Pension Crisis

Illinois' Pension Reforms Struck Down by State's Top Court

Just get more money, judge says.

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GIMME! GIMME! GIMME! MINE! MINE! MINE!
Credit: F9photos | Dreamstime.com

Illinois' massive pension crisis, arguably the worst in the nation, is about to probably get worse. The state's Supreme Court has unanimously ruled that efforts to tamp down on the crisis by scaling back workers benefits is a violation of the state's constitution. A provision in the state constitution states that benefits for government employees cannot be "diminished or impaired."

The pension reforms Illinois enacted to try to rein in its unfunded liabilities and more than $100 billion in debt involved curbing cost of living increases and putting a cap on how much of an employee's salary may be used to calculate pension payments. The court determined these reforms count as diminishing or impairing benefits. The decision was written by Justice Robert Karmeier, whom the Chicago Tribune notes is a Republican:

Karmeier rejected arguments by the state that economic necessity forced curbing retirement benefits despite the constitution's pension protections.

"Our economy is and has always been subject to fluctuations, sometimes very extreme fluctuations," Karmeier said.

But, he noted, "The law was clear that the promised benefits would therefore have to be paid and that the responsibility for providing the state's share of the necessary funding fell squarely on the legislature's shoulders.

"The General Assembly may find itself in crisis, but it is a crisis which other public pension systems managed to avoid and… it is a crisis for which the General Assembly itself is largely responsible," Karmeier wrote.

Both the state and government employees themselves have a very long history of skipping pension payments. The judge even criticized them for failing to keep a temporary tax hike from 2011 to bring in more revenue to the state. The Tribune notes that right now about a quarter of every tax dollar collected in the state's general account goes to pay for pensions.

John Tillman, CEO of the free-market, pension-reform-oriented Illinois Policy Institute, took a dim view of Karmeier's call to raise taxes to fix this problem:

The court's ruling suggested that raising taxes is a way to pay for pensions. Raising taxes will not fix a broken system. The pension system is beyond repair, and there will never be enough money to fund it. Case in point: The 2011 tax increase. That tax increase generated more than $31 billion, and 90 cents out of every $1 collected from the tax increase went to pensions. Yet it still was not enough to make the pension system whole. 

Ultimately, the only way Illinois can break the cycle of siphoning more and more tax dollars and sacrificing more and more state programs to pay for pensions is to follow the lead of the private sector and move new employees to a 401(k)-style system. In the short term, it will not be surprising to see calls to change the state constitution or allow Illinois to file for bankruptcy.

For an interesting historical perspective, check out our own Reason Foundation's dire pension report from 10 years ago, titled "The Gathering Pension Storm: How Government Plans Are Breaking the Bank and Strategies for Reform" (pdf: analysis of Illinois begins on page 40). Illinois was one of the worst-funded pensions even then, but back then the unfunded liability was a mere $35 billion. How times have changed. The report predicted that Illinois pension costs would reach $4 billion a year by 2010. Illinois did indeed contribute $4 billion to the state's pension fund in 2010. But the retirement systems also paid out $7 billion that same year. It's not just an issue of revenue, as Karmeier would attempt to suggest. The state didn't just underfund the pensions; it has dramatically increased government employee benefits over time. And now, thanks to the state's constitution, these benefits cannot be scaled back, no matter how ill-advised they might have been.

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  1. A hack’s life.

  2. “The law was clear that the promised benefits would therefore have to be paid and that the responsibility for providing the state’s share of the necessary funding fell squarely on the legislature’s shoulders.”

    Hey, that’s fine with me. As long as it doesn’t fall on taxpayers’ shoulders.

    Oh, wait.

    1. You think that’s funny?!?

      1. Funny haha, or funny like your face?

        1. Nothing is as funny as his face. Imagine if a butthole could make a fist.

    2. stole my joke.

    3. As long as it falls only on the Illinois taxpayers’ shoulders, I’m pretty apathetic about it.

      1. They will be coming to Washington for a bailout soon.

  3. “A provision in the state constitution states that benefits for government employees cannot be “diminished or impaired.”

    Never think that things will have to get worse before they get better. There is no point at which things get so bad that the unions will start making concessions.

    If we’ve learned anything from Detroit’s experience, it’s that the unions would rather turn the place into a smoldering ruin before they’ll make any concessions.

    1. Funny you should mention Detroit. Along comes the Second City’s bankruptcy.

  4. The insanity is, of course, that this kind of ‘magical thinking’ was actually enshrined in a state constitution.

    I would say Suck it, Illinoisans! but who am I kidding, Illinois is going to get a bailout from everyone else in the country.

    1. Nope – there isn’t enough will to pay off our unions. Too easy for the rest of the country to say “meh”.

  5. So the Illinois state constitution is a suicide pact.

      1. Then suicide it is.

      2. I don’t remember ever signing this suicide pact.

        1. It was a rider attached to that social contract you signed immediately after being born.

          1. You seem to be implying that just being conceived does not put you on the hook for this bailout…you can be free of it until a magical ride through a vagina?

            Are you trying to start an abortion thread? Because I’m pretty sure you are.

