Sunday, May 20, 2012

Urgent: Contact Your Legislator NOW!

UIC UNITED's Board of Directors recommends that you send the following message immediately to your state legislators, either by email or telephone:

Rumors abound that a bill dealing with pension reform is likely to be introduced and voted upon soon.  The last pension bill, SB1946 in 2010, established the two-tier system for state employees hired on or after Jan. 1, 2011, and was fraught with unintended consequences, many of which will negatively impact higher education for decades to come.  It was a bad bill, done in a hurried and secretive way.  With the proper input and discussion, it could have been better.

At this point, I urge you and your colleagues to Vote NO on any pension bill that comes forward in the remaining days of this month which is not given sufficient hearing time and discussion in the General Assembly as well as appropriate input from constituents.  There should be careful consideration given to the positions of employee groups represented by bargaining agents as well as retiree groups such as SUAA.

What Are You Doing to Protect your Future?
Join SUAA Now!

Thursday, May 17, 2012

Illinois Public Universities Presidents & Chancellors Letter to Governor Pat Quinn

Author: Illinois Public Universities Presidents a Chancellors
Title: Letter to Governor Pat Quinn
Date Published: May 3, 2012

The Honorable Pat Quinn
Governor of Illinois
Office of the Governor
207 State House
Springfield, IL 62706

Re: SURS Sector Pension Stabilization Package - Statement of Objectives

Dear Governor Quinn:

No problem weighs heavier on the State of Illinois than the current crisis surrounding funding for public employee pension programs. As the magnitude of this issue has unfolded, we, the presidents and chancellors of Illinois Public Universities, have indicated our willingness to contribute toward a resolution of this matter and our willingness to support reasonable measures that will maintain a viable public employee pension program. However, we remain convinced that any solution must protect the interests of the thousands of state university employees who for decades have unfailingly paid into the State Universities Retirement System (SURS). Human capital and intellectual resources are fundamental to the missions of our public universities and thus we wish to convey the following statement of objectives and principles, as we respond to your most recent proposal and also continue to work with you and leadership of the General Assembly toward a comprehensive stabilization plan for SURS

We firmly believe that any reform of the State University Retirement System (SURS) must provide public universities and colleges with the ability to retain and recruit talented faculty and staff by providing a credible promise of retirement security to our employees. It must also be financially sustainable for the State, the universities, the participant, and it must respect existing constitutional protection against the impairment of already-accrued pension benefits. Any stabilization proposal must find a fair and equitable way to share the burden of the reform among all the stakeholders--the participants, the universities, and the State.

In addition:

• State must implement a clear plan for the amortization of accrued unfunded liabilities and provide credible assurance that all payments going forward will be made as scheduled.

• To sustain the long-term financial health of universities, any transfer of Normal Cost to universities must be limited and achieved over a reasonable transition period. During the transition period, State should maintain appropriations to universities and university contributions for the CMS employee group health insurance plan at the FYl2 level. Any changes in these levels should be considered as university contributions toward normal cost of pensions.

• State should continue to make annual contributions to the pension system to fund the difference between actual Normal Cost and the combined university and employee contribution and not less than 6.2% of payroll. This is the amount the State would be required under federal law to pay in FICA taxes to support Social Security had the state not opted out of that system.

• All promised benefits to current participants should be maintained.

• Resetting the benchmark for determination of the Effective Rate of Interest (ERI) going forward, to a relatively conservative Government Bond index.

• Any reform must include reform of the current Tier II program for new employees. We suggest a "Hybrid" plan to replace the existing Tier II and Self Managed options for new employees. Key aspects should include a defined benefit program similar to social security benefits, a parallel defined contribution plan fully funded by university and employee contributions, a phased-in vesting schedule completed as of the 5th year of service and a compounded cost of living adjustment.

• Unfunded mandates for universities should be stabilized because these too require the obligation of limited university resources, and delays in payment of university appropriation vouchers must be improved.

As presidents and chancellors of the state's public universities, we urge serious review and consideration of this set of objectives and look forward to the opportunity of continuing working with you toward a durable, equitable, and long-term solution to the SURS funding issues.

Illinois Public University Presidents and Chancellors

What Are You Doing to Protect your Future?
Join SUAA Now!

University Senates Conference
Resolution on Pensions

Author: University Senates Conference
Title: Resolution on Pensions
Date Published: April 27, 2012

Resolution on Pensions
University Senates Conference
April 27, 2012

The University Senates Conference (USC), in its role as a faculty elected advisory body to the President of the University and the Board of Trustees, recognizes that the funding basis for the State University Retirement System (SURS) is not sustainable in its current form. Previous underfunding of the system has made SURS unable to continue to pay out benefits indefinitely at current levels, even though participants have fully contributed their portion of responsibility for the system.

As has been documented, Illinois ranks 50th among the 50 states in adequately funding its public pensions. This situation cannot be allowed to continue; retaining and recruiting top faculty to our universities will be increasingly difficult unless this issue is addressed.

Today we face a reality in which sensible, equitable reforms are needed. The USC writes to acknowledge this reality and to seek a constructive way forward. Reforms will be needed in order to return the SURS system to a sound financial footing, and all stakeholders — participants, the universities, and the State — have a necessary role to play in such reforms. These reforms must be guided by certain agreed-upon principles, the most important of which is fairness to university employees who entered the system on the basis of certain understandings and commitments that need to be honored.

