July 22, 2019
By Jacob Huebert
Illinois’s
government finances are in notoriously bad shape. The state has well over $200 billion in
unfunded pension liabilities, some $73 billion in
unfunded state retiree health insurance benefits, and billions in unpaid bills,
and it hasn’t had a
balanced budget since 2001. Meanwhile, an increasing
tax and regulatory burden is driving people and
businesses elsewhere, making it even harder for the state to dig itself out of
the hole it’s in.
Despite
all of that, Illinois’s political leaders recently authorized increases in
costly “pension spiking,” under which school district employees receive sharply
increased salaries in their last working years, and may cash in unused sick
days just before retiring, to give themselves bigger pension payouts.
In
2018, the Illinois legislature tried to rein in this practice by eliminating
state funding for pension increases resulting from late-career salary spikes of
more than three percent per year. But a provision in the 1091-page budget bill that
Governor J.B. Pritzker signed into law this year raised the limit to six
percent.
The
unions that lobbied for this change are sure to take full advantage of it. For
example, as Wirepoints has
reported, a union-negotiated contract with the wealthy New Trier
High School District gives that district’s teachers, who are already among the
state’s best-paid, a six-percent annual salary increase in each of their last
four years before retirement.
Making
matters worse, the cost of the resulting inflated pension payments won’t be
borne primarily by residents of the district, who might hold local officials
accountable if they considered the payments excessive and were personally
responsible for paying them. Instead, as with all school district
pension obligations in Illinois, the
costs will be spread to taxpayers across the state, who have no say over—and
receive no benefits from—New Trier’s lavish spending.
What
to do about this abuse?
One
might hope that Illinois voters, tired of being looted to pay for other
people’s privileges, would demand reforms. But achieving change through the
democratic process is especially difficult in Illinois. That’s because, among
other reasons, the state stifles political competition with unconstitutional
campaign finance rules, gerrymandering, and other dubious practices and laws
designed to keep the state’s longtime political establishment in power and keep
tax dollars flowing to favored interest groups, including government unions.
Illinois
taxpayers might consider seeking relief in court by asserting their rights
under the Illinois Constitution’s guarantee that
“[p]ublic funds, property or credit shall be used only for public purposes.” To
be sure, paying teachers—and paying them well—is a “public purpose.” But some
courts that have applied similar provisions in other states’ constitutions have
said that, to serve a public purpose, expenditures must be proportionate to the benefit the public receives, and they can’t be
a mere gratuity to people who would have provided the same public benefits even
without the payment.
Unfortunately,
the Illinois Supreme Court’s willingness to protect taxpayers’ rights is far
from certain. In 2015, it ruled that public-sector employees’ right to receive
pension benefits—and to continue to accrue them at current rates—is absolute, stronger than
virtually any other constitutional right, even
if that means fiscal and economic disaster for the state.
And
recent cases on the Illinois Constitution’s anti-subsidy clause seem to have
drastically weakened it. For example, a 2008 Illinois Supreme Court decision
approved a law under which the state taxed riverboat casinos and gave the
revenue directly to the owners of racetracks for the admitted purpose of
benefiting the (private) horse racing industry. If the court thinks that’s
okay—even though it’s precisely what the clause exists to prohibit—it’s not
clear what it wouldn’t allow. (Arizona Supreme Court Justice, and former
Goldwater Institute litigator, Clint Bolick wrote a book
chapter on the sad state of Illinois’s anti-subsidy clause.)
Still,
there’s no reason why the court can’t correct its course, and it should. A
Goldwater Institute report has
explained why pension spiking (as well as union release time, under which union
members are paid a government salary to work for their union, not the government)
violates the Arizona Constitution’s gift clause, and similar arguments should
apply to pension spiking in Illinois and other states with anti-subsidy
constitutional provisions.
And,
of course, the state legislature should follow the state constitution whether
the courts enforce it or not, and in any event, lawmakers should end pension
spiking on the grounds of fair, fiscally responsible public policy.
If neither
the legislature nor the courts will enforce Illinois’s current anti-subsidy
clause as written, taxpayers should demand that the state amend it, as Bolick’s
book chapter recommends, to be more specific and harder to evade.
Better
for Illinois to be disciplined by the state constitution sooner than to be
inevitably disciplined by harsh financial reality—potentially including an unprecedented
state bankruptcy—later.
Jacob Huebert is
a Senior Attorney at the Goldwater Institute.
