It wasn’t too long ago when John Stevens, Legal Consultant for the “We Are One” Labor Coalition stated: “To take away the Cost-of-Living Adjustment [COLA] for [current and future] retirees is not a free and fair choice. It is a coercive choice under duress.” Indeed, the concept of duress (or coercion) is a vitiating (legally defective) factor and; therefore, Illinois legislators are breaching a contract by forcing public employees to make a choice to diminish their originally-vested and paid-for guarantee (unless, of course, their guarantees are going to be “diminished” through “modification of contract principles” at the bargaining table).
Like previous legislators’ proposals, the impairment of the COLA for both active teachers and retirees in SB 2404 offers public employees no ethical and lawful alternatives except to consent to the General Assembly’s demands and choose between two illicit choices.
It is unlawful to induce undue pressure upon public employees to make an unfair choice. It is a blatant exploitation of influence to obtain an unwarranted advantage – an illegitimacy of the General Assembly’s advantageous attempt to renegotiate a constitutionally-guaranteed contract. Furthermore, the “ironclad” funding assurance for a COLA is uncertain.
It was a short while ago when the We Are One Illinois Coalition stated, “Although [a] bill contains a pension funding guarantee, it can be circumvented if a court finds it significantly imperils broad categories of other funding priorities… [Besides], it does not give employees a separate right to civil action and only provides permissive authority for the retirement systems to sue for payment.” There is no question whether legislators will renege on any new promise made to public employees. The question is how soon it will happen. Let’s not forget that policymakers can rewrite or undo any bill they pass. After all, they are doing it right now.
And what about contributing even more money for an “ironclad” legislative promise? Out of the 126 state plans recently charted, Illinois would be ranked number one among state-sponsored teacher plans at 11.4% and ranked in the top five among all plans.
Many of us believe there will never be enough public employees’ sacrifice to placate the unscrupulous legislators of Illinois and their mania for “pension reform.” Whatever pension reform bill they sign into law will set a precedent for more assaults later. Eric M. Madiar, Chief Legal Counsel to Illinois Senate President John J. Cullerton and Parliamentarian of the Illinois Senate, stated it this way: “Pension benefits are under siege for two reasons: opportunity and political motives” (Defending and Protecting Public Employees’ Pensions against the Legislative Siege).
Many public employees, especially retirees, argue that unions should not bargain away any of the public employees’ “constitutionally-guaranteed,” rights and benefits. I have heard from some of them. Over 6400 people signed the “Illinois Revenue and Debt Reform, Not Pension Reform” petition online, the petition that IEA refused to endorse a few months ago, the one that stated explicitly that pensions are constitutionally-guaranteed contracts that should be protected against liars and thieves.
Fred Klonsky 
Glenn makes excellent points , the one thing that becomes apparent is you cannot trust politicians in Illinois or the United States for that matter. The only recourse is to run candidates from We Are One ranks to replace the Moylans the Nekritz the Biss of the Illinois political world. With the backing of all the originizations and individuals we might achieve a victory in several major races and send the signal to the rest we are after your jobs. If the NRA can do it why can’t WE.
I am not a union member.
ILLINOIS EDUCATION ESTABLISHMENT/PUBLIC SECTOR UNIONS DECIDE TO ATTEMPT A PUBLIC PENSION COLA THEFT.
The Illinois education establishment and public sector unions have announced that a deal has been reached with Senate President Cullerton to slash accrued pension benefits in the state, in lieu of re-amortization of the debt, or an increase in state revenues sufficient to cover the debt service. Their plan includes a provision to take “fully-vested,” accrued and contracted retiree pension COLA benefits. (The idea is to minimize their dues-paying member’s future pension contributions by taking money from retirees.) This aspect of the proposal is unconstitutional on its face and will be struck down in court. (I recommend a severability clause in the bill.) Illinois retirees should ensure that the cost savings of the proposal, represented by the COLA-theft, are quantified. They will be surprised at the figure.
