Idea similar to what Supreme Court struck down
PENSIONS | Patrick Yeagle
Gov. Bruce Rauner’s new plan to reduce Illinois’ pension obligations would circumvent collective bargaining on several aspects of state employment.
The 485-page plan earned criticism from Democrats in the Illinois House who say it’s too close to what the Illinois Supreme Court already dismissed.
In a July 15 legislative hearing, two of Rauner’s advisors told lawmakers in the House that the plan is based on the “consideration model,” a legal theory in which state employees are offered a choice as a way to get around the Illinois constitutional provision banning benefit cuts. During the hearing, Dennis Murashko, Rauner’s deputy general counsel, and Michael Mahoney, Rauner’s policy adviser for revenue and pensions, repeatedly called the governor’s plan constitutional. But consideration was also the basis of Senate Bill 1, the previous ill-fated pension law that the Supreme Court unequivocally struck down in a unanimous decision issued in May.
The Supreme Court decision doesn’t mean consideration is necessarily doomed as a legal strategy, but it does put strict constraints on any future changes to pensions. Rep. Elaine Nekritz, a Democrat from Des Plaines and chairwoman of the House Personnel and Pensions Committee, said she struggled to see a substantive difference between SB1 and Rauner’s new plan. Other Democrats drew a distinction between the previous law, which offered a benefit in exchange for accepting a cut elsewhere, and Rauner’s plan, which offers a choice between two cuts.
Murashko told the House panel that the “consideration” in the plan revolves in part around future salary increases. If an employee wants to stay in the existing “Tier I” pension system, he said any raises the employee receives would not be included in the calculation of his or her pension benefits. Alternatively, the employee could opt for the “Tier II” pension system – which has significantly worse benefits – and have future raises included in the calculation of their pension benefits.
Murashko cautioned that employees are not entitled to any pay increases, although savings projections run by Rauner’s administration show that employees who remain in Tier I would continue to receive the current 3 percent cost of living adjustment.
Democratic members of the House panel noted that Tony Smith, Rauner’s state Superintendent of Education, was hired under the Tier II system but received a stipend worth thousands of dollars to make up for his inability to be added to the more comfortable Tier I system. A state law passed in 2010 mandated that anyone who first contributed to a state pension system after Dec. 31, 2010, must be added to Tier II instead of Tier I. To the Democratic lawmakers on the panel, Smith’s deal was an admission by Rauner that the Tier II system does not provide an adequate retirement.
The wide-ranging Rauner proposal would limit which aspects of state employment would be negotiable under collective bargaining, would set up “oneon-one” negotiating between the state and individual employees, and would even allow municipalities to declare bankruptcy – a controversial idea that could mean cities could dump their pension debts.
Murashko said that although certain aspects of employment like salary and hours would no longer be subject to collective bargaining, many other aspects of employment would remain so. Rauner’s office later provided a “non-exhaustive” list to the committee detailing 90 aspects of employment that would remain negotiable, including job classifications, dress code and grooming standards, the amount of paid time off to attend grievance hearings, whether the state will collect union dues and more.
Representatives of three union groups vigorously opposed the plan, calling it blatantly unconstitutional.
“This is not necessarily a choice,” said Will Lovett, a lobbyist for the Illinois Education Association. “It’s a coerced choice, in our opinion. … This is more of a choice of how you want to cut your pension benefits.”
Additionally, union leaders question whether Tier II – and thus Rauner’s plan to move employees to that tier – is even legal under federal law. Teachers and some other state employees receive Social Security, so federal law says their benefits must meet or exceed Social Security levels. However, there is some uncertainty in the Statehouse over whether the existing Tier II system will provide such benefits.
Nekritz said the Rauner plan would not likely move beyond her committee until she and other lawmakers get answers to numerous questions. The plan had not been filed as a bill in the Illinois General Assembly at publication time.
Contact Patrick Yeagle at [email protected].