I have posted here that when it comes to current retirees in the state of Illinois, the Illinois Supreme Court made it absolutely clear that our pensions must be paid and that the pension protection clause of the state constitution means what it says. There can be no diminishment of benefits.
I have been posting over the past few days about the views of Eric Madiar, former consigliere to Senate President John Cullerton. Madiar seems to believe that there is a legal basis for currently active employees to have their benefits bargained by their unions as long as they adhere to legal contract principles involving consideration. Consideration is an exchange of a promised benefit for something of equal or greater value.
Current employees should be concerned. In the current economic climate, and with the current union leadership, nobody should rest easy about what the state public employee unions’ leaders might bargain away.
When Glen Brown and I were delegates to the 2015 Illinois Education Association Representative Assembly, the leadership rejected our request for an iron-clad promise not to give away what the courts had guaranteed us. That promise would “tie their hands.”
I have more than a few readers who are currently retired teachers. In spite of my posts stating that current Illinois retired teacher pensions are secure, they worry.
“Look at Detroit,” one wrote me the other day. “I am worried about the state or city declaring bankruptcy.”
What would people do without Detroit?
While Eric Madiar suggests that the pension benefits of current employees may be bargained according to contractual principles, he also says bankruptcy is not an option.
…the General Assembly simply lacks the legal power to enact the valid state law necessary under federal law to authorize its municipalities to file for bankruptcy. As the Illinois Supreme Court recently explained, there is “no possible basis for interpreting the pension clause to mean its protections can be overridden if the General Assembly deems it appropriate.” Accordingly, the clause withdraws from the legislature, as a matter of state law, the legal power to pass any statute authorizing municipal bankruptcy as a means to unilaterally discharge public pension obligations.
In the end, while contract principles and other permissible options can help mitigate the burden of State and municipal pension obligations, the state must still restructure its revenue system so it can meet, not simply defer its fiscal obligations. As Paul Simon observed in 1971, “We mortgage the future not only when we create bonded indebtedness; we also mortgage the future when we don’t pay into the pension systems as we should.”
The state can’t call Peter Francis Geraci.
Bankruptcy is not an option.