Arizona-style pension ‘fix’ won’t work in Illinois
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We’ve seen a big push over the past few weeks for an Arizona-style pension “fix” here. That state’s voters have twice approved constitutional amendments to limit future benefits for public employees – once in 2016 and then again last month.
If Arizona can do it, the logic goes, so can Illinois. The Illinois Policy Institute, the Chicago Tribune editorial board and a host of politicians and others on the right have been pushing this idea of late. Even Chicago Mayor Rahm Emanuel, who was once close pals with Gov. Bruce Rauner, now says he wants Illinois to amend its Constitution as Arizona did.
The state constitutions of Illinois and Arizona have very similar language prohibiting reductions to pension benefits and welding pensions to contract law.
But the two are very different states. In 2016, when Arizona’s legislature approved a pension reform bill to limit first responders’ pension benefits and then voters approved amending their constitution to match that legislation by a 70-30 margin, the Republican Party held the Arizona governor’s mansion and had super-majorities in both legislative chambers. The opposite will be true here starting in January.
This year, the Arizona legislature passed a bill to limit pension benefit increases for corrections employees and elected officials. You’d think the addition of politicians to the pension reform list would attract even more public backing, but you’d be wrong. Voters did approve the change, but with just 51.72 percent of the vote, signaling weakening popular support for the idea.
Arizona’s threshold for voter-approval of constitutional amendments is considerably lower than Illinois’. In that state, a simple majority of those voting on the amendment suffices. But Illinois requires approval from either three-fifths of those voting on the amendment or a simple majority of all those voting in the election. The “Yes” votes in Arizona amounted to just 47 percent of all ballots cast in the election. That wouldn’t have been enough to succeed in Illinois.
Arizona’s politicians brokered an agreement with unions before passing enabling legislation and sending the question to voters. Illinois unions, emerging victorious from a bitter four-year war with a doggedly anti-union Republican governor, are clearly in no mood for such talks.
The Illinois AFL-CIO and the Chicago Federation of Labor issued a joint statement after Mayor Emanuel backed an Arizona-style reform which began: “Too many politicians, including Mayor Rahm Emanuel himself, have wasted years pushing extreme, immoral and illegal schemes to slash pension benefits instead of working together to craft fair, sustainable and constitutional funding solutions.” Whew.
Gov. Rauner was asked earlier this year about amending the state’s Constitution to delete our strict pension language, but even he said he had doubts about its legality and didn’t believe Illinois voters would ever approve it.
Back in 2012, a proposed constitutional amendment to require three-fifths votes in the General Assembly to increase pension benefits received 56 percent of the popular vote and therefore failed.
The Arizona pension changes have yet to be challenged in court. So, even if you could somehow convince the Democratic supermajorities and a Democratic governor who ran on the slogan “Pensions are a promise” to flip on the unions and place the question on the ballot and then even if Illinois’ Democratic-leaning voters approved it, you’d undoubtedly see an immediate legal challenge here.
And despite all the recent hot talk, it does not appear that a pension payment “doomsday” is soon upon us which could force reluctant Democrats to take drastic action.
The General Assembly’s Commission on Governmental Forecasting and Accountability released a report last week projecting that annual state pension payments will increase an average of $300 million a year over the next 10 years. That’s a lot of money, but it’s still fiscally manageable.
And in just a few months, Illinois will make its last billion-dollar annual installment payment on bonds sold by then-Gov. Pat Quinn to make two yearly pension contributions, giving Illinois some fiscal breathing room.
The bond rating agencies might be a different story, however. If they threaten to push Illinois into junk bond status over the state’s huge unfunded pension liability, that might prod the Democrats into taking some action.
And a deep recession combined with more rounds of large and unfavorable actuarial readjustments by the state’s pension funds could combine to make the state’s annual payments impossible.
Pressure from local officials will also likely mount because lots of municipalities under-funded their public safety pension funds and are now in a world of hurt.
Even so, while I could be wrong, I just don’t see it happening yet.
Rich Miller also publishes Capitol Fax, a daily political newsletter, and CapitolFax.com.
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