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Chicago-Kent College of Law Scholarly Commons @ IIT Chicago-Kent College of Law The Illinois Public Employee Relations Report Institute for Law and the Workplace Summer 2014 Vol. 31, No. 3 Eric Madiar Follow this and additional works at: https://scholarship.kentlaw.iit.edu/iperr Part of the Labor and Employment Law Commons Recommended Citation Madiar, Eric, "Vol. 31, No. 3" (2014). The Illinois Public Employee Relations Report. 94. https://scholarship.kentlaw.iit.edu/iperr/94 This Book is brought to you for free and open access by the Institute for Law and the Workplace at Scholarly Commons @ IIT Chicago-Kent College of Law. It has been accepted for inclusion in The Illinois Public Employee Relations Report by an authorized administrator of Scholarly Commons @ IIT Chicago-Kent College of Law. For more information, please contact [email protected], [email protected]. ILLINOIS PUBLIC EMPLOYEE RELATIONS REPORT VOLUME 31 SUMMER 2014 ISSUE 3 FACULTY EDITORS: Peter Feuille and Martin H. Malin PRODUCTION EDITOR: Sharon Wyatt-Jordan STUDENT EDITORIAL BOARD: PETER BRIERTON, CHRISTINA JACOBSON, AND IAN JONES The Illinois Public Employee Relations Report provides current, nonadversarial information to those involved or interested in employer-employee relations in public employment. The authors of bylined articles are responsible for the contents and for the opinions and conclusions expressed. Readers are encouraged to submit comments on the contents, and to contribute information on developments in public agencies or public-sector labor relations. The Illinois Institute of Technology and the University of Illinois at Urbana-Champaign are affirmative action/equal opportunities institutions. Published quarterly by the University of Illinois School of Labor and Employment Relations at Urbana Champaign and Chicago-Kent College of Law. (ISSN 1559-9892) 565 West Adams Street, Chicago, Illinois 60661-3691 SUMMER 2014 ILLINOIS PUBLIC EMPLOYEE RELATIONS REPORT 1 Illinois Public Pension Reform: What’s Past Is Prologue By, Eric Madiar Table of Contents I. Introduction ............................................................................. 3 II. Ilinois’ Long History of Underfunding Public Pensions ............ 5 A. State and Municipal Pension Funds Were Chronically Underfunded Long Before the 1970 Illinois Constitutional Convention .................................................................................................... 5 B. Chronic Underfunding Continued After The Pension Clause’s Adoption in 1970 .................10 C. Pension Underfunding Was Further Aggravated During Governor Thompson’s Tenure ... 12 D. The 1995 Funding Plan By Design Increased Unfunded Pension Liabilities ........................ 14 E. The Lack of Proper Pension Funding Stems From A Flawed Fiscal System ......................... 16 III. The Scope of the Illinois Constitution’s Pension Clause ........... 17 IV. PROLOGUE: Public Act 98-0599 and Its Origins ..................... 18 A. Background ............................................................................................................................. 18 B. SUMMARY OF PUBLIC ACT 98-0599’S PROVISIONS ........................................................ 20 Benefit Changes ................................................................................................................ 20 Additional Provisions ...................................................................................................... 23 V. The Pending Legal Challenges To Public Act 98-0599 ............. 24 A. Procedural History ................................................................................................................ 24 B. Plaintiffs’ Legal Challenges To Public Act 98-0599 .............................................................. 25 C. The Illinois Attorney General’s Defense of Public Act 98-0599 ............................................ 26 VI. Concluding Observations ........................................................ 28 2 ILLINOIS PUBLIC EMPLOYEE RELATIONS REPORT SUMMER 2014 RECENT DEVELOPMENTS Recent Developments is a regular feature of the Illinois Public Employee Relations Report. It highlights recent legal developments of interest to the public employment relations community. This issue focuses on developments under the public employee collective bargaining statutes, The First Amendment and the Illinois Constitution. By, Student Editorial Board: PETER BRIERTON, CHRISTINA JACOBSON, AND IAN JONES I. IELRB Developments .............................................................. 70 A. Bargaining Units ................................................................................................................... 