With just 10 days remaining in the spring legislative session, Gov. Bruce Rauner has finally put large parts of his so-called Turnaround Agenda into bill form, a move that follows months of criticism by Democrats who argued there was no way to vet his plans.
Rauner aides shared copies of five pieces of legislation with reporters late Thursday, including measures that would make changes to workers’ compensation insurance for employees hurt on the job, overhaul the system for awarding judgments in civil cases and freeze local property taxes. Also drafted were two constitutional amendments that would set term limits for lawmakers and statewide officials and change the way legislative boundaries are drawn.
Administration officials say the legislation will be formally filed Friday, but would not say who they’ve recruited to sponsor the measures. The governor’s office said it decided to release the information after Democrats walked away from the bargaining table.
Rauner had sought to use the spring budget-making process to cut a deal on his agenda, saying he’d consider a possible tax increase to offset a massive budget deficit if lawmakers agreed to the changes he wanted. He formed working groups to negotiate in private, but Democrats said the governor shouldn’t hold the spending plan “hostage” in order to win his political agenda.
Instead, Democrats have begun to craft their own budget without Rauner’s input. They’re looking to spend $36 billion on government operations next year, according to a Democratic source with knowledge of budget talks. That figure is the same amount lawmakers signed off on last year, which Rauner’s office has said was $1.6 billion out of whack. That shortfall will only grow next year after the January rollback of portions of an income tax increase, and questions remain about where the state will get the money to cover that level of spending.
In recent weeks, Madigan has held a series of test votes to publicly reject a number of Rauner’s ideas, bills that were cobbled together based on the governor’s talking points.
A Madigan spokesman said late Thursday that Democrats will “take a look” at the legislation Rauner plans to file, but were “reserving judgment” until the language could be reviewed.
Still, Madigan spokesman Steve Brown contended the move by Rauner was an attempt to “change the topic from the embarrassment they have been suffering” after the governor made $400,000 in contributions to Republican lawmakers last week.
One of Rauner’s bills would freeze property taxes at 2015 levels for all local units of government, including home rule communities such as Chicago. That means the bill would need 71 votes to pass in the House, a threshold that will be difficult to reach amid opposition from mayors complaining of their own budget pressures. Also included in that bill is language allowing local governments to determine what terms of employment should be covered under collective bargaining, and allowing them to choose whether to pay prevailing union wages.
On workers’ compensation, Rauner’s proposal would raise the threshold for establishing that an injury occurred at work. Known as causation, it’s a change that’s largely a nonstarter with Democrats. His legislation also would reduce some medical fees, which doctors and hospitals oppose after having their payments cut when changes were last made in 2011.
The governor also wants to pursue changes to the Illinois Constitution that would limit lawmakers to 10 years in office and restrict statewide officials to no more than eight years in office. A Madigan ally led efforts to block Rauner’s push last year to put a question on the November ballot asking voters to impose term limits.
Rauner also wants to amend the constitution to overhaul how legislative districts are drawn by establishing a nonpartisan independent commission to determine boundaries. It’s an attempt to get around limits in the constitution that led a judge to strike down redistricting efforts last year.
Currently, state lawmakers are charged with drawing a new map that’s subject to approval of the governor. That’s what happened after the 2010 census when the Democrat-controlled General Assembly drew a map signed by then-Gov. Pat Quinn, a Democrat.
Copyright © 2015, Chicago Tribune
Preventing the same mistakes: ensuring local government pension contributions
Legislation sponsored by State Senator Daniel Biss (D – Evanston) seeks to shore up local pension funds by diverting state payments from an employer into the local pension fund when the employer fails to make the required pension contributions.
“Just as we must hold our state government accountable for pension contributions, so should we hold Illinois’ local governments accountable,” Sen. Biss said. “This legislation provides the enforcement mechanisms necessary to first encourage and then require the adequate funding of local pension funds.”
Combating sexual violence on college campuses
An alarming one in five undergraduate college women will become a victim of rape or attempted rape.
