Illinois Judge Issues Injunction Halting Public Pension “COLA-theft,” Similar to Colorado PERA’s SB10-001.

Public pension contractual rights advocate Fred Klonsky in Illinois, on May 15, 2014:

"Belz has sent the message to the Legislature, Governor and Mayors that the courts will not likely approve pension theft."

"On a personal level . . . all this ignores the pain and fear that retirees across the state must endure while politicians, judges, lawyers and lobbyists play this terrible game."

http://preaprez.wordpress.com/

Coloradopols readers, note that public sector unions in Illinois defend their member's contracts.  Why were Colorado's public sector unions able to be co-opted in supporting the breach of Colorado union member's public pension contracts in 2010?  How did this happen?

Yesterday, the efforts of Illinois' public sector unions to defend the contractual rights of their members resulted in the issuance of an injunction that will halt the taking of accrued public pension benefits in that state while recent Illinois state legislation (which I believe clearly abrogates existing contractual relationships) progresses through the courts.

In some states unions defend the contractual rights of their public worker members, in other states unions may be co-opted into "cutting deals" in backrooms, (as noted by a Colorado state legislator during the 2010 PERA pension "reform" floor debate.)

Unfortunately, Colorado's public sector "unions" are so ineffectual that, in 2009 and 2010, they could indeed be co-opted into supporting the breach of the public pension contracts of their union members.  I would like to see the leadership of Colorado's public sector unions strengthened in the future.  I would like to see Colorado's public sector unions sufficiently empowered that they will, at a minimum, testify in opposition when the Colorado Legislature entertains the breach of public worker contracts to which the state is a party.

As the sponsors of the 2010 Colorado "COLA-theft" legislation (SB10-001), and Colorado PERA's administrators have told us many times, ninety percent of the taking in SB10-001 falls on the shoulders of Colorado PERA pensioners who are parties to "fully-vested" PERA pension contracts.

I believe that Colorado's public sector unions failed to defend the contractual rights of their retired union "brothers and sisters" in 2009 and 2010, since these retired union "brothers and sisters" no longer pay union dues.  Colorado PERA pensioners (for the most part) no longer contribute to union coffers.  When a public sector union member retires, union leaders no longer have a financial incentive to defend the retired union member's contracts before the Colorado General Assembly.

In 2009, certain Colorado state employees lead the political campaign to break Colorado PERA pension contracts (i.e., Colorado PERA's administrators.)  These Colorado PERA administrators disseminated propaganda across the state claiming the "support" of Colorado's public sector unions for the PERA contract breach scheme.  However, as we have seen, a number of individual members of the public sector unions involved have refused to quietly acquiesce to their leadership's support for the breach of their fellow union member's pension contracts (more on that later.)

From the Illinois' We Are One Coalition:

"BREAKING: Court Grants Union Coalition's Request to Stay Implementation of Pension Changes."

"Today, the Sangamon County Circuit Court granted a temporary restraining order (TRO) and a preliminary injunction, as requested by the We Are One Illinois coalition and its plaintiffs, halting the implementation of Senate Bill 1 (Public Act 98-599)."

"This stays the legislation in its entirety so that the pension systems and other defendants are enjoined from implementing or administering any provisions of the act until further order of the court or the court issues a final ruling on the merits of the act’s constitutionality."

"The court found that plaintiffs have shown a likelihood of success on their contention that Public Act 98-599 violates the Pension Protection Clause of the Illinois Constitution."

http://www.weareoneillinois.org/news/breaking-court-grants-union-coalitions-request-to-stay-implementation-of-pension-changes

Reuters:

"An Illinois judge on Wednesday suspended the June 1 implementation date for the state's new pension reform law, according to a labor union coalition spokesman."

http://www.reuters.com/article/2014/05/14/usa-illinois-pensions-idUSL1N0O01VH20140514

Chicago Tribune:

"Retiree groups and a union coalition called We Are One Illinois won a temporary restraining order and preliminary injunction in Sangamon County Circuit Court that will put the law on hold and prevent it from taking effect on June 1."

"The groups argued the law is unconstitutional because it scales back benefits and raises retirement ages.  Under the Illinois Constitution, public employee pensions are a 'contractual relationship' with benefits that cannot be 'diminished or impaired.'”

“'This is an important first step in our efforts to overturn this unfair, unconstitutional law and to protect retirement security for working and retired Illinois families,' said Michael T. Carrigan, president of the Illinois AFL-CIO, the point man for the union coalition."

"Judge John Belz recognized the retirees and others in the pension systems could suffer 'irreparable harm' if the law is allowed to go forward while the constitutionality issues is still being fought out in the courts, according to his order.  The case is expected to wind up in the Illinois Supreme Court."

http://www.chicagotribune.com/news/politics/clout/chi-judge-halts-illinois-pension-reform-law-20140514,0,4599846.story

From the Colorado PERA website:

“In Colorado, Senate Bill 1 passed with the support of the Colorado Coalition for Retirement Security, which brought together Friends of PERA (which includes PERA members and retirees), the Colorado Education Association, the Colorado School and Public Employees Retirement Association, AFSCME Colorado, the American Federation of Teachers Colorado, the Association of Colorado State Patrol Professionals, the Colorado Association of School Executives, and Colorado WINS.”

http://www.copera.org/pera/about/ask.htm

During Colorado PERA's 2009 political campaign to escape its contractual obligations many Colorado PERA members and retirees objected to the proposed breach of their PERA contracts (some filed a lawsuit addressing the taking.)  The objections of Colorado PERA member David Holme at the 2009 Colorado PERA Denver "Listening Tour" are a memorable example of objection to the contract breach:

“My decision to join the state was based on the PERA program.”