Other principles also seem to us reasonable and prudent as a solution is being worked out. Many of these principles are laid out and defended in the IGPA report authored byJeffrey R. Brown and Robert F. Rich: Fiscal Sustainability and Retirement Security: A Reform Proposal for the Illinois State Universities Retirement Systems (SURS), Institute of Government & Public Affairs, University of Illinois, Urbana-Champaign, Chicago, Springfield, Feb. 9, 2012.
  • Any reformed SURS system must be financially sustainable for the State, the universities, and the participants, and it must respect existing constitutional protections of already-accrued benefits;
  • All promised benefits to current participants and annuitants should be maintained, as guaranteed by the State Constitution (Article 8, Section 5 General Provisions);
  • Existing unfunded liabilities must remain the State's responsibility, and the State must provide credible guarantees that future payments will be made on time (such as through a clause that state contributions to the system must have priority);
  • In addition, the State should continue to make its contributions to the system at a level at least equal to the level of what it would be paying to Social Security (6.2% of pay) along with its contributions to health care;
  • Any transfer of normal costs to universities must be nominal, and phased in gradually;
  • Any reform must include improvements to the current Tier II program for new employees, as suggested in the IGPA position paper referenced above (this could include a hybrid plan combining some elements of defined benefits and an employee self-managed plan), and this revised program should also be available to Tier I employees;
  • Any change in participant contributions must involve consultations with those affected. The USC is ready to participate in further discussions in order to seek a constructive resolution to these issues.
The USC is ready to participate in further discussions in order to seek a constructive resolution to these issues.

President Hogan and President-Designate Easter's Message Regarding the Letter from Presidents and Chancellors of Public Universities to Gov Quinn and Legislative Leaders

Author: Michael J. Hogan, Robert A. Easter
Title: President Hogan and President-designate Easter's Gov Quinn...
Publication: UI Massmail
Date Published: May 4, 2012

Members of the University of Illinois community:

In these closing weeks of the scheduled legislative session in Springfield, there is heightened attention and activity around the critical issue of stabilizing the underfunded liabilities of Illinois' five public pension systems, including the State Universities Retirement System (SURS).

Leaders of our state's public universities have been engaged on their respective campuses and in Springfield for over a year to identify an equitable solution to the unsustainable pension funding shortfall. On Thursday, the presidents and chancellors of the state's public universities acted in unison to provide a "Statement of Objectives" for successfully resolving this issue. They did so in a letter to Gov. Pat Quinn and to the four leaders of the state House and Senate.

The letter states that any changes affecting SURS must provide "a credible certainty of retirement security to our employees." It lays out principles and specific conditions essential for a successful pension stabilization proposal. "It must also be financially sustainable for the state, the universities, the participant, and it must respect existing constitutional protection against impairment of already-accrued pension benefits," the letter stated.

Last week our University Senates Conference (USC) approved a resolution endorsing a similar set of principles and objectives. We commend the USC and faculty members for helping to draw attention to this important issue. We and our government relations team will continue to strongly advocate on this issue as the legislative session, scheduled to end May 31, progresses, as we have been throughout these discussions. Links to additional information on this subject are listed below.


Michael J. Hogan, President
Robert A. Easter, President-Designate

Letter (May 3) from presidents of state universities in Illinois:

USC statement (April 30):

Institute of Government & Public Affairs pension website:

What Are You Doing to Protect your Future?
Join SUAA Now!

President-Designate Easter's Statement about Gov. Quinn's Pension Proposal

Author: Robert A. Easter, President-designate, University of Illinois
Title: President-designate Easter's statement about Gov. Quinn's pension proposal
Publication: UI Massmail
Date Published: April 23, 2012

Members of the University Community:

The state of Illinois continues to experience severe financial stress caused by the largest economic downturn in decades and resulting insufficient revenue to meet the needs and obligations of the state, including pensions.

Last Friday, Gov. Quinn announced his proposal to stabilize the state's public pension system that includes the State University Retirement System (SURS). The proposal is limited to the SURS traditional benefit plan and does not impact employees in SURS self-managed plans.

The Governor's proposal includes increasing employee contributions, raising the retirement age, and reducing cost-of-living adjustments. The proposal does not identify an effective date for the changes or suggested phase-in periods.

Let me stress that this is only a proposal, and no legislation has been introduced. We will closely monitor its progress through the legislative session.

We also will be actively engaged in proposing adjustments and amendments to the proposal to minimize the financial impact on our dedicated employees and protect retirement benefits earned. Approval of the proposal by the legislature in its present form is uncertain.

I fully appreciate the concern you may have about your retirement system and the impact these proposed changes may have on you and our great University. We will keep you informed as this proposal moves forward for legislative consideration and do everything possible to protect the retirement benefits you have earned.

Robert A. Easter
University of Illinois

For More Information
Gov. Quinn's news release

SURS fact sheet on governor's proposal

Rockford Register Star coverage of governor's proposal

What Are You Doing to Protect your Future?
Join SUAA Now!

Wednesday, May 16, 2012

Rep. Biss Holds Town Hall Meeting on Pensions

Author: John Laesch
Title: Rep. Biss Holds Town Hall Meeting on Pensions
Publication: The Progressive Fox
Date Published: May 2, 2012

State Rep. Daniel Biss had the courage to hold a town hall meeting to discuss “pension reform” in Glenview on April 30th. I estimate that 200-225 people attended the overcrowded room that was set up to accommodate 75 people.

The standing room only crowd was a mirror image of other pension discussions happening around the state. The general mood of the cramped, “slightly too warm for comfort” room was polite and respectful. Biss set the tone by taking questions and respecting diverse opinions while facilitating the conversation artfully.

I attended the event because I felt that if Representative Biss had the courage to hold a controversial town hall meeting that he might also have the courage to lead a fight to actually fund pensions and uphold the state’s end of the deal.

There seemed to be a general understanding (and acceptance) that Mike Madigan would ultimately write a bill and drop it in for a late-night vote that everyone would support. One woman asked Biss if he would vote “yes” if something like SB 7 came down in the middle of the night. He dodged by saying, “I won’t vote for something I don’t understand.”

When I asked if Biss would support eliminating tax loopholes or a graduated tax as a funding mechanism for the Teachers Retirement System (TRS), he suggested that we might be able to do something like that in 2015. Like all lawmakers who talk to a progressive, informed voter, Biss said that he supports a constitutional amendment to get a progressive tax structure. Any lawmaker will tell you the same thing if you ask him or her, “why are we not taxing the rich like most of the other states do?” While lawmakers placate in-district voters with supportive language, for some reason, this conversation must never come up in Springfield during sessions that are dominated by discussions about budget shortfalls.

During his answer to this question Biss eluded to the “Springfield group think,” also known as “Madigan think,” that there would only be discussions of cuts in 2012 because we had already raised taxes in 2011.