“College represents new experiences and new beginnings for thousands of young women and men each year,” Senator Toi Hutchinson (D – Chicago Heights) said. “Unfortunately, too many of those students will become victims of sexual violence that can have negative effects lasting a lifetime.”
Making needs of the developmentally disabled a priority
Students with developmental disabilities may soon find it easier to get the help they and their families need. Sponsored by Assistant Majority Leader Kimberly A. Lightford (D – Maywood), the prospective law would require the Dept. of Human Services (DHS) and the Illinois State Board of Education (ISBE) to train public school case workers to register students with the PUNS (Prioritization or Urgency of Need for Services) database.
It is widely argued that due to a lack of awareness, PUNS is under-utilized, and therefore, in some cases, people with developmental disabilities across the state are not getting the services they need. The legislation is an attempt to ensure students in Illinois public schools and parents have the information they need to register with PUNS if they so choose.
“The PUNS database was instituted to ensure that people with developmental disabilities were never overlooked and always given help,” said Sen. Lightford. “Through this legislation, we can ensure that the database reaches its fullest potential so that these young people in the greatest of need can achieve their fullest potential too.”
DHS and ISBE would also have to develop a new program to provide resources and training for case workers so they are as prepared as possible to provide these students and their families with the information and advice they need. The measure also requires ISBE to inform parents and guardians through school districts on the PUNS waiting list.
Senate Bill 226 now goes to the House of Representatives for further discussion.
The legislature has just two weeks left in the scheduled spring session. Talk on the rail is increasingly pointing to the possibility of lawmakers working into at least June. There has been movement on several key Chamber issues and bills.
Turnaround Agenda Issues
The House Speaker’s bill on right-to-work was defeated in the House by a 0-72-37 vote Thursday. The Chamber issued a statement reiterating support for empowerment zones as a powerful tool to be used to improve the Illinois economy. In other action, the Illinois Chamber joined a group of civil justice reform proponents in a news conference held to allow dialog with reporters in light of the tort reform committee of the whole in the House
The House has now scheduled votes on civil justice reform and workers’ compensation reform for Thurs., May 21.
Plus, the House has scheduled a vote on a millionaire’s tax hike for next week. Those affected would pay the current individual income tax rate of 3.75 percent on income under $1 million, and pay 6.75 percent on income above $1 million, with the revenue going toward elementary and high schools.
Other Key Bills
from the Illinois House Republicans
Illinois Supreme Court strikes down pension reform law. On Friday, May 8, the Illinois Supreme Court unanimously reaffirmed a lower circuit court ruling on State pension system reforms contained in SB 1 (P.A. 98-599). In response to enactment of P.A. 98-599, five separate actions were filed in Cook County and Sangamon County courts to enjoin implementation of the pension reforms, claiming the reforms were unconstitutional due to a violation of the provision in the Illinois Constitution (Article XIII, Section 5) that asserts pensions are a contractual right and cannot be diminished or impaired. The five suits were subsequently consolidated into one action in Sangamon County Circuit Court.
On November 21, 2014, Sangamon County Circuit Court Judge Belz found for the plaintiffs, finding their claims that the pension reforms were unconstitutional had merit and the defense offered by the State, which was premised on police powers of the State allowed the reforms, was inapplicable. The Attorney General, on behalf of the State, sought an expedited appeal of the circuit court ruling, which was granted. Oral arguments before the Illinois Supreme Court were heard on March 11th. The State’s argument on appeal was premised on a belief that, notwithstanding a possible violation of the Constitution’s pension clause, the State’s reserved sovereign powers, namely the police power to ensure the health, safety and welfare of its citizens, permitted the pension benefit reforms to be made.
The Illinois Supreme Court ruling found P.A. 98-599 unconstitutional and permanently enjoined its enforcement. Regardless of the severability provision that linked only certain reforms, written to allow some reforms to fall and others to stand if so ruled by the Court, the opinion held that the pension annuity reduction provisions were so central to the Act that the entire Act must fall. The Court found that if all unconstitutional provisions were stricken, then the bill would no longer reflect the intent of the General Assembly and must be void in its entirety.
