02 / 2016
By Edward N. Tiesenga
Originally published by the DuPage County Bar Association, reprinted with permission
To be an Illinois legislator creating great outpourings of benefits targeted to your supporters, accounting or actuarial competence is not required. To be an Illinois municipality charged by law with funding police and fire pensions, however, does require financial competence, and the ability to read the map of Illinois pension spending in some detail. Like the great cartographers of the past, we lawyers can share the excitement of measuring the actual locations of the tributary statutory language forming the rivers of debt now engulfing municipal budgets everywhere in Illinois.
We start with the Illinois constitution, which says that no matter what prior majorities of the Illinois General Assembly did with their math, the resulting spending mandates are for all practical purposes infallible, and may not be reversed, revised, or reduced in any way! This is good news for those legislators who shied away from math in school, but still wanted to make laws about the complexities of pensions. And interestingly, the Illinois Supreme Court has now confirmed that the Illinois Constitutional Convention of 1970 prohibits us from correcting any such bad math. Legislatively enacted pensions, as a result, can never be corrected—just paid for.
The financial expression of decades of legislative effort in the municipal pension area has become devastating. At the state level, Illinois owes at least $104.6 billion to its pension plans. Accusations of underfunding go back and forth at the state level. However, in the realm of municipal fire and police pensions for the over 6,994 units of local government in Illinois, there has not been state underfunding, because the state never has funded these municipal pensions. 1,299 of these governmental units are municipalities. Police and fire pensions are funded by payroll deductions (which are capped at 9.91 percent of payroll for police, and 9.455 percent for fire) and by general municipal revenue fund contributions (which are not capped).
In the recent Illinois State pension litigation, Justice Karmeier, writing for a unanimous court, analyzed the attempt of the Illinois General Assembly to reduce some benefits under four of Illinois’s five state-funded pension systems. The court held that article XIII, section 5 of the Illinois Constitution of 1970 protects any increased pension benefits from ever being decreased by normal legislation; and that no benefit reductions may be made except by amending the Illinois Constitution. Here is what article XIII, section 5 says:
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