Tag Archives: government debt

A Challenge to the Pension-Protection Clause

7 Aug 2017 By in Illinois Tags: , , , , , , , 2 Comments


Two years ago, I wrote of Illinois, “The state’s deepening fiscal crisis will end when an ordinary citizen, who is not a public employee, successfully challenges the Illinois constitution’s ‘pension-protection clause’ in a federal court.”  Curiously, something along these lines is happening.  The U.S. Court of Appeals for the Seventh Circuit will soon consider the case of Bargo v. Bruce Rauner, et.al. which argues that the state’s ironclad protection of public-employee pensions is unfair to the other residents of Illinois.

The petitioner, Michael E. Bargo, Jr., is appealing the decision of a district court, which dismissed his case in May.  The brief Bargo filed in the lower court argued that the Illinois constitution’s pension-protection clause violates the equal protection clause of the US Constitution.  A single sentence makes up Article 13, Section 5, of the state constitution (the pension-protection clause), which reads: “PENSION AND RETIREMENT RIGHTS: Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”

This provision inviolably protects the the pensions of every public employee, setting up a privileged class of Illinoisans with a “retirement right” that no one else in Illinois enjoys.  The arrangement appears to violate the Fourteenth Amendment of the Constitution, which declares: “No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the Unites States . . . nor deny to any person within its jurisdiction the equal protection of the laws.”

Much of Bargo’s brief concerns how the pension-protection clause affects Illinois taxpayers and the governments within Illinois.  Collectively, state and local governments are groaning under the weight of unfunded pension obligations totaling some $250 billion.  Meanwhile, Illinois sanctions several funding mechanisms that benefit the Illinois Municipal Retirement Fund (IMRF, the state’s largest pension fund) without regard to the needs and wishes of local populations.  These mechanisms allow the IMRF to seize state grants allocated to communities throughout the state without restriction and to seize revenue from county treasuries.  They empower IMRF to sue in circuit courts throughout the State.

Bargo seeks to demonstrate how the obligation to fund public pensions goes hand-in-hand with taxation that fails to benefit taxepayers, diverting funds away from public purposes.  As taxes are levied and engrossed for the sake of public employees, the general welfare of Illinois is suffering.  Pensions claim an ever larger share of the tuition that students pay at Illinois’ public universities.  School systems and social services throughout the state are suffering as a larger share of taxes must go to pension obligations.  As Illinois faces mounting financial embarrassment, its citizens must acquiesce in a system that transfers wealth from the general population and the State itself to one class of people, thanks to the superior protection the Illinois constitution affords public employees.

The pension-protection clause, which stipulates that a benefit once given to a public worker can never be reduced or taken away, robs government of the discretion to curb or modify pension provisions that are being abused or that are unduly generous to the point of being unaffordable.  The state’s courts have repeatedly cited the pension-protection clause in striking down pension-reform proposals, including several that the unions themselves have agreed to.  Unfortunately, Article 13, section 5, creates a class interest within the public sector that stacks the deck against ordinary Illinois citizens, making an appeal to the federal courts necessary.

Bargo v. Rauner, et. al., puts the pressure on the state’s most powerful officials to defend a principle gradually strangling once-vigorous Illinois.

Graphic by the Illinois Policy Institute.

A Cracking Veneer

2 Jun 2016 By in Illinois Tags: , , , , , , 2 Comments

heavily tweeked aerial shot of downtown and industrial Chicago
I’ve been away.  To Puerto Rico, ironically, which like Illinois is bankrupt, but which is free of the pretensions of grandeur that make living in Chicago, Illinois such a political and spiritual nightmare.

While I’ve been away,

A woman fleeing a gang of 10 youths in Streeterville ran out onto the Drive, where she was killed by a car.

Sixty-nine people were shot over the holiday weekend, 6 fatally.

The City of Chicago paid $2 million to settle a lawsuit that whistle-blowing cops had brought, heading off a trial that would have centered on the police department’s code of silence.  Mayor Emanuel, who was to have been called to testify, figured this was a good use of citizens’ money.  What use is justice here anymore, anyway?