The In re Pension Reform Litigation v. Pat Quinn opinion explored the concept of diminishment, citing that the “…protections afforded to such benefits by Article XIII, Section 5 attach once an individual first embarks upon employment in a position covered by a public retirement system.” In reference to the State’s police powers defense, the Court referenced historical, cyclical examples of financial distress by governments, and citing case law precedent that “[N]o principle of law permits us to suspend constitutional requirements for economic reason…no matter how compelling those reasons may seem.”
House Republicans reject piecemeal budget components. An all-too-often told story played out again Wednesday in the Illinois House of Representatives: the story of a broken, backwards budgeting process intended to divide, not unite.
The process began with Governor Rauner’s introduced Fiscal Year 2016 budget which is meant to be a starting point for negotiations through which changes are made, with a final budget arriving back on the Governor’s desk for either approval or rejection. The budget process is designed to ensure all priorities are considered and more important that all decisions are made in an open and transparent manner.
Wednesday, in a divisive spirit, House Democrats short-circuited the budget process by bringing the Human Services budget directly to the House floor with little notice and no committee deliberations, then defeated the bill with unanimous Democrat opposition. This action was not genuine; it was intended to send a message. Recognizing that, the House Republicans voted “Present.”
Immediately thereafter, House Democrats filed 15 additional amendments, cherry-picking various programs vulnerable in the budget and began running them one at a time, again in the hopes of deliberately sabotaging the budget working groups that have been meeting for months, and continue to meet. Again, House Republicans voted “Present.”
House Republicans call for benefit certainty, process reform. A lengthy Committee of the Whole hearing on workers’ compensation issues was held before the full House on Tuesday, May 5. Injured workers, members of their families, and other stakeholders testified to lawmakers on the strengths and problems of Illinois’ current system of workers’ compensation.
Despite limited workers’ compensation reforms passed in 2011, Illinois still has the seventh highest workers’ compensation costs in the country. These high structural costs drive jobs to other states, including Indiana, where workers’ compensation costs are more than 50 percent less. For every $100 in payroll an Illinois employer pays another $2.35 in workers’ compensation premiums, whereas Indiana employers pay $1.06. For 2014, Illinois’ rates are 27 percent higher than the national median.
Governor Rauner speaks to Chicago City Council, warns no bailout. As the fiscal picture darkens for Illinois’ largest city, some advocates have held out hope that Illinois taxpayer could be persuaded to ride to the rescue with moves intended to bail out Chicago. However, in remarks delivered to the Chicago City Council on Wednesday, May 6, Governor Rauner told Chicago’s mayor and alderman their city has many strengths. The governor asserted that leveraging these strengths, combined with sacrifices by stakeholders, will lead to city-state cooperation that offers the best hope of achieving financial recovery.
“Compromise,” the governor urged. “Accept things we might normally oppose. That’s going to be required of all of us.” Chicago issues in which State actions are possible include pension reform, a possible Chicago-based casino, school reform, and changes to labor-management law. Bond rating agencies agree that the quality of Chicago’s debt is plunging towards junk-bond levels.
Governor Rauner releases key findings from Illinois-initiated study of ten foreign trading partners. The survey of key Illinois investors shows areas where Illinois can improve in its ability to become a focus for job creation and economic growth. Foreign companies considering investment in Illinois are asking the State and its lawmakers to focus on the State’s high tax rates, aging infrastructure, and lack of vocational training. The nations surveyed here have invested tens of billions of dollars in the United States, leading to the employment of hundreds of thousands of Illinois workers.
Governor names new executive inspector general. Maggie Hickey, a professional federal prosecutor, is finishing up a 10-year tour of duty in the Office of the Northern District of Illinois. She was named by Gov. Bruce Rauner on Tuesday, May 5 to the key post of executive inspector general.
Trick bag; no property tax relief in sight. Once again the Democrat-controlled House brought sham legislation to a vote for the sole purpose of putting Republican lawmakers in a trick bag and embarrassing the new Governor.
