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 Illinois was born 200 years ago this week. But another
significant birthday should provoke pause, because it points the way forward for
our struggling state.
Five years ago, on Dec. 5, 2013, then-Gov. Pat Quinn signed into law a suite of
pension reforms passed by Democratic supermajorities in the Illinois House and
Senate.
They weren’t perfect. Lawmakers didn’t take pensions out of political hands
entirely. Some thought the changes didn’t go far enough to protect taxpayers.
And ultimately, reformers were either willfully blind or did not foresee the
harsh treatment they would receive from the Illinois Supreme Court.
But the reforms were historic.
Barring their judicial demise, they would have brought about the most
significant improvements to Illinois’ fiscal health in generations – changing
the course of the state entirely.
How could something as tedious as pension reform stand among the most important
legislative actions in Illinois history? Here’s how:
The state’s number crunchers estimated the pension reform bill would have saved
taxpayers between $1.1 billion and $1.4 billion in each of the budget years
under Gov. Bruce Rauner. Savings of that size would have made the budget impasse
between Rauner and House Speaker Mike Madigan much less likely.
No social service cuts. No racking up unpaid bills. No record-breaking income
tax hike. All of this, without cutting a dime from current pension benefit
checks for retirees and protecting every single active employee’s earned
benefits.
With Democratic supermajorities and a Democratic governor set to take office in
2019, it’s worth revisiting what made those reforms so important.
First, what did they do? And second, how can lawmakers tackle them again without
running afoul of the courts?
The most important thing to know about the 2013 reforms is that they protected
already-earned retirement benefits. But they changed the accrual of future
benefits.
Changes to future benefits focused on three areas: The first was increasing the
retirement age for current state workers younger than 45. The second was capping
workers’ maximum pensionable salary, with future growth in the cap pegged to
inflation. And the third was to eliminate 3 percent guaranteed post-retirement
raises in favor of a true cost-of-living increase tied to inflation.
These might seem like small changes on their own. But taken together, they would
be extraordinary.
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Actuarial projections at the time showed the
state’s entire pension debt would have been eliminated or nearly
eliminated by 2045, all while increasing the funding target for the
largest state pension funds to 100 percent from 90 percent, and
slightly decreasing the contributions employees had to make to their
own retirement.
Today, pensions consume more than a quarter of the state’s general
funds budget. That, or worse, will remain the case for decades
without changes.
Under the 2013 reforms, that share would have fallen to just over 1
percent by 2040.
So why did the Supreme Court stand in the way?
The majority opinion cited the pension clause of the Illinois
Constitution, stating pension benefits may not be “diminished or
impaired.” It controversially considered promises of future benefits
as part of that clause. In other words, if you’re hired as a young
worker in 1970, you have the right to an automatic 3 percent raise
in your retirement check in 2020.
This extreme reading of the constitution again was upheld by the
justices as the reason Illinoisans must pay 23 Chicago union leaders
an estimated $56 million in inflated pension payments based not on
their public salary, but on their union salary.
Lawmakers passed the perk into law, were ridiculed, and then changed
the law back.
Ah, ah, ah … “diminished or impaired.” A promise is a promise. The
Illinois Supreme Court ordered Nov. 29 that the state honor this
outrageous benefit.
That’s why a constitutional amendment is so necessary. And it
doesn’t have to eliminate the pension clause in order to allow cuts.
A solid amendment simply needs to allow for changes in future
benefits, while protecting what has already been earned by public
employees. Voters could approve the amendment as early as 2020, and
lawmakers could pass specific reforms that trigger the morning after
Election Day.
Those changes need to be a bit more substantial than in 2013,
because the problem has grown tremendously since then. But the
principles can remain the same.
Illinois’ worst-in-the-nation pension crisis causes despair. It’s a
massive problem, constantly bemoaned, that appears unsolvable.
But Illinoisans should know lawmakers in the past made big moves to
fix it. It’s politically possible. They just need a little reminder
of our history.
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