“Any sort of a reduction in benefits today would be a violation of that contract, and bait and switch advertising . . . and so fraud.” 

“State employees have never failed to provide their contributions  . . . and in fact we’ve paid more into the system than the employers have over the total of the years, according to PERA reports.”

“The employers, starting in 2002, the last year of 100 percent funding, began providing less than the annual contribution requirement, setting contribution rates for the state of less than required.” 

“Today, the State of Colorado PERA employer is past due to the tune of $6.5 billion into the trust fund contributions, not counting any interest — if  you do it at the three percent PERA interest, it would be another $1.1 billion past due over the last 9 years.”

“PERA’s overall funds at the end of last year were about $30 billion, this bad debt constitutes about 25 percent of the PERA assets.  If they were paid with interest to the PERA investment fund it would be at 94 percent funded on the actuarial basis or 76 percent on the market basis.  Most experts believe that a fund at 80 percent is a healthy fund.  We’d be above that.”

“The survey today, that we just talked about, is a good example of this.  If you look at that, 28 of the options on there cost the employees money, and only two cost the employers money.”

“As a state employee, I’m ready to sit down and work on whatever fixes are needed once the deadbeat employer has made arrangements to fully fund its share.”

http://coloradopols.com/diary/19048/colorado-pera-listens-to-pera-retirees-label-pera-employers-deadbeats

In 2010, the American Federation of Teachers Colorado joined in the effort to enact SB10-001.  In Illinois, the Illinois Federation of Teachers labels similar legislation "Pension Theft."

Illinois Federation of Teachers (on May 12, 2014):

"We Are One Illinois Seeks Injunction to Halt Implementation of Pension Theft Legislation."

"Today, the We Are One Illinois union coalition and plaintiffs filed a motion for a temporary restraining order and preliminary injunction in Sangamon County Circuit Court to seek a full stay of the implementation of Senate Bill 1 (Public Act 98-599), pending a resolution on the act’s merits."

"SB 1 slashes cost-of-living adjustments, reducing the value of pension benefits by one-third or more after twenty years in retirement.  It also hikes retirement ages by up to five years and makes other unfair, unconstitutional cuts to the pensions of working and retired members of the Teachers' Retirement System, State Employees' Retirement System, and State Universities Retirement System."

https://www.ift-aft.org/pensions/pension-watch-blog/2014/05/12/we-are-one-illinois-coalition-statement-on-injunction-filing

From news-gazette.com:

"The law and the constitution are not situational constructs to be applied as is convenient to political purposes."

http://www.news-gazette.com/opinion/guest-commentary/2013-12-08/illinois-pension-reform-constitutional.html

Public pension rights advocate Glen Brown in Illinois, on May 15, 2014:

"What is at stake right now is an adjudication of claims that public employees have against policymakers who have coerced changes to public employees’ benefits and rights and who are breaking public employees’ contractual and constitutional promises.  These are legitimate rights and moral concerns not only for public employees, but for every citizen in Illinois: for any unwarranted acts of stealing a person’s guaranteed rights and compensation will violate interests in morality and ethics and the basic principles of both the State and United States Constitutions that protect every one of us."

" . . . there is no justice in granting tax breaks for wealthy corporations and, at the same time, legislating cuts to public employees’ constitutionally-promised compensation."

http://preaprez.wordpress.com/

In light of the legal analysis of his own legal advisor (Eric Madiar), why did Illinois' state Senate President Cullerton support legislation breaking public pension contracts?

"IS WELCHING ON PUBLIC PENSION PROMISES AN OPTION FOR ILLINOIS?"

http://www.ilretirementsecurity.org/admin/reports/files/Pension-Clause-Article-Final.pdf

We should also recall that President Cullerton's legal aide, Eric Madiar, has written that the Colorado Legislature's taking of fully-vested, accrued public pension COLA benefits is likely unconstitutional.  So, why did Cullerton go down that path in Illinois?

From Madiar's “Public Pension Benefits Under Siege”:

“The adoption of the contractual approach by Colorado . . . however, make(s) it more likely that pension reform efforts (the COLA provisions of SB 10-001) will be found unconstitutional.”

A PDF of the Madiar paper is available on the website of the National Conference of State Legislatures at the following link:

http://www.ncsl.org/home/search-results.aspx?zoom_query=madiar%20public%20pensions

Support the public pension contractual rights of Colorado workers at saveperacola.com.

Algernon Moncrief

About Algernon Moncrief

Independent Nationwide Public Pension Rights Blogger.

