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 Illinois’ money and taxation woes all loop back to
state pensions and the decision in 1970 to lock away the ability to change them.
Despite the hardships and lessons from that decision, Illinoisans are being
asked to apply the same mistake to government unions.
At the top of the Nov. 8 ballot is a proposal to change the Illinois
Constitution called Amendment 1, which union backers are calling the “Workers’
Rights Amendment.” Just like the controversial decision to include rigid rules
about pensions in the 1970 state constitution, Amendment 1 proposes rigid rules
regarding how government unions are treated and makes their powers virtually
untouchable.
State lawmakers cannot control soaring pension costs without changing the state
constitution. Amendment 1 would similarly make it impossible for them to curb
government union negotiating powers, and unchecked union power means an
unchecked ability to make demands that taxpayers would have no choice but to
fund. The cost of those demands is conservatively estimated at $2,100 for the
typical Illinois family during the next four years if voters pass Amendment 1,
but the tax damage could be far worse.
Looking back, the adoption of the pension protection clause in the 1970 Illinois
Constitution started many of the problems Illinois faces today. Illinois’
pension protection clause has been interpreted to be more rigid than any similar
provision in any state constitution. With no ability to rein in the cost of
public pensions, payments have crowded out spending on education and public
services even as Illinoisans bear some of the highest tax burdens in the
country.
The state holds the lowest credit ratings in the country, and residents are
consistently leaving for states unrestrained by an unyielding pension clause in
their constitutions. State lawmakers made attempts to correct the problem in
2013, but the Illinois Supreme Court struck down most of those reforms. The only
option left is to change the state constitution, which could let the state
regain fiscal sanity.
Instead, state lawmakers went in the opposite direction and handed voters
Amendment 1. Instead of giving Illinois more flexibility to handle its money
problems, the proposal takes away options and is potentially more restrictive
than even the 1970 constitution’s pension protection clause.
Amendment 1 would be the pension clause on steroids. This amendment would place
pensions and every term in a public union collective bargaining agreement above
state laws. That would include issues commonly bargained over such as wages and
working conditions, plus add broad new subjects that encompass virtually any and
every public union demand.
The costly mistake of Illinois’ pension clause
When the pension protection clause was first submitted for consideration to the
1970 constitutional convention, there were already warnings of what was to come.
Delegate John Parkhurst of Peoria warned, “This is a terribly, terribly
mischievous amendment… It is the desire of a special interest group; it should
be legislative; there is no history of impairment; there is no history of
welching on any contracts; and to put it in the constitution is simply pandering
to a group that haven’t been able to have their way in the General Assembly.”
History professor George Cullom Davis argued for caution as well: “I think that
we would be making a serious mistake to adopt this language without consulting
at least with the actuary who advises the Pension Laws Commission of the state.”
Despite the warnings, the pension clause was ultimately adopted.
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It took decades for the damage to take effect, and even longer for that damage
to be felt, but today, Illinoisans are feeling the pain of the legacy of
overpromised pensions. In 1990, 20 years after the constitution was adopted, the
legislature passed a minimum 3% compounding cost of living adjustment completely
untethered from inflation. Three years later, the Edgar Ramp, designed to push
the pain of pension payments onto future generations, took effect. In the
following decades, Illinois would issue billions of dollars in bonds and take
holidays to escape the punishing pace of funding demands. Meanwhile, Illinois’
credit rating dropped to the lowest of all 50 states. Since 2000, pensions have
gone up 584% in real terms while total spending has gone up a little more than
20%. Annual pension payments are consistently taking up around one-fourth of the
state budget, and funding to serve the state’s most vulnerable residents is
being crowded out of the budget by those pension costs.
To add insult to injury, the politicians most responsible for the pension mess
are benefitting from it, with players such as former Illinois House Speaker Mike
Madigan and former Gov. Jim Edgar set to collect millions in pension payments
during their retirements. Technical loopholes in the laws have allowed some
politicians to be paid far more than intended by the legislature. Yet the
pension protection clause halts lawmakers from correcting these abuses, other
than to close loopholes going forward.
After over a half-century of experience living under Illinois’ pension
protection clause, pension reform that would protect retirees’ earned benefits
while allowing reduction in future growth is broadly popular. But even that
popular reform requires a constitutional amendment under the state supreme
court’s current interpretation. With the benefit of hindsight, most can see the
mistake made by including language in the constitution that would act as a
one-way ratchet to protect every deal made by the legislature, whether it be
corrupt, imprudent or easily exploitable.
Amendment 1 shows lawmakers haven’t learned from past mistakes
Despite the damage caused by the pension amendment to the people of Illinois,
government unions are pushing an amendment that would extend their power far
beyond public pensions. Lawmakers listened and put Amendment 1 on the Nov. 8
ballot.
The language in Amendment 1 is so broad that if enacted, its limits would have
to be litigated in court. It would be the only amendment of its kind in the
country and could invalidate at least 350 state laws. These include laws that
protect students and children in state care.
The amendment could protect negotiation of secret government contracts, making
it more difficult to tackle corruption in the state even after the revelation of
state contracts favoring Gov. J.B. Pritzker and government projects contracted
to those close to indicted former Speaker Madigan.
The amendment could also prevent reforms needed to reduce property taxes,
practically guaranteeing a $2,100 property tax hike for the typical Illinois
family with a house currently worth $248,000. The tax damage could be far worse
as a result of significantly greater government union power to make broader
demands that taxpayers would be required to fund.
It would make the state’s business climate even worse than it already is,
leaving businesses bracing for higher taxes and increased legal costs. Reforms
that could help Illinoisans and their families, such as reducing the costs of
bloated school administration and redundant local governments, could be hobbled
with carve-outs and loopholes in collective bargaining agreements. Once
Illinoisans discovered the full damage from the amendment, it would require
another constitutional amendment to end it.
Just as during the 1970 state constitutional convention, Illinois stands at a
turning point. This time, voters have the benefit of experience. There is still
a chance for voters to avoid the mistakes of the pension clause and allow future
lawmakers the flexibility to address unwise or corrupt deals made by past
lawmakers.
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