Friday, November 28, 2014

VOCABULARY - Judge Belz: AG Madigan cross motion denied WITH PREJUDICE

Judge Belz: Lisa Madigan’s “cross-motion for summary judgment is denied WITH PREJUDICE…”

When the Illinois Supreme Court hears Attorney General Lisa Madigan’s appeal of Sangamon County Judge Belz’s decision, the justices will be reviewing earlier court decisions as well as attending to her reconstructed arguments.  According to a spokesperson interviewed a few days ago on WBBM radio, the Attorney General does not plan to change her argument defending PA98-599.

In fact, she cannot.  The appeal to the Supreme Court in Illinois is an appeal of the decision presented by Judge Belz, not a “do-over.” 

Moreover, that decision includes the District  Court’s order: “The Plaintiffs’ motions are granted.  The defendants cross-motion for summary judgment is denied, with prejudice, because the Court finds there is no police power or reserved sovereign power to diminish pension benefits.”

You might remember that in Kanerva v. Weems, Justice Burke’s single dissent included her expressed concerns that the inclusion of health care as an inherent and additional pension benefits were beyond the scope and definition of “pension,” which was to be considered a fixed fiscal sum specified at the moment of employment.  In her opinion, the acceptance by the six other Illinois Justices to additional arrangements or benefits made during the life of one’s contract, including healthcare, were equivalent to “making something out of whole cloth.”

Judge Belz’s specific selection of the term “with prejudice” regarding the affirmative defense police-power argument engaged by Attorney General Madigan now likewise becomes considered unsupported - a “making something out of whole cloth.”  In short, fabricated. 

What is a judgment “with prejudice?”

A court may also enter judgment with prejudice, however. This signifies that the court has made an adjudication on the merits of the case and a final disposition, barring the plaintiff from bringing a new lawsuit based on the same subject. If a new lawsuit is brought, a defendant can properly invoke res judicata as a defense, because a court will not relitigate a matter that has been fully heard before. Often a court will enter a judgment with prejudice if the plaintiff has shown bad faith, misled the court, or persisted in filing frivolous lawsuits. (

The question of constitutionality may propel the pension lawsuit to the Illinois Supreme Court, but Lisa Madigan’s appeal will arrive tainted and sullied by the term “with prejudice,” and the Illinois Supreme Court Justices are compelled to take notice.

In addition, the latest written decision by Judge Belz will act as a clear and lucid reminder of past precedent(s), as well as his close scrutiny of the faulty reasoning by the Attorney General’s legal team. 

Citing the recent decisions by the ISC in Kanerva v Weems, Judge Belz astutely reminds the same Supreme Court of its mid-summer view regarding the Pension Protection Clause: “it is clear that if something qualifies as a benefit of the enforceable contractual relationship resulting from membership in one of the State’s pension or retirement systems, it cannot be diminished or impaired” (Kanerva v Weems, 2014 IL 11581, 38). 

Furthermore, in each acting section of PA 98-599, the Belz Court found that the law was enabled by the General Assembly’s diminishment and/or impairment to the benefits of membership in the State retirement system – to which the defendants (Attorney General Lisa Madigan) “admit…will reduce the AAI [automatic annual increases] amounts certain pension system members receive.” 

Moreover, the legal team for the Attorney General of Illinois openly admits that any operation of the law’s effect will generate a mathematical reduction of COLA’s for retirees, a lessening of COLA’s for those yet to retire, a declining of caps on pensionable salaries of current workers, sudden raises in the thresholds for retirement ages, new methodology for determining rates of interest(s) for members’ money purchase options…in sum, a reduction of overall pension annuity payments.

But, in an affirmative defense of police powers, Lisa Madigan considers such an admission of fiscal destruction a defendable strength before before the Illinois Supreme Court?  Reconsider.

On his way to his carefully wrought conclusion, Judge Belz cited other antecedent cases, which historically reinforce his considered opinion: McNamee v. State; Felt v. Bd. Of Trustees of Judges Retirement System; Kraus v Bd. of Trustees of Pension Fund of Vill. of Niles, and Kanerva v. Weems.  Beyond “with prejudice,” the sobering weight of precedent figures heavily in the Circuit Court decision.

Finally, despite the Chicago Tribune’s plea for some guidance regarding any of the legally acceptable and unacceptable aspects of the law, the act called PA 98-599 holds that 39 provisions making up the totality of the new law must be held and enacted in inseverability.  That is, these subsections of PA98-599 are “mututally dependant and inseparable from one another.” 

