Illinois’ public pension mess shows threat of unchecked government union power

For 52 years the Illinois Constitution’s pension protection clause has locked the state into retirement promises it cannot afford. Amendment 1 could do the same for government union demands, handing taxpayers the bill.

Illinois’ money and taxation woes all loop back to state pensions and the decision in 1970 to lock away the ability to change them. Despite the hardships and lessons from that decision, Illinoisans are being asked to apply the same mistake to government unions.

At the top of the Nov. 8 ballot is a proposal to change the Illinois Constitution called Amendment 1, which union backers are calling the “Workers’ Rights Amendment.” Just like the controversial decision to include rigid rules about pensions in the 1970 state constitution, Amendment 1 proposes rigid rules regarding how government unions are treated and makes their powers virtually untouchable.

State lawmakers cannot control soaring pension costs without changing the state constitution. Amendment 1 would similarly make it impossible for them to curb government union negotiating powers, and unchecked union power means an unchecked ability to make demands that taxpayers would have no choice but to fund. The cost of those demands is conservatively estimated at $2,100 for the typical Illinois family during the next four years if voters pass Amendment 1, but the tax damage could be far worse.

Looking back, the adoption of the pension protection clause in the 1970 Illinois Constitution started many of the problems Illinois faces today. Illinois’ pension protection clause has been interpreted to be more rigid than any similar provision in any state constitution. With no ability to rein in the cost of public pensions, payments have crowded out spending on education and public services even as Illinoisans bear some of the highest tax burdens in the country.

The state holds the lowest credit ratings in the country, and residents are consistently leaving for states unrestrained by an unyielding pension clause in their constitutions. State lawmakers made attempts to correct the problem in 2013, but the Illinois Supreme Court struck down most of those reforms. The only option left is to change the state constitution, which could let the state regain fiscal sanity.

Instead, state lawmakers went in the opposite direction and handed voters Amendment 1. Instead of giving Illinois more flexibility to handle its money problems, the proposal takes away options and is potentially more restrictive than even the 1970 constitution’s pension protection clause.

Amendment 1  would be the pension clause on steroids. This amendment would place pensions and every term in a public union collective bargaining agreement above state laws. That would include issues commonly bargained over such as wages and working conditions, plus add broad new subjects that encompass virtually any and every public union demand.

The costly mistake of Illinois’ pension clause

When the pension protection clause was first submitted for consideration to the 1970 constitutional convention, there were already warnings of what was to come.  Delegate John Parkhurst of Peoria warned, “This is a terribly, terribly mischievous amendment… It is the desire of a special interest group; it should be legislative; there is no history of impairment; there is no history of welching on any contracts; and to put it in the constitution is simply pandering to a group that haven’t been able to have their way in the General Assembly.”

History professor George Cullom Davis argued for caution as well: “I think that we would be making a serious mistake to adopt this language without consulting at least with the actuary who advises the Pension Laws Commission of the state.” Despite the warnings, the pension clause was ultimately adopted.

It took decades for the damage to take effect, and even longer for that damage to be felt, but today, Illinoisans are feeling the pain of the legacy of overpromised pensions. In 1990, 20 years after the constitution was adopted, the legislature passed a minimum 3% compounding cost of living adjustment completely untethered from inflation. Three years later, the Edgar Ramp, designed to push the pain of pension payments onto future generations, took effect. In the following decades, Illinois would issue billions of dollars in bonds and take holidays to escape the punishing pace of funding demands. Meanwhile, Illinois’ credit rating dropped to the lowest of all 50 states. Since 2000, pensions have gone up 584% in real terms while total spending has gone up a little more than 20%. Annual pension payments are consistently taking up around one-fourth of the state budget, and funding to serve the state’s most vulnerable residents is being crowded out of the budget by those pension costs.

To add insult to injury, the politicians most responsible for the pension mess are benefitting from it, with players such as former Illinois House Speaker Mike Madigan and former Gov. Jim Edgar set to collect millions in pension payments during their retirements. Technical loopholes in the laws have allowed some politicians to be paid far more than intended by the legislature. Yet the pension protection clause halts lawmakers from correcting these abuses, other than to close loopholes going forward.

After over a half-century of experience living under Illinois’ pension protection clause, pension reform that would protect retirees’ earned benefits while allowing reduction in future growth is broadly popular. But even that popular reform requires a constitutional amendment under the state supreme court’s current interpretation. With the benefit of hindsight, most can see the mistake made by including language in the constitution that would act as a one-way ratchet to protect every deal made by the legislature, whether it be corrupt, imprudent or easily exploitable.

Amendment 1 shows lawmakers haven’t learned from past mistakes

Despite the damage caused by the pension amendment to the people of Illinois, government unions are pushing an amendment that would extend their power far beyond public pensions. Lawmakers listened and put Amendment 1 on the Nov. 8 ballot.

The language in Amendment 1 is so broad that if enacted, its limits would have to be litigated in court. It would be the only amendment of its kind in the country and could invalidate at least 350 state laws. These include laws that protect students and children in state care.

The amendment could protect negotiation of secret government contracts, making it more difficult to tackle corruption in the state even after the revelation of state contracts favoring Gov. J.B. Pritzker and government projects contracted to those close to indicted former Speaker Madigan.

The amendment could also prevent reforms needed to reduce property taxes, practically guaranteeing a $2,100 property tax hike for the typical Illinois family with a house currently worth $248,000. The tax damage could be far worse as a result of significantly greater government union power to make broader demands that taxpayers would be required to fund.

It would make the state’s business climate even worse than it already is, leaving businesses bracing for higher taxes and increased legal costs. Reforms that could help Illinoisans and their families, such as reducing the costs of bloated school administration and redundant local governments, could be hobbled with carve-outs and loopholes in collective bargaining agreements. Once Illinoisans discovered the full damage from the amendment, it would require another constitutional amendment to end it.

Just as during the 1970 state constitutional convention, Illinois stands at a turning point. This time, voters have the benefit of experience. There is still a chance for voters to avoid the mistakes of the pension clause and allow future lawmakers the flexibility to address unwise or corrupt deals made by past lawmakers.