Supreme Court hands Chicago a pension reality check
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The gig is up.
On Thursday, the Illinois Supreme Court made clear the courts are not about to rescue Chicago from its financially-backbreaking employee pension mess.
At best, the high court may have hinted that the city could solve its pension funding problems — currently a $10 billion shortfall for two sets of unions — at least in good part, through direct collective bargaining with those unions. It may be constitutionally kosher, the court seemed to suggest, to negotiate reductions in future pension benefits in exchange for some other carrot.
Meanwhile, some experts are calling for a constitutional amendment — to be put on the ballot as early as November — to clarify the extent to which future pension benefits can be altered. This could create a relief valve for the state, Chicago and other local governments struggling with mounting pension obligations.
While Thursdahttps://suntimesmedia.wordpress.com/wp-admin/post.php?post=171905&action=edity’s ruling, thankfully, gives Chicago some breathing room in making sizeable pension fund payments, the city more than ever must plan for the worst. We’re talking, of course, about even higher taxes and service cuts.
Brace yourself, Chicagoans.
Then again, nobody should be surprised.
As the Illinois Supreme Court pointed out Thursday, experts warned way back in 1949 that every pension fund in Illinois – including Chicago’s – was being irresponsibly underfunded. And at least in Chicago, nothing much has changed.
The high court overturned Mayor Rahm Emanuel’s plan to address the looming insolvency — in as little as a decade — of two city pension funds by cutting worker benefits and mandating increased employee contributions. The court ruled that a law Emanuel pushed through in 2014 to bolster the long-term health of the Municipal Employees and Laborers pension funds was unconstitutional. It did not buy the city’s argument that a more stable system of funding pensions amounted to a “benefit” for union members. And it questioned whether that new funding system would be all that stable anyway, since payments into the funds could still be reduced if they imperiled “the public health, safety or welfare.”
The “plain language” of the constitution, the court said, establishes “an absolute prohibition against diminishment of pension benefits.’’ And it did not matter that elected representatives of 28 of 31 city unions affected supported the changes; that support was not gained through binding collective bargaining.
City Hall sources on Thursday chose to put a positive spin on the ruling. They told the Sun-Times’ Fran Spielman that it opened the door to addressing pension fund insufficiencies via collective bargaining. They contend the city and union can now horse-trade on the pensionability of future pay hikes and other pension benefits.
This legal concept, called the “consideration model,” is at the heart of State Sen. President John Cullerton’s proposed solution to the state’s pension problems. Under it, for example, the city might offer to sweeten employee health benefits in return for a limit on how much future pay raises would be pensionable.
Let’s hope that flies with the courts. But nobody should build a financial plan based on what could be just another Hail Mary pass. Prudence, as the Civic Federation said Thursday, should be the watchword.
In the interest of bringing legal clarity to this fuzzy matter, the Civic Federation has called for putting a constitutional amendment on the November ballot that would make clear that the state’s “pension protection clause” protects only current accrued or earned pension benefits. In concept, Gov. Bruce Rauner favors such an amendment as well.
The city has tough union negotiations ahead. Just because the representatives of 28 of 31 unions signed off on the mayor’s plan, now shot down by the state Supreme Court, does not mean they’ll touch it with a ten-foot pole in collective bargaining. That “consideration” offered in return for a break on pensions would have to be substantial.
At the same time, the unions have to understand something. They didn’t necessarily cause this mess, but it’s no less a real mess. They have to bargain realistically.
There’s a limit as to how much taxes can grow in Chicago, and how many services can be cut, before the city becomes unlivable for everyone — including city workers.
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