In Judge Belz’s findings, because of this refusal to exclude the overt benefit reduction provisions of the Act, “all 39 provisions identified in the Act’s ‘[s]everability and inseverability’ clause must fail.”   
Clarification: the law includes a promise to guarantee funding for the State pension systems. 
Further clarification: the inclusion of a promise to ameliorate an unfunding caused by the State in order to receive legal justification for taking the funding away from those owed is neither inseverable nor acceptable.

Personally, I have spent years repeating the legal mantra of Article XIII, Section 5, for my friends and family: “shall not be diminished nor impaired.”  But, perhaps it is reason #6 of Judge Belz’s order in the finding of summary judgment of November 21st I should begin memorizing:

“The defendants (AG Madigan, have attempted to create a factual record to the effect that, if a reserved sovereign power to diminish or impair pensions existed, the facts would justify an exercise of that power.  The defendant can cite no Illinois case that would allow this affirmative defense.  Because the Court finds that no such power exists, it need not and does not reach the issue of whether the facts would justify the exercise of such a power if it existed, and the Court will not require the plaintiffs to respond to the defendants’ evidentiary submissions…

In summary, the State of Illinois made a constitutionally protected promise to its employees concerning their pensions benefits.  Under established and uncontroverted Illinois law, the State of Illinois cannot break its promise.”

Friday, November 21, 2014

Lisa Madigan: Who or What Could Trump Police Powers?

LISA MADIGAN: What or Who Could Trump Police Powers?

“Remember,” Representative Nekritz  said across the desk, “there isn’t a law or statute that the General Assembly passes that we can’t undo later…”

Maybe Not…

(From the IRTA) Judge Belz Rules in Favor of Retirees SPRINGFIELD - The Honorable John Belz handed down his ruling today from the 7th Judicial Circuit Court stating that pension rights are constitutionally protected for retirees in Illinois. "I am encouraged by the ruling made today by Judge Belz," said Bob Pinkerton, President of the Illinois Retired Teachers Association. "I remain hopeful that this decision, and the previous verdict made by the Supreme Court on Kanerva, will once and for all determine that Senate Bill 1 is unconstitutional and reiterate that the pension protection clause means pension benefits for current workers and retirees cannot be changed." Senate Bill 1 would cut a retiree's cost-of-living adjustments, increase the retirement age of current employees and make unconstitutional cuts to the pensions of working and retired members of the Teachers' Retirement System. Now that Judge Belz has ruled on the case, the IRTA and other organizations involved in the lawsuit are preparing for the Attorney General's Office to continue the fight by taking their argument for the constitutionality of Senate Bill 1 to the Supreme Court.

Henry Green
THANK YOU: Henry Green and Helen Kinney
Delegates to the 1970 Illinois Constitutional Convention

Without Henry Green’s and Helen Kinney’s foresight, wisdom and prescience of likely future political irresolution, the members of the five retirement systems in Illinois could already have suffered the fate of other public employees in some other states across the United States (Minnesota, Colorado, Rhode Island - to name a few).  Both individuals were delegates to the Constitutional Convention of 1970, and Mr. Green was the primary sponsor of Article XIII, Section V, which states that  membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.  Ms. Kinney was the secondary voice behind this attempt to insert into a constitution unchanged for one hundred years a new guarantee of retirement security for those who toiled for the state. 

More new vocab: 

Prior to the efforts of these two, pension rights were dependent upon whether one’s pension plan was compulsory or optional.  In the former, a person signed on to the retirement program offered at that point in time by the company, state, or organization.  In that sense, according to one judicial review, “pension benefits in mandatory plans (were) mere gratuities…springing from the appreciation and graciousness of the sovereign. (Jan. 2008.  Handbook of Illinois Pension Case Law. Illinois Committee of Government Finance and Accounting)”   In other words, as mere statutes, compulsory pensions could be amended, repealed or ignored by an act of the legislature in Illinois.  On the other hand, later rulings by the Illinois Supreme Court found that when a public pension was optional, the employee’s right to receive later benefits was more likely a contractual certitude. 

After 1970, and the adoption by the people of the State of Illinois of the new Constitution and Article XIII, Section V, the issue of a reduction in pension payment due to a disability was brought before the courts (Kraus vs.  Board of Trustees).  The court, led by Justice Stamos, relied heavily upon the transcripts and comments of delegates Henry Green and Helen Kinney in order to discern their intent in the original drafting of the “pension clause.” 