So, the evening went on in the same polite, respectful, non-controversial manner that it opened with and, by 9:30 we were back on the road. Maybe Video News Service Producer, Mike Barr, summarized the meeting best when he said, “Everybody seemed happy. Let me politely stick this knife in your back. Is that OK? Good. Everybody keep smiling now.” Then it hit me.

Teachers are used to being polite and teaching children to be respectful and use “inside voices.” Unfortunately, this is a fight that demands controversy, strategy, and some “outside voices” of agitation.

I came home and read e-mails from the agitators, the fighters, also known as “The Pension Stalwarts,” a grassroots organizations of teachers that effectively stopped this assault when it was in the form of SB 512. One “stalwart” forwarded an e-mail from IEA President, Cinda Klickna. The e-mail acknowledged that this was, “the fight of our lives” and e-mail recipients should know that IEA was pursuing a legal strategy to stop Quinn’s proposal.


A legal strategy is necessary and smart, but teachers’ labor leaders need to strengthen their negotiating position by pushing lawmakers with in-district meetings and public events. Negotiating within the existing framework of “pension reform” is a guaranteed loss. Instead, labor leaders need to negotiate from a position of “pension funding.” The call for a graduated income tax is a good way to generate necessary revenue, but it is politically unlikely and complicated to pull off. Labor would be much better positioned to seek necessary revenue through a “Speculation Sales Tax” (SST), taxing the trades at the Chicago Mercantile Exchange and the Chicago Board Options Exchange. The SST is on each contract (essentially the buying and selling of derivatives), not each trade, and would generate an estimated $6 billion in revenue.

Now I get to use this blog to tell teachers and Representative Biss what I really think in my polite and respectful way.

Dear teachers and educators of all levels,

Every teacher knows that words are powerful. Telling a child that he or she is “stupid,” “dumb,” or “worthless” can leave lasting mental and emotional scars. The words become a self-fulfilling prophecy until they are replaced with words of empowerment and encouragement. Words like, “great job,” “you can do it,” “you can do anything” can change a child’s outlook and self-confidence forever. As educators, you use these words all of the time, and the world thanks you for repeatedly using these “word gifts.”

Brothers and sisters in education, you need to know that a coordinated attack that uses repetition and negative words is being used against you. The words are designed to make you stop fighting and stop questioning “the new reality.” Words like, “pension reform is needed” are designed to make you feel like you are the problem. Words like, “sure it is not fair, but we have to do something” are designed to make you look beyond the fairness issue and move towards acceptance. Words like, “it is a done deal” or, “there is nothing you can do to stop it” are designed to make you stop fighting all together.

These messages are repeated and work as a brainwashing method. Repetition through talking heads like Ty Fahner (Chicago Civic Committee), repetition through the Chicago Tribune, repetition through the Daily Herald, repetition through Governor Quinn, repetition through members of the Illinois General Assembly. And, even repetition through Dick Ingram, the Executive Director of your own retirement system.

Fortunately for me, my first teacher was my mother on the mission field in West Africa. In addition to teaching math and English, she did a great job re-enforcing the idea that her four boys “could be anything we wanted to be,” and, “that there were no mountains too high.”

As we approach decades of Springfield’s inaction, incompetence and the biggest threat to public employees that the state of Illinois has seen in a long time, I feel good that we can climb this mountain. I hear not the repetitious words of failure. Instead I am taken back to Wisconsin and the stories of teachers calling in sick to occupy the capital.

Fresh in my mind are the images of that gym teacher crawling through the bathroom window to retake the Capital after it was closed for cleaning. My ears are still ringing with the sounds of heels and work boots stomping on the marble floors to the powerful, unified voices of America chanting, “WHO’S HOUSE?” “OUR HOUSE!”

I remain optimistic that 2012 is the year of justice in Illinois - the year of unity - the year that the voices of hard working Illinois citizens silence and defeat “Madigan think.” We can do it!

These are my words for those who want to keep fighting from the outside. Now…

Brother Biss,

We first met when we were both fighting uphill political battles. Your path took you to the halls of power in Springfield and you need to be there. My path has made me one of the voices of dissent and agitation on the outside. I need to be here.

Having referenced my mother, it is only appropriate to recall words of wisdom from my father. He once said, “leadership is doing the right thing at the right time, even when it is not popular.”

Right now, Illinois needs leaders, not “tow the liners.” Leaders have the courage to challenge broken ideologies and broken systems. We have a broken political system that is begging for new leadership.

You have proven that you can get elected. You have proven that you have leadership potential. You have proven that you are smart; smart enough to do “pension math.” I think you are smart enough to figure out how to navigate the broken system and build a team that can change things.

Specifically, we need a leader to enter a pension funding bill.

Smart, ambitious leaders have the potential to be speaker, or governor. People will follow a leader, but they will not follow a capitulator.

My words to brother Biss and other members of the Illinois General Assembly are a plea to look beyond politics of the day and provide the kind of leadership that will strengthen our public education system and create a better future for our children.

What Are You Doing to Protect your Future?
Join SUAA Now!

The Constitutionality of
Illinois Public Pension Reform

Author: Donald R. Tyer
Title: The constitutionality of Illinois public pension reform
Publication: OTTOSEN*BRITZ
Date Published: Fall, 2011

Legal Insights for Pension Boards (Fall 2011)

Illinois legislators have postponed the inevitable battle on pension reform for public employees until the General Assembly’s fall veto-session. Even though a bi-partisan sponsored reform package made it out of a House committee in May, it could not garner sufficient support on the floor to encourage its sponsors to attempt to push it through the General Assembly.

One fact everyone agrees on is that the Illinois public pension systems are critically underfunded, which some have estimated at $85 billion. Early last year, Governor Quinn signed into law a reform measure for public pensions decreasing the pension benefits of all public employees hired after the law took effect last year. Governor Quinn claims the law will save Illinois billions of dollars, but the projected savings will not be realized until many years down the road. The question now facing the General Assembly is whether the “Pension Clause” contained in the Illinois Constitution bars reforms that would decrease the benefits of current public employees.

