By JAY TRAVIS
On May 8, 2015, the Illinois Supreme Court sided with public sector retirees and workers with a unanimous decision that ruled the pension law passed in 2013 unconstitutional. This court ruling honors the promises made to public sector workers and paves the way for a more collaborative process for reaching a solution to challenges facing Illinois public retirement systems. Additionally, the ruling requires legislators to seek long term solutions to both the pension and state budget dilemmas that require multi-faceted approaches and sobering decisions regarding revenue generation. Public sector retirees and employees are vital to the economic viability of many of Chicago’s neighborhoods, and it is good to know that their benefits are protected by this landmark decision.
Formerly known as SB 1, this purported Pension Reform law slashed the annual cost of living adjustments for current retirees (many of whom are elderly and do not receive social security), increased the retirement age for current workers and limited the amount of a worker’s salary that could be factored in to determining benefits. This legislation was controversial and a key issue in state electoral races, as many legislators supported this bill, which was strongly opposed by retirees, public sector unions and community allies. Shortly after the bill was passed, a lawsuit was filed which eventually made it to the Supreme Court. The Supreme Court’s ruling criticized past governors and legislators for failing to pay the state’s share of pension costs for decades. The crux of this issue is that employees paid their share on a regular basis, but state legislators diverted dollars that should have gone into the pension systems to cover other cost – causing the debt to spiral out of control.
Legislators now have an opportunity to work collaboratively with public sector workers to reach a solution that is agreeable and respectful of current employees and elderly retirees. As with any complex problem, a multi-faceted solution is required. It is important to consider options that get to root causes. New options for revenue generation, such as a graduated tax or a “fair-tax,” which would require wealthy individuals to pay slightly more, should be considered as an avenue to generate more funding in the state budget. More dollars in the state budget provide the necessary resources to cover expenses and pay the appropriate allocation into the state pension systems. Justice Karmeier of the Illinois Supreme Court stated emphatically, “The General Assembly could have also sought additional tax revenue; it allowed the temporary tax increase to lapse to a lower rate even as pension funding was being debated and litigated.”
The practice of postponing payments and utilizing so-called “pension holidays” should be eliminated. This practice generates more debt over time. For example in fiscal year 2014, it was projected that Illinois would spend an estimated $6 billion on pension obligations. Of that amount, approximately $4.8 billion was for debt service. I also agree with experts at the Center for Tax and Budget Accountability about creating a realistic time frame to pay down the exorbitant debt.
Hopefully, a process that is inclusive of public sector workers and aimed at addressing root causes will commence. Nothing less than the future of retirees’ modest incomes and the fiscal health of Illinois is at stake.
Jay Travis is former executive director of the Kenwood-Oakland Community Organization and former program officer for the Woods Fund of Chicago.