It is not without reason that House Republicans question the majority leadership’s commitment to property tax relief, when out of the clear blue sky they embrace so-called property tax freeze legislation that neither includes reforms nor guarantees that property taxes won’t increase (so no freeze). It’s not hard to draw the accurate conclusion that it is just political theatre.
After being sworn into office, Governor Rauner took action to address high property taxes. He assembled a bipartisan working group to look holistically at thoughtful reforms that would provide meaningful property tax relief without strangling schools and local governments. The group is considering unfunded mandates, pensions and other factors impacting costs that keep property taxes high. Once the working group completes its assessment, it will bring its work product to the proper standing committee for a full hearing – provided the Democrat leadership permits it to get that far.
After Republicans voted “Present” on an amendment to a bill going nowhere, State Rep. Ron Sandack called for HB 136, legislation he filed on the first day of the 2015 session, to be released from the House Rules Committee where the Democrats have kept it bottled up. House Bill 136, a carefully crafted, measured approach to property tax reform targeting homeowners who have lost value on their homes, was immediately dismissed through draconian House Rules that provide the majority party a defense again virtually any legislation they don’t like.
Illinois lawmakers face finish line in fight over massive deficit. Both the House and the Senate held repeated budget hearings this week to discuss estimated FY16 budget shortfalls of $6 billion to $8 billion, depending on how the red ink is counted.
Governor Rauner submitted a budget for FY16 to the General Assembly in February. Since that time, Democrats that opposes Rauner have repeatedly attacked budgetary adjustments made in this spending plan, but have neither generated a budget of their own nor issued a projection of State revenues from which a budget can be generated. The General Assembly is required to enact a budget for FY16, starting July 1, no later than May 31.
Moody’s reduces Chicago’s credit rating to junk bond status. The downgrade to what Moody’s calls “Ba1,” a junk-bond level, was announced on Tuesday, May 12, and affects $8.1 billion in city general-obligation debt. The moved marked semi-official acknowledgement, by a major player in global debt markets, that there is material risk that Chicago may on a future date fail to repay its bondholders in full and the city may default on its debts. The New York credit-rating agency attributed this move to the Friday, May 8 decision by the Illinois Supreme Court to discard recent moves toward pension reform. The decision (Illinois Supreme Court ruling) found SB 1, a December 2013 law that sharply reduced future pension liabilities to many classes of Illinois public-sector workers, to be unconstitutional.
As recently as March 2014, Moody’s rated Chicago debt at A3. With this May 2015 move, Chicago’s GO bonds will no longer be suitable for most purposes of fiduciary investment, including investments by pension funds, annuity funds, and funds operated by Wall Street that provide savings options to workers enrolled in 401(k) plans. Junk-bond debt often continues to trade back and forth between speculators and aggressive income-oriented investment funds.
New York’s largest credit-rating firm also reduced credit ratings on various Chicago-related and secured Chicago debts this week. Ratings for Chicago Public Schools were knocked down to Ba3 junk status on Wednesday, May 13, affecting $6.2 billion in school debt. Billions of dollars of additional Chicago bonded debts are backed by Chicago water and sewer services, motor fuel tax revenue streams, and sales tax streams. Bond watchers will be looking for ratings changes by several of Moody’s’ competitors in the credit-rating industry, especially Fitch Ratings and Standard & Poor’s.
House unanimously approves detailed performance audit of College of DuPage. In a unanimous show of support for the taxpayers who fund the College of DuPage (COD), the House of Representatives approved a resolution on Thursday that will launch a thorough performance audit of the college.
HR 55, sponsored by State Rep. Jeanne Ives, was filed in response to the decision by the COD board to provide outgoing College President Dr. Robert Breuder with a $763,000 severance package in exchange for his early departure as College President.
