Including healthcare liabilities, which the court recently decided are constitutionally protected along with pension benefits, the reform bill at issue would reduce unfunded liabilities by only 12%.

 

By: Mark Glennon*

 

Illinois needs a reminder about what kind of supreme court it has.

 

Pundits and politicians from both parties, including Governor-elect Rauner, regularly express hope that if the Illinois Supreme court strikes down SB1, the pension reform bill from 2013, it at least will provide “guidance” on what kind of reform it would find acceptable. They apparently presume the court will act in a legally principled manner to help the other branches of government address the pension crisis.

 

Don’t count on it. The Illinois Supreme Court is a political institution that’s perfectly comfortable ignoring legal principle, other branches of government, statutes, the constitution, and pension problems to get the results it wants. And it does not want pension reform. If you think that’s exaggeration, consider what we learned from attempts at tort reform and what the court has already done recently on pensions:

 

The tort reform lesson. The Illinois legislature tried, tried and tried again to limit non-economic damages in certain tort claims in a manner the court would find acceptable, only to have the court make up new impediments each time. Three different bills have been struck down by the court, though each was drafted based on guidance that earlier rulings are supposed to provide. Reformers have now given up. As one commentator put it, “At this point, if Illinois wants to put the voters and their representatives back in charge, it will need either to alter its constitution or–perhaps a better idea–alter the composition of its supreme court.”

 

As if for the purpose of insulting the legislature, the court’s rationale for invalidating a cap on non-economic damages was separation of powers. Only the court has the power to limit those damage claims, they said. “We make the law around here”  — that’s a fair summary of the court’s decision in the most recent of those three decisions. The rationale the court used, as a dissenting opinion documented, “has not only been rejected by the federal courts, it has failed to carry the day in any reported decision in any other state in the United States.”

 

The court is dragging out review of SB1 unnecessarily. Courts can move very, very rapidly when they want. The Bush v. Gore dispute over the November 7, 2000 presidential election went through three Florida courts, was fully briefed and argued before the U.S. Supreme Court, and disposed of with a written opinion by that court on December 12 of that year — less than five weeks, start to finish.

 

Under the “expedited” schedule set by the Illinois Supreme Court for SB1, oral arguments will be in March and a decision will come after that, probably before May 31.

 

That’s far longer than necessary. Remember that no facts are in dispute on this appeal and there is no trial record to go over; only a pure legal issue is on the table. The appeal is from a ruling on the pleadings that, as a matter of law, the state cannot raise any defenses to the constitutional pension protection clause. To state the question differently, can the state even bring up the “police powers” defense that it’s too broke to pay the pensions? That question was already briefed and argued by both sides at the lower court that ruled against SB1 on November 21. The law was passed in December 2013. Lawyers don’t need months of revisions to their previous work, and there is nothing remotely as pressing in Illinois.

 

And remember that if the Illinois Supreme Court rules in favor of SB1, the case goes back to the trial court for what will surely be a tedious trial on the facts, including expert testimony about whether the state is indeed too broke to pay the pensions. After that trial is conducted, the ruling almost certainly would be appealed again on other issues. Ultimate resolution easily could be over a year away, perhaps much longer. Implementation of the law is stayed pending all that.

 

The recent Kanerva decision told us the court doesn’t care what the law is, and that it doesn’t like pension reform. In July, with the stroke of a pen, the Illinois Supreme Court increased the official unfunded pension liability by 50% — $56 billion — by ruling that healthcare benefits are protected along with pensions under the constitution. The court had zero basis for that ruling. Healthcare, insurance, and benefit supplements are not even mentioned in the constitution. The sole dissent ridiculed the majority opinion for that reason. The court simply made up a constitutional right for public retirees. No state court has ever unilaterally created so large a financial burden on its legislature that I can think of.

 

In dicta in the Kanerva opinion, the court also told us what it thinks of pension reform and the police powers defense. The pension protection clause was aimed, the court said, at “protecting the right to receive the promised retirement benefits, not the adequacy of funding to pay for them.”

 

A paradox makes it particularly easy for the court to kill pension reform. The paradox is that a conservative judicial philosophy suggests that the police powers defense should be rejected and SB1 invalidated. A strict constructionist would say the constitution states plainly that pension benefits cannot be cut, so that’s it — amend the constitution if you want it changed. Also, accepting the police powers argument probably would lead to years and years of judicial activism. The defense would require trials on the facts not just on the state’s budget, economy, capacity for higher taxes and competing budget items, but on those for each city that tried pension reform. The court could easily base its decision on plain wording and avoidance of judicial activism — a very reasonable position as we explained earlier.

 

Alternatively, because of that issue of judicial activism, if the court wants to deliberately jack around pension reformers, upholding SB1 might be the best way. After all, SB1 would only reduce the unfunded pension liability by about 12%. Implementation would be stayed while the court sends it back for trial. When the trial court decision is rendered and appealed, new issues arising from the trial would likely give the court additional ways it could invalidate the bill.

