Monday, April 4, 2016

Cullerton & Rauner Pension Plan: Stymied by Latest ILSC Decision

Rauner’s Planned Pension Deal with Cullerton: Better Read the Latest ILSC Decision

We were having lunch the other day with a friend/blogger after the late March release of the latest Illinois Supreme Court response to one more attempt to curtail the benefits earned by retirees and future retirees of state workers safeguarded by the Pension Protection Clause in the Illinois Constitution. 

In this case, it was the March 24th refutation of the argument by those representing the City of Chicago and besieged Mayor Rahm Emanuel to support the legal validity of Public Act 98-641, passed by the General Assembly; which would progressively increase the contributions of workers in the MEABF (Municipal Employees Annuity and Benefit Fund)and the LABF(Labor & Retirement Board Employees), make permanent changes in their retiree Cost of Living allowances, and promise to make payments to bring funding ratios to 90% by 2055.  

Promise, that is. 

If this sounds strangely familiar, it should.  Especially if you were a retired state worker in 2013 when the We Are One Coalition was promoting SB2404 as a way forward in a negotiated solution to remedy an outrageous unfunded liability in Illinois.

Cullerton’s bill in 2013 offered what was promoted by the WAO coalition as a choice (or consideration) between retaining a compounded COLA or specific health care opportunities.  According to the WAO coalition, the most attractive of the offerings was the promise of a “key element…the language that guarantees pension funding…This will help guard against a repeat of the mistakes made by politicians of the past.”

Promise, that is, again. 

You might also remember that the General Assembly dismissed the Cullerton SB2404 and instead embraced the Nekritz/committee’s more draconian SB1, which was later struck down by a unanimous decision of justices of the Illinois Supreme Court in May of 2015.

Interestingly, the aforementioned Public Act 98-641 now provides quite an analogous opportunity to view the potential judicial reaction to the Cullerton bill and its supporters, including the WAO coalition.  Although it contains some aspects of the more severe SB1, an argument incorporating an affirmative defense and an argument for sovereign rights, the bulk of its presentation included an affirmation of shared sacrifice on the part of unions (and particular peoples) as well as promises made by the City to make payments.

In fact, current Governor Rauner and Minority Leader Representative Jim Durkin have been intensely promoting the same type of “consideration” argument, and Governor Rauner has vocalized his collaboration with Senate Leader Cullerton in the drafting of another “choice” pension reform bill in order to save the state money and provide money for the Governor’s desperate revenue needs. 

Nothing thus far.

Back in 2013, leadership from the WAO Coalition informed a group of us in Lombard that representative tallies of membership indicated a majority willingness to accept “choice” between health care and COLA benefits an acceptable pathway to making permanent changes in future benefits of public workers.   “We’ve done a large sample of our people,” we were informed. 

“While both bills employ a "choice" concept to meet the constitutional challenge, only the Cullerton-Coalition bill provides something of value in exchange for a participant agreeing to a benefit change.
The unions believe SB 2404 is constitutional, and we urge that it be passed.”

The recent ILSC decision in the case of the City of Chicago contravenes this presumed position of political influence by either sampling or the acquiescence of specific union members as representative of the whole:

¶ 23

The court additionally rejected defendants’ assertion that the Act was a valid bargained-for exchange, finding that (1) the unions were not acting as agents in a collective bargaining process, (2) the unions could not have represented the retired members while at the same time acting as representatives of the active employees, and (3) nothing in the process that led to the enactment of the Act barred the individual plaintiffs from asserting their constitutional rights or operated as a waiver of those rights.

Secondly, the inclusion of language to promise making payment “from now on” to increase funding is treated as a canard by the ILSC.

¶ 41

Despite the City’s reliance on the General Assembly’s stated purpose in enacting the legislation to save the Funds from insolvency and the inclusion of enforcement mechanisms, nothing in the Act’s funding provisions expressly provides for an enforceable contractual right to an “actuarial funding guarantee.” Indeed, the language in the enforcement provisions is qualified in many respects.
40 ILCS 5/8-173.1, 11-169.1 (West 2014).
For example, the Act provides that the Funds may bring a mandamus action at their discretion if the City fails to make its required annual contributions, and limits any repayment plans to those that do not “significantly imperil[ ] the public health, safety, or welfare.” 40 ILCS
5/8-173.1(b), 11-169.1(b) (West 2014).
Nothing in that language supports a legislative intent to establish clearly and unequivocally an enforceable contractual right of the members of the Fund to an “actuarial funding guarantee.” Accordingly, for all of these reasons, the statutory funding provisions are not a “benefit” that can be “offset” against an unconstitutional diminishment of pension benefits.

The City’s theory would allow the legislature “through its funding decisions, [to] create the very
emergency conditions used to justify its suspension of the rights conferred and protected by the constitution.” Heaton, 2015 IL 118585, ¶ 85.
This is the very circumstance that the pension protection clause was intended to foreclose. To be
clear, the constitution removed the option of unilaterally diminishing benefits as a means of attaining pension stability.

In other words, the offer of 2013’s SB 2404 to make payments or face mandamus proceedings by the unions is regarded as an “illusory promise” at best by the ILSC in its 2016 decision.

As for the question of what might constitute a valid consideration when it comes to choices, the ILSC is also nuanced in its response:

Whether members of the Funds may be “better off” under the new terms of the Act despite the unconstitutional diminishment of their benefits, as defendants contend, is not for the General Assembly to decide unilaterally. The fundamental point here is that determination must be made, if at all, according to contract principles by mutual assent of the members, and not by legislative dictates.

Some, like Rauner and other legislators, hold out hope that this decision means pension benefits may be curtailed through a collective bargaining process.  On the other hand, the nearest such bargaining at a localized level may reach might be the amount of pension pick-up (as in Chicago and the CPS) and not much more.  We may have ratified salaries or benefits or class sizes or increased assistance for students’ programs in our association negotiations – but I do not recall ever choosing retirement options or changes in after-work benefits. 

My friend across the lunch table had been present at that same meeting in 2013.  He had loudly and vehemently reminded leadership that no one had ever asked him how he’d felt about the proposed SB2404.  He also propitiously forewarned them what the ILSC said last month:

In this case, it is undisputed that the unions were not acting as authorized agents within a collective bargaining process. Thus, we need not resolve whether the vote taken by union representatives as expressed in the Brandon affidavit bound members of the Funds in a collective bargaining process. Rather, we agree with the trial court that “these negotiations were no different than legislative advocacy on behalf of any interest group supporting collective interests to a lawmaking body.”
The individual members of the Funds have done nothing that could be said to have unequivocally assented to the new terms or to have “bargained away” their
constitutional rights. Accordingly, nothing in the legislative process that led to the enactment of the Act constituted a waiver of the Funds members’ constitutional rights under the pension protection clause.

Recalling all of this, our friend/blogger smiled and ordered the Taramosalata.  

We cringed.  

He shares.

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