Current retirees and public employees who will be retiring in the near future will place a tremendous strain on Illinois’ already underfunded pension systems. In an effort to ease this burden, the recently-tabled reform proposal planned to create a three-tiered pension benefit plan for some current public employees in the statewide pension systems. The reform proposal does not include fire or police pension funds, at this point. The first tier would preserve existing pension benefits by requiring higher employee contributions which would increase every three years. The second tier would offer reduced pension benefits for current employees, while the third tier would allow employees to opt in to a 401(k) type retirement plan with the state matching employee contributions.

All three options have the net effect of reducing benefits for employees who are currently contributing to the various state pension systems, and this, critics argue, is a violation of the Pension Clause in the Illinois Constitution.

The Pension Clause of the 1970 Illinois Constitution provides:

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. (1970 Illinois Constitution, Article XIII, Section 5)

The Pension Clause establishes that a contractual relationship exists between a public employee who contributes to a public pension fund and the fund itself. Throughout the history of public pension systems in the United States, states have adopted a variety of protections for pension plan participants ranging from codifying the contractual nature of the relationship in the state constitution (as in Illinois) to using legal concepts such as promissory estoppel to define the rights and benefits of each employee (as in Minnesota).

Even though states choose different approaches to afford protections to public workers, funding problems are forcing legislators to explore ways to alter benefits. In some states pension reform has already been challenged in the court system. Recent pension reform court rulings in Minnesota and Colorado may be viewed as bellwethers to other states grappling with the same problems.

The Minnesota and Colorado pension reform cases involved reducing the cost of living adjustment (COLA) that pensioners in those states automatically received. In both cases, courts dismissed the lawsuits in favor of the state legislatures, allowing the reform measures to proceed. In Minnesota, the court found that the retirees did not prove beyond a reasonable doubt that changes to pension benefits were unconstitutional. In Colorado, the court held that reducing pension benefits to strengthen the overall pension fund was not a violation of any constitutional protections. (Swanson v. State of Minnesota, No. 62-CV-10-5285 (Second Judicial District, Ramsey County, Minn., amended complaint filed July 2, 2010) and Justus v. State of Colorado, 2010 CV1589 (Denver, Colo. Dist. Ct. Sept. 13, 2010)) These two decisions are not binding precedent for other state courts facing similar pension reform lawsuits now or in the future. To proponents of pension reform, however, these decisions bolster their argument to pursue the reduction of current benefits even when those benefits are constitutionally protected.

Note that South Dakota is currently awaiting a decision in its COLA reduction lawsuit, and the governor of New Jersey signed legislation on June 28, 2011, suspending COLA increases for New Jersey’s public pensioners as part of a package of comprehensive pension reforms. (Tice v. South Dakota, 10-225 (Hughes, S.D.Cir.Ct. 2010), New Jersey Laws, Chapt. 78, P.L. 2011)

Public employee unions are the most vocal in the anti-reform movement. They argue that the Illinois Constitution’s Pension Clause is an iron-clad protection for public pension benefits and was drafted specifically for that very purpose. Eric Madiar, chief legal counsel to Illinois Senate President John Cullerton, also argued against pension reform in a comprehensive legal analysis of the issues and history surrounding the Pension Clause. (Eric Madiar, 2011, Is Welching on Public Pension Promises An Option of Illinois? An Analysis of Article XIII, Section 5 of the Illinois Constitution.)

In his analysis, Madiar pointed to the Pension Clause debates that took place during the 1970 Illinois Constitutional Convention as a starting point for his interpretation of the Pension Clause language that prohibits Illinois from reducing benefits at all. In 1970, the Pension Clause sponsors argued that the Illinois Constitution needed a codified protection for public employees, similar to a provision in the New York Constitution that declared the contractual nature of pension benefits and foreclosed the possibility of the state reducing or eliminating those benefits entirely.

According to Madiar’s brief, after the Pension Clause was sent to committee for editing prior to submission to the voters, the Pension Laws Commission attempted to change the language by adding a contingency clause that would give power to the General Assembly to “enact reasonable modifications in employee rates of contribution, minimum service requirements and other provisions pertaining to the fiscal soundness of the retirement systems . . .” This change (submitted by the Commission twice) was rejected prior to sending the Constitution in its final form to the voters. Anti-reformers point to this fact as evidence that the drafters of the Pension Clause clearly sought to prohibit the state from reducing or diminishing an employee’s benefits.

When the text of the Pension Clause was eventually sent to Illinois voters, it included an official explanation from the Convention. The explanation stated that under the Clause, “provisions of state and local governmental pension and retirement systems shall not have their benefits reduced” and that membership in these systems “shall be a valid contractual relationship.” Finally, the explanation stated that the clause was “self-explanatory.”

Anti-reformers argue that Illinois case law supports the proposition that public pension benefits may not be reduced by the state. The Illinois Supreme Court first analyzed the issue of reducing pension benefits in the 1974 decision, Peters v. City of Springfield, 57 Ill2d 142 (1974). In Peters the firefighters sued to enjoin the city from lowering the mandatory retirement age, arguing that if the retirement age was lowered from 63 to 60, their overall pension payment would be reduced as they would not receive the extra three years’ increase in their salaries. The court held that the Pension Clause, like its counterpart in New York, created a contractual relationship that protected the employees’ rights from being diminished or impaired, even though it upheld the ordinance lowering the retirement age. Anti-reformers point out that the Illinois Supreme Court interpreted the Pension Clause to be a protection against state or local governments diminishing benefits, but the Peters decision was hardly a resounding proclamation that benefit terms could never be touched.

In the 1979 case, Kraus v. Board of Trustees of the Police Pension Fund of the Village of Niles, 72 Ill.App.3d 833 (1st Dist. 1979), the First District appellate court re-viewed a case involving the reduction of benefits to current public employees. In Kraus, a police officer on disability challenged changes made to the Illinois Pension Code while he was on disability and before he became eligible to collect his pension. The changes to the Code became the basis for the pension board’s decision to award Kraus a lower pension than he expected. In reviewing the case, the court conducted an exhaustive analysis of the Illinois Constitutional debates, the New York court decisions, as well as the Petersdecision, and concluded that any direct legislative action to reduce benefits due to a pension member is unconstitutional. The court distinguished the Peters decision, finding that lowering the mandatory retirement age only indirectly affected pension benefits and thus did not trigger the protections of the Pension Clause. Importantly, the court also held that pension benefits were a contractual right that could be modified under established contract principles such as an exchange for valuable consideration.