 

mars_attacks_1_1024x768

One of my favorite movie scenes is in Mars Attacks! After an initial encounter where they shoot up some earthlings, the Martians laugh while they sit in their spaceship watching a broadcast to them by the president saying it was all a big “misunderstanding,” and asking for another meeting. The Martian leader feigns regret with teary eyes in their next encounter, and of course proceeds with another attack.

 

OK, that’s too cynical. Our justices aren’t evil Martians. But I do think about that scene when I envision Illinois Supreme Court judges watching reformers say they hope the court will provide “guidance” about how to cut pensions.

 

Illinois eventually will cease to operate as a state unless it makes large cuts to benefits already accrued on the fattest pensions, and judges’ pensions are among the fattest. (Reasonably sized pensions for those who really need them, however, should be protected.)  The Illinois Supreme Court will not give guidance on how to accomplish that.

 

*Mark Glennon is founder of WirePoints and formerly practiced law.

Updated 3/11/15

 

 

 

h&m

Sort by:   newest | oldest
Adam, move already. Get the H E double hockey sticks LL out of here please. Union employees are not just pigs but rather tax paying citizens whose money that they earn goes right back in to the local economies for homes, autos, schooling the same things that you supposedly pay for. So please move on maybe Texas where you can earn 5 dollars an hour and pay nothing while your employer hides his money off shore. These are the real culprits the greedy bastards who hide their little pile of wealth off shore to avoid paying taxes while reaping the benefits of living here. It should be… Read more »
Adam
What is good about living in IL? The fact that it has the worst education funding in the nation? The fact the roads are garbage? The fact that the pensions help very few people yet suck the life out of the state as a whole? The fact it has the number two property taxes in the nation and yet has a bunch of cities on the verge of going bankrupt due to the fat pensions anyway? The fact it keeps cutting police and firefighters to pay for the old greedy pigs collecting pensions that could be reduced and still be much better than the private sector? Every… Read more »
Adam

Iowa, Indiana, Minnesota, all much better states than Illinois yet very close by with better services and just as good of pay for jobs. These states are not ruled by pigs who only care about the minority of the state, the slobbering fat union sows. Sorry union pig, but your pensions were created for votes and were created when people did not live near as long. We taxpayers are not your slaves, reform or default. I am moving, and so are thousands more. Enjoy default greedy pig.

Indyisgreat

Just another reason to move to Indiana 🙂
Indiana has no pension issues, A Balanced budget for over 10 years in a row, 2 BILLION dollar Surplus, AAA credit rating, much lower taxes, more jobs and opportunity along with better schools and good government.

Adam

I would rather live in Iowa or Minnesota, and that is why I moved to Iowa. Sorry. By the way, get a life.

Sarah

Too bad the courts don’t order Illinois to make the payments necessary to eliminate the pension deficit. Eliminate some spending, sell assets and change the retirement benefits of future hires and all benefits earned of current employees beginning with a specific date. Tax all pensions being received if they are over $50,000 annually.

Adam
These pensions will default in less than a decade with no reform. There is simply no way the money can be paid out. People are leaving the state in droves and taxes cannot cover the problem in any realistic way. Say hello to default greedy union pigs whose pensions were created for votes anyway. These pensions were created when people lived on average to 50, not 80 as now. What they pay in comes no where close to covering their pension until they die. Even if the payments were not skipped there would still be a major shortage of funds due to the economy being so poor… Read more »
James Gordon
Adam, There have been several local news articles stating how much the state of IL is expected pay to its public employee pension systems for the next fiscal year. My memory of that figure tells me its something in the range of 6.2 billion dollars! The exact amount aside, what I want to report to you is another allied statistic I’ve seen on that same topic repeatedly lately as wel. Its been stated that roughly 80% of that 6.2 billion dollar amount is due to the IL government now having to pay the capital and interest repayment cost of having underfunded its public employee costs over many,… Read more »

James, its exactly because they are bloated that they have been underfunded. Even with a Dem governor, supermajority control of the legislature by union friends, and great markets for four years, the state cannot, politically or economically, fund what is needed just to keep the unfunded liabilities stable. Never has.
And I defy you or anybody else to link to a plan for any combination of tax increases and spending cuts that solves the problem.

Adam

Do not hold your breath Mark! James will come up with nothing but what a worthless piece of paper says because reality says they cannot be funded much longer. Come on James, how will they be funded in a state already on the brink with more and more people leaving each year? Do tell James.

Adam

Like many of the union pigs, you state no true way to pay these pensions, and you know why? Because there is no way to. Hello Iowa!

Adam

Also, these pensions were created by criminals for votes and should be treated as such. They are killing the state and if the credit rating reaches junk they shall default overnight anyway. I am just happy I am not some greed filled fool with his head in the sand. Reality says the pensions are completely doomed. Also, enjoy the massive union terminations headed your way before the default. There will be very few services in this dump left. Hello Iowa!