According to conversations and notes by Henry Green, “The underlying purpose of the pension clause was “to provide public employees with a basic protection against abolishing their rights completely or changing the terms of their rights by reducing their benefits after they had already embarked upon employment. (”   Green had admitted that he “promoted the pension promise, which was based on a 1938 amendment to the New York State Constitution, because of concerns raised by university employees who had lost ‘faith in the ability of state and local governments to make benefit payments.’(”

Helen Kinney
Helen Kinney, later to become a distinguished judge in DuPage County was more direct: “Benefits not being diminished really refers to this situation: If a police officer accepted employment under a provision where he was entitled to retire at two-thirds of his salary after twenty years of service, that could not subsequently be changed to say he was entitled to only one-third of his salary after thirty years of service, or perhaps entitled to nothing.  That is the thrust of the word ‘diminished.’…It is simply to give them a basic protection against abolishing their rights completely or changing the terms of their rights after they have embarked upon the employment – to lessen them. (15 Feb 2011. IEA Fact Sheet: Reducing Pension Benefits for Current Educators)”

The Civic Committee of the Commercial Club of Chicago’s legal advisors (Sidley Austin) argue that two voices of the many delegates involved in the drafting of the Illinois Constitution do not speak for the entire body of delegates.  What about the endorsement of both Republican and Democratic parties in 1970?  What about the more than one million voters who ratified it?  What about common sense?   

Nota Bene:

“The defendants have attempted to create a factual record. to the effect that, if a reserved sovereign power to diminish or impair pensions existed, the facts would justify an exercise of that power. The defendants can cite to no Illinois case that would allow this affirmative defense. Because the Court finds that no such power exists, it need not and does not reach the issue of whether the facts would justify the exercise of such a power if it existed, and the Court will not require the plaintiffs to respond to the defendants' evidentiary submissions. The plaintiffs having obtained complete relief, the Court also need not address at this time the plaintiffs' additional claims that the Act is unconstitutional or illegal on other grounds. See Kanerva, 2014 IL 115811,1158. in summary, the State of Illinois made a constitutionally protected promise to its employees concerning their pension benefits. Under established and uncontroverted Illinois law, the State of Illinois cannot break this promise.  Judge Belz

Sunday, November 16, 2014

Coming in the Veto Session? Madigan Making Local Districts Pay Pension Costs

Fred Klonsky and Bev Johns
According to Bev Johns, education activist and contributor to Fred Klonsky’s blog, recent activity in Springfield approaching the Veto Session suggests that Speaker Madigan may be considering/preparing to move on a pension cost shift to the local level districts.  This is neither a new idea nor one particular to the Speaker.  From 2012, please see the Speaker’s and the Senate Leader Cullerton’s fascination with this strategy, and how the policy would affect locals.

“Some Skin in the Game” (…or...Making local school districts pay for pension costs).

"What we’ve suggested is that local districts have a little skin in the game when they hire teachers and administrators and set their salaries.  They should be required to set aside money into the pension system for their future retirees.”  Senate Leader John Cullerton (McQueary, Kristen.  Illinois schools may chip in…  NY Times.  19 February 2012).

Idiom: While many credit sagacious investor Warren Buffet with the phrase “to have some skin in the game,” Mr. Buffet has strongly denied such attributions.  In essence, the idiomatic phrase means being personally, emotionally, or financially vulnerable to a possible venture and, therefore, connected to it at all levels of possible aftermaths.  According to William Safire, the Oxford English Dictionary explains the “skin game” was a card game in which each player has one card which he bets will not be the first to be matched by a card drawn from the deck; so dealer or player, all have equal chances of winning or losing

Sadly, in the case of the public pension system, it appears to be losers all around.  The concept of shifting responsibility for the teacher’s pension from the state of Illinois to local school districts has become increasingly popular in the last few months. 

The president of the senate, Mr. Cullerton, sees this transfer as an opportunity to force local districts to keep increasing costs of retirees and salary increases in check.  Costs for pensions per district would become an essential part of union contract negotiations (McQueary, Kristen). 

For Governor Quinn, the “rendezvous with reality” will also call for everyone’s sacrifice, including the local districts. 
Regarding teacher retirement benefits, the state could save nearly $1.5 billion; according to the Associated Press, Governor Quinn has given the nod to those who would seek such a shift in responsibilities ( Such savings would allow the state of Illinois to continue making payments to reduce the unfunded liability, a result of years of pension holidays, to continue to provide and improve  human services, and to force local districts to enact new procedures for dealing with public unions. 

