Jim Dey: Pension case pits irresistible force vs. immovable object

Jim Dey: Pension case pits irresistible force vs. immovable object

Two weeks ago, the Illinois Supreme Court appeared to drive a stake through the state's fiscal heart by ruling that health insurance benefits for retired public employees are pension-based and cannot be modified to save money.

Based on that result, the logical conclusion is that different legislation modifying future unearned pension benefits also is doomed — that the high court will rule the Illinois Constitution's non-diminution pension clause bars any prospective reductions in benefits once an employee is hired.

Still, there are holdouts expressing the view that the pension legislation passed in December 2013 to slow cost increases is materially different from the 2012 legislation on health insurance. Different facts, different arguments, they say.

In the insurance case, the state argued that free or subsidized health coverage can be changed because it is separate from public pension systems. The claim was rejected by a 6-1 margin.

The state's argument on the pension legislation is a plea of poverty.

"Having considered other alternatives that would not involve changes to the retirement system, the General Assembly has determined that fiscal problems facing the state and its retirement systems cannot be solved without making some changes to the structure of the retirement systems," the pension bill's preamble states.

In other words, the General Assembly and Gov. Pat Quinn claim they have no choice but to slow skyrocketing pension costs because funding them at required levels doesn't leave them enough money to finance other constitutionally mandated programs.

State Rep. Elaine Nekritz, a Northbrook Democrat who has worked on the pension issue, contends the high court must balance conflicting mandates.

"What's disappointing (about the court's ruling) to me is the ability of the legislature to balance competing demands is lessened," she said. "That makes it more difficult to fund education as well as other things required under the (Illinois) Constitution."

More chickens came home to roost in this bankrupt state after the court's decision. Moody's bond rating service characterized the decision as a "credit negative" for a state where bond ratings were already among the nation's lowest.

That was followed by a disclosure from RebootIllinois.com revealing lavish pensions of the top 50 retired school superintendents. Taking the No. 1 spot is Lawrence Wyllie from the Lincoln-Way High School District. His annual pension is $284,861. Ranking No. 50 is Deerfield's Lawrence Pekoe, whose pension is $207,458.

Almost as striking are their relatively young retirement ages. Wyllie worked until he turned 75. But 17 of the top 20 retired in their mid-to-late 50s. The other two left at 61 and 62.

Typical is Bloomingdale's Henry Gitmo, who retired at 56 in 2009 and receives an annual pension of $234,803. So far, Gitmo has received $1.1 million in pension payments; it's projected he'll receive another $9.1 million over the rest of his life.

There was more bad news before the court's July 3 ruling. The Teachers Retirement System lowered its projected annual rate of return on its $44.2 billion assets, from 8 percent to 7.5 percent. Since TRS is expecting lower investment income, that means the state will have to make larger contributions. Rep. Nekritz said lower projected returns from TRS and the State Universities Retirement System will cost an additional $800 million in the fiscal year beginning July 1, 2015.

Public employees and retirees hate it when six-figure pensioners, like the superintendents, are noted. They contend most retirees are not nearly as well compensated and point out that state legislators have both under-financed and over-burdened the pensions. They have little to no sympathy for the state's plight.

A Tuesday column on pensions brought some strong responses.

"I could not survive without the pension. This is more important to me than the problems of the State of Illinois since the state brought this on itself," wrote a teacher who said he will retire in three years.

"I have some sympathy for the fiscal problems of the state, but also believe the state should keep its commitments. Particularly when they are removing money from my retired pocket," said another reader.

So it's the irresistible force against the immovable object. A court ruling isn't expected until early next year. Even though it seems clear how the court will rule, Nekritz said there's no use thinking about what to do next until a decision is issued.

Jim Dey, a member of The News-Gazette staff, can be reached by email at jdey@news-gazette.com or at 217-351-5369.

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Sid Saltfork wrote on July 17, 2014 at 10:07 am

It is difficult for the State of Illinois to plead poverty when the unessential spending continues.  How can the state plead it's case when money is given out for hiking trails, swimming pools, indoor volleyball courts, and new buildings?  The state's case violates the Illinois Constitution.  The "diminishment, and impair" clause was put into the state's constitution by the same legislators who did not fund the pensions as a legal promise that the pensions would be funded by the employer.  The employees paid their share with every paycheck.  The state's plea violates contractual law also.  If the state can violate contractual law, it can stiff the bondholders also.

Notice that in the past, and present; the "opinions" of the local right wing media quotes the few high retirement pensions.  It never gives the numbers of state employees, university employees, and teachers who never made the high salaries.  Why does the local media never mention it's tax break for "ink, and paper"?  It makes one wonder if the Koch brothers are shareholders.

GoIllini777 wrote on July 17, 2014 at 10:07 pm

Brilliant.  Stop building hiking trails and swimming pools, and we'll magically get out of this mess.  Why hasn't anyone else thought of that?  I think you should probably tip off the governor! He will be so relieved that someone has figured out such a simple, pain-free way to fix the State's debt problems. I don't think reasonable pensions should be affected, especially if we're talking about teachers who aren't going to be collecting Social Security checks.  I don't know if that's financially possible, but I feel bad for pensioners who have worked hard and are not bringing in the sort of eye-popping checks described in this article. At the same time, these superintendent pensions are absolutely appalling.  If there were a constitutional way to hack these in half, at the very least, it should be done.  Nobody should be pulling in six figures for a state pension.  It's ridiculous. If you don't want pensions affected at all, just be honest and say we should jack up taxes-- 'cause that's really the only alternative.  Or we can just badmouth the State a bunch and then suggest some insignificant cuts to discretionary spending...

