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dir="ltr">Illinois’ likely deepening pension hole, brought about by the pandemic and subsequent government lockdowns of the economy, have reform advocates calling for the state to finally make some tough decisions about its debt.
Illinois’ pension liabilities, long underfunded by state lawmakers as a way to balance their books in lieu of spending restraint, are going to come out on the other side of the pandemic with more unfunded debt than ever.
Despite this, Illinois lawmakers and Gov. J.B. Pritzker have discounted the thought of reshaping the state’s arrangements with pensioners as “fantasy.”
“The fantasy of a constitutional amendment to cut retirees’ benefits is just that, a fantasy,” he said in his budget address. “The idea that all of this can be fixed with a single silver bullet ignores the protracted legal battle that will ultimately run headlong into the Contracts Clause of the U.S. Constitution.”
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As a part of the organization's larger series examining Illinois’ financial problems, nonprofit fiscal watchdog Wirepoints said arguments about the feasibility of pension reform continue to be shot down, even by Pritzker’s own legal team.
“His own lawyers are arguing that there’s an exception right now that applies to the eviction moratorium,” Wirepoints Founder Mark Glennon said. “When the impairment of the contract is reasonably drafted, fair and properly done, then contracts can be impaired.”
He said Arizona, with a nearly identical pension protection clause in its guiding charter, hammered out an agreement with firefighters to remove some of the agreed-upon perks in their pension contracts that place undue stress on taxpayers and put public safety at risk. Arizona lawmakers enacted a law that did so in 2016. It was not challenged in the courts.
In 2019, the Rhode Island Supreme Court upheld an agreement between the city of Cranston and its public safety unions to temporarily suspend the cost-of-living increases of some police officers and firefighters in order to keep pensions solvent. Challengers argued that the suspension broke the U.S. Constitution’s Contracts Clause but the Supreme Court upheld the opinion that the city’s police powers allowed them to alter it to weather the financial crisis.
“They went up to the Rhode Island Supreme Court applying federal law that would apply here and they said it was reasonable under the circumstances,” Glennon said.
Illinois’ public pension funds are about 40% funded. Some credit agencies estimate the state has more than $250 billion in total unfunded liabilities.