In 1985, the Illinois Supreme Court revisited the Pension Clause in Felt v. Board of Trustees of the Judges Retirement System, 107 Ill.2d 158 (1985). In Felt, several judges sued the Judges Retirement System after it applied an amendment in the Illinois Pension Code that changed the formula to determine pension benefits. The new formula used an average of the last year’s salary rather than the salary on the last day of service to determine the annuity benefit. The plaintiffs argued that the Pension Clause protected their interest in having their benefits calculated by the rules in effect on their first day of service and that any change should only apply to new judges.

The court agreed, holding that the judges had a contract with their pension system and changing the formula amounted to an unconstitutional reduction of the benefits they were vested in from the day they joined the system. The court rejected the argument that the state could make these changes under its police power, characterizing the proposed change as a substantial impairment of benefits and not at all defensible as an exercise of the state’s police powers.

Anti-reformers use the Felt decision to illustrate their fundamental point: the Illinois Constitution codifies the relationship between public employees and the pension system as contractual with benefits that cannot be taken away without consideration. The question is what would constitute the kind of valuable consideration that would make benefit reductions constitutional. Pension reformers have an answer for that question.

The bi-partisan pension reform proposal that has been tabled until this fall would ultimately diminish pension benefits for some current public workers. The proposal seeks to change the annuity amounts that these workers would receive when they retire, based on the new three-tier system previously explained above.

Reformers agree that the Pension Clause clearly establishes that a contractual relationship exists between public employees and the pension system. However, reformers argue that the term “benefits” of membership in the system that shall not be diminished or impaired in the Pension Clause means the benefit is simply an employee’s right to receive an annuity upon retirement, but does not guarantee the amount of the annuity or the formula for calculating the annuity. While reformers acknowledge that the Pension Clause protects those benefits already earned, they cite their interpretation of the Convention debates, case law and common sense in support of pension reforms that reduce the benefits that employees may earn in the future, especially in consideration of not lowering salaries, eliminating positions, or allowing pension funds to collapse.

Reformers argue that during the convention debates, delegates mainly grappled with two important issues involving the Pension Clause. The first issue was whether the Pension Clause required state government to fully fund its public pensions. Delegates were concerned that they were adding a provision to the Constitution that would hamstring the state by forcing it to fully fund pensions that were woefully underfunded even prior to the convention. The second issue was whether eliminating COLA increases to annuitants would be considered a reduction in pension benefits.

Delegates Lyons and Kinney, co-sponsors of the Pension Clause, explained to the delegates that their proposed language was meant to establish contractual protection for pension rights and to “provide security to people . . . in the event that sweeping home rule powers are given to local governments.” Kinney went on to explain that the language of the clause was meant to guarantee that “people will have the rights that were in force at the time they entered into the agreement to become an employee” - that if their benefits were $100 a month when they started in 1970, then they should not be less than $100 a month in 1990.

Though this statement appears to support the premise that the Illinois Constitution prohibits decreasing future benefits, reformers point out that Kinney made this statement (and others like it) in the context of explaining to delegates that the Pension Clause did not require the state to provide cost of living increases. Reformers argue that Delegate Kinney was the only sponsor to articulate any viewpoint about changing prospective benefits, and if the other sponsors agreed with her, they could have made that clear during the debates.

At best, reformers argue, the delegates’ debates about the Pension Clause indicate there was uncertainty about the scope of its restrictions, a view shared by the Illinois Supreme Court in thePeters decision. Thus, the court held that the purpose of the Pension Clause was only to “prevent retroactive diminution of previously ‘earned’ benefits.” The Peters holding, though over thirty years old, has never been expressly overruled and is the cornerstone of the argument that the Illinois Constitution would not be violated if future pension benefits were somehow altered or diminished.

In the Felt decision, reformers argue the Illinois Supreme Court applied a balancing test in weighing the legislation changing the formula for calculating the judges’ pension benefits, with the need to remedy a chronically underfunded system. The court opined that the pension system’s woes were not the fault of too many judges retiring early and that changing the retirement formula would not fix the problem. Reformers point out the court did not expressly overrule its decision in Peters, and the Felt holding indicates the court could look at the present pension crisis, weigh it against the proposed changes to the system, and find that these changes are, in fact, a permissible exercise of the state’s police power unlike the circumstances in Felt.

Pension reformers interpret the Pension Clause and pertinent case law in a light that favors their most basic argument, which supports enacting legislation that begins the process of repairing the pension system, couching it in terms of modifying state employees’ contracts in consideration for not firing those employees or significantly reducing salaries, then let the courts determine whether this legislation is proper in light of the Illinois Constitution.

What becomes clear, after considering both viewpoints, is that the language of the Pension Clause is open to interpretation, and Illinois courts have not clearly delineated the limits of its protections for pensioners. As seen in the recent Colorado and Minnesota decisions, courts may begin to look for methods to square the need for reform with the language of each state’s constitution and the established protections of contract law. If pension reform is successfully adopted in Illinois, it will undoubtedly be promptly challenged in the court system. The courts will be called upon to determine whether the state can impose these changes as a contract modification or whether it is just a convenient argument for making an unconstitutional modification to its employees’ benefits.

What Are You Doing to Protect your Future?
Join SUAA Now!

Tuesday, May 15, 2012

Illinois Universities ask Quinn to Soften Pension Cuts, Say Recruiting Talent at Stake

Author: The Associated Press
Title: Illinois universities ask Quinn to soften pension cuts, say recruiting talent...
Publication: The Republic
Date Published: May 14, 2012

SPRINGFIELD, Ill. — Public universities in Illinois are asking Gov. Pat Quinn not to cut retirement benefits for current employees in his plan to overhaul state pension programs.

Presidents and chancellors of 15 schools recently signed a letter urging Quinn to consider their ability to attract top faculty talent and not to take away "promised benefits" to current employees.