Sid Saltfork wrote on July 18, 2014 at 12:07 pm

Okay, "jack up taxes".  The vast majority of retirees DO NOT pull in six figure pensions.  They were not the administrators, high paid profs, or school superintents. They were working people.  If you feel that the non-essential spending is insignificant, add up all of the state grants across the state for whims versus needs.  Add that to jacking up taxes.

I worked forty plus years for the state.  I paid into my pension with every paycheck.  My employer did not.  Cutting the retirees pensions is unconstitutional, and violates contract law.  You voted for the corrupt fools.  You can pay the debt like the rest of us.  You as an Illinois citizen owe the debt just as I do.  Pay up! 

Skepticity wrote on July 17, 2014 at 11:07 am

Nice job listing the "lavish pensions" taken from Rebootillinois.com.  Shouldn't you note what individuals and organizations create and financially support that website?  After all, you noted later in your piece that "public employees and retirees" don't like the focus on the few who receive such pensions.    Looks like some prominent journalists/editorial writers are part of it.  Friends of yours, Mr. Dey?  Who is funding Rebootillinois.com??? 

By the way, Illinois is not a computer to be rebooted, and retired state workers are not characters in a computer game. They are real people who worked years to earn pensions and who are trying to get by on the pensions they earned until they die.  Retirees don't get to start over like a character in a computer game.  Very few retirees are among the elite six figure folks who are frequently paraded to enflame the public.  Stop waving those few like a red flag in order to enrage the public.   

****

If corporate officials misappropriate contractually obligated funds for their own ends, and the company and pension fund are placed at risk of insolvency, usually those who committed the fraud face criminal charges. 

In Illinois, instead of facing prosecution, they are the ones empowered to create "solutions" that steal from those who earned pensions.  These same officials created the laws that protect themselves from prosecution.  The government officials who created the mess by violating their oaths of office through deliberate misappropriation of funds do not face criminal charges or the loss of their own assets. They continue profligate spending on nonessential projects and giveaways while attempting to loot constitutionally guaranteed retirement benefits. 

The State of Illinois cannot go bankrupt, so the constitutionally guaranteed contractual obligation of making up the pension deficit falls upon the citizens who elected and re-elected the officials who perpetrated the ongoing fraud. 

One can only hope that the crooks who have been juggling the irresistible force and immovable object will somehow be crushed between them.

Local Yocal wrote on July 17, 2014 at 7:07 pm
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What is the relationship of the decade-old decision to reinstate the superintendent positions after they were discontinued by the legislature, and the price of these pensions to .........Michael Madigan? The corruption is his and the cowardice of the legislature to vote him out, vote against his parlaimentary rules that produces secret budgets, omnibus bills with the pork at the bottom, and no time for legislators to read the damn things. Dey would do well to research how the 50 supers got such hefty deals on their pensions. It's special legislation crafted by Madigan- which Naomi probably voted for- unknowingly of course.

Until every district in Illinois makes every representative contest a referendum on Madigan, this crap will continue. Madigan and the boys deliberately crafted illegal pension reform so they wouldn't have to face a hard decision until after the election in November, hence the court's ruling will be next year.

So what will be the speedy, unknown, and unfair austerity cuts in the budget to human services early next year? DSC? Medicare? Are there anymore mental hospitals left to close, perhaps? Get Madigan out of there. This is his fault. Maybe there's room for one more in Blago's cell.

And what a sick excuse to tell us next year: "If it wasn't for the Supreme Court's ruling on pensions we wouldn't have to cut essential services to the sick and poor..."

ERS9 wrote on July 18, 2014 at 9:07 pm

  This article would have cedibility if it had been balanced.  For example, the articles quotes a survey of pensions of a small number of retired superintendent of schools..  No where in the article was the reader told that this number compared to the pensions of thousands of state retirees is quite small.  Apparently the writer of this article wanted to give the impression to the public that the pensions received by these superintendent of schools was the norm for ALL state retirees.  The article also did not address the fact that  our past and present legislaors decided over these last forty years or so decided to use the state pension funds as a credit card in order to finance state services and programs; they did this instead of rasing the taxes to foot the bills for these programs. What the public is not told is that if the legislators had obeyed the pension laws they themselves created, the pension funds today would be in good fiscal health                                       

trvth wrote on July 22, 2014 at 11:07 am

A quick check of the SURS website shows that for 2013 the mean (average) pension was $3025 per month, or just $36,300 per year, around 1/8th the amount quoted in the article for the (very) few exorbitant pensions, most of which arise from the Chicago schools.

Also from SURS, in 2013 60% of pensioners received <$3000 per month ($36,000) per year. An annual pension of less than $36,000 for 60% of pensioners, with no Social Security, is hardly an income that should be targeted for cutting.

Citizen1 wrote on July 19, 2014 at 7:07 am

Perhaps you are right.  If the state had made contributions as scheduled the pension would be fine.  The fact is the state didn't.  Whinning about it ,claiming your rights, blah, blah does not solve the problem.  The fact is that the taxpayers paid their part too.  The taxpayer can not and will not pay again.  The taxpayers will not work until age 70 for less benefits and less social security than promised so some fat cat can retire at age 52.  The taxpayers will continue to leave the state if that happens as they are already doing.  Give a little and get over yourself.  Otherwise you just may end up with nothing.  

Sid Saltfork wrote on July 19, 2014 at 6:07 pm

Increase farmland taxes.  The public employees are taxpayers also.  Pay up, or move!