‘Tuesday Is A Yes-Or-No Moment’ – The Ill-Fated 2013 Illinois Pension Reform

So far in the history of Illinois pension legislation that I’ve been recounting, the public and the press have little to no role, between the lack of interest and the backroom dealing.

But, however much the Chicago Tribune editorial board, among others, worried in 2012 that voters would be fooled into thinking that the pension crisis would be “fixed” with the (ultimately unsuccessful) Illinois constitutional amendment, there was finally real discussion underway on the topic of pension reform. In the spring of 2012, both then-governor Pat Quinn and House Speaker Michael Madigan promoted reform plans making cuts to retirement benefits of current, not just new, state employees, though neither of those plans ever went anywhere. Then, in the fall, after the constitutional amendment failed, Quinn attempted to get greater grass-roots support for the cause of pension reform, with a mascot, Squeezy the Pension Python, and a video highlighting the problem, “The Pension Squeeze.” It was not well-received, but nonetheless this was a period when real efforts were underway.

There were two camps among the reformers. In the House, led by Madigan, the approach was a set of unilateral cuts to pensions, on the basis that cuts are permissible, even in light of the Pensions Clause of the state constitution, because the toll that the required contributions being made to the plan take, in terms of cuts made to social welfare spending, places “the health, safety and welfare of Illinois residents . . . in jeopardy.” Consequently, “the bill would not violate the Pension Clause because the legislature purportedly retained the power to cut pension benefits to address the State’s fiscal crisis, preserve the pension system, and protect the public welfare as detailed in the bill’s preamble” — as described by Eric Madiar in a 2014 report, summarizing the opinion of the Civic Federation of Chicago, a supporter of this approach.

(I cite Madiar because his report is a comprehensive description, but, it turns out, the report he cites, a Civic Federation blog post, does not take a stand but simply describes positions it attributes to unnamed supporters.)

This bill was debated on May 2, 2013, and Rep. Elaine Nekritz seemed to voice the general consensus when she said,

“I just want to spend a couple of — say a few words about the constitutional question because that’s been a very, very important part of this debate. I believe we have a very strong case in this Bill before us as to why this Bill is constitutional. Just as though — just like under the First Amendment, which is a very absolute statement that you’re — that your freedom of speech cannot be abridged, you can’t, under that, still be allowed to shout fire in a crowded theater. And I believe that the courts will not force us, in this instance, to put pension payments above every other constitutionally required and constitutionally encouraged priorities that — that this state has. We are striking a balance here and for me, throughout this entire debate, this has been about balance, about seeking balance.”

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The bill then passed by a vote of 62 – 51 (two voted present), with tight margins among both Democrats and Republicans (based on Wikipedia’s party affiliations). Among Democrats, 40 voted yes and 27 no; among Republicans, 22 and 24. One presumes there are a mix of reasons for opposition — from a conviction the bill didn’t go far enough, to the opinion it went too far or would be judged unconstitutional.

The second reform effort was led by Senate President John Cullerton, through Senate Bill 2404. As explained, again, by Madiar, it used a legal theory of “consideration,” believing that reductions in pension benefits would pass constitutional muster if employees and retirees were given “consideration” for benefit reductions: in this case, they would have their COLA rate reduced but receive “among other things, a contractually-binding pension funding guarantee by the State, retiree healthcare access, and legal treatment of all future salary increases as pensionable income.” What’s more, these provisions were intended to be offered to each employee, with the belief that the plan to cut those employees not electing the deal from health insurance in retirement and freeze their pensionable pay, would be acceptable and outside the guarantees of the state constitution. (It turned out that the Illinois Supreme Court would decide otherwise, but that’s another story.)

The Senate debated the bill on May 9, 2013, and, yes, they had a real debate, with a fair amount of attention on the question of whether the bill would be deemed acceptable by the Supreme Court, and, it seems to me, somewhat less confidence in the matter, but in the end it passed with firmer margins, 40 – 16.

And, having two competing bills, for the first time in this overview of the history of Illinois pension legislation, the factions made their case publicly with open disputes about the best path forward, and with a proper conference committee with public hearings. Ultimately, the House approach, and their conviction, or desperate hope, that the Illinois Supreme Court would rule in their favor, won the day, and a sweeping bill was passed on December 3, 2013, which included such provisions as a delayed retirement age, a holiday on COLA increases, and a pay cap applied to existing employees rather than just new hires. The bill received strong support, with the Chicago Tribune, the day of its passage, urging,

“Tuesday is a yes-or-no moment. . . . Lawmakers: be the solution. Stabilize this state’s future, its credit rating and its business climate. Vote ‘yes.’ Or declare that you’re the problem.”

Again, there was significant opposition, with the Senate adopting the bill 30 – 24 (3 present) and the State House 62 – 53 (1 present). But this was not simply a matter of demanding the status quo. Some legislators went on the record with their reasons for opposition, in the debate transcript, for instance; or in news reporting (the Dubuque Telegraph-Herald reported on December 5 that its local legislators voted against it because they didn’t believe it would be accepted by the Supreme Court); or in op-ed columns, such as that of Jeanne Ives, who wrote that “it’s not the best we can do, since it’s not good enough.” She also pointed to the short time, only 24 hours, available for legislators to review the conference committee’s bill. Of the Republicans running for governor in the coming election, ultimate winner Bruce Rauner opposed it because it didn’t go far enough; others were skeptical of the constitutionality. And a December 11 Chicago Tribune editorial claimed that “The most significant reason why so many Republicans opposed this bill is that they represent districts that have large constituencies of state workers and teachers who fought this and every other pension reform bill. It didn’t matter that the business community overwhelmingly supported the bill.”

We know how this ended — in 2015 the Illinois Supreme Court firmly declared that the state had no fundamental obligation to fund pensions in advance, so that the only sort of crisis that would justify pension cuts would be the dire need of the state being unable to pay pensions as they come do in a pay as you go fashion. If you live in the real world, this is pretty appalling — as it is, the state’s funding target of 90% funding in 2045 requires 25% of the state’s general revenue to go to pensions, crowding out other essential services. But to take the court’s logic to its bitter end, imagine that the state had indeed discarded its funding plan, but the state of Illinois’ population continues to decline, and suddenly a new generation has to pay even more, or slash pensions far more dramatically than modest cuts made earlier.

But what I cannot find, in any of the debate transcripts, or in any of the news reporting, or any editorials, is any consideration of ought to have been — acknowledging that hindsight is 20/20 — the obvious solution: if it’s iffy at best that the Supreme Court would accept this legislation in light of the state constitution, and if everyone agrees in the need for reform and some of the apparent opposition is skepticism that the bill will succeed, why wasn’t an Arizona-style constitutional amendment on the table?

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