The most pressing budget issue that the State of Illinois faces is its spiraling public pension debt. The problem is proving difficult to fix, not necessarily because the legislature refuses to try to fix it — though they are doing darn little — but because the problem is ensconced in the state’s Constitution, causing the state Supreme Court to rule against any changes in the pensions.
Last week, the Illinois Supreme Court once again ruled that the latest move by the state legislature to defuse the pension bomb was unconstitutional. This leaves the $105 billion shortfall free to continue growing unabated.
The legislature and the state’s past governor passed a law that would have cut benefits for newly hired employees, extended retirement ages for current employees, place limits on salary size reckoning for pension benefits, and stop the automatic increases for retirees. It was hoped that these changes would begin to defuse the pension bomb.
Naturally the public employee unions opposed the changes proposed and took the state to court to stop the new plan.
Unfortunately, the unions have a good argument based on the Illinois constitution’s pension protection clause.
In 1970, unions and compliant politicians altered Section 5 of Article XIII of the Illinois Constitution to effectively put an end to any changes being made to public pensions. The clause stipulates, “[m]embership in any pension or retirement system of the State shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”
Unfortunately, the meaning of the law is quite clear. No changes at all can be made to the pensions despite that the state is already unable to pay the benefits already being doled out.
A few years ago, the PEW Charitable Trusts noted that, “almost two-thirds of each dollar put into the State Employees’ Retirement System of Illinois went to pay for pension debt from past years rather than for benefits earned that year.” This expenditure, PEW reported, will only continue to grow eventually claiming almost half of every dollar the state brings in.
Illinois has one of the worst pension messes in the country, but it doesn’t look like anything can be done about it unless the state’s constitution is re-written to give lawmakers some flexibility to deal with the crisis.
But Illinois now has a new, Republican governor and he made pension reform one of his campaign issues. It remains to be seen what Governor Bruce Rauner can do to stem the budget bleeding.
Follow Warner Todd Huston on Twitter: @warnerthuston. Email the author at email@example.com.