Through the language in HR55, the COD will assume the costs associated with a detailed audit the covers the following:
“The majority of the trustees were making some very bad decisions at the expense of the taxpayers who support the College of DuPage,” said Ives. “With the recent election, we now have several concerned taxpayers serving as COD trustees, and they are committed to unearthing the extent of the malfeasance and taking steps to prevent these types of problems from occurring in the future. I expect they will cooperate fully with the investigation.”
For more on this audit resolution, please visit The Caucus Blog.
50-state survey shows recent Illinois job growth has underperformed neighboring states. The study, conducted by the nonpartisan Pew Charitable Trusts, counted the rates of new job creation in each of the 50 states between January 2008 (marking the start of the 2008-15 downturn) and March 2015. The study was released on Wednesday, May 13.
Most Senate bills had to be out of House committee by the end of last week to remain alive. As the General Assembly continues to move towards May 31 adjournment, members of the Illinois House and Senate scrambled to get committee approval for their bills this week. The coming week, May 18 through May 22, will see the deadline for Senate bills on the House floor.
By May 22, most Senate bills will either have been passed by the House and sent to the Governor for final signature, passed by the House as amended and sent back to the Senate for concurrence, or will have been sent to the House Rules Committee for failure to meet the deadline. Meanwhile, the Senate has a parallel deadline for House bills.
White House confirms future presidential library will be built on Chicago’s South Side. The widely leaked decision was officially disclosed on Tuesday, May 12.
The University of Chicago, in cooperation with Chicago’s City Hall, is recommending sites in Chicago’s Jackson Park or Washington Park. Both locations would be physically close to the Obamas’ longtime family home in Chicago’s Hyde Park/Kenwood neighborhood, as well as the University of Chicago Law School where Obama served as an instructor.
Investigative report finds generous Chicago police pensions. The revelations, uncovered by the Better Government Association in cooperation with CBS Chicago, found retired Chicago police officers working for at least six city agencies and the Chicago City Council and enjoying simultaneous pay and pensions. The practice is commonly called “double-dipping.” In some cases, the retired police officers were hired to their new civilian jobs less than 24 hours after completing their retirement. Pensions are blamed for this week’s significant decline in the credit ratings of the City of Chicago and government units affiliated with the city.
While House Republicans support keeping promises to our police officers and paying out pensions that have been earned, they are pushing back against aspects of double-dipping. Representative Grant Wehrli sponsored HB 1320 to strongly discourage retiring as a police officer in one jurisdiction and taking up service as a police officer or police chief in another jurisdiction. The bill was approved in April by the House by a vote of 88-20-2 and sent to the state Senate for further action.
House Republicans toughen push for tort reform. Trail-lawyer-friendly State laws and court procedures, which go far beyond the rights granted to trial lawyers in neighboring and comparable states, are blamed for a substantial share of the continued economic gap between Illinois and the rest of the U.S. House Republicans are working with civil justice reform groups to enact needed reforms to these laws.
Last week, the Illinois House continued what it started the week before by bringing to the floor for debate, a vote, or both, pieces of Governor Bruce Rauner’s Turnaround Agenda.
Tort Reform Committee of the Whole
IRMA’s This Week in Springfield readers will recall that two weeks ago, Speaker Michael Madigan convened a Committee of the Whole in the Illinois House. This past week, the House once again met as a Committee of the Whole, this time to debate tort reform. This tool is being used by the House Democrats to publicly debate and attempt to frame reform components in Governor Rauner’s Turnaround Agenda.
According to the Turnaround Agenda, the Rauner Administration would like to limit venue shopping, restore jury composition to 12, limit joint and several liability, and limit damage awards as a result of medical expenses to those expenses that are actually paid. According to the Turnaround Agenda, these reforms would end abusive lawsuits “that have made Illinois uncompetitive as a result of the increased premiums required to practice in Illinois and improve the litigious nature within Illinois’ boundaries”.
Very similar to last week’s workers compensation hearing, the panels were dominated by witnesses that suffered from a variety of injuries from negligent or other tortious actions. The witnesses suffered from medical malpractice, product deficiencies or other accidents. These included witnesses from Illinois, Indiana, and Missouri. The witnesses cautioned against adopting reform measures, particularly caps, as they would never be fully compensated for the injuries they sustained and such measures are ultimately unfair to victims.