Illinois universities ask Quinn to soften pension cuts, say recruiting talent at stake

Governors State University President Elaine Maimon (MAY'-mun) says Quinn and legislative leaders have listened to the colleges' concerns.

Quinn wants to require state employees to contribute more to their pensions, pay more to keep certain benefits, retire later and require schools and universities to contribute.

The May 3 letter also seeks a "reasonable" transition to university contributions, a guarantee of proper state funding in the future and more.

What Are You Doing to Protect your Future?
Join SUAA Now!

Quinn: Reform Plans a Rescue Operation

Author: Jason Keyser, The Associated Press
Title: Quinn: Reform plans a rescue operation
Publication: The State Journal-Register
Date Published: May 14, 2012

In this May 2, 2012 photo, Illinois Gov. Pat Quinn speaks to members of the Illinois Retail Merchants Association at a luncheon in Springfield, Ill. Quinn recently lit a fire under the simmering questions of what Illinois will do about climbing pension and Medicaid costs. He proposed cuts in both programs and warned that inaction could mean financial disaster for the state. (AP Photo/Seth Perlman)

CHICAGO — Gov. Pat Quinn appealed Monday to an influential group of business leaders in Chicago to add their weight to his push to reform Illinois’ debt-laden Medicaid and public pension systems, describing the plan as a tough sacrifice and an urgent “rescue operation” for future generations.
With barely two weeks left in the legislative session, the Democratic governor has gone on the offensive and turned to unlikely allies in the business community to pressure lawmakers to pass his proposals. On the other side, unions and advocates for the poor say the reforms will hurt the most vulnerable.

Quinn told the City Club of Chicago that the two programs are taking a 39 percent bite out of the state budget this year, putting what he called a “serious squeeze” on spending for other essential government duties: to ensure public safety, provide education and other services and invest in transportation and infrastructure.

“All the other things that we want our government to do, there’s less and less money available,” Quinn said.

But leaders of the state’s public universities are saying too much damage to pension benefits could drive away top faculty talent. In a letter to Quinn, presidents and chancellors of 15 schools urged him not to cut already-earned benefits, guarantee proper state funding for the systems in the future and give colleges time to adjust if they must contribute a portion of the funding.

Medicaid, the health program for the poor and disabled, is currently running a $2.7 billion deficit. The state retirement systems are running a shortfall of $83 billion on the money they’ll have to pay out to state employees in the decades ahead.

To rein in Medicaid costs, Quinn has proposed cutting services for the poor and disabled and cutting payments to doctors and hospitals. To keep from having to cut further, he proposes essentially doubling the tax on a pack of cigarettes.

He wants to control pension costs by having government workers pay more from their paychecks into pension funds, making those employees work longer before they can retire and reducing cost-of-living increases after they leave work.

He said Monday he is sticking by all of those proposals, as negotiations continue in Springfield.

Quinn urged the hundreds of business leaders in the room to join his campaign.

“We want you to call today, call tomorrow, call every day legislators even if you don’t know them ... to let them know that the stakes are very high,” the governor said.

Quinn’s proposals have gained support among many of the state’s business leaders.

On Monday, Chicago-based energy provider Exelon Corp. and electricity utility ComEd voiced support, saying “the current structure is in dire need of change.”

The letter from the universities, dated May 3, says pension reform must not hurt their “ability to retain and recruit talented faculty and staff” and “must respect constitutional protection” against reducing retirement benefits that have already been earned — a major factor in the debate.

The letter lists seven “objectives” for a pension package, from pronouncing a “clear plan” to ensure the state doesn’t fall behind again to limiting new rules universities must follow that come without state funding to implement them.

“We’ve been heard and I think we have a place at the table,” Governors State University President Elaine Maimon said. “I don’t know at all whether we’ll like the outcome.”

Associated Press political writer John O’Connor contributed to this report from Springfield.

What Are You Doing to Protect your Future?
Join SUAA Now!

Quinn Proposals Find Allies
in the Business Community

Author: David Merce, The Associated Press
Title: Quinn proposals find allies in the business community
Date Published: May 14, 2012

In this March 26, 2012, file photo, Illinois Gov. Pat Quinn speaks to reporters in Springfield, Ill. On Friday, April 20, 2012, Quinn announced that wanted to raise the retirement age for Illinois public employees and require them to contribute more money to their retirement funds. (AP Photo/Seth Perlman, File)

CHAMPAIGN, Ill. • Gov. Pat Quinn built his career on populism and consumer advocacy. But, in the middle of what might be his defining political moment, he finds himself in an unlikely alliance with major Illinois business groups in a battle against unions and advocates for the poor.

Quinn has proposed sharp cuts in both Medicaid and pensions for government workers to save billions in expenses the state can't afford to pay. In that, he for the most part has the support of the state's business community.

Business leaders say it's a surprise the ideas are coming from Quinn — a surprise they welcome.

"I have been more comfortable with Gov. Quinn since he got elected, and his actions, if you will, than I was for the past 30 years of his political life," said Doug Whitley, president of the Illinois Chamber of Commerce. "He's coming across as being a solid guy who's interested in getting the state's problems fixed."

Whitley noted that the problems are ones that Quinn inherited.

Quinn addressed an Illinois Retail Merchants Association meeting May 2 in Springfield, and he sounded almost surprised the group wanted to hear from him. But that did not stop him from appealing for their help.

"I was so happy when I got the invitation," he told the audience. "This is a moment we cannot miss. Like never before, we need you to talk to your legislators."

The state's tough financial situation has been a sore point for business executives, some of whom complain that the state's climate hampers investment. Quinn signed off last year on an income-tax increase that angered many business leaders. The state continues struggling to pay companies it uses as vendors. The state's credit rating has been downgraded. And other states are trying to lure Illinois companies away.

Quinn, 63, spent most of his career building a populist résumé. As a Cook County politician in the early 1980s, he helped create the Citizens Utility Board, a consumer watchdog group whose mission is to look out for the interests of residential utility customers. His speeches are liberally sprinkled with references to the everyman president, Abraham Lincoln, and the working men and women of Illinois.

