February 28, 2013 12:08 PM UTC
Illinois to Consider Legal Public Pension Reform! Oh, the Humanity!
- by: PolDancer
An Illinois newspaper, the Journal Star, is reporting that a constitutional, prospective pension reform proposal is now on the table. It’s good to see states that have much more pressing pension problems than Colorado provide examples of legal pension reform. Many such “less drastic” alternatives exist to Colorado’s calculated breach of Colorado PERA pension COLA contracts in 2010.
The Journal Star describes the Illinois pension reform proposal as follows:
“The income tax increase would be made permanent and then solely dedicated to pension payments under a pension reform plan floated Wednesday by Rep. Lou Lang.”
“Under the plan, employees would pay 3 percentage points more of their salaries toward their pensions and the minimum retirement age to receive full pension benefits (for new employees) would be 67 for all five pension systems.”
(My comment: Attention Colorado legislators! One of your counterparts in Illinois is providing an excellent example. He does not propose that Illinois abandon its contractual obligations. Conservatives, I know the idea of an income tax hike in Colorado is anathema. But, let’s face it, we have to pay our debts. Perhaps other revenue sources will be more palatable.
Illinois’ Representative Lang is proposing that the State of Illinois allocate new revenue to meet the state’s pension obligations. In 2010 [or earlier] there was nothing preventing the Colorado Legislature from submitting a measure to Colorado voters to dedicate new funding sources toward meeting Colorado’s debt. This action is permitted under TABOR. The voters can be asked for permission for new revenues. Such a referred pension funding measure would have demonstrated good faith on the part of the Colorado General Assembly in 2010 [or earlier]. Yes, asking the state’s voters to dedicate new revenues to meet Colorado PERA contractual obligations would have required creativity, effort and political capital. It was much simpler to just break PERA contracts in 2010. But, finding new revenue to meet state and local debt obligations has the significant advantage of constitutionality. It is a “real” solution, as opposed to a “litigation timeout.”
While we’re on the subject of TABOR it should be universally recognized that the defendants in the case Justus v. State [the Colorado public pension COLA lawsuit] cannot legitimately argue that the existence of the TABOR Amendment in the Colorado Constitution somehow justifies Colorado’s breach of contract. TABOR’s revenue and spending limitations were put in place in 1992. Since 1992, the Colorado Legislature has irresponsibly enacted further cuts to its available revenue and has adopted legislation that significantly increased Colorado PERA’s unfunded liabilities. It is not possible to argue with a straight face that TABOR does not allow the State of Colorado to meet its contractual pension obligations, when the state has cut its revenue stream beyond TABOR’s requirements, and has racked up long-term PERA pension debt (unfunded liabilities) for short-term taxpayer savings.
In 2001, the Colorado Legislature and Governor Bill Owens enacted legislation to incentivize the early retirement of public sector workers. The goal (which was achieved) was to encourage the expensive (higher paid) older public sector workers in Colorado to retire, thus saving the State of Colorado and Colorado local governments significant short-term labor costs.
From the Silver and Gold Record:
“Befort also noted that several years ago, the Legislature and Gov. Bill Owens decided to encourage higher-paid employees to retire early. Payroll expenses went down for the state, but PERA's costs increased, he explained.”
https://www.cu.edu/sg/messages/4405.html
From the Colorado Statesman:
“PERA’s troubles date back to 1999-2000, when the pension plan peaked at 104.7 percent on its ratio of assets to obligations (liabilities). The Legislature was feeling flush, and passed bills reducing the employer contribution.”
Link:
https://www.coloradostatesman.com/content/991527-state-retirees-ready-pounce-pera-fix
The group “Friends of PERA” tells us on their website:
“Rate cuts to PERA (affiliated employers) between 2000 and 2005 equaled some $325 million.”
Finally, have you all noticed that even our cherished TABOR amendment recognizes public pension obligations as state “debt”?
