Public pension reforms enacted in Illinois in 2014 by former Gov. Pat Quinn (D) violated retired Chicago government employees’ constitutional rights, the Illinois Supreme Court has ruled.
In March, judges on the Illinois Supreme Court unanimously ruled Public Act 98-641 violated the state’s constitution “because it diminished pension benefits” by attempting to reduce automatic cost-of-living increases for current retirees, increase the retirement age, and revise the salary amounts used in calculating benefits for future retirees.
The case reached Illinois’ highest court after lawyers representing the City of Chicago appealed a lower court’s July 2014 decision, in which Cook County Circuit Court Judge Rita Novak determined Quinn’s pension reform law to be unconstitutional because it “diminished or impaired” pension agreements offered to workers when they were first hired.
Sheila Weinberg, founder and chief executive officer of the nonpartisan watchdog group Truth in Accounting, says Chicago taxpayers are now drifting into uncharted waters without a paddle.
“We are in uncharted territory,” Weinberg said. “It’s not like we can say this has happened in ‘X’ place before, so therefore ‘Y’ is going to happen now. We know it is doom and gloom, but we’re not exactly sure what it is.
“In the Chicago area specifically, I tell people there are only two ways out of this,” Weinberg said. “Either you bring more money in, increasing contributions, which probably means increasing taxes, or you have to take less money out, which means cutting benefits. Option number two is off the table, as far as the Illinois Supreme Court is concerned.”
‘It’s a Death Spiral’
Weinberg says taxpayers are already abandoning ship and leaving the city for other, more financially sound cities.
“Then, the doom and gloom gets into it: Are people going to leave because you’re raising taxes?” Weinberg said. “Yes, people are already leaving.”
Rachel Grezler, a senior policy analyst for economics and entitlements at The Heritage Foundation, says Chicago lawmakers have created a financial “death spiral” for the city.
“Their taxes are already extremely high, and it comes to the point where you’re worried about people and businesses leaving the city, and then it’s a death spiral, because at that point you don’t even have a tax base to keep raising tax rates,” Grezler said. “All that does is reduce tax revenues, because people and businesses are leaving.”
Blame for Unions, Courts
Grezler says government unions’ unwillingness to compromise with lawmakers is leading them and the state toward disaster.
“The fear is that the unions and the court decision are just going to lead to this death spiral in both Chicago and in Illinois,” Grezler said. “The unions not being willing to compromise and reduce benefits at all, … ultimately that could be to their detriment, because there is only so much money there.”
Luke Karnick ([email protected]) writes from Indianapolis, Indiana.