Unions are his biggest campaign contributors, though he angered them by moving to cancel a pay increase promised to state workers.

The state's mounting fiscal problems — the state government owes $9 billion in unpaid bills — led Quinn to announce plans that so far business leaders support as realistic efforts to get the state's ledgers under control.

To rein in Medicaid costs, Quinn has proposed cutting services for the poor and disabled and cutting payments to doctors and hospitals. To keep from having to cut further, he proposes essentially doubling the tax on a pack of cigarettes, a measure that is not as popular with the chamber.

He wants to control pension costs by having government workers pay more from their paychecks into pension funds, making those employees work longer before they can retire and reducing cost-of-living increases after they leave work.

"The IMA supports both pension and Medicaid reform and we commend Governor Quinn for laying out bold proposals," said Mark Denzler, vice president of the Illinois Manufacturers Association, though he noted the group wants to see more details.

Business leaders say reining in the rapidly increasing Medicaid and pension systems will have a long-term impact like few other things the governor could do. Medicaid is currently running a $2.7 billion deficit, while the state retirement systems are running a shortfall of $83 billion on the money they'll have to pay out to state employees in the decades ahead.

"It's clear that these are things that are eating more and more and more of the budget each year," said David F. Vite, the Retail Merchants Association president.

What Are You Doing to Protect your Future?
Join SUAA Now!

SUAA Mini Briefing

Author: The State Universities Annuitants Association (SUAA)
Title: SUAA Mini Briefing
Publication: SUAA Website
Date Published: May 11, 2012

Now that State Health Insurance SB1313 HAM 8 and 9 has passed the Senate there is much  work for us to do as it moves to the Governor's Desk.  The Governor has stated that he will sign  the bill with an effective date of July 1, 2012.

The bill itself is still quite ambiguous. Not read into the Senate testimony was the Memorandum  dated May 9, 2012 to Representative Cross from CMS which stated the following:

  • Senate Bill 1313 allows the Director of CMS to set the premiums that are paid by retirees in the Group Health Insurance Program every year in order to ensure we will be able to continue providing quality health care for our retired employees.
  • The proposed retiree contributions will pay a percentage of their healthcare costs on a sliding scale.  The scale is based on (1) length of service, and (2) ability to pay.
  • The percent of cost the retiree will pay will also be based on his or her pension level.  Pension amounts will be broken up into seven tiers; the higher the tier, the more the retiree will pay.
  • Retirees who are eligible for Medicare (generally 65 years old and above) cost the state substantially less than those who are not on Medicare.  Since the contributions will be based on paying a percent of the cost of care for the state, those retirees on Medicare will pay significantly less than those (generally younger and still working) who are not. 
  • Those who have already retired when this plan goes into effect will pay based on their ability to pay, but will be given service credit at the highest level.  However, regardless of the contribution amount determined under those rules, the new plan contribution will not be less for any retiree than the amount they contribute under the current policy.

Those people who signed the Irrevocable Election of both 1997 and 2004 are not included in this bill. 

Those people who have the College Insurance Program (CIP) are not included in this bill.

Those people who have the Teachers Insurance Program (TRIP) are not included in this bill.

Today SUAA asked that the above talked about Memo be a part of the Senate "record".

SUAA will write a letter to the Governor asking him to veto SB1313.  We urge our members to  do the same.  The Governor's contact information is 312.814.2121 (voice); 217.782.6830 (voice);  312.814.5512 (fax); 217.524.4049 (fax); is his email.

The bill was adopted under "Emergency Rules".  These rules will be published quite soon in the  Illinois Register.  SUAA will be responsible for analyzing as soon as they appear.  These rules  will be in effect for the next 150 days and cannot be changed during that period.  At the same  time those Rules are published, Central Management Services (CMS) will also publish Rules for  the period following the 150 days.  Those Rules are subject to review by the Joint Committee on  Administrative Rules (JCAR) and by any established organization.  It is possible for the 12  legislators appointed as members, to cause Rules to be withdrawn or changed.  We will have  more about the process later.

It is SUAA's intent to bring forth legislation that protects those without Medicare (especially  those who are now 65 and older). SB1313 had intent, but it was too vague.  We want certainty.

We will continue to work with the Governor's staff, CMS and JCAR for the next several days.   

Pension Reform is likely to come to a head this next week as even more important debates take  place. Medicaid is also taking serious presence.  Major cuts will be made in every area of State  government as Speaker Madigan and Minority Leader Cross try to balance the budget by making  more monetary cuts than the Governor proposed in his Budget presentation.  

It is a tough year for even tougher decisions.  If your legislator voted "no" for SB1313 be sure to  say thank you.  If your legislator voted "yes" then call to find out why.  Please be courteous  when you call. The pension reform bill is yet to come.

Please check out the SUAA website for additional information.  There are related articles;  legislation that is being watched and acted on; how to find your legislator; archives of MiniBriefings; how to get to other relevant websites, etc. 

What Are You Doing to Protect your Future?
Join SUAA Now!

Madigan Proposes Diverting Local Funds
to Pensions

Author: Chris Wetterich
Title: Madigan proposes diverting local funds to pensions
Publication: The State Journal-Register
Date Published: May 14, 2012

Cities and local governments are balking at a proposal released by House Speaker Michael Madigan, D-Chicago, to divert revenue that would normally go to them to the Teachers’ Retirement System. If Madigan moves the bill and is successful at passing it, it would blow multimillion dollar holes in Springfield’s city and school district budgets and hit other local government budgets by varying degrees.

Madigan’s proposal would take varying amounts of revenue from the corporate personal property replacement tax fund and use it to bolster pension funding. He introduced three amendments to House Bill 3637. One would divert about $536 million, another would divert $982 million and the third would divert $1.4 billion. The tax brings in $1.4 billion for local governments.

School districts and universities have balked at an idea by Madigan, Quinn and Senate President John Cullerton, D-Chicago, to shift the employer share of teacher and university pensions from the state to local authorities.

Money from the CPPRT currently goes to local governments, who used to be able to assess a tax on businesses’ personal property. After the 1970 Constitution was passed, the state eliminated those local taxes and instead imposed a statewide tax that it then sent some of the revenue from to the cities.

