hand.

“Illinois can and must amend the pension protection clause,” says Mark. “Doing so will allow Illinois to address its overwhelming pension debt and put the state on a sustainable fiscal path.”

Read “Part 3: Why Pension Reform is Legal” at: https://wirepoints.org/part-3-why-pension-reform-is-legal

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PensionActuary1058
6 days ago

I really do respect the Wirepoints team and the work they do. However, trying to salvage Illinois from fiscal calamity is impossible. No one with real political power in this state will ever consider these proposals and most voters obviously do not care. Illinois is a blue state through and through which means these issues will never be solved with anything other than a crisis or a bailout

Admin
6 days ago

We don’t disagree. We think, between the alternatives you stated, it will be crisis. Then, we hope to have the solutions thought out, on the shelf and ready to go.

PensionActuary1058
6 days ago
Reply to  Mark Glennon

Thanks for the reply, Mark. My concern would be that even in a crisis the Democrat politicians in Illinois would not be open to your solutions because of their allegiances to public employee unions. Do you really think they would be open to hearing what you have to say?

Admin
6 days ago

That’s indeed the ultimate question, though it would really be up to voters at that point. I don’t claim to be certain about that outcome. Same for the future of our country, which is already on the line.

JimBob
6 days ago

I’d simply observe that the crisis is here and the politicians aren’t seeking solutions that work. They are actively seeking to delay solutions and that’s because effective solutions threaten their own pensions and their own re-elections. Educating and mobilizing taxpayer-voters on pension economics during a pandemic in the midst of a presidential election is likely futile but getting legal options lined up [and perhaps some political options] is a laudable enterprise.

Admin
6 days ago

Ultimately, what will help determine what the unions accept is just how bad the math gets. It wasn’t looking pretty before COVID. It’s far worse now. Barring a federal bailout, our reforms in the future may become politically expedient.

PensionActuary1058
6 days ago
Reply to  Ted Dabrowski

Excellent point, Ted. Thanks again for the work you all do. Hopefully Illinois voters wake up soon and realize the slow motion train wreck that is occurring.

Mark Felt
7 days ago

In Illinois you have politicians that see only as far as the next election, hence no change.

Admin
7 days ago
Reply to  Mark Felt

Same for much of the press. At Wirepoints, however, we are playing a longer game.

NoHope4Illinois
7 days ago

Pritzker – No chance I and Chicago Democrats will curb our spending or pandering to public employee unions. Illinois is toast.

Rob Maitino
7 days ago

I hate Trump. I find him abhorrent and disgusting, but as I learn more and seek out different sources, it’s becoming more apparent that he’s just more out in the open, and decidedly more brash and arrogant, but es not the only one who’s dirty. It’s clear that most politicians, and especially here in Illinois, are grifters of the highest order. They all need to go. I see n9 reason to vote for any incumbent, especially any Illinois Democrat. Until pensions are reformed, the exodus will continue, and get worse, and ultimately, those who are of the most modest means… Read more »

Freddy
7 days ago
Reply to  Rob Maitino

Hard to get rid of them. 12 of 20 senators have no opposition and 54 of 118 Reps will be the only choice and no third parties hold a seat in the General Assembly. Not sure on local elections but most of the time 50% run unopposed overall.

Poor Taxpayer
7 days ago

Illinois is a goner, DOA.
The greed of the cops, teachers and firemen have destroyed Illinois forever.
They all live in Luxury homes in Florida, who would live in Illinois?
Only a fool or rich government worker would live in Illinois.
No opportunities for the next generation, none for anyone.
The best day of you life is the day you leave.
Buy a nice house on the tax savings, live the good life elsewhere.
Illinois “Land of Slavery”

John
5 days ago
Reply to  Poor Taxpayer

You keep posting the same comment over and over. Get a life.

LessonLearned
7 days ago

It doesn’t matter. Dem leaders know they can’t go against the public unions so the discussion is pointless. Wirepoint efforts would be better spent advising residents where to relocate. All the charts and graphs come down to this one statement, “You don’t want to be in this state a second longer than absolutely necessary.”

willowglen
7 days ago
Reply to  LessonLearned

LessonLearned – leaving may be the answer for some, and it is hard to argue against that proposition. But individuals are not Wirepoints’ only readers. The financial community benefits from Wirepoints’ work, and frankly, when the bond market shuts down on Chicago and Illinois, Wirepoints’ data will be viewed as very relevant and helpful. They also demonstrate how financiers are in on the scam, grabbing liens on every conceivable cash flow or assets, meaning the state is a carved out carcass, far more than is reported on (except here).

Admin
7 days ago
Reply to  LessonLearned

We know that this and other reforms are not politically feasible today. However, it’s inevitable that the crash at some point will become so severe that demands for real solutions become strong enough to get them through. Our goal is to have those solutions thought out , on the shelf and ready to go at that point.

James
7 days ago
Reply to  Mark Glennon

Hallelujah, I’m all for it! It seems to me and likely to most of the citizenry that the IL legislature is reactive at best and not even good at that most times, lurching from one crisis to the next with far too little obvious forethought given as to how to respond to or—better yet–prepare for it. The typical approach seems to be a slap-dash hurried bill dreamed-up very quickly by the party leadership teams and thrust on to the the voters in the legislative with far too little time to review it realistically. That’s seems to be the ongoing plans… Read more »

Platinum Goose
6 days ago
Reply to  James

Exaggerating? I think you just described the sale of the City of Chicago’s parking meters to a T.

NoHope4Illinois
7 days ago
Reply to  LessonLearned

I agree. By the time the time the Illinois financial collapse occurs which could finally give motivation for change, you certainly do not want to be in this state.

My wife’s St Vincent de Paul partner just moved to FL. They prepared to exit IL by selling their home a few years back, and downsizing to a rented condo. I’m thinking of the same approach.

LessonLearned
6 days ago

Selling and renting for a couple years is a smart move in Illinois. It’s one step closer to leaving.

Deep In The Heart
6 days ago
Reply to  LessonLearned

Smart to sell your home before the mass exodus starts.