Posted May 16, 2015 9:35 pm by Comments (3)

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By: Mark Glennon*

 

Senate President John Cullerton has rekindled his idea that meaningful constitutional pension reform can be accomplished by offering a swap to pensioners — accept lower benefits in exchange for some sweetener. It’s called the “consideration” approach, and most of the press is reporting it as a serious alternative to the approach recently invalidated by the Illinois Supreme Court. Here’s what the City of Chicago, also searching desperately for a means to accomplish meaningful reform, said about it in a sworn court filing earlier this year:

 

Nor would ‘consideration’ work from an economic standpoint. To give participants (or their legal representatives) an incentive to agree, the value of such consideration would need to be similar to the value of the benefits given up. But this would involve trading one obligation for another and by definition would not solve the problem that neither the fund nor the governmental entity has enough money to pay the benefits promised…. And, even if this ‘consideration’ were constitutional, it is unclear how many participants would accept it and, to the extent they did not, full funding would not be available and the funds would not be saved, to the detriment of all participants. (Pages 19-20.)

 

That should be obvious. Nobody will voluntarily accept a swap that’s not for equivalent value. The state would be left in no better position. If pensioners were coerced somehow to accept an unequal swap, it would clearly be unconstitutional under the recent ruling.

 

Illinois Senate President John Cullerton

Illinois Senate President John Cullerton

We’ve been telling you that all along. We’ve also been telling you that John Cullerton has no interest in actual pension reform. He is the go-to guy for public unions in the Illinois Senate. He will continue to propose reform ideas that are no such thing. Evidently, he will continue to be taken seriously.

 

By the way, the entire document from which that excerpt was taken is worth reading for those seriously interested in Chicago’s crisis. It’s blunt and clearly written.

 

*Mark Glennon is founder of WirePoints. Opinions expressed are his own.

 

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Anonymous
The funds that should have been deposited in the pension accounts over the years were instead diverted to pay for operation of the state. All citizens of Illinois benefited from this diversion whether it was for fixing potholes or whatever. Now the retirement systems want the money that is owed them. But what does the legislature do? It tries to steal money from the retirees under the name of “reform”. It passed a “reform” package in 2011 that slashed benefits. The legislature wrote that law because it knew that was as far as they could legally go. But then they… Read more »
Mike
Consideration is the union way of refusing clawbacks, its done during arbitration and collective bargaining and in other areas. Legislative pension benefit hikes to underfunded pension funds, a practice which escalated after the pension sentence was added to the Illinois State Constitution in 1970, is what what wrecked the pensions. Same happened with retiree healthcare. Illinois has 18 pension funds in the Illinois Pension Code and when Downstate Police and Downstate Fire are broken out of that 18, they mushroom into about 600 additional pension funds, because each municipality in Downstate Police has its own police pension fund for just… Read more »
Paul

I agree with you Mark, Offering two bad choices is an impairment and offering similar value( non-impairment) in a different package would be “spining our wheels.” No point in that. Raise taxes or re-amortize…..or go the long haul….constitutional amendment…..years in state and federal court argueing contract clause /expost facto….or bankruptcy ala Detroit only throughout the Stata…pick your poison.

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