On the other hand, many Republicans and others  - including the Illinois Association of School Boards – figure the costs would be injurious to local taxpayers as well as the districts themselves.  Such requirements might bring “an additional  $800 million in contributions toward teacher pensions,” which coincidentally is the projected amount the state of Illinois will owe to the pension system this year - without their required payment to the unfunded liability (McQueary, Kristen). In short, it may be more than coincidental that this proposal will allow the debtor (the state) to pay simply the interest on past non-payments and not the current bill that is due for 2012.  

Meanwhile, Republicans in the General Assembly realize what kind of pressure is being put on the local districts and the citizens who live within those school boundaries.   They foresee an increased burden on the local taxpayers and the school boards. “ ‘It could either be a property tax increase or depending on how they structure the deal they’re going to have to cut whatever those costs are within [the] school district,’ Rep. Ed Sullivan, R – Mundelein, said. ‘So you’re either going to lose teachers or have a massive property tax.’”  (  Such a deal might also be phased in through several years; thus, easing the immediate pain and immediate financial impact upon taxpayers.  Regardless, financial resources on the local district levels will become strained.  Perhaps there will be cuts to staff, increased class sizes, or loss of auxiliary programs - Theater Arts, Music, Creative Writing, to name a few.

Some truths are still evident.  School income – also wealth – is created by a combination of three elements:

1.      Property Wealth – This is the combined value of all the real estate in a school district, which in turn determines just how much money the local schools can generate from their property taxes.  According to Dick Ingram, head of TRS, Illinois is a state of financial extremes.
2.      Tax Effort – The total assessed value of real property must be multiplied by the school district tax rate to determine the amount of property taxes the district can receive.  Tax rates are subject to local referendums; therefore, taxpayers themselves decide whether or not to support their local schools and by how much.
3.      State Equalization Aid – The State of Illinois is supposed to provide equalization funds to compensate for the differences in local property wealth, but the dollars can never meet the vast gaps in differences.  District relying on state aid have far less than districts that can rely on wealthy property taxes (Illinois Association of School Boards. Playing fair with the children of Illinois. .

Need an example?

In south suburban Ford Heights, where the median annual household income is about $16,000 and the average home is worth $42,000, the local taxpayers give up property tax rates of 21.7 percent.  On the other hand, in Winnetka, where the average home is worth $1 million, and the annual household income is $207,955, the property tax rate is about 6%, according to statistics compiled by the Cook County clerk (Kadner, Phil. Pols pull bait and switch on teacher pensions, taxes.  Chicago Sun-Times.  12 February 2012). 

Here’s a real rendezvous with reality.

Shifting the costs of the state’s pension problems to local taxpayers would break the poor but only slightly distress the wealthy.  (Personally, while I can live with the latter, I find it unconscionable to do the former.) 

Augmenting that most unacceptable fact, Illinois (in 2006!) had the most inequitable education funding system in the country, with per pupil spending ranging from a high of almost $23,700 to a low of less than $4,500 (Center for Tax and Budget Accountability.  The current status of public education funding in Illinois. 2006).  And, today, while taxpayers in Schaumburg pay a composite tax of nearly 7.7%, those who struggle in poverty-ridden Robbins will pay property taxes ranging from 9 to 10.3%, with an income average at least one third that of Schaumburg. 

In the case of House Speaker Madigan, “skin in the game” means, basically, if you are a public employee, it’s your skin.  “The question is how to do that (solve the pension problem) within the confines of the state constitution, which says public employee pension benefits cannot be reduced once they are given.  Madigan outlined a potential trade-off.  ‘The question is for a person on a public job today, can we say to them “Everything you’ve earned up to today you keep, no change?” But…can we say to that person, “Starting tomorrow, it’s going to be a different deal.  It won’t be as rich.  The benefit level will not be as high, but we will save the stability and integrity of your pension system.’” (

So, either the public employees sacrifice or the local taxpayers sacrifice.  Meanwhile, companies in Illinois carry on calmly claiming their rights to tax loopholes and rebates.  While the governor nods to the idea of locals paying more, remember that big-box Illinois retailers receive back 1.75% of the sales tax revenue they collect from consumers on behalf of the state (Sachdev, Ameet & Cancino, Alejandra.  Tax giveaways under a microscope. Chicago Tribune.  4 March 2012).  And that’s just one small sampling.