In the state capital, the legislature once again ended its spring session without passing a budget.  The legislature has now failed of its duty for two years.  According to the website Truth in Accounting, Illinois’s debt burden is $187 billion.  Others place it at $148 billion.  Illinois lawmakers are too cowardly to face the pain entailed in getting the state’s finances back in balance again.  It’s difficult to divine why they are in office.

Chicago is a microcosm of all that troubles the nation now.  The racial divisions, out-of-control violence, and public corruption are corrosive.  Public order is fragile and in jeopardy.  Over all this is a posturing ‘leadership’ that cares mainly for reputation and the superiority of being part of a political elite.

Image © Susan Barsy

The Teachers’ Example

1 Apr 2016 By in Chicago Tags: , , , , , , , , , 4 Comments

Winslow Homer, The Noon Recess (Courtesy Library of Congress)

Today, children enrolled in the Chicago Public Schools are learning to do without their teachers.  The teachers are not in the schools today because they, as union members, decided to teach us all a lesson by not showing up to do their jobs.  Instead of teaching, they chose today, April Fools Day, to stage what they ironically refer to as a Day of Action.  Yes, this day, when they do not show up to do their jobs.

No doubt the teachers have legitimate grievances, but so do taxpayers.  The teachers want the school district and the state government to bend heaven and earth to give them an agreeable contract.  The school district is teetering on bankruptcy.  Teachers’ unfunded pensions are an underlying cause.  The teachers deserve pensions and rightly fault the politicians for failing to invest in and protect the pension funds, as obligated.  But the funds that should be there simply aren’t.

Taxation is increasing to help cover ballooning pension obligations.   Meanwhile, the school budget is being cut.  Education in the present is being sacrificed to preserve the benefits of retired and retiring teachers.  The teachers’ union doesn’t speak to this issue.  Yet, to all appearances, Peter is being robbed in order to pay Paul.  The teachers are going to squeeze Peter and everyone around him, hoping that enough money can miraculously be conjured to go around.

The Day of Action is a farce, because it does not solve the problem.  It doesn’t bring antagonistic parties any closer to agreeing on what to do about a desperate lack of money.  Instead it diminishes the public’s sympathy and respect for teachers and the difficult work they do.  How not to behave: this is all Chicago teachers have taught on this April Fools.

Factor Rauner In

12 Sep 2015 By in Illinois Tags: , , , , ,

After getting off to a wobbly start, Illinois Governor Bruce Rauner has begun to speak truth to power. While a nervous media has attempted to portray the governor and state legislature as equally responsible for the State’s impoverished condition, he has rightly insisted that the budget is the bailiwick of the legislature.  (Click here for his latest on the budget impasse.)

After years of overspending, mismanagement, and corruption, Illinois government is in the throes of an all-out economic crisis.  Yet the Democratic-controlled legislature continues shilly-shallying.  That body, whose lack of prudence over decades has created this disaster, is still evading responsibility.  Rather than face the music, the legislature’s top priority is shifting blame.

Meanwhile, legislators have failed to kick into emergency mode and make the painful decisions necessary to keep the government running and avoid defaulting on its obligations.  The state can no longer pay its bills and has been without a budget for weeks, with penalties accruing.  Do members of the Illinois House and Senate, whatever their party affiliation, really want to be associated with a bankruptcy?  Do they want to be remembered as the individuals who did nothing, who failed to be heroic, as the public sector’s finances tanked?

To say that the situation reflects poorly on the long-dominant Democratic party is putting it mildly.  Though the self-interested rule of House Speaker Mike Madigan and Senate President John Cullerton has been unbreakable, some cracks in their monolithic organizational control have begun appearing.  As the crisis builds, some legislators see that, when the state goes down, their careers and reputations will be destroyed too.  Some may begin to buck the status quo.  If only they would break rank, the power of Mike Madigan would at last be destroyed.