Republicans questioned why no employers, insurance companies, or related witness were invited to offer testimony on the detrimental effect that malpractice premiums and liability have on Illinois’ ability to attract businesses and doctors. Democrats answered that these groups are heard from regularly at the Capitol and this was an opportunity to hear from individuals directly affected by tortious actions and the civil justice process.
Governor Rauner’s office did not comment on the specifics of the testimony but did say that he is pleased that lawmakers are opening discussions that could lead to reforming one of the worst lawsuit climates in the country.
No votes were taken during the committee as no bill was being considered. Subsequent to the hearing, House Speaker Madigan announced his intent to put before the House a vote on both workers’ compensation and tort reform next week.
Right to Work
As reported in TWIS, last week Speaker Madigan announced his intent to put before the House for a vote Right to Work legislation that mirrors Governor Rauner’s proposal in his Turnaround Agenda. Governor Rauner’s Turnaround Agenda prominently features the creation of ‘empowerment zones’. These zones would allow local units of government that choose to do so to become right to work zones. This week, Speaker Madigan followed through by filing and sending directly to the floor House Amendment 2 to HB 1286.
House Republican Leader Jim Durkin referred to the process as a ‘sham’. As a result, the House Republicans voted ‘present’. The only exception was Representative Raymond Poe (R-Springfield) who voted ‘no’. Every Democrat voted ‘no’ meaning the proposal did not receive a single ‘yes’ vote. This was the same strategy employed last week by the House Republicans when the Democrats sent to the floor the Governor’s proposed $2 billion in cuts in Medicaid and Human Services as well as other amendments restoring the cuts.
In a move to debate and vote on another portion of Governor Rauner’s Turnaround Agenda, HB 695 Amendment #1 (Rep. Jack Franks, D-Woodstock) was called on the House floor for a vote Friday morning. The amendment would freeze automatic property tax extension increases for local governments that are currently guaranteed regardless of whether the value of the property has decreased. The freeze would be in effect for two years and then local voters would have to approve subsequent increases. While property tax extension limitations (PTELL) are generally a protection for property owners when the value of their property rises, opponents of PTELLs warn of the cost to property owners when property values are decreasing. PTELLs are a guarantee that local governments will continue to receive revenue regardless of the status of home values in the area. This bill, along with bills on right to work and budget cuts, were called to the floor with similar language to the points contained in the Governor’s Turnaround Agenda. After much debate, the House was split on whether the amendment was a fully developed attempt at real reform, but it passed with a vote of 37-23-38. It only takes a simple majority of those voting to adopt an amendment. It remains to be seen whether or not it will be called for a final vote in the House where 60 votes would be required for passage.
Criminal Background Records in Hiring
SB 567 (Sen. James Clayborne, Jr., D-Belleville/Rep. Esther Golar, D-Chicago) seeks to regulate the use of criminal backgrounds in employment decisions. In 2012, the Equal Employment Opportunity Commission (EEOC) issued guidance for both employers and employees/applicants on how a person’s criminal background can be considered in making employment decisions without running afoul of Title VII of the Civil Rights Act of 1964. The guidance is meant to highlight best practices, explain relevant court rulings and help all interested parties skillfully navigate the often complicated hiring process. SB 567 proposes to allow an employer to make an adverse employment decision based on an applicant’s or an employee’s criminal background as long as the background was job-related and consistent with business necessity. These factors are consistent with how the EEOC determines whether an employer has violated Title VII.
In addition, the bill addresses forum shopping by plaintiffs with the Department of Human Rights by prohibiting plaintiffs from filing cases in multiple jurisdictions. After the bill passed the Senate it was amended in the House to allow plaintiffs to file in multiple jurisdictions until a jurisdiction decides to allow the case to proceed to the litigation phase. IRMA is opposed to this amendment which would allow plaintiffs to essentially shop their case for the same proposed violation.
