Monthly Archives: May 2015

Pension Fix un-Constitutional

Today [May 8,2015], the Illinois Supreme Court found Illinois’ 2013 pension reform bill to be un-Constitutional.  

The Daily Herald article http://www.dailyherald.com/article/20150507/news/150508857/  

 

Did some web searches to find history.

A long, interesting article about Illinois pension history:

http://www.sj-r.com/x846054923/State-of-Illinois-record-of-shorting-pensions-goes-back-decades

“Of principle concern to the Commission is the accumulation of large unfunded accrued liabilities resulting for the most part from the inadequacy of government contributions in prior years to meet INCREASES IN COSTS DUE TO THE UPWARD TREND IN SALARY RATES AND LARGE ADDITIONS TO THE MEMBERSHIP OF THE FUNDS.”

It has links to the details from 1984 to 2012 by fund and cause of pension shortage.

** See chart detailing the unfunded liability for all state pension systems (pdf) **

** See charts detailing the liability for individual state pension systems (pdf) **

Gov. Pat Quinn often has stated that Illinois pension underfunding dates back 70 years. Quinn’s budget office provided a copy of a letter prepared by the State Universities Retirement System that urged delegates to the 1970 Constitutional Convention to adopt a provision regarding vesting and funding of public employee pensions.

The letter reported that public employee pensions already were running a debt in 1946. The letter also noted that in 1967, legislators stipulated how much money should be allocated to SURS to prevent the system from falling further in debt.

“Despite this legislative mandate for stabilization of the past service liabilities, the General Assembly refused to appropriate the necessary funds to meet this requirement during the 1969 and 1970 legislative sessions,” the letter said.

Note: the pension sentence was added to the Illinois State Constitution on December 15, 1970.  The Illinois legislature and the unions already knew that the pension systems were underfunded.

 

Verbatim Debate about the Pension line for the 1970 Constitution

http://illinoisissues.uis.edu/archives/2013/02/Concon.html

The Pension line was put in the Constitution because the pension funding problem already existed, and the legislature had not agreed to increase funding.

Mr. Parkhurst said “…And the legislature has said, ‘For Heaven’s sake, we don’t have $2,200,000,000. Why can’t you let us run it like the federal government runs the Social Security program, which is to pay the benefits out of the income as they become due.’ And the proponents of 100 percent funding have said, ‘Nope, that’s not good enough. We want you to put all the money there right now, and not wait until the payment comes due before you wrestle up the money to make the payment.’

So they compromised. They added the line to the Illinois Constitution so that future legislators would need to deal with it.

The most clairvoyant line is from Mr. Parkhurst: “There just isn’t that much money available. There is no history in the state of Illinois of impairing or diminishing or welching on any pension plans when they come due. If we are going to get to the point in the state of Illinois where we can’t pay the pensions, we’re down the drain anyway; and anything you put in this constitution is not going to change that one bit.”