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 firstname.lastname@example.org or at 217-351-5369.