Adam

You just type dout a bunch of nothing. Pension payment will be nearly 20 billion in ten years. They will default long before then, however. They CANNOT be paid as is. Once again, I can just move. Enjoy default.

Mike
The sentence in the Constitution made no mention of future pension and retiree healthcare benefit hikes. So benefits were hiked in the 18 pension funds in the Illinois Pension Code, and in the retiree healthcare funds. In fact, even funds that didn’t exist in 1970 were created and then hiked. State Senators, State Representatives, and Governors conspired with special interest groups such as public sector unions to hike benefits, simply because they could do so, the costs mainly and sometimes entirely in the future. Present funding status is immaterial when new hikes are added. Unlimited number of legislative hikes are allowed. Unlimited cost of hikes is allowed.… Read more »
Mike

Illinois State Constitution

ARTICLE XIII – GENERAL PROVISIONS

SECTION 5. PENSION AND RETIREMENT RIGHTS

Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an
enforceable contractual relationship, the benefits of which shall not be diminished or impaired.

Adam
These pensions will default in less than a decade with no reform. There is simply no way the money can be paid out. People are leaving the state in droves and taxes cannot cover the problem in any realistic way. Say hello to default greedy union pigs whose pensions were created for votes anyway. These pensions were created when people lived on average to 50, not 80 as now. What they pay in comes no where close to covering their pension until they die. Even if the payments were not skipped there would still be a major shortage of funds due to the economy being so poor… Read more »
James Gordon
You are correct when saying that the 1970 IL Constitution makes no mention of what might well be called “ancillary benefits” in its Pension Clause (such as state-paid health care, for example). It didn’t have to since the wording of that clause is all-inclusive presumably. While I am paraphrasing here, it says essentially that the benefits of belonging to a pension for state employees or any subordinate agency shall accrue from the time of one’s entry into that membership, and any benefits accruing from that membership shall be neither reduced nor diminished. In the Kanerva decision this past summer the IL Supreme Court’s majority opinion clearly said… Read more »
Mr. Gordon- By your reasoning, any benefit, no matter how absurd or expensive, that the legislature chose to grant to pensioners would be come a permanent constitutional right. It could say pensioners’ homes are free from the property tax, exempt pensioners from residency requirements, whatever. And I disagree that the principle of interpreting vague provisions against the drafter has any genuine applicability here. Healthcare was an almost negligible cost when the constitution was drafted, and I don’t believe any material healthcare benefits were even granted then. Since the time the constitution was written, the legislature, not the drafters, expanded benefits dramatically, and taxpayers certainly did not give… Read more »
James Gordon
Mark, its not all that important what either one of us thinks about this matter personally. We we care about is what the IL Supreme Court thinks, and I’m simply conveying my interpretation of their Kanerva ruling as well as the logic used to arrive at it. What we all would like is to government at every level occupied by altruistic, selfless people who vote accordingly on matters of wide impact by weighing every possible side-effect of a particular position as well as its long-term known effects. Yet, in reality and in the last few years in particular those votes are taken all too hurriedly and without… Read more »
James- Nicely said, and perhaps I should have been clearer that I agree with you that the court would be right to reject the police power/sovereign power defense. I said basically the same thing as you in that earlier piece I linked to — http://wp.me/p2Oseh-4SR My point here is simply that we shouldn’t expect any principled guidance from the court. Where we apparently disagree is that there are other ways to cut some pensions that would be right — amending the constitution, bankruptcy in the case of cities, and possible other means. I don’t think we even reach the question of whether some benefits should be cut,… Read more »
James Gordon
Mark, Okay, I don’t know how this will all end, but essentially the Pension Clause considers a pensioner’s rights to be contractual, meaning in part that it requires mutual agreement for changes to occur. As a public employee retiree I for one might agree to any REAL consideration given to those who voluntarily agree to a reduction of his/her current rights but not where any one-sided tokenism is said to meet the requirements as legal “consideration.” I won’t spelled it out here, but I could agree to some negative changes to my current pension entitlement rights if the inducements were sufficient. Maybe there are a significant number… Read more »
Adam
These pensions will default in less than a decade with no reform. There is simply no way the money can be paid out. People are leaving the state in droves and taxes cannot cover the problem in any realistic way. Say hello to default greedy union pigs whose pensions were created for votes anyway. These pensions were created when people lived on average to 50, not 80 as now. What they pay in comes no where close to covering their pension until they die. Even if the payments were not skipped there would still be a major shortage of funds due to the economy being so poor… Read more »
Mike

The Illinois Supreme Court Justices.
Anne M. Burke, First District, appointed 2006.
Charles E. Freeman, First District, elected 1990.
Mary Jane Theis, First District, appointed 2010.
Robert R. Thomas, Second District, elected 2005.
Thomas L. Kilbride, Third District, elected 2000.
Rita B. Garman, Chief Justice, Fourth District, appointed 2001, elected 2002.
Lloyd A. Karmeier, Fifth District, elected 2004.

wpDiscuz