Governor Rauner has begun to work these fault lines.  He has wisely refused to be drawn in to the budget crisis (it isn’t his job), thereby exposing the legislature’s ineptitude and lack of resolve.  Mike Madigan has begun looking like a silly befuddled wizard, with an inadequate inventory of smoke and mirrors.  On September 2, he failed to secure enough votes to override the Governor’s veto of a labor bill that would have excluded the governor from negotiations with unions.

The override failed by one vote, and the public has now heard from the brave Democratic legislator who chose to absent himself rather than act as Speaker Madigan’s lackey.  Ken Dunkin, a Chicago-area representative and former chair of the Legislative Black Caucus, said afterward that his action was a refusal to ‘wear the jacket.’   Despite being widely criticized by fellow legislators and publicly chastised by Speaker Madigan (!), Dunkin told reporter Charles Thomas afterward that his duty is to work for the economic empowerment of struggling African-Americans in Chicago, a crusade that might involve finding common ground with Governor Rauner.

These developments are sweet to every Illinoisan longing for public integrity and economy, and for an end to Mike Madigan’s iniquitous reign.

Why not challenge the constitutionality of Illinois’s pension-protection clause?

14 Apr 2015 By in Illinois Tags: , , , , , , , 2 Comments

pensions-photo
Illinois citizens are expected to sit tight as the cost of meeting state and local pension obligations brings their government ever nearer to bankruptcy.  Everyday, we hear of a new head-ache: how our property-taxes are likely to begin sky-rocketing, or how short-term borrowing to pay pensions will soon destroy Chicago’s bond rating, and how people are leaving the state to avoid being stuck with the costs when the looming disaster of all-out bankruptcy finally arrives.  Yet no matter how painful to the citizenry, our government must rake together the money for public-pension obligations that are burgeoning.

All because a section of the Illinois constitution stipulates that, no matter what, one class of Illinois citizens can count on protections that no others can: the benefits of belonging to a state pension system must not be diminished or impaired.  In the service of this constitutional provision, the state may be driven into bankruptcy and the rest of the population held forever accountable for promises that by-gone politicians irresponsibly made.  The needs of ordinary citizens are being choked off so that those of lawmakers and public workers may be fulfilled.

The power of the legislature to pass laws conferring benefits on themselves and other public workers is difficult to limit.  The pension ‘system’ in Illinois is an irrational bricolage of myriad laws passed over the decades.  The Chicago Tribune has described it as a “convoluted mess of provisions riddled with giveaways, funding flaws, excessive borrowing, and pension holidays.”  The pension code is organic in the sense that’s easy to add to, but any benefit, once added, is virtually impossible to take away.

Consequently, the state’s pension system is an unholy mix of the good, the bad, and the ugly.  It pays pensions to convicted felons like Jon Burge and to brazen scoundrels who had the luck to head up our towns and public universities.  It pays millions of dollars in benefits to cagey officials who correctly perceived the advantages of ‘double-dipping.’  The fact that citizens are powerless to curb the excesses of the pension system feeds hostility to it, to the detriment of many decent and deserving public employees.

Why not take a page from the four Virginians who have mounted a potentially game-changing challenge to the Affordable Care Act by questioning the meaning of just one of its phrases?  Should the public welfare of Illinois be sacrificed to secure the well-being of one special class in perpetuity?  In fact, the pension provision defines a special class of citizens in terms of their distinctive relationship to the state and then confers unassailable privileges on them.  How can this be constitutional?

 Membership in any pension or retirement system of the
State, any unit of local government or school district, or
any agency or instrumentality thereof, shall be an
enforceable contractual relationship, the benefits of which
shall not be diminished or impaired.

As matters stand, the pension provision has become the yardstick against which any pension-reform legislation must be fearfully measured.  Sensible legislation has been struck down while legality of this patently odious and inegalitarian provision has gone challenged.  Illinois citizens should stand up and challenge the constitutionality of the pension provision itself.  A requirement that leads to such unfair and destructive outcomes is an affront to the larger purpose of government.  Does it really trump every other principle of constitutional law?

Given the urgency of Illinois’s fiscal condition, this question should be engaging the state’s best legal minds.

RELATED
Susan Barsy, “The Pension Stand-Off in Illinois”