Will this state ever get out of its pension hole? Not at the rate it’s going.
The Illinois Supreme Court last week issued a complicated, unanimous decision that didn’t make a ripple on the news.
Too bad – the ruling again demonstrated why public pensions in Illinois are in such deep financial trouble and, for the most part, how futile the efforts to change that sad fact have been.
As often is the case in Illinois, the controversy is the result of pension skulduggery brought about by political insiders – in this case, powerful Chicago labor leaders – who relied on friendly public officials – Chicago legislators and municipal officials – to get lavish public pension benefits while working for a private sector employer.
Sometime in the early 1990s, a group of powerful labor leaders, who once had worked for public entities, persuaded legislators to change pension law in two ways – allow them to take leaves of absence from their public employer to work for a private employer and use the salary paid by the private employer to determine their public pensions.
No one noticed the effect of those legislative changes until years later, when the Chicago Tribune published a lengthy 2011 article outlining the extent of the damage that, in part, read: “Twenty years later, 23 retired union officials from Chicago stand to collect about $56 million from two ailing city pension funds thanks to the changes, a Tribune/WGN-TV investigation found.
“Because the law bases the city pensions on the labor leaders’ union salaries, they are reaping retirement benefits that far outstrip the modest salaries they made as city employees. On average, their pensions are nearly three times higher than what the typical retired city worker receives.”
Having discovered the horse long had been stolen, legislators immediately rushed to lock the barn door.
They passed legislation that barred providing pension credits to those who, like in this case, were working for private sector employers, such as a union. They also required pensions be determined based on what the pensioner earned as a public employee rather than as a private sector employee.
It makes perfect sense. After all, how much do taxpayers have to take before they’re protected by the law? And what about legitimate public employees who see their pension funds on the verge of failure while nonpublic employees collect public pensions well into six figures?
Well, what about them?
That’s not exactly what the state’s highest court said, but that’s the effect. Reaffirming its position that benefits once granted never can be “impaired or diminished,” the Supreme Court struck down the Legislature’s modifications as unconstitutional.
It’s an ill wind that does not blow some good. So these changes were good for the recipients.
Here’s one example the Tribune cited. Labor leader Dennis Gannon, who worked for the city for 13 years at a salary that peaked out at $56,000 a year, started collecting a $150,000-a-year pension in 2004 while he continued to work for the union at a salary of $200,000 a year.
Another took a 25-year leave of absence from his $15,000-a-year city job. When he finally retired, he was collecting a $13,000-a-month pension while continuing his $300,000-a-year private union job.
“If our pension system is not reformed, Chicago has two roads to take. We can watch each of our funds go bankrupt ... or we will be forced to raise property taxes by $1.4 billion per year, triple what we pay now toward pensions costs,” Chicago Mayor Rahm Emanuel has written.
When the new Legislature and governor take office in January, their highest priorities must include state and municipal pension woes. The court’s legal analysis may be sound in this latest case, but maintaining the status quo on pensions only can end in disaster.
The (Champaign) News-Gazette