Economy, Regs, & Taxes

Pensions Remain Illinois' Ball and Chain

The state Supreme Court shot down attempts to rein in public worker pensions.

Lewis Morris · May 12, 2015

The Illinois State Supreme Court shot down attempts to rein in the Prairie State’s out-of-control public worker pension system, ruling unconstitutional a 2013 law that eliminated automatic pay increases and reduced future benefits. Friday’s ruling just goes to show how difficult such fiscal reform can be.

The state had been scrambling to cope with $100 billion in unfunded liabilities in public pensions when then-Democrat Gov. Pat Quinn signed a law to reform the system. It was a sweeping plan that extended retirement ages for current state workers, ended automatic and compounded yearly cost-of-living increases for retirees, and limited the amount of salary used to calculate pension benefits.

The law, as you can imagine, was met immediately with resistance by public sector unions. And, to be fair, not without reason. The unions went to court, citing a 1970 provision in the state constitution that prevents the legislature from ever touching established union pensions. This little gem of an amendment, pushed through by public unions themselves, established public worker pensions as a constitutional right.

Emboldened by the state’s governing document, public sector unions have held the state hostage ever since. The ensuing corruption and abuse was so extensive that one union lobbyist sued for a lifetime pension for working only one day as a substitute teacher.

Now things are so bad that the public pension system is $111 billion in the red. The state high court’s decision — a unanimous one in favor of the unions, by the way — means another $1 billion added to the rapidly mounting debt. State legislators have to go back to the drawing board, and even Chicago don, er Mayor, Rahm Emanuel’s plans for a similar reform plan for police, fire and teacher pensions in the Windy City have been stymied.

What should Illinois do next? The state finds itself in a jam of its own making, and, like several other states that have allowed public sector unions to run rampant under Democrat control, there is real danger of its public pension system collapsing under its own weight.

Republican Governor Bruce Rauner won election in part on a promise to reform the public pension system, but opposition to his plan is fierce. One option before him is to submit a new constitutional amendment that basically reverses the 1970 amendment by allowing for changes to the pension system. That will be a hard sell in a deeply divided legislature.

The other option is to, wait for it, raise taxes. Illinois currently holds only 39% of the assets necessary to cover the bloated public pension bill, the worst among the states. Raising the state income tax will inevitably squeeze the economy even tighter, forcing a continued exodus of workers and businesses who pick up stakes and move to friendly climes — like Indiana.

This latest failed attempt to bring fiscal sanity to Illinois further proves that it truly does matter which party governs. That state, along with California and New York, has been generally Democrat-controlled for decades, notwithstanding the occasional Republican governor. And all three states year in, year out, find themselves with the shakiest employment records, the worst business climates, and the highest tax and debt burdens in the country. Coincidence? Hardly.

A recent Heritage Foundation report by economists Stephen Moore and Arthur Laffer analyzing a series of economic policy variables among the states found essentially that “states that spend less … and states that tax less … experience higher growth rates than states that tax and spend more.” In other words, state and local governments run by Democrats tend to bring economic trouble upon their citizens, while the opposite tends to be true for states run by Republicans.

No wonder Republicans did so well in the 2014 state and local elections. The people closest to the issues see things for what they are. Now, it’s just a small matter of putting a fiscal conservative in the White House.

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