What We Need Is a Time Machine

The big news here in Illinois is the state legislature’s mad dash to enact pension reform legislation. The tirade of one legislator’s reaction to the bum’s rush has already reached viral status:

The reason for the hurry can be found in Article IV, Section 10 of the state constitution:

The General Assembly shall provide by law for a uniform effective date for laws passed prior to June 1 of a calendar year. The General Assembly may provide for a different effective date in any law passed prior to June 1. A bill passed after May 31 shall not become effective prior to June 1 of the next calendar year unless the General Assembly by the vote of three-fifths of the members elected to each house provides for an earlier effective date.

Unless the law is passed today, either it can’t become effective for a year or a three-fifths vote of the legislature will be required to enact the earlier effective date into law. That would mean that the legislation would require Republican votes to pass.

That’s the reason that House Speaker Mike Madigan struck the provision that local governments become responsible for teacher pensions rather than the state as it is now. Here’s the Sun-Times’s editorial on the subject:

Late Wednesday night, House Speaker Michael Madigan agreed to drop a provision in his public employee pension reform package that Republicans had vehemently opposed. The provision would have shifted teacher pension costs from the state to suburban and Downstate school districts.

By stripping away that piece, Madigan dramatically increased the odds that desperately-needed pension cuts are coming to Illinois.

That is progress, even if passage on Thursday, the last day of the legislative session, isn’t guaranteed.

And, it’s important to point out, Madigan was right on the cost shift.

Madigan’s provision wasn’t a side note to pension reform. It was a vital component. It would have, for the first time, forced school districts to pay for the benefits they dole out. Currently, school districts can sweeten pensions without paying for them. Cost shifting is a much-needed check on excessive pension benefit growth.

The Trib is even more strident:

If the majority Democrats push through pension reform lite at the last minute, with virtually no Republican input and with genteel treatment of current workers, they will have delivered one more in a long line of feckless legislative sessions that didn’t fix the most pressing danger to state government’s financial future.

A legislative session that began in February has produced meaningful cuts in Medicaid spending. It may produce a tight spending plan that will close several expensive and unnecessary state institutions. All good. But on the year’s most crucial issue — pension reform — lawmakers have perpetuated their decades-long habit of popping huge legislation on the eve of adjournment, creating an artificial rush to an uninformed decision. At that point, bosses rule and gotcha politics trumps good policy.

[…]

So far this year, the most impressive leadership on pensions has come from the governor. Quinn proposed a bold plan to reduce benefits, eliminate unfunded obligations over 30 years, and add a legal requirement that lawmakers fully fund the pension system every year. That’s still the better outline for a negotiated solution.

Gov. Quinn, don’t cave. If legislators don’t deliver, keep them in Springfield.

As I see it Illinois’s pension problems have three major components:

1. The perverse incentives that districts and local governments have to beef up public employees’ retiree benefits, a burden that doesn’t fall on them but on the state.
2. The failure of the state, particularly during the Blagojevich years, to fund the public employee pensions’ funds.
3. The decline in revenues as a consequence of the recession and the new normal in the economy. Despite increased taxes revenues are still down.

Now the state’s in a bind. It’s having problems increasing revenues. It needs to make up the shortfall that it created. And there’s a mad dash to the door as public employees retire, hoping to secure their pensions before the legislature changes the rules.

There are several things that I want to add to the pot before I close this post. First, I can’t imagine the public employees’ unions sitting still for the drastic change in their retirees’ pensions and benefits that the reforms being debated will impose. I don’t see any way that legislators, public employees, and voters can all be satisfied at the same time. Did I mention that this is an election year?

Second, as I’ve mentioned before the pension reforms will unquestionably end up in the courts and by “courts” I mean the U. S. Supreme Court. Interesting times.

Finally, I haven’t seen anyone else mention this but the revision in pensions and benefits completely re-write the rules on public employee compensation. For decades local governments and school districts have been able to promise hefty retirement packages as an alternative to higher pay, promises Illinois’s economy isn’t able to live up to. That will certainly be taken into account at the next contract negotiations. I expect teachers, police officers, and firefighters to demand higher pay so that they can pay for the loss they will see in retirement compensation themselves.