The education establishment and public unions in Montana also recently supported a “last minute deal” that curiously breaches retiree pension contracts. The Governor of Montana has stated that the Montana Legislature’s taking of the COLA is unconstitutional, and that the retirees will win their case in court. The Colorado education establishment and public sector unions also supported the taking of fully-vested pension COLA benefits from Colorado PERA retirees in 2010. Last October, the Colorado Court of Appeals held that Colorado PERA retirees have a contractual right to the COLA benefit.
A pension COLA is simply method of providing a defined pension benefit. The fact that a state legislature has opted to deliver contracted pension benefits by means of a pension COLA annual “escalator” does not relieve a state government of its contractual obligation to pay the total, accrued, defined public pension benefit. Legislatures could just as well have created a statutory contract providing a larger monthly public pension annuity payment at retirement, with NO COLA.
To illustrate, if a legislature had, in the past, created a statutory pension contract providing that 90 percent of the total, defined pension benefit derived from the COLA “escalator” (for example, a small initial base benefit at retirement, perhaps 20 percent of final salary, but also a quite large COLA escalator, perhaps a 10 percent COLA) would any public pension attorney argue that the legislature should be able to break its contracts and take 90 percent of a worker’s total, accrued pension benefit after 30 years of work? No.
Then, why do so many legislators believe that it is acceptable for a state to break its contracts and take a third or half of a retiree’s total, accrued pension benefit?
Watch the February 22, 2013, the Ohio State University Moritz College of Law “Roundtable on Public Pension Reform” at this link:
http://moritzlaw.osu.edu/programs/capital-markets/roundtable-on-public-pension-reform-video-archive/
Read the research of Professor Amy Monahan of the University of Minnesota School of Law, “Public Pension Reform: The Legal Framework”:
http://www.law.umn.edu/facultyprofiles/monahana.html)
Professor Amy Monahan at the Roundtable:
“I’m not aware of any case, where a court has said that once a participant has retired, and completed all of the necessary ingredients to receive a pension that that pension is not contractual.”
“Even in some liberal states, once you’ve retired, you have a vested, contractual right to the benefit.”
Amy Monahan on the relative legal risk of legislative enactment of various reforms to public pension systems:
“I think it’s fair to generalize that there is a sort of risk hierarchy here.”
“So, I’m going to start with the most risky and go down to the least.”
Pension Changes Impacting:
Public Pension Retiree Accrued Benefits
” . . . benefits being paid to retirees are the riskiest thing to touch.” “The idea is that they have completed their side of the bargain, and so any changes to those individuals usually get the highest level of scrutiny.”
Active Pension Member Accrued Benefits
“Next, is touching accrued benefits for people who haven’t retired. So, they’re still working, but you’re reducing what they’ve already earned to date. That’s also pretty risky. Basically, the analogy here is to salary. You can’t retroactively reduce someone’s salary. The court’s going to easily imply a contract here, for the same reasons reducing accrued benefits are risky.”
Future Benefit Accruals
“Future benefit accruals in most states, should be less risky.”
New Hires
“New hires are easy.”
Monahan on public pension COLAs:
“I think that most people in the pension world, when they think of COLAs, think of it as part of the participant’s accrued benefit.”
(My comment: “Automatic” public pension COLA benefits are fixed, contracted obligations of pension plans sponsors. “Ad Hoc” public pension COLA benefits may be adjusted by pension plan sponsors as needed. Many critics of public pension systems in the U.S. are attempting to confuse the two types of COLAs in support of their efforts to break pension COLA contracts.)
Monahan on the “Reasonable and Necessary” standard to break public pension contracts:
“That sounds like an easy test.” “It’s not.” “The U.S. Supreme Court tells us that it has to be the least drastic way of achieving the policy goal.”
Visit saveperacol.com to read about the Colorado Legislature’s public pension COLA theft.
Today is teacher appreciation day. Maybe not so much!
Dear Glen.
Glen — I respect you but i could not disagree with YOU more!!
I appreciate your burning zeal for advocacy.
I have spent 45 years advocating for teachers, challenging superintendents, filling grievances, negotiating contracts.
