The Story Of The Illinois Pension Reform That Wasn’t

How did an Illinois pension reform plan get the key unions of state and local public sector employees lined up in opposition alongside a conservative think tank, the Illinois Policy Institute? That’s the story of the 2012 proposed constitutional amendment intended to require a supermajority before passing any pension benefit increase.

To pick up our story after the Tier 2 pension reform of 2010, Illinois legislators by 2012 recognized that the state’s pensions were in trouble, and that it was imperiling the state’s credit ratings, so they offered an amendment, which, in the Illinois system, must be passed by the General Assembly before being put on the ballot for voters to approve. The bill was passed unanimously by the House, and nearly so in the Senate in May of 2012. The text was long and cumbersome, requiring a 3/5ths vote for any pension benefit increase, “except [in] a bill for appropriations,” and a similar supermajority for any “emolument increase”— a provision that no one seemed to know what to make of, though in the (only public) debate before the bill’s passage, House Speaker Michael Madigan explained (if I follow correctly) that this has to do with ensuring that local employers don’t boost employees’ pension benefits by creating new pensionable fringe benefits.

At the time, again, looking at the debate, Madigan himself acknowledged that votes in the past would not have been impeded by this additional requirement but claims that this proposed amendment would give opponents “a better chance” to make their case, and suggests that efforts to boost Tier 2 pension benefits would arise soon enough that this proposed amendment would be needed to fight them off.

Not surprisingly, the Illinois Education Association criticized the amendment for reducing their ability to negotiate higher retirement benefits, framing it in particular as a change that would “make it nearly impossible to reduce the Tier 2 retirement age of 67 to a more reasonable age.” The Chicago Teachers Union went further, calling it an “attack on workers.”

Here’s what the Illinois Policy Institute had to say about it at the time:

“History shows that a supermajority voting requirement would have made virtually no difference in preventing the pension benefit increases and sweeteners approved by the legislature during recent decades. Nor would it have prevented the pension crisis the state now faces. Such measures have passed by overwhelming margins in both houses of the legislature, far surpassing the supermajority mark (which is 71 votes in the House and 36 in the Senate).

“The conundrum voters face is that to support the amendment is to further the fallacy that it actually means something, while to oppose it may send the wrong message to state and local decision makers who are already spending beyond the taxpayers’ means, who knowingly passed this “do nothing” amendment so they could say they did something toward pension reform. . . .

“[I]f the General Assembly was truly interested in advancing pension reform, it would have referred a constitutional amendment that prohibits pension and retirement system benefit increases unless and until they are fully funded (using risk-free discount rates).”

And the editorial writers at the Chicago Tribune went even further, calling out the toothlessness of the proposed amendment, then suggesting an alternative, as follows:

“The Pension Clause of the Illinois Constitution shall not be deemed a suicide pact requiring any government to let retiree benefits reduce it, and its taxpayers, to penury. Life is long, circumstances change, and what looks affordable today might be unaffordable a few decades from now.”

(Chicago Tribune, April 16, 2012.)

Subsequently, just before the election, they further reiterated their opposition to the amendment in an October 29 editorial headlined, “Pension Head-Fake.” They called the amendment “a misleading gesture — essentially worthless” and “both diabolical and feckless,” designed to convince voters to “think fond thoughts of all those legislators who, golly, must have passed pension reforms.”

“Don’t be a chump,” the editorialists wrote in bold, and offered voters these concluding thoughts:

“Whatever the outcome Nov. 6, voters need to tell their lawmakers that — eyewash amendment or no — Illinois needs real reforms. A constitutional amendment that clarifies the pension protection clause would help. As is, the unions contend a worker is entitled, until death, to the pension scheme that was in force on the first day he or she reported for work. We know, that’s ridiculous. The Illinois Constitution needs to say so.”

As it happened, the amendment didn’t pass — specifically, Illinois law requires that voters approve amendments by a three-fifth’s majority, and the amendment fell short by 4%, with a margin of 56% approving of the amendment.

Were the 44% of voters who voted no, expressing their true desire to maintain the simple majority vote because they want to ensure that supported the unions’ desire for easy benefit increases? Was it an instinctive opposition to new amendments? A general lack of trust that legislators would put something genuinely useful on the ballot? Or were they indeed attempting to send a message that this was meaningless and that Illinois was due for true reform instead? And were the editorialists’ and the Illinois Policy Institute authors right that the state legislature wished by putting this amendment on the ballot to convince Illinoisans that they were solving the pension crisis, while having no intentions to do anything of the sort, or it that far too cynical an explanation?

It is difficult to know, but here’s a bit of context: Illinois legislation on ballot measures is much tighter than other states. There is no means of placing legislation on the ballot, as in California, for instance, and the ability of citizens to place an amendment on the ballot is also very narrow; in almost all instances, potential amendments must be passed through the General Assembly first before making it to the ballot. In 2012, this was the only measure on the ballot; in 2010, in the wake of the Blagojevich ouster, voters approved a provision allowing for the recall of the governor. In 2008, based on a provision in the existing constitution requiring this periodically, Illinoisans voted against a new constitutional convention (there was a long list of opponents, asserting it would be costly with no real benefit). The next most recent amendment was a decade prior — meaning that it’s very easy to believe that voters had been conditioned to be skeptical of amendments such as this.

In any case, of course, this is all just a prelude to the first — and perhaps last — attempt by the Illinois legislature to truly reform existing pensions the following year, about which, more to come as I finish off this little series of “more than you ever wanted to know about the legislative history of Illinois pensions.”

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