Here’s some background information on TABOR:
https://www.colorado.gov/cs/Satellite/CGA-LegislativeCouncil/CLC/1200536135614)
Off soapbox . . . back to the Journal Star article:
“But Lang’s plan does not call for any reduction in pension benefits, something he said makes his plan constitutional. Other pension reform plans floated so far call for a change in cost of living adjustments to retiree benefits, something Lang said makes them unconstitutional.”
(My comment: Heads up Colorado legislators! A retrospective taking of accrued public pension COLA benefits is unconstitutional. Who knew?)
The Journal Star article:
“Gov. Pat Quinn has thrown his support behind [an alternative pension reform bill] Senate Bill 1, sponsored by Senate President John Cullerton, D-Chicago. It combines two major reform proposals into one bill. If the courts strike down one of the proposals, the other would take effect.”
“Lang said he thinks both components of the bill are unconstitutional because they diminish pension benefits.”
(My comment: Is it not uncanny irony that the unconstitutional pension reform proposal in Illinois is Senate Bill 1, sponsored by the Senate President? I think this proves the existence of a parallel universe.
Recall that earlier we examined the unconstitutional nature of the Cullerton proposal. An Illinois Appellate Court has already held that: “the [government] cannot whipsaw citizens into ‘voluntarily’ choosing one of two means by which they will be divested of an existing property interest.” (Boonstra v. City of Chicago, 214 Ill. App. 3d 379, 387, 574 N.E.2d 689, 695 [1st Dist. 1991].
See this link:
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1774163)
Here’s a link to the complete article on Illinois pension reform in The Journal Star:
https://www.pjstar.com/news/x1037514608/Reform-measure-would-make-rate-increase-permanent-raise-full-benefit-retirement-age
Below, I present the Illinois Federation of Teachers’ guiding principles for pension reform in their state:
“Guaranteed Funding. You’ve always paid toward your retirement. The state has not. Decades of skipped and shorted payments have created a $90 billion debt and a serious crisis. This bill secures an ironclad promise that lawmakers must make the annual pension and debt payment every year. And, SB2404 establishes the right for the state retirement systems – or individuals – to bring court action if they don’t.”
(My comment: As we know, the State of Colorado has also skipped billions in annual required pension contributions in the last ten years. Note that although Illinois pensions have the lowest public pension funded ratios in the nation, and this public sector union [IFT] perceives a “crisis,” the union is not calling for the breach of pension contracts. They are pursuing solutions that are admittedly more difficult than a simple contract breach, but will withstand court muster.
The Colorado General Assembly could have explored such “less drastic” reform options if it had not relinquished its policy-making authority in this area to lobbyists and pension administrators in 2009/2010. Those in attendance at the Colorado PERA “listening tours” pointed out that Colorado PERA’s list of pension reform options [that were distributed to attendees] almost exclusively asked for sacrifices from Colorado PERA employees, rather than Colorado PERA employers.
The Colorado Legislature should consider creation of a statutory commission, composed of legislators, to monitor all of the state’s public pension systems, review and propose legislation addressing those systems, and elevate the level of knowledge of the members regarding public pension administration.)
“Creating a Pension Stabilization Fund. Beyond paying the annual costs, the state must also pay down the massive debt. In past years, Springfield leaders used creative borrowing schemes to make payments, which only created more debt through bonds that had to be paid off first by law. SB2404 would create a constitutionally protected fund to directly pay down the debt with resources already in the Illinois budget.”
“Shared Sacrifice. While public workers are not to blame for Illinois’ pension problem, we are willing to be part of the solution. With an ironclad funding guarantee to ensure employer underfunding can never happen again and the dedicated revenue source described above, active members would contribute an additional 2 percent of salary, phased in over the next two years. This will generate more than $3 billion over the next decade.”
(My comment: Note that this public sector union [IFT] does not employ the concept of “shared sacrifice” as a euphemism for breach of contract. Implicit in the concept of “shared sacrifice” is the intent that such “sacrifice” actually be legal.)