While IRMA is supportive of the right to seek remedies for alleged unlawful employment practices, the plaintiff should choose where to bring the case and commit to follow that case to its favorable or unfavorable conclusion. The bill, without the House amendment, affords them this right while protecting employers from answering to the same charges with the department, with a local jurisdiction and with the EEOC. It is possible that the bill will be further amended and return to the House Judiciary Civil Committee for further debate.
SPRINGFIELD — Some Illinois lawmakers are skeptical the Legislature can pass a new pension overhaul this spring despite pressure from Gov. Bruce Rauner and major credit rating agencies.
Democratic Rep. Elaine Nekritz is chairwoman of the House pension committee, which is holding a hearing Wednesday. She calls the odds of a deal before the session ends May 31 “slim.”
The Illinois Supreme Court last week ruled a 2013 pension overhaul unconstitutional.
Rauner wants legislators to approve a proposal to let workers keep benefits earned to date but move them to a less-generous plan going forward. He also wants a constitutional amendment to allow future benefits to be cut.
Senate President John Cullerton is pitching his own plan. But his spokeswoman says “what’s important is to get it right,” not a specific timeline.
By Robert F. Rich
Robert F. Rich, now a SURS annuitant, is the former director of the Institute of Government and Public Affairs at the University of Illinois. He lives in Urbana.
The Wall Street Journal’s recent opinion piece labeled as “suicide” the Illinois Supreme Court’s decision regarding pension reform. This editorial did not accurately reflect past legislative history or the realities of the current fiscal crisis. It did not accurately reflect the reasons why the very strong non-impairment clause of the Illinois Constitution was adopted in 1970 nor did it reflect the most recent legislative history regarding pension reform.
Since 1917, the state of Illinois has reneged on its pension funding obligations. This fact led to the adoption of the non-impairment clause of the Illinois Constitution in 1970.
Then, for 44 years thereafter, the state continued to ignore its legislatively-mandated pension obligations, with the exception of a few years. In 1995, the legislature passed a law initiated by Gov. Edgar requiring the State to meet its pension obligations each year. Yet, the state has failed to do so. This near-100-year history of pension-fund mismanagement was a dominant consideration in the recent Illinois Supreme Court decision.
The General Assembly knew what the actuarially determined rate of mandated contributions were. Yet the state chose not to meet these obligations.
Ironically, this same General Assembly required municipalities to meet their obligations to the Illinois Municipal Retirement Fund — which today has no deficit problem. It is worth noting that Illinois municipalities exist in the same economic environment facing the state as a whole.
The 1995 law was motivated by analytic studies by the state comptroller and by the Economic and Fiscal Commission of the General Assembly, which documented the depth of the pension underfunding problem. Clearly, this is not a new problem or one which was caused by the Great Recession of 2008-2009, nor is it caused by an “overly generous” set of pension benefits for retirees. The current set of benefits has simply kept up with inflation since 1980 and is also consistent with the Consumer Price Index.
Illinois does have a structural budget deficit and a major fiscal crisis; however, the structural deficit is not due primarily to pension obligations. The unmet obligations and unpaid bills of the state are due largely to spending on Medicaid, educational spending, spending on human services, and the need for tax reform.
Many states have faced a major fiscal crisis and several states have major unmet pension obligations. Other states have been able to meet their pension obligations on a consistent and regular basis (e.g., Iowa, Indiana, Wisconsin, New York) in the same Great Recession that faced Illinois. These states have a record of being able to meet at least 82 percent of their pension-fund liabilities.
Even if Illinois passed a pension reform act that was constitutional, it would not solve the fiscal crisis. Illinois will need to develop a package of revenue generation and spending cuts. It is worth noting that Gov. Rauner’s proposal for private-sector 401(k) accounts is built on the base of Social Security, which is not available for the vast majority of public sector employees in Illinois.
In sum, Illinois’ pension crisis has developed over a long period of time. Similarly, it will take time and fiscal discipline to solve this problem — created by the Illinois General Assembly without regard to laws and obligations which it itself enacted.