By: Mark Glennon*

Opponents of a a state constitutional amendment to allow for real pension reform have long tried to throw cold water on that idea by overstating concerns about its legality. Most of those efforts have centered on the claim that a state constitutional amendment would be barred by the United States Constitution. The Better Government Association this week wrote about a new supposed concern.

But their article contains error after error. Published on their site, Crain’s and other places, they say:

Backers of the latest drive to slash Illinois public pension benefits may want to take note of the fate of a similar effort in San Diego, which won strong voter approval years ago but was nonetheless blocked in the courts and now will not go into effect.

Nonsense. The California decision had nothing to do with Illinois or the law that would be applied if Illinois were to amend its constitution. It was strictly about a California statute. That statute requires public officials to meet and confer with labor officials prior to implementing certain changes which, the court decided, included the pension reforms San Diego tried to implement. The case is Boling v. Public Employment Relations Board. Pension reform failed there because the city didn’t meet and confer with labor.

The BGA went on to say the United States Supreme Court declined to hear the case, further indicating the obstacle Illinois would face.

Nonsense again. San Diego appealed to the United States Supreme Court solely on an unrelated issue – whether that California statute can preempt an elected public official’s First Amendment right to participate in a citizens’ initiative process, which was how the San Diego pension reform came about.

One law firm writing about the case put it simply: “Boling should not be read as a statement on pension reform.”

The BGA goes on to say that a particular research piece by the Civic Committee questioned the legality of a state constitutional amendment, quoting this line: “The options to reduce the unfunded liability are limited due to constitutional constraints.”

But that line was used in a different context entirely. The Civic Committee used it when talking about the underlying problem of how Illinois courts have interpreted our pension reform amendment. They were not talking about legality of an amendment, nor did they discuss that anywhere else in the report.

Finally, the BGA rekindles a claim that pension reform would represent an unconstitutional “taking” of property, relying only on the writings of Senate President John Cullerton’s pension law guy.

But they said not a word to support the other side and ignored the leading new decision on “taking” and other relevant federal constitutional issues. That’s this month’s Rhode Island decision validating reforms in the City of Cranston. We’ve written about that decision in detail. The court, applying the same federal law that would apply after Illinois amended its constitution, rejected claims of unconstitutional “taking” as well as “contract impairment.” Cranston’s mayor correctly called the decision historic because it withstood “a full legal challenge.”

Let’s go back to the point of the California case, which is rather interesting.  That decision said San Diego should have met and conferred with labor representatives before trying to implement pension reform. Of course those meetings and conferences should occur, and it shouldn’t matter what state law says. Regardless of what the law is on that in Illinois, it should go without saying that negotiated efforts should be exhausted. They undoubtedly will be if Illinois ever gets serious about reform.

Negotiation is fair, reasonable and certain to happen. However, the unions will say what they’ve always said – “drop dead.” Interestingly, Justice Alito on the Supreme Court seemed to mock Illinois labor unions’ unwillingness to negotiate fairly. In last year’s Janus decision, he wrote that when Illinois offered cost-saving proposals, “the Union countered with very different sugges­tions. Among other things, it advocated wage and tax increases, cutting spending ‘to Wall Street financial insti­tutions,’ and reforms to Illinois’ pension and tax systems (such as closing ‘corporate tax loopholes,’ ‘[e]xpanding the base of the state sales tax,’ and ‘allowing an income tax that is adjusted in accordance with ability to pay’).”

Any open legal issues that would arise after Illinois properly amended its pension protection clause would be appealable, ultimately, to the United States Supreme Court. Alito seems to be itching to write that opinion.

To recap our view on this topic, for some of our worst off towns and cities, pension reform after a constitutional amendment would almost most certainly survive the required legal test that reforms be “reasonably and necessary to fulfill an important public purpose.” More prosperous cities with healthier pensions would not. For the state’s own pensions, chances are high that reform would prevail and, if not, it’s only a matter of time before it would thanks to the states rapidly growing insolvency. There’s no political will for a constitutional amendment now, but there will be when we get to the “inevitable financial collapse,” as the Wall Street Journal termed it.

The BGA article was published by Crain’s as part of its special edition on pensions. Salute to them for including different perspectives from leading voices. However, that gave a platform to plenty of nonsense. We earlier wrote about the dishonest article by the Executive Director of AFSCME, the big public union. Next up will be an article by Amanda Kass.

*Mark Glennon is founder of Wirepoints.

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Wise Willy World
1 year ago

Within 4 years the courts will have to decide how much can be paid. My guess is 60%

world with end
1 year ago
Reply to  Mark Glennon

Mark, at first glance, a 40 percent pension reduction sounds draconian. However, those pensioners already over $100K a year, of whom there are many and many more ready to join that club, wouldn’t exactly be hitting the bread lines with that cut. They’d still have a more lucrative retirement than most retirees.

Also, would the automatic three percent a year raise and free health care be affected? If not, that 40 percent cut wouldn’t have a big effect in the long term.

S and P 500
1 year ago

There’s an episode of “Dragnet” on you-tube (“Dragnet 129, the pyramid swindle”) that makes me think about the trillions of dollars owed to public employees. The nice lady in the Grecian gown is telling the people in the room that money will be coming as long as you have faith in the system. In the public sector, the “system” is referred to as “pay as you go” or “kick the can”.

J.A. Herzrent
1 year ago

One thing I worry about — some sort of estoppel action. There is a Michigan case where a public employee retired in reliance on a representation from his superior that his pension would be $X per month. Instead, his calculated pension was less than $X per month. A court held that the employee was entitled to the larger pension based on the fact that he relied on the higher number when he gave up his job. How many thousands of public employees have been assured by those who hire them (or by their bosses) that their pension and health benefits… Read more »

J.A. Herzrent
1 year ago
Reply to  Mark Glennon

I haven’t researched this beyond what I will indicate below: McQuillin (municipal corporation law treatise) notes that “the impairment of contract clause of a state constitution has been applicable where pension rights are found to exist under the doctrine of promissory estoppel. The treatise cites Christensen v. Minneapolis Mun. Employees Retirement Bd., 331 N.W.2d 740, 4 Employee Benefits Cas. (BNA) 1209 (Minn. 1983). In other words, perhaps a court would find that the constitutional amendment was a state action impairing a contract arising out of promissory estoppel based on repeated representations that someone would have health care for life or… Read more »

1 year ago
Reply to  J.A. Herzrent

So everyone that retire and had their health insurance coverage changes should sue their private company over this “broken” promise.

J.A. Herzrent
1 year ago
Reply to  David

In private sector case law, most courts have declined to apply the “estoppel” remedy to plans covered by ERISA. I recall one case, however, where an employee was told that his health insurance covered motor cycle accidents even though the policy excluded that coverage. I think the court permitted him to collect for injuries sustained in a motorcycle accident. The rationale may have been that ERISA is a federal law and it overrides state law and that in limited circumstances an erroneous plan summary or erroneous information relayed by a plan administrator can override the terms of the plan.

1 year ago

Amanda’s gonna tell us there’s nothing to see here.

1 year ago
Reply to  nixit

Amanda is a wide eyed, pretentious idiot.

1 year ago
Reply to  nixit