Despite challenging my school board or some goofy principal – I believed ultimately in talking. Compromise. Negotiations. I believe you were a local negotiator — a sign of a good contract was criticism and tough questions. There were times when I was bone tired form marathon negotiating sessions to AVOID a strike that it was hard not to take some questions (even accusations) hard. But I always asked for the questions. I always tried to answer everyone. The IEA will do the same thing on SB 2404. When the dust settles I think people will see SB2404 — as not perfect, not ideal, not 100% — but we live in a non- perfect world. Utopia, 100% ,total victory only comes in books – fantasies, utopias. Negotiations and political solutions are never perfect, 100% or without some pain. Negotiations are what is possible, practical not perfection, not 100%. That is the result of talking to the other side – You never get 100%. You might disagree but in the end YOU SUPPORT the UNION.
I believe with all my heart that the IEA leadership “did the right thing”. Negotiations is the way to solve these things. “Just Say No” is just not a viable option – except to be run over.
I support my Union -THE IEA.
I not only support our Union but I applaud it for making the coalition work, keeping it together, being persistent, continuing to reach out to “the other side” . It would have been so easy to give up and blame it all on Madigan. I applaud President Klickna and President Cullerton for their persistence and vision.
Bob Haisman
Who will profit if pensioners in Illinois lose their state-paid health coverage? See this:
http://www.unitedhealthgroup.com/Businesses/ProductsServices/Individual.aspx
Now you know why all this is coming down. Someone should check campaign contributions for the legislators voting to screw the pensioners.
SB 2404 is a Trojan horse backed up by a more draconian version in the House. It’s an old political maneuver. Take this deal or we’ll give you something worse. You’re being played. Let’s review SB 2404.
First, in the civic interest of compromise active members would contribute an additional 2% of their salaries, providing more than $3 billion over the next decade. What’s wrong with that? Well, on its own merit, it is unfair to place such a burden on active working members without assessing the 2% levy on retiree’s pensions as well. The whole concept of “union” is solidarity for all. When solidarity breaks down, people break down. When people break down, the union breaks down.
But the benefits of inactive members are also threatened. According to the Illinois Retired Teachers Association, the We Are One Illinois Coalition, including IEA, have negotiated an agreement with Senate President Cullerton concerning pension reform. The agreement is structured as a choice proposal affecting current retirees. The proposal will provide a choice between access to health care and accepting a staggered two-year COLA freeze or keeping your 3% compounded COLA and no retiree health care access. As active and inactive members are being asked to fix a problem they didn’t create, the IEA leadership is expressing more concern for the state’s budgetary health than the welfare of its own constituency.
Second, the IEA’s hard-fought funding guarantee requiring lawmakers to make the annual pension and debt payment each year isn’t worth the paper it’s written on. It’s backed up by nothing more than the right of state retirement systems or individuals to bring court action if the payments are not made. But since past failures of the state to make payments into the pension fund already empower retirees and their representatives with actionable legal rights, the IEA is simply trading promises with no effect. State lawmakers acted quickly to influence the legal process in their favor by guaranteeing the pensions of court judges who would adjudicate any such challenges. Hence, except for judges who have been recruited to the state’s cause, the guarantee is just a “feel good” clause. It has no teeth and it can’t bite.
Fourth, though it is correct to say the pension crisis is a fiscal crisis that can be resolved only by new sources of revenue, it is a pipe dream to believe that a handful of squeamish lawmakers will close corporate tax loopholes to help boost the state’s future revenues. That has not happened in the past, it is not happening now, and it is not going to happen in the future. Monopoly corporations run the state. They own the media; they control the legislature; and they write the laws to serve one purpose only – maximizing their profits. Their biggest problem is finding new ways to squeeze interest payments on outstanding debt. The state’s future budget will not be balanced by any fair assessment. The austerity psychology that has gripped the state will prompt local districts to close schools and increase class sizes to meet their budgets, and the $3 billion projection will be challenged as fewer and fewer teacher positions are filled.
Before buying into SB 2404, as sponsored by the IEA, members should wake up from their fairy tale world. The pension shortfall cannot be resolved within the very system that created it. Focusing on a mirage of legal formalities and insincere budgetary pledges only makes matters worse. How dare we teach our children and grandchildren about democracy and our republican form of government, yet tolerate the festering rot within our institutions! Perhaps a younger generation will learn self-respect in revulsion to the cowardice of our generation.