By: Mark Glennon*
If you’re among the countless Illinoisans who have been laid off, had your pay cut or closed your business, maybe you’ve wondered what deal public employees who aren’t working got. Nobody in the press has bothered to ask.
The answer is among the most nauseating aspects of the crisis: Illinois state and local workers are getting paid in full for not working with full pension accrual.
Illinois and its public unions wasted no time ensuring the checks keep coming regardless of work. On March 15, well before the stay-at-home order and most of the shutdowns came, the state quietly announced this, buried in a press release headlined about closing bars and restaurants: “Select [state] employees will continue to report to work; while the remaining workforce will either work remotely or be asked to remain home on call while receiving pay. All state employees will continue to be paid during this period.”
Yes, that was a priority for Illinois’ crisis response.
Roberta Lynch, the head of AFSCME Council 31, the biggest public union in Illinois, had the astonishing gall to say this respecting the state’s action: “[Governor JB Pritzker] is modeling the behavior that every Illinois employer should follow.”
Has your employer assured you a paycheck even if you are not working, on a job from which you can’t be fired?
We have been unable to find any unit of government in Illinois that has cut pay for employees not working.** In other words, the same policy apparently is in place for all state and local workers in Illinois. Countless of them are not working at all – toll road cashiers, park employees, librarians, transit workers and many others where operations are partially or completely closed down.
Many are continuing to work whether from home or otherwise, some under extreme pressure. We salute them. But with the state and most local governments already insolvent before the crisis, full pay for those not working is criminally irresponsible. Slashing pay is essential, as the private sector well knows.
And then there are pensioners. Crisis? What crisis?
Pension checks keep flowing no matter what the size and irrespective of the market forces now savaging pension assets — the stock market’s fastest 30% loss in history.
Those automatic 3% COLAs are now exceptionally absurd because the country is likely facing a period of deflation. Commodity prices have dropped by roughly 30% over the past few months and the dollar has soared. Both indicate declining prices. Even before the crisis COLAs accounted for almost 40% of pension unfunded liabilities. The 3% COLA likely will become a bigger bonanza than ever.
The increased cost of public pensions resulting from losses in their investment portfolio will be pushed entirely to taxpayers. No shared sacrifice whatsoever for pensioners. For now, that is. When pensions run dry, for retirees reliant on reasonable pensions, the situation will become desperate, especially for retirees in smaller, local pensions sponsored by broke municipalities.
State and local governments should have already done what’s essential – pay cuts and layoffs. Monthly pension checks should be reduced for larger pensions immediately, protecting money for the sake of those smaller pensioners who will eventually need it. Pension assets must be marshaled. Pension trustees should have seen it as their fiduciary duty long ago to cut larger, current pension payments to protect smaller, future ones
Don’t let anybody tell you there is some constitutional protection for breaking contracts in that manner. The leading United States Supreme Court decision on that topic is now clearly on point, pertaining to contract modifications during the Great Depression.
And politicians at many levels of government in both parties are moving to enact moratoriums on mortgage foreclosures and tenant evictions, which also require overriding contracts. There is no constitutional impediment.
We recognize that Governor Pritzker and much of his top staff must focus primarily on the emergency medical aspects of this crisis, but there is no excuse for not declaring a fiscal emergency as well. He has other financial staff for that. We have a legislature that can act. We have a Comptroller and Treasurer who should be screaming for action. Deputy Governor Dan Hynes is a former state comptroller.
We have long said that Illinois is being looted by public unions. It is accelerating during this crisis. Illinois state and local governments have committed Illinois taxpayers essentially to holding harmless public sector workers from any loss. It’s immoral.
We will be writing again soon with a list of further emergency fiscal actions Illinois state and local government should have implemented.
*Mark Glennon is founder of Wirepoints.
**Illinois teachers are subject to a different rule as described in our article here. They are being paid in full with full pension accruals, but the extent to which they are expected to attempt to teach online, or are actually doing so, varies.