2 Community Comments, Facebook Comments

  1. hawkeye says:

    Hey Algernon, I truly believe TABOR was (and is) the driving force behind some public employee associations' collaboration with PERA in crafting SB10-001, primarily the Colorado Coalition for Retirement Security.  If PERA retirees were polled individually and privately as to whether or not they support the contract breach, there's no question in my mind that the vast majority of respondants would register their lack of support for the claw back of post-retirement benefits.

    Although I hope the majority of the participating Supreme Court justices rule in favor of the SavePeraCola plaintiffs.  However, the political climate or tide does not bode well for the retirees.  At least a 2-2 court split with 3 reclusals will give the plantiffs a good shot at prevailing in a subsequent district court trial, as they can use discovery to shed light on the whole matter.  Of course, PERA would strongly object to discovery as it would undermind their case.  The trial along with subsequent appeals would take an additional 3-5 years, however, further retiree benefit cuts would be much less likely until the SB10-001 lawsuit is resolved.   

     

     

     

     

     

     

     

     

     

     

     

     

     

      

           

  2. Algernon MoncriefAlgernon Moncrief says:

    Hey Hawkeye, of course, the 1992 TABOR Amendment itself includes language recognizing accrued Colorado public pension benefits as state "debt."

    How were Colorado PERA officials persuaded to support the planned PERA pension contract breach in 2009, after so many decades of supporting public pension contractual rights?

    PERA Officials – Court Decisions Protect PERA Benefits:
    “We believe lawmakers already have that authority, but PERA disagrees.  It insists benefits can't be cut for current retirees and employees, and claims court decisions uphold that view.”

    http://m.rockymountainnews.com/news/2006/jan/18/no-time-to-lose-on-pera-reform/

    As we have seen PERA officials, on multiple occasions have stated that actuarial funded ratios (AFR) at the 50 and 60 percent level for the pension plan are not a “crisis,” so why are they now claiming that the much higher AFR at the time of the breach of pension contracts in SB 10-001 is somehow a “crisis”?

    PERA official Katie Kaufmanis — No “Crisis”:

    “In an e-mailed statement, spokeswoman Katie Kaufmanis said PERA's funded status at the end of 2004 ‘is the same as the funded status 20 years ago, and there was not a perceived crisis at that time. . . . PERA continues to enjoy positive cash flow and will be able to meet current and future retirement benefit payments for many decades in the future.’"

    http://m.rockymountainnews.com/news/2006/feb/24/peras-red-ink-stains-colorado/

    PERA Board Trustee Casebolt — No “Crisis”:

    Trustee Casebolt comments at the August 11, 2009 Colorado PERA Denver “Listening Tour” meeting: “PERA faces no immediate danger of being unable to pay benefits, in fact, PERA can pay benefits for many years to come, based on our current funding and our benefit structure coupled with over $30 billion in assets, at present market value.”

    Colorado PERA Officials Presentation at Fall 2005 Shareholders Meeting — No “Crisis”:

    “Note that PERA’s funded status was lower 30 years ago than it is now.  You may recall that there was no perceived ‘crisis’ in PERA’s funded status in 1975.”
    (My comment: In 1975, Colorado PERA’s actuarial funded ratio was 59.6 percent.)

    Colorado PERA Officials Spring 2006 “PERA Update” — No “Crisis”:

    https://www.copera.org/pdf/Misc/Update3-06.pdf

    (Page 4 of this Colorado PERA document includes a “History of Funding” ratio chart and the following quotation: "See that PERA's (actuarial) funded status was lower (61.5 percent) 30 years ago than what it is now. You may recall that there was no perceived "crisis" in PERA's funded status in 1975.")

    Colorado PERA Officials “News Archive” for 2004 — No “Crisis”:

    “PERA’S funded level was below 60 percent in 1970, and there was not a perceived crisis in PERA’s financial health,” September 16, 2004.
    PERA Official Dennis Gatlin — Legislators Argued that an 87% PERA Pension Funded Ratio was “Too-well Funded.”

    “Gatlin tried to put the figures in perspective by pointing out that in 1985, PERA's funding ratio was at 87 percent, and legislators claimed that the association was ‘too well-funded.’  In 1970, the ratio was 54 percent, he added.  According to Gatlin, PERA has been overfunded, when its assets equaled more than its liabilities, only twice in its 73-year history, in 1999 and 2000.”

    “If those changes hadn't been enacted, Gatlin said, projections indicate that PERA's funding ratio could have dropped to 35 percent by 2030.  Instead, he said, PERA officials are expecting the ratio to be about 60.4 percent in 2030, using what Gatlin described as a conservative return rate of 8.5 percent.”

    https://www.cu.edu/sg/messages/3851.html

    (My comment: It is also quite odd that members of the Colorado General Assembly in 1985 argued that an 87 percent Colorado PERA actuarial funded ratio (AFR) was “too-well” funded, yet the 2010 Colorado General Assembly decided to attempt to breach Colorado PERA retiree pension contracts until a 100 percent PERA AFR is achieved.  As we know, Fitch Ratings considers public pensions “well-funded” at an 80 percent funded ratio.)

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