Thomas Donlan of Barron’s focuses his latest editorial commentary on the controversy surrounding Illnois’ unsustainable public pension fund.
The Illinois Supreme Court issued a decision this month upholding the plain language of the state constitution, which makes a sacred obligation out of pension promises. The decision astonished lots of observers in and out of the state. Some had never imagined that the state might be forced to raise taxes and cut spending just to pay pensions. Austerity is for suckers, they thought, and many still think so.
The unanimous court said the constitution means what it has said since the legislature and the voters adopted it in 1970: “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.”
The constitutional convention members were trying to protect benefits, but they assumed that the state and its subgovernments would act responsibly and morally to set aside sufficient assets if they knew they had to pay the benefits.
That was a foolish assumption. Legislators are always torn between pleasing their civilian voters and pleasing their employees, who are their noisiest and best-organized voting bloc. They can please both, in the worst possible way, by promising lavish pension benefits and diverting some of the funds for them to highways, schools, police, parks, and whatever else the voters like.
Foolish or not, the 1970 constitution provided strong language that the state Supreme Court could not evade. It’s so ironclad that it even covers benefits that haven’t been earned yet. The court is adamant: The state and municipalities cannot change pension terms for any existing employee. New hires can be given lesser pension benefits, or even none at all, but pension obligations are sacrosanct once a person is hired.