70 B. Protected Activity .................................................................................................................... 71 II. IPLRA Developments ............................................................... 71 A. Subjects of Bargaining ............................................................................................................ 71 III. First Amendment Developments ............................................ 72 A. Fair Share Fees ...................................................................................................................... 72 B. Free Speech ..............................................................................................................................73 IV. Illinois Constitution Developments ........................................ 74 A. Pension Clause ....................................................................................................................... 74 SUMMER 2014 ILLINOIS PUBLIC EMPLOYEE RELATIONS REPORT 3 Illinois Public Pension Reform: What’s Past Is Prologue By, Eric Madiar Eric M. Madiar is Chief Legal Counsel to Illinois Senate President John J. Cullerton and Parliamentarian of the Illinois Senate. He has a B.A. from Truman State University and a J.D. from IIT Chicago-Kent College of Law. The author thanks Senate President John J. Cullerton for the continued opportunity to research public pension issues in Illinois and elsewhere, offer counsel on these issues, and publish in this field. He also thanks Professor Martin Malin for inviting him to write this article. This article is based on an earlier presentation at the Illinois Public Sector Labor Relations Law Conference held at IIT Chicago-Kent College of Law on December 6, 2013. © 2014, Eric M. Madiar, all rights reserved. I. INTRODUCTION In December 2013, after three years of contentious debate, the Illinois General Assembly enacted sweeping pension legislation via Public Act 98-0599 to reduce the pension benefits of current and retired teachers, State and university employees, legislators, and elected State officials.[1] The legislation—which was the culmination of events beginning in 2010, when the legislature lowered the benefits of employees hired after January 1, 2011[2]—broke a political stalemate over competing bills and views on how to address the State’s underfunded pension systems.[3] The 2013 legislation was also the product of aggressive lobbying efforts by Illinois’ business community, principally the Commercial Club of Chicago (the “Club”), to cut the benefits of current and retired employees.[4] Although the Club recognized that the State’s failure to properly fund the State-funded pension systems was the primary cause of those systems’ underfunding,[5] the Club stated it would be “unfair to require taxpayers to bear the costs of the current pension programs for the State’s employees.”[6] As Eden Martin, then-Club President, stated to Club members, paying these obligations was politically unpalatable because “State Government couldn’t cut—and nobody could stand the thought of a tax increase.”[7] Ty Fahner, Martin’s successor, put it even more bluntly: “[I]t is fundamentally unfair to ask 95 percent of us—all of those who are not in one of the State’s five pension systems—to pay for the 5 percent who benefit from those plans.”[8] Public employees and retirees, however, have a much different perspective and view Public Act 98-0599 and other unilateral efforts to cut benefits as morally and legally irresponsible.[9] They point out that “almost 80% of [public sector] 4 ILLINOIS PUBLIC EMPLOYEE RELATIONS REPORT SUMMER 2014 workers are ineligible for Social Security, making pensions their only reliable means of retirement security.”[10] They note that the State’s unfunded pension liabilities are not their fault because they have historically paid their fair share of the normal cost of benefits through payroll deductions.[11] If fault must be assigned, then they contend it is well-established that fault principally rests with past governors and General Assemblies that, for decades, used the moneys the State should have contributed to the pension system to fund public services, such as education, healthcare, and public safety, and stave off the need for tax increases, services cuts or both.[12] In other words, the State’s underfunding of the pension system has, for decades, served as a proverbial credit card that benefitted taxpayers and elected officials alike by relieving them of (i) the short term burden of tax increases, service cuts or both, and (ii) the long term burden of fixing a State fiscal system that generates insufficient revenue to pay for public services and cover the State’s actuarially- required pension contributions.[13] As a result, public employees and retirees contend