Link:
https://www.ift-aft.org/news/dailynews/13-02-19/Progress_on_Pensions.aspx
Meanwhile, Kentucky legislators are considering their own “less drastic” alternatives to the breach of public pension contracts.
From Kentucky’s Courier Journal:
“Leaders of the House Democratic majority are proposing a new sales tax on lottery tickets, with the revenue earmarked for stabilizing the state’s financially strapped retirement system.”
“A 6 percent sales tax on lottery tickets could generate about $49 million each year, and new lottery games could be implemented over several years to eventually create $60 million to $90 million annually for pensions, said Rep. Brent Yonts, D-Greenville, chairman of the House State Government Committee.”
“House Speaker Greg Stumbo, D-Prestonsburg, said the Democratic caucus will discuss the proposal Monday and then talk with House Republicans to determine if it has enough votes to clear the House floor.”
“SB 2 would also require the state to fully fund Kentucky Retirement Systems by fiscal 2015, costing $120 million for the state general fund in the first year.”
“House Democrats have reviewed more than a dozen other funding options — including higher cigarette taxes, Instant Racing and casino gambling — but Stumbo confirmed Friday that those proposals are no longer under consideration.”
(My comment: A dozen? Surely, some of these funding options could be pursued in Colorado. Instead, the Colorado Legislature decided to force Colorado courts into the role of “the bad guy.” Where was the statesmanship in 2010?!)
The Courier Journal:
“Yonts said the sales tax was viewed as the most “palatable” since lottery games are voluntary, and would generate $15 million in additional net revenue for the lottery system. Once complete, the sales tax and expansion would likely provide enough new revenue to cover the state’s full general fund contribution to Kentucky Retirement Systems, Yonts said.”
Link to complete Courier Journal article:
https://www.courier-journal.com/article/20130222/NEWS0101/302220067/Kentucky-pension-bill-include-6-lottery-sales-tax?nclick_check=1
From the group, Kentucky Government Retirees:
“A number of proposals have been floated in recent weeks, but House Democrats seem to have settled on expanding Kentucky Lottery games and Instant Racing as funding sources for public pension contributions.”
“House Speaker Greg Stumbo, D-Prestonsburg, said the House will propose paying full pension contributions by offering Keno and online wagering through the Kentucky Lottery and expanding Instant Racing statewide should the courts uphold the game’s legality.”
“Those measures are expected to generate $1 billion over 10 years in a trust fund.”
“Studies commissioned by the horse racing industry show Instant Racing would generate about $25 million in new revenue if the game, which allows players to bet on previously run horse races, is established across Kentucky, he said.”
“Expanding Kentucky Lottery games to include Keno and an online lottery would bring the annual total to more than $100 million after three to five years, Stumbo said, adding the Kentucky Lottery has the authority to expand its offering of lottery-type games.”
Link:
https://www.facebook.com/permalink.php?story_fbid=451773918228190&id=152951648110420
The Lane Report on Kentucky public pensions:
“A state employee’s pension is a legal contract with the state: They pay into the system to get specific benefits when they retire – a defined-benefits model. The state – and its taxpayers – is obligated to pay at the rate the contract promised.”
“Commitments made by governors and legislators are legal obligations to state residents collectively, including the liabilities. Taxpayers owe the money needed to shore up the system. For over a decade, the legislature has not put the money into KERS that it was supposed to, spending tax revenue on other projects and obligations. The debt owed by law to KERS grew.”
Link:
https://www.lanereport.com/19048/2013/02/pension-reform-bill-revised/
Support public pension contractual rights and the rule of law in the United States. All members of Colorado PERA (active or retired) should help Save Pera Cola defend public pension rights. The website, saveperacola.com, explains how to make a contribution. Also, “Friend” Save Pera Cola on Facebook!
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