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Sunday, March 23, 2014

Illinois pension crisis: a prediction

I’ve blogged several times on the financial crisis around the state of Illinois’s long-term tendency to promise pension benefits but not fund them.

So, a few months ago, they passed a pension reform bill. Shouldn’t I be happy now?

No. I think there’s a good chance this is just more theatre.

1. I haven’t seen an actuarial study that indicates this reform will actually solve the problem.  The reform was pushed through in almost a star-chamber manner with little information about it ahead of the vote – even for legislators – and certainly not enough time for careful study. So they didn’t know it would work when then voted for it.

2. After several months, I haven’t seen such an actuarial study.

3. There are, of course, lawsuits filed by interested parties. The reform bill seems unconstitutional on its face, since the Illinois constitution states:

SECTION 5. PENSION AND RETIREMENT RIGHTS
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.



4. About the only thing working in favor of the judges ignoring the clear language of the constitution is (1) as Madigan noted, many of the judges are his political allies, and (2) the pension reform deliberately does not cut the benefits of judges.



Madigan … believes "at least four members of the Illinois Supreme Court that will approve the bill." Snickering, arrogant Madigan said this about not including judges in the bill: "That's a practical judgment that was made. No further comment."




5. The court does not have to rule with any particular timing; the law is scheduled to take effect in June, 2014, but they could easily defer that until the case is settled.  So they can wait until after the November elections to rule, and probably would want to avoid such a hot button issue in what will probably be a very dirty campaign for governor.


6. So, my prediction is that they will rule against the pension reform bill after the November, 2014 gubernatorial election – putting us back where we were years ago, but with the financing problem having compounded since then.