Gov. Pat Quinn and the Illinois General Assembly continue to search for a way to reduce the state’s nearly $97 billion public pension liability by changing the benefits of current state employees, teachers, university workers, legislators and, perhaps, judges. The constitutional validity of any changes would almost certainly be challenged in court, with a key issue being the article of the state Constitution that reads: “Membership in any pension or retirement system of the State, any unit of local government or school district or any agency or instrumentality thereof, shall be an enforceable, contractual relationship, the benefits of which shall not be diminished or impaired.”
The courts would be expected to consider arguments by plaintiffs and defendants, along with subsequent legal rulings and other issues. They also would likely take into account the intent of the delegates to the 1970 Constitutional Convention who voted to insert that language. The excerpted discussions below are from the verbatim transcript of that debate on July 21, 1970, published by the General Assembly’s Legislative Research Unit. The quotations are in chronological order and are intended to present an accurate sense of the arguments by the speakers. In most cases, procedural or less-relevant discussions occurred between the excerpts.
HENRY GREEN: “Now this amendment does two things: It first mandates a contractual relationship between the employer and the employee; and secondly, it mandates the General Assembly not to impair or diminish these rights. Now, with regard to the first point, the Illinois courts have generally ruled that pension benefits under mandatory participation plans were in the nature of bounties which could be changed or even recalled as a matter of complete legislative discretion. And as a result in Illinois today we have public employees who are beginning to lose faith in the ability of the state and its political subdivisions to meet these benefit payments. This insecurity on the part of the public employees is really defeating the very purpose for which the retirement system was established, and this is one of the reasons why I personally request that the Convention adopt the provision which will guarantee these rights and direct the General Assembly to take the necessary steps to fund the pension obligations.”
HELEN KINNEY: “To establish the record as to intent, I should just like to briefly say that the word ‘enforceable’ is meant to provide that the rights so established shall be subject to judicial proceedings and can be enforced through court action. The word ‘impaired’ is meant to imply and to intend that if a pension fund would be on the verge of default or imminent bankruptcy, a group action could be taken to show that these rights should be preserved. The amendment does not mention whether benefits could be increased. It is definitely the intent that an increase in benefits would not be precluded. Many states tie their pension and retirement benefits into a cost of living and raise them from time to time. It is the intent that this amendment would permit so doing if the legislature at some future time should decide to do this.”
JAMES KEMP: “I would presume that the purpose of this proposal is to make certain that irrespective of the financial condition of a municipality or even the state government, that those persons who have worked for often substandard wages over a long period of time could at least expect to live in some kind of dignity during their golden years; and I would urge that we support this obviously nonpartisan measure.”
JOHN PARKHURST: “On the face of it, this innocuous little amendment sounds a lot like motherhood and strawberry shortcake. Actually, I think it is a culmination of a kind of a running battle by a special interest group of pension administrators in the state of Illinois that has been going on in the legislature for years and years and years; and it probably should be continued in the legislature. ... There is no history in the state of Illinois of impairing or diminishing or welching on any pension plans when they come due. If we are going to get to the point in the state of Illinois where we can’t pay the pensions, we’re down the drain anyway; and anything you put in this Constitution is not going to change that one bit.”
PAUL ELWARD: “This is well-intentioned, but like so many other things that are well-intentioned, it has consequences far beyond this afternoon and today, and I for one must oppose it.”
TED BOREK: “The only reason why pension and retirement rights are in the present — people today enjoy them, because the 1870 Constitution said nothing about this. I think this is strictly legislative and certainly ought to be not put in the constitution. Let’s look at it this way: We’re told on this floor that one out of every seven people are public employees. By this amendment we are doing special legislation protecting one out of seven. What happens to the six out of seven that do not get this constitutional guarantee? They’ve got to be resentful and vote against this. May I remind you, too, that the tremendous competition between labor and management to offer better conditions for the employees might make the words “pension” and “retirement” as anachronistic as the Model T Ford fifty years from today. There might be completely new types of systems. To freeze this in the constitution might hurt the very, very people that we are trying to help at this time.”
JOHN PARKHURST: “When the flurry of letters and messages and delegations came to the Local Government Committee, the interest of those people was, as you have described it, Tom, to be sure that home rule did not give to municipalities or anybody else that had home rule the power to invade a pension fund, change the administration system … or abolish it completely. … Now, this is not a proposal that goes to the local government article; this is an amendment that goes to the legislative article and covers not only local governments, but retirement systems of the state. It does refer to benefits being diminished or impaired, as many people have commented on, including myself; and it is a broader concept — much broader than that narrow concept that was brought before our committee.”
HELEN KINNEY: “Benefits not being diminished really refers to this situation: If a police officer accepted employment under a provision where he was entitled to retire at two-thirds of his salary after twenty years of service, that could not subsequently be changed to say he was entitled to only one-third of his salary after thirty years of service, or perhaps entitled to nothing.”
STANLEY JOHNSON: “I think we’ve gone into something far broader than that simple protection here, and this is what worries me a little bit about this amendment. Until such time as it can be narrowed down to that, or just discarded entirely, I think I would have to oppose it.”
HENRY GREEN (In closing): “In answer to the contractual status, one of the overwhelming reasons to mandate this contractual status is based on a Supreme Court decision from New Jersey in 1964 that has a very, very similar pension problem to that of Illinois. In a Supreme Court decision, in ruling — or rejecting — an appeal to attach a contractual status to a plan of mandatory participation — and this is the interesting part — it stated that all these funds had in common the promise of inevitable doom. The reason was that the annual revenues in New Jersey were not related to the ultimate cost of pension benefits; so that while current income might suffice for the earlier pensioners, the day had to come when little or nothing would remain for others, even of their own contributions to the fund. Now this, ladies and gentlemen, is basically what the people of Illinois — or the public employees of Illinois — are very fearful of. In answer to Delegate Parkhurst’s question with regard to the diminishing aspect of it — the cost of living — any of you who know when you buy an insurance policy you’re going to get back what that contract says. Now if the dollar isn’t worth but twenty-seven cents when you get it back, there is absolutely no reason why you have any recourse against that insurance company. What we are trying to merely say is that if you mandate the public employees in the state of Illinois to put in their 5 percent or 8 percent or whatever it may be monthly, and you say when you employ these people, ‘Now, if you do this, when you reach sixty-five, you will receive $287 a month,’ that is, in fact, is what you will get.”
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The vote was 57 ayes, 36 nays, 6 pass and 3 present.
See the full transcript of the debate here.
Illinois Issues, February 2013