            1. Ugh, I hate my state.

  6. I predict that Illinois will become even more Team Blue as a result of this decision.

    The people who actually pay taxes will accelerate their rate of moving out of the state, throwing more people out of work who will be hired by the government to give them jobs.

    1. I predict that Illinois will become even more Team Blue as a result of this decision.

      Yes, it’s a process of self-selection. Detroit is a good example. California is another. You essentially distill your population by getting rid of all the impurities: People who think this shit isn’t working any more.

  7. The judge even criticized them for failing to keep a temporary tax hike from 2011 to bring in more revenue to the state.

    Fuck off, black robe wearing slaver.

    1. It’s almost like normal people don’t give a shit about previous generations’ promises.

      1. “We’ll pay this, I swear!”

        /IL Legislature

  8. Put a fork in it. We’re done.

    1. And to add insult to injury not only do I get to pay the ex but that I get to pay as a taxpayer for her teacher’s pension as well.

  9. So, the judge is insisting that the State of Illinois raise taxes to fund the public sector unions.

    Okay.

    How about a 100% tax on all members of the judiciary in the state. And an additional $200,000 surcharge payable by $50 a pop sexual favors?

    Sound like a deal?

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    http://www.work-cash.com

  11. Simple fix, change the Constitution…

    1. Democrat super majorities in both houses of the IL Legislature. The heat death of the universe would happen first.

  12. There will soon be gates put on all roads leaving the state to pay an exit fee.

    Don’t leave home without money in your pocket.

    1. They are known as the “Illinois Tollway Authority tollbooths”

      1. The Lepetomane Thruway. Somebody go get a shitload of dimes.

  13. I had a friend who is one of the representatives of the public sector unions in Illinois and we had a discussion about the pension crisis and I told him that perhaps while the people who were 45 and older stay under the current plan, those who are under 45 should be made to have a 403(b) account. He retorted that they should close the tax “loopholes” and raise taxes on the rich and corporations.I basically told him that it wasn’t the rich nore the corporations fault that the pension fund is insolvent. It’s the fault of your union and the politicians they put in power.

    After that conversation, he has not talked to me.

    1. Small loss. Your friend sounds like a total douchenozzle.

      1. Is douchenozzle worse than douchebag? Serious question, just looking for clarification…

        1. It was odd because I asked him the question of why would he trust some politician to handle his retirement when you could geta 401(k) or a 403(b). I would rather do that then allow Madigan and his asshole cronies provide me with my retirement.

  14. A provision in the state constitution states that benefits for government employees cannot be “diminished or impaired

    So amend that shit and move on.

    1. I think they almost did a state constitution convention but the public sector unions campaigned heavily against it.

  15. Someone… I think it was Tman (I like to give credit when I can) said that western ‘liberal’ democracies would gladly torpedo their own economies before ceding a fucking inch of ground or power.

    This illustrates that nicely.

  16. It always amazes me when I see items like this enshrined into a state constitution. It’s one thing to determine the structure of the government (bi-cameral legislature, etc), but to actually put these sort of financial guarantees for a “class” of people – what the hell were they smoking.

    1. what the hell were they smoking.

      $100 bills, apparently.

    2. The knowledge that the day of reckoning would not come during their watch.

  17. It’s funny how the progs look upon constitutions as mere suggestions until it comes to union pensions. Then it’s ironclad, strictly interpreted, holy writ.

    1. yep.

    2. Hey Sandwich, did you say in a previous thread you are from southern Illinois ? Anywhere near Randolph county ?

      1. St. Clair county

        1. “Land of the Bought Judges”

          1. My turn to narrow my gaze.
            My dad was a judge in that circuit.
            He retired like 25 years ago though.
            That he was one of the few that couldn’t be bought did not help him.

        2. I’m in New Hampshire now. Our company has been served with some old asbestos claims, and people here wondered how I guessed (correctly) the suits may have been filed in St. Clair or Madison county. Notorious plaintiffs venues.

          How much I don’t miss living in Illinois is a lot.

          1. I grew up there (born in East St. Louis, grew up in O’Fallon) but got out when I joined the Navy in the ’70s. I visit kinfolk out there but can’t imagine ever living there again.

        3. Calhoun county here

    3. Just call everyone who interprets the constitution the “wrong” way a “hater.” Point out that this clause was put into the constitution, nearly 1/2 century ago, back at the beginning of the disco era, and is outdated. Sneer at the “literalists” and “fundamentalists” who actually think there are “easy answers” to constitutional interpretation. Etc.

  18. Now I’m wondering if Texas was stupid enough to do the same thing, or if that will happen once enough Californians move here.

    1. Now I’m wondering if Texas was stupid enough to do the same thing

      Not stupid – evil.

  19. Didn’t IL just pass a “Millionaire’s Tax”? Surely that will solve everything.

    I think it will soon be time for me to cross the river to Missourah.

    1. That was floated out there, but the Chicago metro area would have been the place it would have hit….so it sort of fizzled.

      1. OK. I thought it passed as a ballot initiative, but looked it up and saw that the ballot initiative only advised the legislature to consider it.

  20. Problem: Illinois’ public employee pension funds need money. My solution: a special tax on Illinois public employees.

    1. This, I like.

      Everybody else has to fund their own retirement. Why not pubsecs?

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