Can a pension diminishment be bargained?

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Responding to last week’s Illinois Supreme Court ruling in favor of city workers and retirees, IEA General Counsel said, “Whether a union and employer could agree to changes through the collective bargaining process remains an open question.”

Lawyers for the City had argued before the Court that one of the reasons for the constitutionality of the City’s pension theft was that the City unions had gone along with it.

The Court rejected that argument.

“(The unions) were not acting as authorized agents within the collective bargaining process….Rather, ‘these negotiations were no different that legislative advocacy on behalf of any interest group supporting collective interested to a lawmaking body.’”

What the court said – in this case – was that the unions were not engaged in collective bargaining. They were acting no differently than any group lobbying in Springfield for legislation.

Is the IEA correct in saying that bargaining away our pension benefits by public employee unions is an open question?

Interestingly, the Mayor’s lawyers agree with the IEA General Counsel. 

“Obviously, we would have preferred a win, but we don’t think the door is completely shut. They left the door open on collective bargaining as a possible,” said a top mayoral aide who asked to remain anonymous.

The Emanuel adviser specifically pointed to the approach that Il. Senate President John Cullerton (D-Chicago) has applied to the state pension crisis.

The central issue in all this is the concept of consideration.

My friend and colleague Glen Brown has written extensively on the issue of consderation.

Thee latest Cullerton plan was not devised by the Senate President alone. After some political mis-steps by the Governor, Bruce Rauner has his fingerprints on it as well.

The Cullerton pension plan summary:

Tier 1 members (hired before January 1, 2011) in SERS, SURS, TRS, and GARS are provided two choices and must make an election between the two choices.

Choice 1:

 COLA is the lessor of 3% OR ½ CPI, simple interest on the originally granted annuity in exchange for future increases in salary will count as pensionable salary.

Choice 2:

No changes to current level of pension benefits; COLA remains at 3% annually, compounded in exchange for future salary increases will not count as pensionable salary.​

Consideration and the Illinois Constitution demand that there can be no diminishment in our pension benefits. This applies to all current public employees from the day they were hired. And, of course, it applies to all current retirees.

Nothing in the Cullerton plan is anything but a diminishment of pension benefits.

It would still be a diminishment if the IEA bargained it.

The unions can engage in bargaining to improve our retirement benefits. But they cannot bargain a diminishment.

10 thoughts on “Can a pension diminishment be bargained?

  1. Dear Fred,
    I may be incorrect, but my reading and understanding of these decisions has led me to conclude the following:

    Unions may bargain a framework for changes to be offered to active members (as part of a collective bargaining agreement) with the following caveats: 1) each individual must be allowed to elect their own choice. “No change” must be one of the choices in order for “consideration” to be legal. 3) Some new benefit of real value must be offered, not just a choice between two reductions.

    Unions may not negotiate on behalf of non- members (retirees). There is no body of law providing unions with the right to apply a collective bargaining agreement to non-employees. Then there are the irrevocable elements of federal pension laws and Social Security. Your pension rights are individual and belong to you. Not something others can mess with.

    A retiree would be a fool in most all cases to accept anything offered. Keep what you have.
    Individuals trying to protect their own interests sometimes try to “interpret” these rulings to try to manipulate public opinion. They do not, however, speak for the court, which has been VERY clear.

    • Dear Jack,
      Your public pension cannot be targeted for taxation without taxing everyone else’s retirement income.

      There is this little problem of the 14th amendment to the U.S. Constitution. It provides equal protection to all citizens. Taxing pensions is perfectly legal and not a diminishment. Many states do. It is unlikely, however, that Illinois would tax public pensions when “pension envy” voters discover that their retirement income (not just public pensions) would have to be subject to tax.

      All retirement income from all sources must be liable to taxation on an equal footing if any is to be taxed. So I.R.A. distributions, Social Security, annuities, e.t.c. would all have to be taxed in order to tax public pensions. Not likely.

  2. Yes, it may be theoretically possible but practically speaking the limitation of changes to those in a bargaining unit and the strictures of collective bargaining (everything out on the table for a vote) plus the requirement that the consideration be more than illusion (not a diminishment and not a promise to pay) means that it is highly unlikely to happen. Offering a fair deal would be the only way to pass this test, and a fair deal isn’t what the “reformers” are after.

  3. On our F/B site City Workers Present and Past this medias interpretation and the politicians interpretation has been sickening to say the least. There has been 99 different versions of just 1 ruling. As Hugh has stated a retiree would be out of their mind to rebargin what they already have and we agree. These twisters of facts to which 9 fingers is a master of ( he hasn’t told the truth in 5 years on anything ) just keep on going. They keep referring to the unions as our happy go betweens. These same unions are not the unions of old as the CTU or a few other unions that still have honor and trust. Oh no, the opposite is true. They have turned into backstabbing, dues collecting , sheep herders, who only look out for themselves. The Labors Pension board in Chicago is rigged the same way with 4 suits from City Hall appointed by the great bullshitter on 5 and 4 members from the union, all in bed with the devil on 5. IT IS LAW…A UNION CANNOT REPRESENT A RETIREE ON ANYTING. But yet that is never mentioned in media or these interpretations. So please to those politicians that have to say anything to justify their paychecks, do us retirees a favor pick up a broom and start sweeping the city if you want to earn a pay check, leave us retirees out of your conversations. There is no door left open when in fact that door has been slammed shut in your face by the courts.
    What’s troubling is our current work force that these Judas’s can bargain for. We have warned them on our site that they better watch them good, in fact a few options should be explored. Consulting of outside help either from the goverment or legal council. The handwriting is on the wall with 1001 Laborers Union. Last election after they (ahem) bargained away benifits for the current workforce they donated 100,000 to 9 fingers campaign. Yes the same money that was collected from their membership.
    In our lawsuits against the City we have also carried our currents with us. The colas of 3 % are in place as they retire and the second case on the theft of our promised health care is also fought with the intention of our current workers. These are our brothers and sisters and if the union won’t protect them we sure in hell will do our best to protect them. But we can only go so far and can’t protect them if their union back stabs them again. They must be on their toes. Attend every meeting, let it be known that ..NO, DON’T DIMINISH OUR BENIFITS AGAIN!
    And before anyone paints me as anti union, I am not. I started in the alleys of Chicago as a laborer at age 15 ( yes I lied about my age) For my 36 years with the City I was union sponsered, 18 as a laborer, 9 as a foreman, and 9 as a District supervisor. Also 9 as a union stew. But it was a different union that was for its workers. They had honor and trust, never forgot that they were our protectors. Our pension fund was always funded between 90% and as high as 135%…YES 1 3 5 %. So you see I’m no way anti union but I’m anti getting SCREWED. And our brothers and sisters must watch their backs in all this.

  4. I know a teacher whose father actually helped to write the Illinois Constitution in the early 70’s. She has told me that her dad must be rolling in his grave regarding the attempts at stealing or diminishing our pensions. Her father wanted to make sure that Illinois teachers were taken care of upon retirement, and fought to word the pension provision as it is written. Apparently this was so important to him that he discussed this at length at the dinner table when my friend was 11 or 12. By the way, she teaches in SD 64.

    • It was a very good thing they wrote the pension protections into the Illinois constitution when they did. The pension-theft groups already attempted to steal from our pensions, the ONLY thing that saved us was the clear pension-protection language in the 1970 constitution.

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