In 2012, Springfield School District received $5.8 million from the fund. The city of Springfield’s budget estimates it received $2.35 million from the fund last year, although the Illinois Municipal League pegged the number at just over $2.5 million.

“Diversions of the magnitude proposed within the amendments would be crippling to local governments,” said IML Joe McCoy.

Madigan’s proposals are scheduled for a hearing Wednesday at 2:30 in Room 114 of the Capitol.

Chris Wetterich can be reached at 788-1523.

What Are You Doing to Protect your Future?
Join SUAA Now!

Legislative Update from UI

Author:  Michael J. Hogan, President, and Robert A. Easter, President-designate
Title: Legislative Update
Publication: Email to Official UI Staff Listserv
Date Published: May 15, 2012

Members of the University of Illinois community:

The Illinois General Assembly is entering the final three weeks of its scheduled spring session, and most of the major issues still to be addressed could have a serious impact on the University of Illinois and our dedicated employees. Among those we are paying especially close attention to are: our state general revenue appropriation, stabilization of the public pension system, Medicaid funding for our hospital, and provisions for rehiring retirees.

The common denominator, of course, is the state's continuing fiscal crisis. Other issues are in the Springfield mix, too, but we have identified the dominant subjects in what long-time observers agree has been the most challenging and potentially momentous legislative session in decades.

Along with our governmental relations staff, we have been advocating strongly on behalf of the University, its employees, alumni, annuitants, and the state of Illinois, and we will continue to do so in the closing weeks. We welcome your support. You have every right as an individual to make your feelings known as well.

Public pension funding is the dominant issue and changes to the state pension systems likely will be made during this session, with litigation to follow. Last year the U of I helped to stop a bill that would have imposed an unfair burden on employees for solving the pension funding crisis. Meantime, we have proposed alternatives and worked with leaders from the other public universities to mitigate the most onerous aspects of pension stabilization plans being considered in Springfield. The University Senates Conference last month endorsed principles and objectives for a viable pension funding solution that reflect the arguments we have presented to elected officials.

An example of the legislative pace in Springfield occurred last week with the quick passage of Senate Bill 1313, which requires retired state employees --including those from universities -- to pay a portion of the health insurance premium that the state currently covers. The University formally opposed the bill. But soon after the proposal surfaced, the legislation passed by wide margins in both the House and Senate on back-to-back days. Gov. Pat Quinn is expected to sign it into law. The law requires an annual process for setting the premiums, which will allow the University, employees and annuitants to provide input.

While another successful academic year has just wrapped up, important work remains to be completed in Springfield. Our team will continue to represent the University's interest, and we will keep you informed.


Michael J. Hogan, President
Robert A. Easter, President-designate

What Are You Doing to Protect your Future?
Join SUAA Now!

Unions Gear Up to Oppose Pension Changes

Author: Chris Wetterich
Title: Unions gear up to oppose pension changes 
Publication: The State Journal-Register
Date Published: May 15, 2012

After weeks of relative quiet as they attempted to negotiate with legislative leaders and the governor on restructuring the state’s ailed pension systems, public employee unions want their members to tell their legislators to block benefit changes they believe are unfair.

Labor has grown weary of Gov. Pat Quinn’s efforts to rally business leaders behind his ideas and his use of agency directorsand state government resources to argue that basic state government functions will suffer grievously unless something is done about pensions.

The Illinois Federation of Teachers, the Illinois Education Association and the American Federation of State, County and Municipal Employeesposted links and telephone numbers on their websites that allow members to be connected directly to their lawmakers. The campaign is an effort to counterpunch at Quinn’s efforts and remind lawmakers of the thousands of public employees who are their constituents.

In addition to the telephone calls, the unions are organizing demonstrations atlegislators' district offices on Wednesday.

The unions also fear legislative leaders and the governor will abandon negotiations and a bill will be rammed through this week.

The unions were caught flatfooted in 2010 when a bill changing pension benefits for teachers, state workers, university employees, legislators and judges passed through both legislative chambers in less than a day and was later signed by Gov. Pat Quinn.

The IFT, IEA and AFSCME say they have offered concessions at the negotiating table, although they decline to detail those concessions or an overall union plan to address the state’s $85 billion in debt. The three unions and other labor groups are working in tandem under the umbrella of the We Are One Illinois coalition. The IFT said the proposal would cost members more money and save the state billions of dollars.

Those familiar with the talks say the unions have also talked about finding new revenue. Any tax increase to address the pension problem is viewed as dead on arrival by most lawmakers. Much of the 2011 income tax increase, which increased the individual income tax rate from 3 percent to 5 percent has been eaten up by increases in pension and Medicaid spending.

“Despite our efforts, some lawmakers and the governor continue to try and solve the problems they created by placing the entire pension burden on the backs of workers – that is unfair and unacceptable,” the IFT wrote in an e-mail to its members. “IFT members and other public employees have faithfully made their payments to the systems, while the state has shirked its payment obligations for decades. The state’s irresponsibility has created the problem we face. To now ask teachers and other public employees to pay off the state’s entire bill is simply wrong.”

Quinn has proposed increasing employee contributions by 3 percentage points, reducing the annual cost-of-living increases from 3 percent annually compounded to the lesser of 3 percent or inflation and increasing the retirement age to 67 years old. He has estimated his proposal would save at least $65 billion, although he hasn’t provided the numbers to back that up.

In its e-mail IFT sounded a negative note about the status of negotiations.

“Top IFT leaders spent the past several weeks in an honest attempt to determine how public workers can be part of a solution to Illinois’ pension challenges. Unfortunately, it’s clear that legislative leaders and the governor are now working to quickly introduce and pass an unfair, unacceptable bill that will severely harm the retirement security of hundreds of thousands of public workers,” the union’s website says. 

“At the very least, lawmakers and the public should be given adequate time to review the details of any legislation political leaders will try to pass in order to fully consider how it will impact our workers and Illinois communities.”

Chris Wetterich can be reached at 788-1523.

What Are You Doing to Protect your Future?
Join SUAA Now!