When Illinois lawmakers found out seven years ago that major labor leaders were significantly pumping up their taxpayer-funded pensions by basing them on their larger union salaries, state officials swiftly approved a law to rein in the windfalls.
Union executives cried foul, however, saying the changes spurred by a Chicago Tribune/WGN-TV investigation were an overreach. And after a lengthy legal battle, the Illinois Supreme Court has sided with the unions, ruling the changes unconstitutional and striking a blow to lawmakers’ reform efforts.
The court’s unanimous ruling last week that once again illustrated how difficult it is to cut back public pensions. Justices cited a provision in the Illinois Constitution stating that pension benefits, once granted, “shall not be diminished or impaired.”
The city ruling led Mayor Rahm Emanuel to increase property taxes, boost the 911 emergency telecommunications fee attached to phone bills and put in place a new sewer and water bill tax to start contributing more money to four city pension funds covering police, firefighters, municipal employees and laborers.
The state still has to fix its woefully underfunded government worker pension system, which carries a shortfall of more than $100 billion.
A small part of that debt is due to a long-running practice at the Capitol of approving pension sweeteners for political allies. In September 2011, the Tribune and WGN found that nearly two dozen labor leaders from Chicago stood to reap benefits that could cost ailing local pension plans tens of millions of dollars over the course of their retirements. At one point, federal authorities even subpoenaed records on the inflated city pensions.
The law allowed union members to take a leave of absence from their public employment to work in high-ranking union jobs, earn years of public service credit for their union time and base their taxpayer-funded pensions on the more lucrative union positions. Union official pension benefits also could be based on a labor leader’s last four consecutive highest-paid years in the decade before retirement.
The Illinois General Assembly approved a series of changes designed to base the pensions of union officials on their salaries and tenure from the lower-paid government workers positions. Then-Gov. Pat Quinn signed the reforms into law in January 2012.
The state Supreme Court, however, found those changes violated the state constitution, which protects pension benefits once they’re granted.
“We find nothing in the case law, in the text of the pension clause, or in the constitutional debates on the clause that would support the state’s argument that the particular benefit conferred here is not entitled to protection,” according to the opinion written by Justice Robert Thomas.
“The state’s contention that the delegates and voters did not intend that the benefit at issue would be protected by the pension clause is pure speculation and appears to be manifestly inaccurate,” the opinion continued.
The suit that overturned the state law was brought by blue- and white-collar city employees as well as Chicago teachers and their unions against their public pensions funds. The law’s constitutionality was defended by the attorney general. Union representatives had no comment following the ruling.
Some historical context: Since the 1950s, city workers who take leaves of absence to work full time for unions have been able to remain in city pension funds if they choose. The time they spend at their union jobs counts toward their city pensions.
But few labor leaders took the deal until the law was changed in 1991 to base those workers’ city pensions on their union salaries instead of their old city paychecks, dramatically boosting the amount they could receive.
Because that 1991 law bases city pensions on the labor leaders’ union salaries, they received retirement benefits that far outstrip the modest salaries they made as city employees. On average, their pensions are nearly three times higher than what the typical retired city worker receives.
High-profile examples that triggered the 2012 changes included such top earners as:
•Liberato “Al” Naimoli, president of the Cement Workers Union Local 76. He retired from a $15,000-a-year city job that he last held a quarter-century ago. Naimoli received more than $13,000 a month from the city laborers’ pension fund even as he continued to earn nearly $300,000 annually as union president.
•James McNally, former vice president of the International Union of Operating Engineers Local 150. He received nearly $115,000 a year even though at the time he retired, in 2008, he had not worked for the city in more than 13 years. He was only 51 when he started collecting a city pension.
•Dennis Gannon, former president of the Chicago Federation of Labor. In 2004, he began receiving more than $150,000 a year after retiring at age 50 from a $56,000-a-year city job that he had left nearly 13 years earlier. He received his city pension while collecting a salary of about $200,000 from the federation. As in most cases, Gannon told the Tribune at the time that he was only following the law in filing for a city pension.
The state Supreme Court ruling tossed out the changes for workers and retirees who already were covered by the pension system before the law took effect in January 2012. But the ruling did not address whether the law has been invalidated for people who became public employees after it took effect.
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November 30, 2018 at 05:51PM